10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

(Mark One)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2010

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission	Registrant; State of Incorporation;	I.R.S. Employer
File Number	Address; and Telephone Number	Identification No.
333-21011	FIRSTENERGY CORP. (An Ohio Corporation) 76 South Main Street Akron, OH 44308 Telephone (800)736-3402	34-1843785
000-53742	FIRSTENERGY SOLUTIONS CORP. (An Ohio Corporation) c/o FirstEnergy Corp. 76 South Main Street Akron, OH 44308 Telephone (800)736-3402	31-1560186
1-2578	OHIO EDISON COMPANY (An Ohio Corporation) c/o FirstEnergy Corp. 76 South Main Street Akron, OH 44308 Telephone (800)736-3402	34-0437786
1-2323	THE CLEVELAND ELECTRIC ILLUMINATING COMPANY (An Ohio Corporation) c/o FirstEnergy Corp. 76 South Main Street Akron, OH 44308 Telephone (800)736-3402	34-0150020
1-3583	THE TOLEDO EDISON COMPANY (An Ohio Corporation) c/o FirstEnergy Corp. 76 South Main Street Akron, OH 44308 Telephone (800)736-3402	34-4375005
1-3141	JERSEY CENTRAL POWER & LIGHT COMPANY (A New Jersey Corporation) c/o FirstEnergy Corp. 76 South Main Street Akron, OH 44308 Telephone (800)736-3402	21-0485010
1-446	METROPOLITAN EDISON COMPANY (A Pennsylvania Corporation) c/o FirstEnergy Corp. 76 South Main Street Akron, OH 44308 Telephone (800)736-3402	23-0870160
1-3522	PENNSYLVANIA ELECTRIC COMPANY (A Pennsylvania Corporation) c/o FirstEnergy Corp. 76 South Main Street Akron, OH 44308 Telephone (800)736-3402	25-0718085

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 þ No o FirstEnergy Corp., FirstEnergy Solutions Corp., Ohio Edison Company, The Cleveland Electric Illuminating Company, The Toledo Edison Company, Jersey Central Power & Light Company, Metropolitan Edison Company and Pennsylvania Electric Company

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes þ No o	FirstEnergy Corp.
Yes o No o	FirstEnergy Solutions Corp., Ohio Edison Company, The Cleveland Electric Illuminating Company, The Toledo Edison Company, Jersey Central Power & Light Company, Metropolitan Edison Company, and Pennsylvania Electric Company

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer þ	FirstEnergy Corp.
Accelerated Filer o	N/A
Non-accelerated Filer (Do not check if a smaller reporting company) þ	FirstEnergy Solutions Corp., Ohio Edison Company, The Cleveland Electric Illuminating Company, The Toledo Edison Company, Jersey Central Power & Light Company, Metropolitan Edison Company and Pennsylvania Electric Company
Smaller Reporting Company o	N/A

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes o No þ FirstEnergy Corp., FirstEnergy Solutions Corp., Ohio Edison Company, The Cleveland Electric Illuminating Company, The Toledo Edison Company, Jersey Central Power & Light Company, Metropolitan Edison Company and Pennsylvania Electric Company

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

	OUTSTANDING
CLASS	AS OF OCTOBER 22, 2010
FirstEnergy Corp., $10 par value		304,835,407
FirstEnergy Solutions Corp., no par value		7
Ohio Edison Company, no par value		60
The Cleveland Electric Illuminating Company, no par value		67,930,743
The Toledo Edison Company, $5 par value		29,402,054
Jersey Central Power & Light Company, $10 par value		13,628,447
Metropolitan Edison Company, no par value		859,500
Pennsylvania Electric Company, $20 par value		4,427,577

FirstEnergy Corp. is the sole holder of FirstEnergy Solutions Corp., Ohio Edison Company, The Cleveland Electric Illuminating Company, The Toledo Edison Company, Jersey Central Power & Light Company, Metropolitan Edison Company and Pennsylvania Electric Company common stock.

This combined Form 10-Q is separately filed by FirstEnergy Corp., FirstEnergy Solutions Corp., Ohio Edison Company, The Cleveland Electric Illuminating Company, The Toledo Edison Company, Jersey Central Power & Light Company, Metropolitan Edison Company and Pennsylvania Electric Company. Information contained herein relating to any individual registrant is filed by such registrant on its own behalf. No registrant makes any representation as to information relating to any other registrant, except that information relating to any of the FirstEnergy subsidiary registrants is also attributed to FirstEnergy Corp.

FirstEnergy Web Site

Each of the registrants’ Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed with or furnished to the SEC pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are also made available free of charge on or through FirstEnergy’s Internet web site at www.firstenergycorp.com.

These reports are posted on the web site as soon as reasonably practicable after they are electronically filed with the SEC. Additionally, the registrants routinely post important information on FirstEnergy’s Internet web site and recognize FirstEnergy’s Internet web site as channel of distribution to reach public investors and as a means of disclosing material non-public information for complying with disclosure obligations under SEC Regulation FD. Information contained on FirstEnergy’s Internet web site shall not be deemed incorporated into, or to be part of, this report.

OMISSION OF CERTAIN INFORMATION

FirstEnergy Solutions Corp., Ohio Edison Company, The Cleveland Electric Illuminating Company, The Toledo Edison Company, Jersey Central Power & Light Company, Metropolitan Edison Company and Pennsylvania Electric Company meet the conditions set forth in General Instruction H(1)(a) and (b) of Form 10-Q and are therefore filing this Form 10-Q with the reduced disclosure format specified in General Instruction H(2) to Form 10-Q.

Forward-Looking Statements: This Form 10-Q includes forward-looking statements based on information currently available to management. Such statements are subject to certain risks and uncertainties. These statements include declarations regarding management’s intents, beliefs and current expectations. These statements typically contain, but are not limited to, the terms “anticipate,” “potential,” “expect,” “believe,” “estimate” and similar words. Forward-looking statements involve estimates, assumptions, known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.

Actual results may differ materially due to:

• The speed and nature of increased competition in the electric utility industry and legislative and regulatory changes affecting how generation rates will be determined following the expiration of existing rate plans in Pennsylvania.

• The impact of the regulatory process on the pending matters in Ohio, Pennsylvania and New Jersey.

• Business and regulatory impacts from ATSI’s realignment into PJM.

• Economic or weather conditions affecting future sales and margins.

• Changes in markets for energy services.

• Changing energy and commodity market prices and availability.

• Financial derivative reforms that could increase our liquidity needs and collateral costs.

• Replacement power costs being higher than anticipated or inadequately hedged.

• The continued ability of FirstEnergy’s regulated utilities to recover regulatory assets or increased costs.

• Operation and maintenance costs being higher than anticipated.

• Other legislative and regulatory changes, and revised environmental requirements, including possible GHG emission and coal combustion residual regulations.

• The potential impacts of the proposed rules promulgated by the EPA on July 6, 2010, in response to the U.S. Court of Appeals’ July 11, 2008 decision requiring revisions to the CAIR rules or any final laws, rules or regulations that may ultimately replace CAIR.

• The uncertainty of the timing and amounts of the capital expenditures needed to, among other things, implement the Air Quality Compliance Plan (including that such amounts could be higher than anticipated or that certain generating units may need to be shut down) or levels of emission reductions related to the Consent Decree resolving the NSR litigation or other potential similar regulatory initiatives or actions.

• Adverse regulatory or legal decisions and outcomes (including, but not limited to, the revocation of necessary licenses or operating permits and oversight) by the NRC.

• Ultimate resolution of Met-Ed’s and Penelec’s TSC filings with the PPUC.

• The continuing availability of generating units and their ability to operate at or near full capacity.

• The ability to comply with applicable state and federal reliability standards and energy efficiency mandates.

• The ability to accomplish or realize anticipated benefits from strategic goals (including employee workforce initiatives).

• The ability to improve electric commodity margins and to experience growth in the distribution business.

• The changing market conditions that could affect the value of assets held in the registrants’ nuclear decommissioning trusts, pension trusts and other trust funds, and cause FirstEnergy to make additional contributions sooner, or in amounts that are larger than currently anticipated.

• The ability to access the public securities and other capital and credit markets in accordance with FirstEnergy’s financing plan and the cost of such capital.

• Changes in general economic conditions affecting the registrants.

• The state of the capital and credit markets affecting the registrants.

• Interest rates and any actions taken by credit rating agencies that could negatively affect the registrants’ access to financing or their costs and increase requirements to post additional collateral to support outstanding commodity positions, LOCs and other financial guarantees.

• The state of the national and regional economies and associated impacts on the registrants’ major industrial and commercial customers.

• Issues concerning the soundness of financial institutions and counterparties with which the registrants do business.

• The expected timing and likelihood of completion of the proposed merger with Allegheny Energy, Inc., including the timing, receipt and terms and conditions of any required governmental and regulatory approvals of the proposed merger that could reduce anticipated benefits or cause the parties to abandon the merger, the diversion of management’s time and attention from FirstEnergy’s ongoing business during this time period, the ability to maintain relationships with customers, employees or suppliers as well as the ability to successfully integrate the businesses and realize cost savings and any other synergies and the risk that the credit ratings of the combined company or its subsidiaries may be different from what the companies expect.

• The risks and other factors discussed from time to time in the registrants’ SEC filings, and other similar factors.

The foregoing review of factors should not be construed as exhaustive. New factors emerge from time to time, and it is not possible for management to predict all such factors, nor assess the impact of any such factor on the registrants’ business or the extent to which any factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statements. A security rating is not a recommendation to buy, sell or hold securities that may be subject to revision or withdrawal at any time by the assigning rating organization. Each rating should be evaluated independently of any other rating. The registrants expressly disclaim any current intention to update any forward-looking statements contained herein as a result of new information, future events or otherwise.

TABLE OF CONTENTS

	Page
Glossary of Terms		iii-v
Item 1. Financial Statements
FirstEnergy Corp.
Consolidated Statements of Income		1
Consolidated Statements of Comprehensive Income		2
Consolidated Balance Sheets		3
Consolidated Statements of Cash Flows		4
FirstEnergy Solutions Corp.
Consolidated Statements of Income and Comprehensive Income		5
Consolidated Balance Sheets		6
Consolidated Statements of Cash Flows		7
Ohio Edison Company
Consolidated Statements of Income and Comprehensive Income		8
Consolidated Balance Sheets		9
Consolidated Statements of Cash Flows		10
The Cleveland Electric Illuminating Company
Consolidated Statements of Income (Loss) and Comprehensive Income		11
Consolidated Balance Sheets		12
Consolidated Statements of Cash Flows		13
The Toledo Edison Company
Consolidated Statements of Income and Comprehensive Income		14
Consolidated Balance Sheets		15
Consolidated Statements of Cash Flows		16
Jersey Central Power & Light Company
Consolidated Statements of Income and Comprehensive Income		17
Consolidated Balance Sheets		18
Consolidated Statements of Cash Flows		19
Metropolitan Edison Company
Consolidated Statements of Income and Comprehensive Income		20
Consolidated Balance Sheets		21
Consolidated Statements of Cash Flows		22
Pennsylvania Electric Company
Consolidated Statements of Income and Comprehensive Income		23
Consolidated Balance Sheets		24
Consolidated Statements of Cash Flows		25

i

TABLE OF CONTENTS (Cont’d)

	Page
Combined Notes To Consolidated Financial Statements		26
Item 2. Management’s Discussion and Analysis of Registrant and Subsidiaries		63
Management’s Narrative Analysis of Results of Operations
FirstEnergy Solutions Corp.		99
Ohio Edison Company		102
The Cleveland Electric Illuminating Company		104
The Toledo Edison Company		106
Jersey Central Power & Light Company		108
Metropolitan Edison Company		110
Pennsylvania Electric Company		112
Item 3. Quantitative and Qualitative Disclosures About Market Risk		114
Item 4. Controls and Procedures — FirstEnergy		114
Item 4T. Controls and Procedures — FES, OE, CEI, TE, JCP&L, Met-Ed and Penelec		114
Part II. Other Information
Item 1. Legal Proceedings		114
Item 1A. Risk Factors		114
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		114
Item 5. Other Information		114
Item 6. Exhibits		115
Exhibit 10.1
Exhibit 10.2
Exhibit 10.3
Exhibit 12
Exhibit 31.1
Exhibit 31.2
Exhibit 32
EX-101 INSTANCE DOCUMENT
EX-101 SCHEMA DOCUMENT
EX-101 CALCULATION LINKBASE DOCUMENT
EX-101 LABELS LINKBASE DOCUMENT
EX-101 PRESENTATION LINKBASE DOCUMENT
EX-101 DEFINITION LINKBASE DOCUMENT

ii

GLOSSARY OF TERMS

The following abbreviations and acronyms are used in this report to identify FirstEnergy Corp. and its current and former subsidiaries:

ATSI	American Transmission Systems, Incorporated, owns and operates transmission facilities
CEI	The Cleveland Electric Illuminating Company, an Ohio electric utility operating subsidiary
FENOC	FirstEnergy Nuclear Operating Company, operates nuclear generating facilities
FES	FirstEnergy Solutions Corp., provides energy-related products and services
FESC	FirstEnergy Service Company, provides legal, financial and other corporate support services
FEV	FirstEnergy Ventures Corp., invests in certain unregulated enterprises and business ventures
FGCO	FirstEnergy Generation Corp., owns and operates non-nuclear generating facilities
FirstEnergy	FirstEnergy Corp., a public utility holding company
Global Rail	A joint venture between FirstEnergy Ventures Corp. and WMB Loan Ventures II LLC, that owns coal transportation operations near Roundup, Montana
GPU	GPU, Inc., former parent of JCP&L, Met-Ed and Penelec, which merged with FirstEnergy on November 7, 2001
JCP&L	Jersey Central Power & Light Company, a New Jersey electric utility operating subsidiary
Met-Ed	Metropolitan Edison Company, a Pennsylvania electric utility operating subsidiary
NGC	FirstEnergy Nuclear Generation Corp., owns nuclear generating facilities
OE	Ohio Edison Company, an Ohio electric utility operating subsidiary
Ohio Companies	CEI, OE and TE
Penelec	Pennsylvania Electric Company, a Pennsylvania electric utility operating subsidiary
Penn	Pennsylvania Power Company, a Pennsylvania electric utility operating subsidiary of OE
Pennsylvania Companies	Met-Ed, Penelec and Penn
PNBV	PNBV Capital Trust, a special purpose entity created by OE in 1996
Shippingport	Shippingport Capital Trust, a special purpose entity created by CEI and TE in 1997
Signal Peak	A joint venture between FirstEnergy Ventures Corp. and WMB Loan Ventures LLC, that owns mining operations near Roundup, Montana
TE	The Toledo Edison Company, an Ohio electric utility operating subsidiary
Utilities	OE, CEI, TE, Penn, JCP&L, Met-Ed and Penelec

The following abbreviations and acronyms are used to identify frequently used terms in this report:

ALJ	Administrative Law Judge
AOCL	Accumulated Other Comprehensive Loss
AQC	Air Quality Control
ARO	Asset Retirement Obligation
BGS	Basic Generation Service
CAA	Clean Air Act
CAIR	Clean Air Interstate Rule
CAMR	Clean Air Mercury Rule
CATR	Clean Air Transport Rule
CBP	Competitive Bid Process
CO2	Carbon Dioxide
CTC	Competitive Transition Charge
DOE	United States Department of Energy
DOJ	United States Department of Justice
DPA	Department of the Public Advocate, Division of Rate Counsel (New Jersey)
EE&C	Energy Efficiency and Conservation
EMP	Energy Master Plan
EPA	United States Environmental Protection Agency

iii

GLOSSARY OF TERMS, Cont’d.

ESP	Electric Security Plan
FASB	Financial Accounting Standards Board
FERC	Federal Energy Regulatory Commission
FMB	First Mortgage Bond
FPA	Federal Power Act
FRR	Fixed Resource Requirement
GAAP	Generally Accepted Accounting Principles in the United States
GHG	Greenhouse Gases
IRS	Internal Revenue Service
JOA	Joint Operating Agreement
kV	Kilovolt
KWH	Kilowatt-hours
LED	Light-Emitting Diode
LOC	Letter of Credit
MACT	Maximum Achievable Control Technology
MDPSC	Maryland Public Service Commission
MEIUG	Met-Ed Industrial users Group
MISO	Midwest Independent Transmission System Operator, Inc.
Moody’s	Moody’s Investors Service, Inc.
MRO	Market Rate Offer
MTEP	MISO Regional Transmission Expansion Plan
MW	Megawatts
MWH	Megawatt-hours
NAAQS	National Ambient Air Quality Standards
NERC	North American Electric Reliability Corporation
NJBPU	New Jersey Board of Public Utilities
NNSR	Non-Attainment New Source Review
NOAC	Northwest Ohio Aggregation Coalition
NOPEC	Northeast Ohio Public Energy Council
NOV	Notice of Violation
NOX	Nitrogen Oxide
NRC	Nuclear Regulatory Commission
NSR	New Source Review
NUG	Non-Utility Generation
NUGC	Non-Utility Generation Charge
NYSEG	New York State Electric and Gas
OCC	Ohio Consumers’ Counsel
OCI	Other Comprehensive Income
OPEB	Other Post-Employment Benefits
OVEC	Ohio Valley Electric Corporation
PCRB	Pollution Control Revenue Bond
PICA	Pennsylvania Intergovernmental Cooperation Authority
PJM	PJM Interconnection L. L. C.
POLR	Provider of Last Resort; an electric utility’s obligation to provide generation service to customers whose alternative supplier fails to deliver service
PPUC	Pennsylvania Public Utility Commission
PSCWV	Public Service Commission of West Virginia
PSA	Power Supply Agreement
PSD	Prevention of Significant Deterioration
PUCO	Public Utilities Commission of Ohio
RECs	Renewable Energy Credits
RFP	Request for Proposal
RTEP	Regional Transmission Expansion Plan
RTC	Regulatory Transition Charge
RTO	Regional Transmission Organization
S&P	Standard & Poor’s Ratings Service
SB221	Amended Substitute Senate Bill 221
SBC	Societal Benefits Charge

iv

GLOSSARY OF TERMS, Cont’d.

SEC	U.S. Securities and Exchange Commission
SIP	State Implementation Plan(s) Under the Clean Air Act
SNCR	Selective Non-Catalytic Reduction
SO2	Sulfur Dioxide
TBC	Transition Bond Charge
TMI-2	Three Mile Island Unit 2
TSC	Transmission Service Charge
VIE	Variable Interest Entity
VSCC	Virginia State Corporation Commission

v

FIRSTENERGY CORP.

CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)

	Three Months						Nine Months
	Ended September 30						Ended September 30
	2010			2009			2010			2009
	(In millions, except per share amounts)
REVENUES:
Electric utilities	$	2,757		$	2,940		$	7,673		$	8,751
Unregulated businesses		936			468			2,449			1,262
Total revenues*		3,693			3,408			10,122			10,013
EXPENSES:
Fuel		400			302			1,084			890
Purchased power		1,284			1,313			3,574			3,480
Other operating expenses		738			665			2,112			2,103
Provision for depreciation		182			188			565			550
Amortization of regulatory assets		176			261			549			903
Deferral of new regulatory assets		—			—			—			(136	)
General taxes		206			192			587			587
Impairment of long-lived assets		292			—			294			—
Total expenses		3,278			2,921			8,765			8,377
OPERATING INCOME		415			487			1,357			1,636
OTHER INCOME (EXPENSE):
Investment income		46			191			93			207
Interest expense		(208	)		(355	)		(628	)		(755	)
Capitalized interest		41			35			122			96
Total other expense		(121	)		(129	)		(413	)		(452	)
INCOME BEFORE INCOME TAXES		294			358			944			1,184
INCOME TAXES		119			128			364			430
NET INCOME		175			230			580			754
Loss attributable to noncontrolling interest		(4	)		(4	)		(19	)		(14	)
EARNINGS AVAILABLE TO FIRSTENERGY CORP.	$	179		$	234		$	599		$	768
BASIC EARNINGS PER SHARE OF COMMON STOCK	$	0.59		$	0.77		$	1.97		$	2.52
WEIGHTED AVERAGE NUMBER OF BASIC SHARES OUTSTANDING		304			304			304			304
DILUTED EARNINGS PER SHARE OF COMMON STOCK	$	0.59		$	0.77		$	1.96		$	2.51
WEIGHTED AVERAGE NUMBER OF DILUTED SHARES OUTSTANDING		305			306			305			306
DIVIDENDS DECLARED PER SHARE OF COMMON STOCK	$	1.10		$	1.10		$	1.65		$	1.65

* Includes excise tax collections of $120 million and $106 million in the three months ended September 30, 2010 and 2009, respectively, and $328 million and $310 million in the nine months ended September 30, 2010 and 2009, respectively.

The accompanying Combined Notes to the Consolidated Financial Statements are an integral part of these financial statements.

1

FIRSTENERGY CORP.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)

	Three Months						Nine Months
	Ended September 30						Ended September 30
	2010			2009			2010			2009
	(In millions)
NET INCOME	$	175		$	230		$	580		$	754
OTHER COMPREHENSIVE INCOME (LOSS):
Pension and other postretirement benefits		17			(480	)		47			24
Unrealized gain on derivative hedges		6			19			16			57
Change in unrealized gain on available-for-sale securities		20			(108	)		32			(76	)
Other comprehensive income (loss)		43			(569	)		95			5
Income tax expense (benefit) related to other comprehensive income		14			(216	)		30			26
Other comprehensive income (loss), net of tax		29			(353	)		65			(21	)
COMPREHENSIVE INCOME (LOSS)		204			(123	)		645			733
COMPREHENSIVE LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST		(4	)		(4	)		(19	)		(14	)
COMPREHENSIVE INCOME (LOSS) AVAILABLE TO FIRSTENERGY CORP.	$	208		$	(119	)	$	664		$	747

The accompanying Combined Notes to the Consolidated Financial Statements are an integral part of these financial statements.

2

FIRSTENERGY CORP.

CONSOLIDATED BALANCE SHEETS
(Unaudited)

	September 30,			December 31,
	2010			2009
	(In millions)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	632		$	874
Receivables-
Customers (less allowances of $39 million in 2010 and $33 million in 2009)		1,414			1,244
Other (less allowances of $7 million in 2010 and 2009)		150			153
Materials and supplies, at average cost		652			647
Prepaid taxes		291			248
Other		252			154
		3,391			3,320
PROPERTY, PLANT AND EQUIPMENT:
In service		27,590			27,826
Less — Accumulated provision for depreciation		11,206			11,397
		16,384			16,429
Construction work in progress		3,154			2,735
		19,538			19,164
INVESTMENTS:
Nuclear plant decommissioning trusts		1,965			1,859
Investments in lease obligation bonds		486			543
Other		564			621
		3,015			3,023
DEFERRED CHARGES AND OTHER ASSETS:
Goodwill		5,575			5,575
Regulatory assets		2,246			2,356
Power purchase contract asset		116			200
Other		826			666
		8,763			8,797
	$	34,707		$	34,304
LIABILITIES AND CAPITALIZATION
CURRENT LIABILITIES:
Currently payable long-term debt	$	1,590		$	1,834
Short-term borrowings		1,000			1,181
Accounts payable		813			829
Accrued taxes		230			314
Other		1,339			1,130
		4,972			5,288
CAPITALIZATION:
Common stockholders’ equity-
Common stock, $0.10 par value, authorized 375,000,000 shares- 304,835,407 shares outstanding		31			31
Other paid-in capital		5,445			5,448
Accumulated other comprehensive loss		(1,350	)		(1,415	)
Retained earnings		4,591			4,495
Total common stockholders’ equity		8,717			8,559
Noncontrolling interest		(26	)		(2	)
Total equity		8,691			8,557
Long-term debt and other long-term obligations		12,104			11,908
		20,795			20,465
NONCURRENT LIABILITIES:
Accumulated deferred income taxes		2,824			2,468
Retirement benefits		1,541			1,534
Asset retirement obligations		1,394			1,425
Deferred gain on sale and leaseback transaction		968			993
Power purchase contract liability		756			643
Lease market valuation liability		228			262
Other		1,229			1,226
		8,940			8,551
COMMITMENTS, GUARANTEES AND CONTINGENCIES (Note 9)
	$	34,707		$	34,304

The accompanying Combined Notes to the Consolidated Financial Statements are an integral part of these financial statements.

3

FIRSTENERGY CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

	Nine Months Ended
	September 30
	2010			2009
	(In millions)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	580		$	754
Adjustments to reconcile net income to net cash from operating activities-
Provision for depreciation		565			550
Amortization of regulatory assets		549			903
Deferral of new regulatory assets		—			(136	)
Nuclear fuel and lease amortization		123			92
Deferred purchased power and other costs		(192	)		(235	)
Deferred income taxes and investment tax credits, net		259			421
Impairment of long-lived assets		294			—
Investment impairment		21			39
Gain on investment securities held in trusts		(39	)		(172	)
Loss on debt redemption		—			142
Deferred rents and lease market valuation liability		(21	)		(20	)
Accrued compensation and retirement benefits		48			20
Interest rate swap transactions		129			—
Commodity derivative transactions, net		(40	)		26
Cash collateral paid, net		(54	)		(85	)
Pension trust contribution		—			(500	)
Decrease (increase) in operating assets-
Receivables		(172	)		78
Materials and supplies		(6	)		30
Prepayments and other current assets		(4	)		(349	)
Increase (decrease) in operating liabilities-
Accounts payable		(16	)		(103	)
Accrued taxes		(18	)		(97	)
Accrued interest		63			121
Other		4			(15	)
Net cash provided from operating activities		2,073			1,464
CASH FLOWS FROM FINANCING ACTIVITIES:
New Financing-
Long-term debt		251			4,151
Redemptions and Repayments-
Long-term debt		(422	)		(2,213	)
Short-term borrowings, net		(171	)		(764	)
Common stock dividend payments		(503	)		(503	)
Other		(25	)		(54	)
Net cash provided from (used for) financing activities		(870	)		617
CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions		(1,467	)		(1,575	)
Proceeds from asset sales		117			19
Sales of investment securities held in trusts		2,577			3,039
Purchases of investment securities held in trusts		(2,610	)		(3,101	)
Customer acquisition costs		(110	)		—
Cash investments		56			(4	)
Restricted funds for debt redemption		—			(150	)
Other		(8	)		(16	)
Net cash used for investing activities		(1,445	)		(1,788	)
Net change in cash and cash equivalents		(242	)		293
Cash and cash equivalents at beginning of period		874			545
Cash and cash equivalents at end of period	$	632		$	838

The accompanying Combined Notes to the Consolidated Financial Statements are an integral part of these financial statements.

4

FIRSTENERGY SOLUTIONS CORP.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)

	Three Months Ended						Nine Months Ended
	September 30						September 30
	2010			2009			2010			2009
	(In thousands)
REVENUES:
Electric sales to affiliates	$	599,695		$	616,300		$	1,745,542		$	2,348,741
Electric sales to non-affiliates		904,752			443,819			2,302,240			928,944
Other		49,230			44,453			208,662			394,145
Total revenues		1,553,677			1,104,572			4,256,444			3,671,830
EXPENSES:
Fuel		391,087			294,693			1,061,719			871,160
Purchased power from affiliates		116,381			35,290			246,232			149,746
Purchased power from non-affiliates		411,084			205,200			1,160,119			551,155
Other operating expenses		309,793			305,935			916,366			891,555
Provision for depreciation		59,298			66,041			185,535			192,962
General taxes		21,804			21,700			70,822			66,361
Impairment of long-lived assets		291,934			—			293,767			—
Total expenses		1,601,381			928,859			3,934,560			2,722,939
OPERATING INCOME (LOSS)		(47,704	)		175,713			321,884			948,891
OTHER INCOME (EXPENSE):
Investment income		29,895			158,857			43,978			135,723
Miscellaneous income		4,765			2,804			10,468			12,840
Interest expense — affiliates		(2,497	)		(2,209	)		(7,362	)		(8,503	)
Interest expense — other		(49,544	)		(42,187	)		(150,560	)		(90,985	)
Capitalized interest		22,955			17,869			66,550			41,975
Total other income (expense)		5,574			135,134			(36,926	)		91,050
INCOME (LOSS) BEFORE INCOME TAXES		(42,130	)		310,847			284,958			1,039,941
INCOME TAXES		(5,404	)		111,164			107,833			372,175
NET INCOME (LOSS)		(36,726	)		199,683			177,125			667,766
OTHER COMPREHENSIVE INCOME (LOSS):
Pension and other postretirement benefits		886			(61,085	)		(8,063	)		13,604
Unrealized gain on derivative hedges		2,818			790			7,109			26,847
Change in unrealized gain on available-for-sale securities		17,445			(89,401	)		28,533			(51,374	)
Other comprehensive income (loss)		21,149			(149,696	)		27,579			(10,923	)
Income taxes related to other comprehensive income (loss)		7,694			(58,883	)		9,898			(3,549	)
Other comprehensive income (loss), net of tax		13,455			(90,813	)		17,681			(7,374	)
TOTAL COMPREHENSIVE INCOME (LOSS)	$	(23,271	)	$	108,870		$	194,806		$	660,392

The accompanying Combined Notes to the Consolidated Financial Statements are an integral part of these financial statements.

5

FIRSTENERGY SOLUTIONS CORP.

CONSOLIDATED BALANCE SHEETS
(Unaudited)

	September 30,			December 31,
	2010			2009
	(In thousands)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	10		$	12
Receivables-
Customers (less accumulated provisions of $16,277,000 and $12,041,000, respectively, for uncollectible accounts)		325,265			195,107
Associated companies		269,986			318,561
Other (less accumulated provisions of $6,702,000 for uncollectible accounts)		57,407			51,872
Notes receivable from associated companies		501,648			805,103
Materials and supplies, at average cost		554,043			539,541
Prepayments and other		204,065			107,782
		1,912,424			2,017,978
PROPERTY, PLANT AND EQUIPMENT:
In service		9,663,264			10,357,632
Less — Accumulated provision for depreciation		4,114,381			4,531,158
		5,548,883			5,826,474
Construction work in progress		2,736,635			2,423,446
		8,285,518			8,249,920
INVESTMENTS:
Nuclear plant decommissioning trusts		1,158,376			1,088,641
Other		7,400			22,466
		1,165,776			1,111,107
DEFERRED CHARGES AND OTHER ASSETS:
Accumulated deferred income tax benefits		3,357			86,626
Customer intangibles		127,420			16,566
Goodwill		24,248			24,248
Property taxes		50,125			50,125
Unamortized sale and leaseback costs		61,934			72,553
Other		164,332			121,665
		431,416			371,783
	$	11,795,134		$	11,750,788
LIABILITIES AND CAPITALIZATION
CURRENT LIABILITIES:
Currently payable long-term debt	$	1,396,792		$	1,550,927
Short-term borrowings-
Associated companies		9,642			9,237
Other		100,000			100,000
Accounts payable-
Associated companies		472,018			466,078
Other		204,928			245,363
Accrued taxes		59,422			83,158
Other		430,824			359,057
		2,673,626			2,813,820
CAPITALIZATION:
Common stockholders’ equity-
Common stock, without par value, authorized 750 shares, 7 shares outstanding		1,490,010			1,468,423
Accumulated other comprehensive loss		(85,320	)		(103,001	)
Retained earnings		2,326,274			2,149,149
Total common stockholders’ equity		3,730,964			3,514,571
Long-term debt and other long-term obligations		2,819,150			2,711,652
		6,550,114			6,226,223
NONCURRENT LIABILITIES:
Deferred gain on sale and leaseback transaction		967,583			992,869
Accumulated deferred investment tax credits		55,267			58,396
Asset retirement obligations		877,522			921,448
Retirement benefits		228,779			204,035
Property taxes		50,125			50,125
Lease market valuation liability		228,119			262,200
Other		163,999			221,672
		2,571,394			2,710,745
COMMITMENTS, GUARANTEES AND CONTINGENCIES (Note 9)
	$	11,795,134		$	11,750,788

The accompanying Combined Notes to the Consolidated Financial Statements are an integral part of these financial statements.

6

FIRSTENERGY SOLUTIONS CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

	Nine Months Ended
	September 30
	2010			2009
	(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	177,125		$	667,766
Adjustments to reconcile net income to net cash from operating activities-
Provision for depreciation		185,535			192,962
Nuclear fuel and lease amortization		126,071			94,244
Deferred rents and lease market valuation liability		(41,493	)		(40,143	)
Deferred income taxes and investment tax credits, net		96,152			268,812
Impairment of long-lived assets		293,767			—
Investment impairment		21,089			36,169
Accrued compensation and retirement benefits		15,887			5,860
Commodity derivative transactions, net		(40,048	)		25,794
Gain on asset sales		(2,213	)		(9,832	)
Gain on investment securities held in trusts		(34,292	)		(154,723	)
Cash collateral, net		(53,900	)		(92,618	)
Decrease (increase) in operating assets-
Receivables		(91,134	)		(55,774	)
Materials and supplies		(15,324	)		38,543
Prepayments and other current assets		36,004			(35,315	)
Increase (decrease) in operating liabilities-
Accounts payable		(50,114	)		(72,181	)
Accrued taxes		(8,404	)		23,846
Accrued interest		(14,130	)		31,770
Other		23,349			(43,369	)
Net cash provided from operating activities		623,927			881,811
CASH FLOWS FROM FINANCING ACTIVITIES:
New Financing-
Long-term debt		249,520			2,356,762
Short-term borrowings, net		405			—
Redemptions and Repayments-
Long-term debt		(296,339	)		(618,213	)
Short-term borrowings, net		—			(1,164,823	)
Other		(798	)		(20,006	)
Net cash provided from (used for) financing activities		(47,212	)		553,720
CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions		(801,238	)		(842,600	)
Proceeds from asset sales		117,213			16,129
Sales of investment securities held in trusts		1,478,086			2,152,717
Purchases of investment securities held in trusts		(1,511,273	)		(2,175,135	)
Loans from (to) associated companies, net		303,455			(298,841	)
Customer acquisition costs		(110,073	)		—
Leasehold improvement payments to associated companies		(51,204	)		—
Other		(1,683	)		(20,882	)
Net cash used for investing activities		(576,717	)		(1,168,612	)
Net change in cash and cash equivalents		(2	)		266,919
Cash and cash equivalents at beginning of period		12			39
Cash and cash equivalents at end of period	$	10		$	266,958

The accompanying Combined Notes to the Consolidated Financial Statements are an integral part of these financial statements.

7

OHIO EDISON COMPANY

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)

	Three Months Ended						Nine Months Ended
	September 30						September 30
	2010			2009			2010			2009
	(In thousands)
STATEMENTS OF INCOME
REVENUES:
Electric sales	$	456,531		$	575,377		$	1,351,893		$	1,942,612
Excise and gross receipts tax collections		30,058			27,127			82,482			81,055
Total revenues		486,589			602,504			1,434,375			2,023,667
EXPENSES:
Purchased power from affiliates		136,804			200,506			424,530			847,712
Purchased power from non-affiliates		84,264			161,732			257,322			397,875
Other operating expenses		94,804			102,463			271,934			372,231
Provision for depreciation		21,990			22,407			65,884			65,916
Amortization of regulatory assets, net		9,704			17,404			48,473			59,910
General taxes		48,909			45,164			139,763			138,187
Total expenses		396,475			549,676			1,207,906			1,881,831
OPERATING INCOME		90,114			52,828			226,469			141,836
OTHER INCOME (EXPENSE):
Investment income		5,438			20,285			16,991			39,796
Miscellaneous income		1,673			237			2,676			2,108
Interest expense		(21,975	)		(22,961	)		(66,440	)		(67,717	)
Capitalized interest		335			231			838			730
Total other expense		(14,529	)		(2,208	)		(45,935	)		(25,083	)
INCOME BEFORE INCOME TAXES		75,585			50,620			180,534			116,753
INCOME TAXES		29,332			15,885			60,797			36,742
NET INCOME		46,253			34,735			119,737			80,011
Income from noncontrolling interest		124			140			386			429
EARNINGS AVAILABLE TO PARENT	$	46,129		$	34,595		$	119,351		$	79,582
STATEMENTS OF COMPREHENSIVE INCOME
NET INCOME	$	46,253		$	34,735		$	119,737		$	80,011
OTHER COMPREHENSIVE INCOME LOSS:
Pension and other postretirement benefits		321			(49,043	)		4,658			46,559
Change in unrealized gain on available-for-sale securities		2,178			(7,695	)		2,989			(9,676	)
Other comprehensive income (loss)		2,499			(56,738	)		7,647			36,883
Income tax expense (benefit) related to other comprehensive income		562			(21,924	)		1,229			15,915
Other comprehensive income (loss), net of tax		1,937			(34,814	)		6,418			20,968
COMPREHENSIVE INCOME (LOSS)		48,190			(79	)		126,155			100,979
COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST		124			140			386			429
COMPREHENSIVE INCOME (LOSS) AVAILABLE TO PARENT	$	48,066		$	(219	)	$	125,769		$	100,550

The accompanying Combined Notes to the Consolidated Financial Statements are an integral part of these financial statements.

8

OHIO EDISON COMPANY

CONSOLIDATED BALANCE SHEETS
(Unaudited)

	September 30,			December 31,
	2010			2009
	(In thousands)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	288,092		$	324,175
Receivables-
Customers (less accumulated provisions of $4,951,000 and $5,119,000, respectively, for uncollectible accounts)		182,894			209,384
Associated companies		38,499			98,874
Other		20,777			14,155
Notes receivable from associated companies		16,234			118,651
Prepayments and other		9,490			15,964
		555,986			781,203
UTILITY PLANT:
In service		3,118,239			3,036,467
Less — Accumulated provision for depreciation		1,199,401			1,165,394
		1,918,838			1,871,073
Construction work in progress		38,915			31,171
		1,957,753			1,902,244
OTHER PROPERTY AND INVESTMENTS:
Investment in lease obligation bonds		204,707			216,600
Nuclear plant decommissioning trusts		129,685			120,812
Other		96,897			96,861
		431,289			434,273
DEFERRED CHARGES AND OTHER ASSETS:
Regulatory assets		413,596			465,331
Pension assets		39,271			19,881
Property taxes		67,037			67,037
Unamortized sale and leaseback costs		31,376			35,127
Other		17,540			39,881
		568,820			627,257
	$	3,513,848		$	3,744,977
LIABILITIES AND CAPITALIZATION
CURRENT LIABILITIES:
Currently payable long-term debt	$	1,479		$	2,723
Short-term borrowings-
Associated companies		47,648			92,863
Other		320			807
Accounts payable-
Associated companies		32,084			102,763
Other		23,994			40,423
Accrued taxes		55,236			81,868
Accrued interest		25,354			25,749
Other		133,060			81,424
		319,175			428,620
CAPITALIZATION:
Common stockholder’s equity-
Common stock, without par value, authorized 175,000,000 shares - 60 shares outstanding		951,839			1,154,797
Accumulated other comprehensive loss		(157,159	)		(163,577	)
Retained earnings		104,241			29,890
Total common stockholder’s equity		898,921			1,021,110
Noncontrolling interest		6,225			6,442
Total equity		905,146			1,027,552
Long-term debt and other long-term obligations		1,152,370			1,160,208
		2,057,516			2,187,760
NONCURRENT LIABILITIES:
Accumulated deferred income taxes		678,815			660,114
Accumulated deferred investment tax credits		10,521			11,406
Retirement benefits		169,070			174,925
Asset retirement obligations		83,194			85,926
Other		195,557			196,226
		1,137,157			1,128,597
COMMITMENTS AND CONTINGENCIES (Note 9)
	$	3,513,848		$	3,744,977

The accompanying Combined Notes to the Consolidated Financial Statements are an integral part of these financial statements.

9

OHIO EDISON COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

	Nine Months Ended
	September 30
	2010			2009
	(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	119,737		$	80,011
Adjustments to reconcile net income to net cash from operating activities-
Provision for depreciation		65,884			65,916
Amortization of regulatory assets, net		48,473			59,910
Purchased power cost recovery reconciliation		3,906			15,372
Amortization of lease costs		28,314			28,394
Deferred income taxes and investment tax credits, net		7,612			32,658
Accrued compensation and retirement benefits		(16,659	)		(3,542	)
Accrued regulatory obligations		1,301			19,172
Electric service prepayment programs		—			(4,634	)
Cash collateral from suppliers		23,286			6,469
Pension trust contributions		—			(103,035	)
Decrease (increase) in operating assets-
Receivables		91,971			128,688
Prepayments and other current assets		10,331			(2,553	)
Decrease in operating liabilities-
Accounts payable		(87,108	)		(60,125	)
Accrued taxes		(26,425	)		(17,196	)
Accrued interest		(395	)		(59	)
Other		(9,695	)		(8,596	)
Net cash provided from operating activities		260,533			236,850
CASH FLOWS FROM FINANCING ACTIVITIES:
New Financing-
Long-term debt		—			100,000
Short-term borrowings, net		—			74,514
Redemptions and Repayments-
Long-term debt		(9,628	)		(101,088	)
Short-term borrowings, net		(45,702	)		—
Common stock dividend payments		(250,000	)		(150,000	)
Other		(892	)		(2,138	)
Net cash used for financing activities		(306,222	)		(78,712	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions		(110,645	)		(108,253	)
Leasehold improvement payments from associated companies		18,375			—
Sales of investment securities held in trusts		78,599			207,280
Purchases of investment securities held in trusts		(83,725	)		(214,592	)
Loan repayments from associated companies, net		102,417			134,975
Cash investments		12,296			7,070
Other		(7,711	)		(1,216	)
Net cash provided from investing activities		9,606			25,264
Net change in cash and cash equivalents		(36,083	)		183,402
Cash and cash equivalents at beginning of period		324,175			146,343
Cash and cash equivalents at end of period	$	288,092		$	329,745

The accompanying Combined Notes to the Consolidated Financial Statements are an integral part of these financial statements.

10

THE CLEVELAND ELECTRIC ILLUMINATING COMPANY

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)

	Three Months Ended						Nine Months Ended
	September 30						September 30
	2010			2009			2010			2009
	(In thousands)
STATEMENTS OF INCOME
REVENUES:
Electric sales	$	309,236		$	417,900		$	901,913		$	1,307,592
Excise tax collections		19,480			17,629			52,548			52,748
Total revenues		328,716			435,529			954,461			1,360,340
EXPENSES:
Purchased power from affiliates		89,389			153,556			298,204			635,927
Purchased power from non-affiliates		35,151			87,689			105,200			208,849
Other operating expenses		36,441			37,822			96,613			141,829
Provision for depreciation		18,057			17,753			54,504			53,885
Amortization of regulatory assets		45,136			39,313			121,082			325,630
Deferral of new regulatory assets		—			—			—			(134,587	)
General taxes		39,878			37,752			107,207			112,749
Total expenses		264,052			373,885			782,810			1,344,282
OPERATING INCOME		64,664			61,644			171,651			16,058
OTHER INCOME (EXPENSE):
Investment income		6,604			7,565			20,756			23,599
Miscellaneous income		533			645			1,790			3,437
Interest expense		(33,384	)		(34,740	)		(100,267	)		(100,819	)
Capitalized interest		10			27			43			145
Total other expense		(26,237	)		(26,503	)		(77,678	)		(73,638	)
INCOME (LOSS) BEFORE INCOME TAXES		38,427			35,141			93,973			(57,580	)
INCOME TAX EXPENSE (BENEFIT)		13,479			9,755			33,107			(25,290	)
NET INCOME (LOSS)		24,948			25,386			60,866			(32,290	)
Income from noncontrolling interest		366			418			1,151			1,295
EARNINGS (LOSS) AVAILABLE TO PARENT	$	24,582		$	24,968		$	59,715		$	(33,585	)
STATEMENTS OF COMPREHENSIVE INCOME
NET INCOME (LOSS)	$	24,948		$	25,386		$	60,866		$	(32,290	)
OTHER COMPREHENSIVE INCOME (LOSS):
Pension and other postretirement benefits		3,228			(48,024	)		(16,129	)		(154	)
Unrealized loss on derivative hedges		—			(1,451	)		—			(1,451	)
Other comprehensive income (loss)		3,228			(49,475	)		(16,129	)		(1,605	)
Income tax expense (benefit) related to other comprehensive income		976			(17,854	)		(6,325	)		1,452
Other comprehensive income (loss), net of tax		2,252			(31,621	)		(9,804	)		(3,057	)
COMPREHENSIVE INCOME (LOSS)		27,200			(6,235	)		51,062			(35,347	)
COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTEREST		366			418			1,151			1,295
COMPREHENSIVE INCOME (LOSS) AVAILABLE TO PARENT	$	26,834		$	(6,653	)	$	49,911		$	(36,642	)

The accompanying Combined Notes to the Consolidated Financial Statements are an integral part of these financial statements.

11

THE CLEVELAND ELECTRIC ILLUMINATING COMPANY

CONSOLIDATED BALANCE SHEETS
(Unaudited)

	September 30,			December 31,
	2010			2009
	(In thousands)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	247		$	86,230
Receivables-
Customers (less accumulated provisions of $5,271,000 and $5,239,000, respectively, for uncollectible accounts)		186,044			209,335
Associated companies		59,339			98,954
Other		4,910			11,661
Notes receivable from associated companies		23,905			26,802
Prepayments and other		4,362			9,973
		278,807			442,955
UTILITY PLANT:
In service		2,373,419			2,310,074
Less — Accumulated provision for depreciation		921,040			888,169
		1,452,379			1,421,905
Construction work in progress		30,482			36,907
		1,482,861			1,458,812
OTHER PROPERTY AND INVESTMENTS:
Investment in lessor notes		340,031			388,641
Other		10,084			10,220
		350,115			398,861
DEFERRED CHARGES AND OTHER ASSETS:
Goodwill		1,688,521			1,688,521
Regulatory assets		420,144			545,505
Pension assets (Note 6)		—			13,380
Property taxes		77,319			77,319
Other		12,897			12,777
		2,198,881			2,337,502
	$	4,310,664		$	4,638,130
LIABILITIES AND CAPITALIZATION
CURRENT LIABILITIES:
Currently payable long-term debt	$	148		$	117
Short-term borrowings-
Associated companies		129,912			339,728
Accounts payable-
Associated companies		14,803			68,634
Other		13,725			17,166
Accrued taxes		64,492			90,511
Accrued interest		39,261			18,466
Other		63,732			45,440
		326,073			580,062
CAPITALIZATION:
Common stockholders’ equity-
Common stock, without par value, authorized 105,000,000 shares, 67,930,743 shares outstanding		886,927			884,897
Accumulated other comprehensive loss		(147,962	)		(138,158	)
Retained earnings		556,963			597,248
Total common stockholders’ equity		1,295,928			1,343,987
Noncontrolling interest		17,651			20,592
Total equity		1,313,579			1,364,579
Long-term debt and other long-term obligations		1,852,511			1,872,750
		3,166,090			3,237,329
NONCURRENT LIABILITIES:
Accumulated deferred income taxes		628,244			644,745
Accumulated deferred investment tax credits		11,205			11,836
Retirement benefits		82,070			69,733
Other		96,982			94,425
		818,501			820,739
COMMITMENTS AND CONTINGENCIES (Note 9)
	$	4,310,664		$	4,638,130

The accompanying Combined Notes to the Consolidated Financial Statements are an integral part of these financial statements.

12

THE CLEVELAND ELECTRIC ILLUMINATING COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended
	September 30
	2010			2009
	(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss)	$	60,866		$	(32,290	)
Adjustments to reconcile net income (loss) to net cash from operating activities-
Provision for depreciation		54,504			53,885
Amortization of regulatory assets, net		121,082			325,630
Deferral of new regulatory assets		—			(134,587	)
Purchased power cost recovery reconciliation		—			(3,478	)
Deferred income taxes and investment tax credits, net		(24,283	)		(41,939	)
Accrued compensation and retirement benefits		10,467			10,311
Pension trust contribution		—			(89,789	)
Electric service prepayment programs		—			(3,510	)
Cash collateral from suppliers, net		19,245			5,404
Decrease (increase) in operating assets-
Receivables		86,725			30,977
Prepayments and other current assets		5,421			(633	)
Increase (decrease) in operating liabilities-
Accounts payable		(57,272	)		(32,240	)
Accrued taxes		(23,876	)		(17,003	)
Accrued interest		20,795			29,816
Other		740			11,489
Net cash provided from operating activities		274,414			112,043
CASH FLOWS FROM FINANCING ACTIVITIES:
New Financing-
Long-term debt		—			298,398
Redemptions and Repayments-
Long-term debt		(84	)		(558	)
Short-term borrowings, net		(230,132	)		(111,128	)
Common stock dividend payments		(100,000	)		(93,000	)
Other		(4,100	)		(6,161	)
Net cash provided from (used for) financing activities		(334,316	)		87,551
CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions		(70,812	)		(73,577	)
Restricted cash		—			(155,573	)
Loan repayments from (to) associated companies, net		2,897			(4,638	)
Redemptions of lessor notes		48,610			37,072
Other		(6,776	)		(2,871	)
Net cash used for investing activities		(26,081	)		(199,587	)
Net change in cash and cash equivalents		(85,983	)		7
Cash and cash equivalents at beginning of period		86,230			226
Cash and cash equivalents at end of period	$	247		$	233

The accompanying Combined Notes to the Consolidated Financial Statements are an integral part of these financial statements.

13

THE TOLEDO EDISON COMPANY

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)

	Three Months Ended						Nine Months Ended
	September 30						September 30
	2010			2009			2010			2009
	(In thousands)
STATEMENTS OF INCOME
REVENUES:
Electric sales	$	136,058		$	206,086		$	376,180		$	663,082
Excise tax collections		7,979			7,422			21,079			21,448
Total revenues		144,037			213,508			397,259			684,530
EXPENSES:
Purchased power from affiliates		42,338			86,278			144,062			342,166
Purchased power from non-affiliates		16,663			56,494			50,377			115,275
Other operating expenses		28,746			30,238			79,790			110,722
Provision for depreciation		7,800			7,847			23,763			23,136
Amortization (deferral) of regulatory assets, net		6,591			9,253			(3,708	)		30,921
General taxes		14,023			13,205			39,766			39,804
Total expenses		116,161			203,315			334,050			662,024
OPERATING INCOME		27,876			10,193			63,209			22,506
OTHER INCOME (EXPENSE):
Investment income		3,018			9,302			11,875			22,315
Miscellaneous expense		(502	)		(1,725	)		(2,853	)		(1,690	)
Interest expense		(10,479	)		(10,854	)		(31,421	)		(25,649	)
Capitalized interest		94			46			252			138
Total other expense		(7,869	)		(3,231	)		(22,147	)		(4,886	)
INCOME BEFORE INCOME TAXES		20,007			6,962			41,062			17,620
INCOME TAX EXPENSE (BENEFIT)		6,911			(138	)		13,241			3,123
NET INCOME		13,096			7,100			27,821			14,497
Income from noncontrolling interest		(4	)		14			1			17
EARNINGS AVAILABLE TO PARENT	$	13,100		$	7,086		$	27,820		$	14,480
STATEMENTS OF COMPREHENSIVE INCOME
NET INCOME	$	13,096		$	7,100		$	27,821		$	14,497
OTHER COMPREHENSIVE INCOME (LOSS):
Pension and other postretirement benefits		713			(24,201	)		1,723			(5,052	)
Change in unrealized gain on available-for-sale securities		427			(11,633	)		466			(15,181	)
Other comprehensive income (loss)		1,140			(35,834	)		2,189			(20,233	)
Income tax expense (benefit) related to other comprehensive income		330			(13,187	)		565			(5,982	)
Other comprehensive income (loss), net of tax		810			(22,647	)		1,624			(14,251	)
COMPREHENSIVE INCOME (LOSS)		13,906			(15,547	)		29,445			246
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO NONCONTROLLING INTEREST		(4	)		14			1			17
COMPREHENSIVE INCOME (LOSS) AVAILABLE TO PARENT	$	13,910		$	(15,561	)	$	29,444		$	229

The accompanying Combined Notes to the Consolidated Financial Statements are an integral part of these financial statements.

14

THE TOLEDO EDISON COMPANY

CONSOLIDATED BALANCE SHEETS
(Unaudited)

	September 30,			December 31,
	2010			2009
	(In thousands)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	134,158		$	436,712
Receivables-
Customers		30			75
Associated companies		44,075			90,191
Other (less accumulated provisions of $224,000 and $208,000, respectively, for uncollectible accounts)		19,146			20,180
Notes receivable from associated companies		81,254			85,101
Prepayments and other		4,272			7,111
		282,935			639,370
UTILITY PLANT:
In service		938,532			912,930
Less — Accumulated provision for depreciation		440,510			427,376
		498,022			485,554
Construction work in progress		9,946			9,069
		507,968			494,623
OTHER PROPERTY AND INVESTMENTS:
Investment in lessor notes		103,848			124,357
Nuclear plant decommissioning trusts		76,051			73,935
Other		1,514			1,580
		181,413			199,872
DEFERRED CHARGES AND OTHER ASSETS:
Goodwill		500,576			500,576
Regulatory assets		74,297			69,557
Property taxes		23,658			23,658
Other		27,215			55,622
		625,746			649,413
	$	1,598,062		$	1,983,278
LIABILITIES AND CAPITALIZATION
CURRENT LIABILITIES:
Currently payable long-term debt	$	208		$	222
Accounts payable-
Associated companies		8,644			78,341
Other		6,212			8,312
Notes payable to associated companies		—			225,975
Accrued taxes		17,904			25,734
Lease market valuation liability		36,900			36,900
Other		44,745			29,273
		114,613			404,757
CAPITALIZATION:
Common stockholders’ equity-
Common stock, $5 par value, authorized 60,000,000 shares, 29,402,054 shares outstanding		147,010			147,010
Other paid-in-capital		178,170			178,181
Accumulated other comprehensive loss		(48,179	)		(49,803	)
Retained earnings		112,310			214,490
Total common stockholders’ equity		389,311			489,878
Noncontrolling interest		2,587			2,696
Total equity		391,898			492,574
Long-term debt and other long-term obligations		600,478			600,443
		992,376			1,093,017
NONCURRENT LIABILITIES:
Accumulated deferred income taxes		116,090			80,508
Accumulated deferred investment tax credits		6,039			6,367
Retirement benefits		67,953			65,988
Asset retirement obligations		28,287			32,290
Lease market valuation liability		208,525			236,200
Other		64,179			64,151
		491,073			485,504
COMMITMENTS, GUARANTEES AND CONTINGENCIES (Note 9)
	$	1,598,062		$	1,983,278

The accompanying Combined Notes to the Consolidated Financial Statements are an integral part of these financial statements.

15

THE TOLEDO EDISON COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

	Nine Months Ended
	September 30
	2010			2009
	(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	27,821		$	14,497
Adjustments to reconcile net income to net cash from operating activities-
Provision for depreciation		23,763			23,136
Amortization (deferral) of regulatory assets, net		(3,708	)		30,921
Deferred rents and lease market valuation liability		(36,123	)		(34,556	)
Deferred income taxes and investment tax credits, net		18,927			(2,242	)
Accrued compensation and retirement benefits		4,529			3,039
Accrued regulatory obligations		40			4,841
Electric service prepayment programs		—			(1,458	)
Pension trust contribution		—			(21,590	)
Cash collateral from suppliers		9,874			2,830
Decrease in operating assets-
Receivables		61,051			24,561
Prepayments and other current assets		2,839			109
Increase (decrease) in operating liabilities-
Accounts payable		(69,846	)		(13,440	)
Accrued taxes		(6,172	)		(5,057	)
Accrued interest		10,050			14,033
Other		(10,971	)		(3,694	)
Net cash provided from operating activities		32,074			35,930
CASH FLOWS FROM FINANCING ACTIVITIES:
New Financing-
Long-term debt		—			297,422
Redemptions and Repayments-
Long-term debt		(167	)		(292	)
Short-term borrowings, net		(225,975	)		(101,569	)
Common stock dividend payments		(130,000	)		(25,000	)
Other		(112	)		(351	)
Net cash provided from (used for) financing activities		(356,254	)		170,210
CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions		(29,592	)		(33,005	)
Leasehold improvement payments from associated companies		32,829			—
Loan repayments from associated companies, net		3,847			10,256
Redemptions of lessor notes		20,509			18,358
Sales of investment securities held in trusts		118,360			171,061
Purchases of investment securities held in trusts		(119,777	)		(173,214	)
Other		(4,550	)		(2,776	)
Net cash provided from (used for) investing activities		21,626			(9,320	)
Net change in cash and cash equivalents		(302,554	)		196,820
Cash and cash equivalents at beginning of period		436,712			14
Cash and cash equivalents at end of period	$	134,158		$	196,834

The accompanying Combined Notes to the Consolidated Financial Statements are an integral part of these financial statements.

16

JERSEY CENTRAL POWER & LIGHT COMPANY

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)

	Three Months Ended						Nine Months Ended
	September 30						September 30
	2010			2009			2010			2009
	(In thousands)
REVENUES:
Electric sales	$	952,420		$	854,108		$	2,353,418		$	2,312,089
Excise tax collections		16,080			14,128			39,444			37,890
Total revenues		968,500			868,236			2,392,862			2,349,979
EXPENSES:
Purchased power		556,618			509,035			1,381,104			1,414,226
Other operating expenses		89,167			84,495			260,004			241,241
Provision for depreciation		26,614			26,565			81,678			76,969
Amortization of regulatory assets, net		100,476			96,051			251,250			262,900
General taxes		19,974			18,344			51,312			48,427
Total expenses		792,849			734,490			2,025,348			2,043,763
OPERATING INCOME		175,651			133,746			367,514			306,216
OTHER INCOME (EXPENSE):
Miscellaneous income		1,662			1,301			5,144			4,113
Interest expense		(30,220	)		(29,593	)		(89,684	)		(87,132	)
Capitalized interest		199			139			488			419
Total other expense		(28,359	)		(28,153	)		(84,052	)		(82,600	)
INCOME BEFORE INCOME TAXES		147,292			105,593			283,462			223,616
INCOME TAXES		64,440			43,435			121,491			95,834
NET INCOME		82,852			62,158			161,971			127,782
OTHER COMPREHENSIVE INCOME (LOSS):
Pension and other postretirement benefits		4,135			(51,932	)		24,198			(26,893	)
Unrealized gain on derivative hedges		69			69			207			207
Other comprehensive income (loss)		4,204			(51,863	)		24,405			(26,686	)
Income tax expense (benefit) related to other comprehensive income		1,443			(21,295	)		9,442			(8,806	)
Other comprehensive income (loss), net of tax		2,761			(30,568	)		14,963			(17,880	)
TOTAL COMPREHENSIVE INCOME	$	85,613		$	31,590		$	176,934		$	109,902

The accompanying Combined Notes to the Consolidated Financial Statements are an integral part of these financial statements.

17

JERSEY CENTRAL POWER & LIGHT COMPANY

CONSOLIDATED BALANCE SHEETS
(Unaudited)

	September 30,			December 31,
	2010			2009
	(In thousands)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	1		$	27
Receivables-
Customers (less accumulated provisions of $4,736,000 and $3,506,000, respectively, for uncollectible accounts)		378,822			300,991
Associated companies		3,900			12,884
Other		26,024			21,877
Notes receivable — associated companies		64,168			102,932
Prepaid taxes		71,153			34,930
Other		15,674			12,945
		559,742			486,586
UTILITY PLANT:
In service		4,568,640			4,463,490
Less — Accumulated provision for depreciation		1,666,918			1,617,639
		2,901,722			2,845,851
Construction work in progress		51,857			54,251
		2,953,579			2,900,102
OTHER PROPERTY AND INVESTMENTS:
Nuclear plant decommissioning trusts		175,254			166,768
Nuclear fuel disposal trust		208,870			199,677
Other		2,136			2,149
		386,260			368,594
DEFERRED CHARGES AND OTHER ASSETS:
Goodwill		1,810,936			1,810,936
Regulatory assets		722,086			888,143
Other		30,608			27,096
		2,563,630			2,726,175
	$	6,463,211		$	6,481,457
LIABILITIES AND CAPITALIZATION
CURRENT LIABILITIES:
Currently payable long-term debt	$	31,947		$	30,639
Accounts payable-
Associated companies		12,743			26,882
Other		154,872			168,093
Accrued taxes		24,798			12,594
Accrued interest		30,003			18,256
Other		78,903			111,156
		333,266			367,620
CAPITALIZATION:
Common stockholders’ equity-
Common stock, $10 par value, authorized 16,000,000 shares, 13,628,447 shares outstanding		136,284			136,284
Other paid-in capital		2,508,852			2,507,049
Accumulated other comprehensive loss		(228,049	)		(243,012	)
Retained earnings		197,046			200,075
Total common stockholders’ equity		2,614,133			2,600,396
Long-term debt and other long-term obligations		1,779,081			1,801,589
		4,393,214			4,401,985
NONCURRENT LIABILITIES:
Accumulated deferred income taxes		720,825			687,545
Nuclear fuel disposal costs		196,703			196,511
Retirement benefits		133,579			150,603
Asset retirement obligations		106,573			101,568
Power purchase contract liability		386,273			399,105
Other		192,778			176,520
		1,736,731			1,711,852
COMMITMENTS, GUARANTEES AND CONTINGENCIES (Note 9)
	$	6,463,211		$	6,481,457

The accompanying Combined Notes to the Consolidated Financial Statements are an integral part of these financial statements.

18

JERSEY CENTRAL POWER & LIGHT COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

	Nine Months Ended
	September 30
	2010			2009
	(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	161,971		$	127,782
Adjustments to reconcile net income to net cash from operating activities-
Provision for depreciation		81,678			76,969
Amortization of regulatory assets, net		251,250			262,900
Deferred purchased power and other costs		(85,136	)		(106,340	)
Deferred income taxes and investment tax credits, net		14,984			40,989
Accrued compensation and retirement benefits		11,621			7,308
Cash collateral paid, net		(23,400	)		(210	)
Pension trust contribution		—			(100,000	)
Decrease (increase) in operating assets-
Receivables		(72,994	)		18,984
Prepayments and other current assets		(36,573	)		(83,538	)
Increase (decrease) in operating liabilities-
Accounts payable		(37,668	)		(40,670	)
Accrued taxes		35,326			(13,399	)
Accrued interest		11,747			20,946
Tax collections payable		—			(9,714	)
Other		(13,953	)		12,606
Net cash provided from operating activities		298,853			214,613
CASH FLOWS FROM FINANCING ACTIVITIES:
New Financing-
Long-term debt		—			299,619
Redemptions and Repayments-
Common stock		—			(150,000	)
Long-term debt		(21,703	)		(20,570	)
Short-term borrowings, net		—			(114,766	)
Common stock dividend payments		(165,000	)		(88,000	)
Other		(2	)		(2,275	)
Net cash used for financing activities		(186,705	)		(75,992	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions		(130,008	)		(121,342	)
Loans from (to) associated companies, net		38,764			(660	)
Sales of investment securities held in trusts		340,368			338,684
Purchases of investment securities held in trusts		(353,028	)		(351,216	)
Other		(8,270	)		(4,152	)
Net cash used for investing activities		(112,174	)		(138,686	)
Net change in cash and cash equivalents		(26	)		(65	)
Cash and cash equivalents at beginning of period		27			66
Cash and cash equivalents at end of period	$	1		$	1

The accompanying Combined Notes to the Consolidated Financial Statements are an integral part of these financial statements.

19

METROPOLITAN EDISON COMPANY

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)

	Three Months Ended						Nine Months Ended
	September 30						September 30
	2010			2009			2010			2009
	(In thousands)
REVENUES:
Electric sales	$	460,864		$	424,901		$	1,334,454		$	1,194,609
Gross receipts tax collections		23,049			20,612			65,245			58,181
Total revenues		483,913			445,513			1,399,699			1,252,790
EXPENSES:
Purchased power from affiliates		166,039			94,768			476,119			273,497
Purchased power from non-affiliates		87,561			142,495			264,765			389,705
Other operating expenses		141,761			63,654			333,895			221,320
Provision for depreciation		12,978			13,262			39,176			38,320
Amortization of regulatory assets, net		15,480			84,631			112,869			173,770
General taxes		25,029			22,540			66,663			66,509
Total expenses		448,848			421,350			1,293,487			1,163,121
OPERATING INCOME		35,065			24,163			106,212			89,669
OTHER INCOME (EXPENSE):
Interest income		581			2,169			2,678			8,124
Miscellaneous income		1,539			1,068			5,093			2,982
Interest expense		(13,037	)		(14,380	)		(39,812	)		(42,502	)
Capitalized interest		176			47			461			124
Total other expense		(10,741	)		(11,096	)		(31,580	)		(31,272	)
INCOME BEFORE INCOME TAXES		24,324			13,067			74,632			58,397
INCOME TAXES		10,084			2,324			30,968			21,027
NET INCOME		14,240			10,743			43,664			37,370
OTHER COMPREHENSIVE INCOME (LOSS):
Pension and other postretirement benefits		2,161			(31,365	)		14,032			557
Unrealized gain on derivative hedges		84			84			252			252
Other comprehensive income (loss)		2,245			(31,281	)		14,284			809
Income tax expense (benefit) related to other comprehensive income		723			(13,112	)		5,624			2,273
Other comprehensive income (loss), net of tax		1,522			(18,169	)		8,660			(1,464	)
TOTAL COMPREHENSIVE INCOME (LOSS)	$	15,762		$	(7,426	)	$	52,324		$	35,906

The accompanying Combined Notes to the Consolidated Financial Statements are an integral part of these financial statements.

20

METROPOLITAN EDISON COMPANY

CONSOLIDATED BALANCE SHEETS
(Unaudited)

	September 30,			December 31,
	2010			2009
	(In thousands)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	124		$	120
Receivables-
Customers (less accumulated provisions of $4,344,000 and $4,044,000, respectively, for uncollectible accounts)		182,509			171,052
Associated companies		41,689			29,413
Other		13,654			11,650
Notes receivable from associated companies		11,201			97,150
Prepaid taxes		27,307			15,229
Other		2,523			1,459
		279,007			326,073
UTILITY PLANT:
In service		2,213,765			2,162,815
Less — Accumulated provision for depreciation		836,821			810,746
		1,376,944			1,352,069
Construction work in progress		31,488			14,901
		1,408,432			1,366,970
OTHER PROPERTY AND INVESTMENTS:
Nuclear plant decommissioning trusts		277,823			266,479
Other		877			890
		278,700			267,369
DEFERRED CHARGES AND OTHER ASSETS:
Goodwill		416,499			416,499
Regulatory assets		400,375			356,754
Power purchase contract asset		103,902			176,111
Other		64,084			36,544
		984,860			985,908
	$	2,950,999		$	2,946,320
LIABILITIES AND CAPITALIZATION
CURRENT LIABILITIES:
Currently payable long-term debt	$	28,500		$	128,500
Short-term borrowings-
Associated companies		6,296			—
Accounts payable-
Associated companies		34,204			40,521
Other		28,604			41,050
Accrued taxes		2,967			11,170
Accrued interest		11,717			17,362
Other		31,993			24,520
		144,281			263,123
CAPITALIZATION:
Common stockholders’ equity-
Common stock, without par value, authorized 900,000 shares, 859,500 shares outstanding		1,197,064			1,197,070
Accumulated other comprehensive loss		(134,891	)		(143,551	)
Retained earnings		48,064			4,399
Total common stockholders’ equity		1,110,237			1,057,918
Long-term debt and other long-term obligations		713,941			713,873
		1,824,178			1,771,791
NONCURRENT LIABILITIES:
Accumulated deferred income taxes		489,608			453,462
Accumulated deferred investment tax credits		6,978			7,313
Nuclear fuel disposal costs		44,434			44,391
Retirement benefits		28,268			33,605
Asset retirement obligations		189,489			180,297
Power purchase contract liability		175,259			143,135
Other		48,504			49,203
		982,540			911,406
COMMITMENTS AND CONTINGENCIES (Note 9)
	$	2,950,999		$	2,946,320

The accompanying Combined Notes to the Consolidated Financial Statements are an integral part of these financial statements.

21

METROPOLITAN EDISON COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

	Nine Months Ended
	September 30
	2010			2009
	(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	43,664		$	37,370
Adjustments to reconcile net income to net cash from operating activities-
Provision for depreciation		39,176			38,320
Amortization of regulatory assets, net		112,869			173,770
Deferred costs recoverable as regulatory assets		(49,646	)		(70,044	)
Deferred income taxes and investment tax credits, net		23,781			59,393
Accrued compensation and retirement benefits		(282	)		6,712
Pension trust contribution		—			(123,521	)
Cash collateral paid, net		(17,647	)		(6,800	)
Decrease (increase) in operating assets-
Receivables		(18,444	)		(23,370	)
Prepayments and other current assets		(13,144	)		(22,614	)
Increase (decrease) in operating liabilities-
Accounts payable		(18,763	)		(17,293	)
Accrued taxes		(8,203	)		(11,095	)
Accrued interest		(5,645	)		5,001
Other		7,721			11,891
Net cash provided from operating activities		95,437			57,720
CASH FLOWS FROM FINANCING ACTIVITIES:
New Financing-
Long-term debt		—			300,000
Short-term borrowings, net		6,296			—
Redemptions and Repayments-
Long-term debt		(100,000	)		—
Short-term borrowings, net		—			(265,003	)
Other		—			(2,268	)
Net cash provided from (used for) financing activities		(93,704	)		32,729
CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions		(77,921	)		(73,106	)
Sales of investment securities held in trusts		420,116			88,802
Purchases of investment securities held in trusts		(427,150	)		(95,982	)
Loans from (to) associated companies, net		85,949			(6,586	)
Other		(2,723	)		(3,597	)
Net cash used for investing activities		(1,729	)		(90,469	)
Net change in cash and cash equivalents		4			(20	)
Cash and cash equivalents at beginning of period		120			144
Cash and cash equivalents at end of period	$	124		$	124

The accompanying Combined Notes to the Consolidated Financial Statements are an integral part of these financial statements.

22

PENNSYLVANIA ELECTRIC COMPANY

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)

	Three Months Ended						Nine Months Ended
	September 30						September 30
	2010			2009			2010			2009
	(In thousands)
REVENUES:
Electric sales	$	372,480		$	340,246		$	1,108,751		$	1,028,420
Gross receipts tax collections		17,414			15,246			51,100			47,342
Total revenues		389,894			355,492			1,159,851			1,075,762
EXPENSES:
Purchased power from affiliates		165,125			81,191			486,470			249,438
Purchased power from non-affiliates		92,648			144,777			270,900			397,260
Other operating expenses		58,832			47,785			198,296			171,375
Provision for depreciation		14,859			15,038			46,146			45,074
Amortization (deferral) of regulatory assets, net		(1,771	)		17,201			(22,259	)		44,090
General taxes		19,194			17,230			54,375			56,074
Total expenses		348,887			323,222			1,033,928			963,311
OPERATING INCOME		41,007			32,270			125,923			112,451
OTHER INCOME (EXPENSE):
Miscellaneous income		1,508			1,156			4,431			2,865
Interest expense		(17,581	)		(11,614	)		(52,501	)		(36,690	)
Capitalized interest		193			23			516			74
Total other expense		(15,880	)		(10,435	)		(47,554	)		(33,751	)
INCOME BEFORE INCOME TAXES		25,127			21,835			78,369			78,700
INCOME TAXES		5,311			6,039			28,280			29,393
NET INCOME		19,816			15,796			50,089			49,307
OTHER COMPREHENSIVE INCOME (LOSS):
Pension and other postretirement benefits		1,830			(79,579	)		12,207			(47,224	)
Unrealized gain on derivative hedges		16			17			48			49
Change in unrealized gain on available-for-sale securities		—			19			—			3
Other comprehensive income (loss)		1,846			(79,543	)		12,255			(47,172	)
Income tax expense (benefit) related to other comprehensive income		484			(33,141	)		4,251			(16,986	)
Other comprehensive income (loss), net of tax		1,362			(46,402	)		8,004			(30,186	)
TOTAL COMPREHENSIVE INCOME (LOSS)	$	21,178		$	(30,606	)	$	58,093		$	19,121

The accompanying Combined Notes to the Consolidated Financial Statements are an integral part of these financial statements.

23

PENNSYLVANIA ELECTRIC COMPANY

CONSOLIDATED BALANCE SHEETS
(Unaudited)

	September 30,			December 31,
	2010			2009
	(In thousands)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	8		$	14
Receivables-
Customers (less accumulated provisions of $3,481,000 and $3,483,000, respectively, for uncollectible accounts)		135,416			139,302
Associated companies		95,355			77,338
Other		14,413			18,320
Notes receivable from associated companies		14,569			14,589
Prepaid taxes		48,264			18,946
Other		2,115			1,400
		310,140			269,909
UTILITY PLANT:
In service		2,503,555			2,431,737
Less — Accumulated provision for depreciation		925,894			901,990
		1,577,661			1,529,747
Construction work in progress		28,498			24,205
		1,606,159			1,553,952
OTHER PROPERTY AND INVESTMENTS:
Nuclear plant decommissioning trusts		147,675			142,603
Non-utility generation trusts		92,034			120,070
Other		294			289
		240,003			262,962
DEFERRED CHARGES AND OTHER ASSETS:
Goodwill		768,628			768,628
Regulatory assets		202,801			9,045
Power purchase contract asset		5,746			15,362
Other		28,780			19,143
		1,005,955			812,178
	$	3,162,257		$	2,899,001
LIABILITIES AND CAPITALIZATION
CURRENT LIABILITIES:
Currently payable long-term debt	$	69,310		$	69,310
Short-term borrowings-
Associated companies		43,244			41,473
Accounts payable-
Associated companies		40,747			39,884
Other		28,427			41,990
Accrued taxes		4,164			6,409
Accrued interest		24,513			17,598
Other		25,871			22,741
		236,276			239,405
CAPITALIZATION:
Common stockholders’ equity-
Common stock, $20 par value, authorized 5,400,000 shares, 4,427,577 shares outstanding		88,552			88,552
Other paid-in capital		913,507			913,437
Accumulated other comprehensive loss		(154,100	)		(162,104	)
Retained earnings		141,590			91,501
Total common stockholders’ equity		989,549			931,386
Long-term debt and other long-term obligations		1,072,207			1,072,181
		2,061,756			2,003,567
NONCURRENT LIABILITIES:
Accumulated deferred income taxes		356,536			242,040
Retirement benefits		167,542			174,306
Asset retirement obligations		96,519			91,841
Power purchase contract liability		194,102			100,849
Other		49,526			46,993
		864,225			656,029
COMMITMENTS, GUARANTEES AND CONTINGENCIES (Note 9)
	$	3,162,257		$	2,899,001

The accompanying Combined Notes to the Consolidated Financial Statements are an integral part of these financial statements.

24

PENNSYLVANIA ELECTRIC COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

	Nine Months Ended
	September 30
	2010			2009
	(In thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	50,089		$	49,307
Adjustments to reconcile net income to net cash from operating activities-
Provision for depreciation		46,146			45,074
Amortization (deferral) of regulatory assets, net		(22,259	)		44,090
Deferred costs recoverable as regulatory assets		(61,574	)		(76,953	)
Deferred income taxes and investment tax credits, net		94,015			56,144
Accrued compensation and retirement benefits		7,634			6,271
Cash collateral paid, net		(11,760	)		—
Pension trust contribution		—			(60,000	)
Decrease (increase) in operating assets-
Receivables		(2,584	)		3,687
Prepayments and other current assets		(30,034	)		(24,730	)
Increase (decrease) in operating liabilities-
Accounts payable		(12,766	)		(8,988	)
Accrued taxes		(2,245	)		(7,015	)
Accrued interest		6,915			(2,570	)
Other		10,127			13,392
Net cash provided from operating activities		71,704			37,709
CASH FLOWS FROM FINANCING ACTIVITIES:
New Financing-
Long-term debt		—			498,583
Short-term borrowings, net		1,771			—
Redemptions and Repayments-
Long-term debt		—			(100,000	)
Short-term borrowings, net		—			(239,770	)
Common stock dividend payments		—			(85,000	)
Other		(125	)		(3,865	)
Net cash provided from financing activities		1,646			69,948
CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions		(91,924	)		(92,070	)
Sales of investment securities held in trusts		141,392			80,986
Purchases of investment securities held in trusts		(116,240	)		(91,105	)
Other		(6,584	)		(5,482	)
Net cash used for investing activities		(73,356	)		(107,671	)
Net change in cash and cash equivalents		(6	)		(14	)
Cash and cash equivalents at beginning of period		14			23
Cash and cash equivalents at end of period	$	8		$	9

The accompanying Combined Notes to the Consolidated Financial Statements are an integral part of these financial statements.

25

COMBINED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

1. ORGANIZATION AND BASIS OF PRESENTATION

FirstEnergy is a diversified energy company that holds, directly or indirectly, all of the outstanding common stock of its principal subsidiaries: OE, CEI, TE, Penn (a wholly owned subsidiary of OE), ATSI, JCP&L, Met-Ed, Penelec, FENOC, FES and its subsidiaries FGCO and NGC, and FESC.

FirstEnergy and its subsidiaries follow GAAP and comply with the regulations, orders, policies and practices prescribed by the SEC, the FERC and, as applicable, the PUCO, the PPUC and the NJBPU. The preparation of financial statements in conformity with GAAP requires management to make periodic estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and disclosure of contingent assets and liabilities. Actual results could differ from these estimates. The reported results of operations are not indicative of results of operations for any future period. In preparing the financial statements, FirstEnergy and its subsidiaries have evaluated events and transactions for potential recognition or disclosure through the date the financial statements were issued.

These statements should be read in conjunction with the financial statements and notes included in the combined Annual Report on Form 10-K for the year ended December 31, 2009 for FirstEnergy, FES and the Utilities, as applicable. The consolidated unaudited financial statements of FirstEnergy, FES and each of the Utilities reflect all normal recurring adjustments that, in the opinion of management, are necessary to fairly present results of operations for the interim periods. Certain prior year amounts have been reclassified to conform to the current year presentation. Unless otherwise indicated, defined terms used herein have the meanings set forth in the accompanying Glossary of Terms.

FirstEnergy and its subsidiaries consolidate all majority-owned subsidiaries over which they exercise control and, when applicable, entities for which they have a controlling financial interest. Intercompany transactions and balances are eliminated in consolidation. FirstEnergy consolidates a VIE when it is determined that it is the primary beneficiary (see Note 7). Investments in affiliates over which FirstEnergy and its subsidiaries have the ability to exercise significant influence, but are not the primary beneficiary and do not exercise control, follow the equity method of accounting. Under the equity method, the interest in the entity is reported as an investment in the Consolidated Balance Sheets and the percentage share of the entity’s earnings is reported in the Consolidated Statements of Income.

2. EARNINGS PER SHARE

Basic earnings per share of common stock is computed using the weighted average of actual common shares outstanding during the respective period as the denominator. The denominator for diluted earnings per share of common stock reflects the weighted average of common shares outstanding plus the potential additional common shares that could result if dilutive securities and other agreements to issue common stock were exercised. The following table reconciles basic and diluted earnings per share of common stock:

	Three Months				Nine Months
Reconciliation of Basic and Diluted Earnings per Share	Ended September 30				Ended September 30
of Common Stock	2010		2009		2010		2009
	(In millions, except per share amounts)
Earnings available to FirstEnergy Corp.	$	179	$	234	$	599	$	768
Weighted average number of basic shares outstanding		304		304		304		304
Assumed exercise of dilutive stock options and awards		1		2		1		2
Weighted average number of diluted shares outstanding		305		306		305		306
Basic earnings per share of common stock	$	0.59	$	0.77	$	1.97	$	2.52
Diluted earnings per share of common stock	$	0.59	$	0.77	$	1.96	$	2.51

26

3. GOODWILL

In a business combination, the excess of the purchase price over the estimated fair values of the assets acquired and liabilities assumed is recognized as goodwill. Goodwill is evaluated for impairment at least annually and more frequently if indicators of impairment arise. In accordance with the accounting standards, if the fair value of a reporting unit is less than its carrying value (including goodwill), the goodwill is tested for impairment. Impairment is indicated and a loss is recognized if the implied fair value of a reporting unit’s goodwill is less than the carrying value of its goodwill.

FirstEnergy’s goodwill primarily relates to its energy delivery services segment. FirstEnergy’s aggregated reporting units are consistent with its operating segments, which are energy delivery services and competitive energy. Goodwill is allocated to these operating segments based on the original purchase price allocation for acquisitions within the various reporting units. The goodwill allocated to competitive energy is insignificant to that segment and to FirstEnergy.

Annual impairment testing is conducted during the third quarter of each year and for 2010 the analysis indicated no impairment of goodwill. For purposes of annual testing the estimated fair values of energy delivery services and the utilities were determined using a discounted cash flow approach.

The discounted cash flow model of the reporting units, which are aggregated into operating segments, is based on the forecasted operating cash flow for the current year, projected operating cash flows for the next five years (determined using forecasted amounts as well as an estimated growth rate) and a terminal value beyond five years. Discounted cash flows consist of the operating cash flows for each reporting unit less an estimate for capital expenditures. The key assumptions incorporated in the discounted cash flow approach include growth rates, projected operating income, changes in working capital, projected capital expenditures, planned funding of pension plans, anticipated funding of nuclear decommissioning trusts, expected results of future rate proceedings and a discount rate equal to our assumed long term cost of capital. Cash flows may be adjusted to exclude certain non-recurring or unusual items. Reporting unit income, which excludes non-recurring or unusual items, was the starting point for determining operating cash flow and there were no non- recurring or unusual items excluded from the calculations of operating cash flow in any of the periods included in the determination of fair value.

Unanticipated changes in assumptions could have a significant effect on FirstEnergy’s evaluation of goodwill. At the time of annual impairment testing, fair value would have to have declined in excess of 52% for energy delivery services to indicate a potential goodwill impairment. Fair value would have to have declined more than 26% for CEI, 64% for TE, 38% for JCP&L, 56% for Met-Ed, and 57% for Penelec to indicate potential goodwill impairment.

27

4. FAIR VALUE OF FINANCIAL INSTRUMENTS

(A) LONG-TERM DEBT AND OTHER LONG-TERM OBLIGATIONS

All borrowings with initial maturities of less than one year are defined as short-term financial instruments under GAAP and are reported on the Consolidated Balance Sheets at cost, which approximates their fair market value, in the caption “short-term borrowings.” The following table provides the approximate fair value and related carrying amounts of long-term debt and other long-term obligations as of September 30, 2010 and December 31, 2009:

	September 30, 2010				December 31, 2009
	Carrying		Fair		Carrying		Fair
	Value		Value		Value		Value
	(In millions)
FirstEnergy (Consolidated)	$	13,592	$	14,920	$	13,753	$	14,502
FES		4,181		4,228		4,224		4,306
OE		1,159		1,409		1,169		1,299
CEI		1,853		2,144		1,873		2,032
TE		600		706		600		638
JCP&L		1,819		2,076		1,840		1,950
Met-Ed		742		849		842		909
Penelec		1,144		1,269		1,144		1,177

The fair values of long-term debt and other long-term obligations 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 period. The yields assumed were based on securities with similar characteristics offered by corporations with credit ratings similar to those of FES and the Utilities.

(B) INVESTMENTS

All temporary cash investments purchased with an initial maturity of three months or less are reported as cash equivalents on the Consolidated Balance Sheets at cost, which approximates their fair market value. Investments other than cash and cash equivalents include held-to-maturity securities, available-for-sale securities, and notes receivable.

Available-For-Sale Securities

The following table summarizes the amortized cost basis, unrealized gains and losses and fair values of investments held in nuclear decommissioning trusts, nuclear fuel disposal trusts and NUG trusts as of September 30, 2010 and December 31, 2009:

	September 30, 2010(1)								December 31, 2009(2)
	Cost		Unrealized		Unrealized		Fair		Cost		Unrealized		Unrealized		Fair
	Basis		Gains		Losses		Value		Basis		Gains		Losses		Value
	(In millions)
Debt securities
FirstEnergy	$	1,795	$	73	$	—	$	1,868	$	1,727	$	22	$	—	$	1,749
FES		1,079		39		—		1,118		1,043		3		—		1,046
OE		124		4		—		128		55		—		—		55
TE		31		1		—		32		72		—		—		72
JCP&L		277		15		—		292		271		9		—		280
Met-Ed		129		8		—		137		120		5		—		125
Penelec		155		6		—		161		166		5		—		171
Equity securities
FirstEnergy	$	261	$	44	$	—	$	305	$	252	$	43	$	—	$	295
JCP&L		78		9		—		87		74		11		—		85
Met-Ed		122		23		—		145		117		23		—		140
Penelec		62		10		—		72		61		9		—		70

(1)	Excludes cash balances: FirstEnergy — $93 million; FES — $40 million; OE — $2 million; TE — $44 million; JCP&L — $5 million; Met-Ed — $(5) million and Penelec — $6 million.
(2)	Excludes cash balances: FirstEnergy — $137 million; FES — $43 million; OE — $66 million; TE — $2 million; JCP&L — $3 million and Penelec — $23 million.

28

Proceeds from the sale of investments in available-for-sale securities, realized gains and losses on those sales, and interest and dividend income for the nine-month period ended September 30, 2010 and 2009 were as follows:

September 30, 2010	FirstEnergy		FES		OE		TE		JCP&L		Met-Ed		Penelec
	(In millions)
Proceeds from sales	$	2,577	$	1,478	$	79	$	118	$	340	$	420	$	141
Realized gains		132		101		2		3		10		10		6
Realized losses		118		88		—		1		10		12		7
Interest and dividend income		56		33		2		1		10		5		5

September 30, 2009	FirstEnergy		FES		OE		TE		JCP&L		Met-Ed		Penelec
	(In millions)
Proceeds from sales	$	3,040	$	2,153	$	207	$	171	$	339	$	89	$	81
Realized gains		186		162		11		7		4		1		1
Realized losses		96		62		3		—		11		13		7
Interest and dividend income		47		22		4		2		10		5		4

Held-To-Maturity Securities

The following table provides the amortized cost basis, unrealized gains and losses, and approximate fair values of investments in held-to-maturity securities as of September 30, 2010 and December 31, 2009:

	September 30, 2010								December 31, 2009
	Cost		Unrealized		Unrealized		Fair		Cost		Unrealized		Unrealized		Fair
	Basis		Gains		Losses		Value		Basis		Gains		Losses		Value
	(In millions)
Debt Securities
FirstEnergy	$	486	$	99	$	—	$	585	$	544	$	72	$	—	$	616
OE		205		60		—		265		217		29		—		246
CEI		340		31		—		371		389		43		—		432

Investments in emission allowances, employee benefits and cost and equity method investments totaling $256 million as of September 30, 2010, and $264 million as of December 31, 2009 are not required to be disclosed and are therefore excluded from the amounts reported above.

Notes Receivable

The table below provides the approximate fair value and related carrying amounts of notes receivable as of September 30, 2010 and December 31, 2009. The fair value of notes receivable represents 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.

	September 30, 2010				December 31, 2009
	Carrying		Fair		Carrying		Fair
	Value		Value		Value		Value
	(In millions)
Notes Receivable
FirstEnergy	$	7	$	8	$	36	$	35
FES		—		—		2		1
TE		104		114		124		141

The fair value of notes receivable represents 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.

(C) RECURRING FAIR VALUE MEASUREMENTS

Fair value is the price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between willing market participants on the measurement date. A fair value hierarchy has been established that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted market prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are as follows:

Level 1 — Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those where transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. FirstEnergy’s Level 1 assets and liabilities primarily consist of exchange-traded derivatives and equity securities listed on active exchanges that are held in various trusts.

29

Level 2 — Pricing inputs are either directly or indirectly observable in the market as of the reporting date, other than quoted prices in active markets included in Level 1. FirstEnergy’s Level 2 assets and liabilities consist primarily of investments in debt securities held in various trusts and commodity forwards. Additionally, Level 2 includes those financial instruments that are valued using models or other valuation methodologies based on assumptions that are observable in the marketplace throughout the full term of the instrument and can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors, and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Instruments in this category include non-exchange-traded derivatives such as forwards and certain interest rate swaps.

Level 3 — Pricing inputs include inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value. FirstEnergy develops its view of the future market price of key commodities through a combination of market observation and assessment (generally for the short term) and fundamental modeling (generally for the long term). Key fundamental electricity model inputs are generally directly observable in the market or derived from publicly available historic and forecast data. Some key inputs reflect forecasts published by industry leading consultants who generally employ similar fundamental modeling approaches. Fundamental model inputs and results, as well as the selection of consultants, reflect the consensus of appropriate FirstEnergy management. Level 3 instruments include those that may be more structured or otherwise tailored to customers’ needs. FirstEnergy’s Level 3 instruments consist exclusively of NUG contracts.

FirstEnergy utilizes market data and assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. FirstEnergy primarily applies the market approach for recurring fair value measurements using the best information available. Accordingly, FirstEnergy maximizes the use of observable inputs and minimizes the use of unobservable inputs.

The following tables set forth financial assets and financial liabilities that are accounted for at fair value by level within the fair value hierarchy as of September 30, 2010 and December 31, 2009. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. FirstEnergy’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the fair valuation of assets and liabilities and their placement within the fair value hierarchy levels.

	Recurring Fair Value Measures as of September 30, 2010
	Level 1
	FirstEnergy		FES		OE		TE		JCP&L		Met-Ed		Penelec
	(In millions)
Assets
Nuclear Decommissioning Trust Investments — equity securities(1)	$	305	$	—	$	—	$	—	$	88	$	145	$	73
Total Assets(2)	$	305	$	—	$	—	$	—	$	88	$	145	$	73
Liabilities
Derivatives — commodity contracts	$	2	$	2	$	—	$	—	$	—	$	—	$	—
Total Liabilities	$	2	$	2	$	—	$	—	$	—	$	—	$	—

30

	Level 2
	FirstEnergy		FES		OE		TE		JCP&L		Met-Ed		Penelec
	(In millions)
Assets
Nuclear Decommissioning Trust Investments
U.S. government debt securities	$	619	$	337	$	127	$	26	$	37	$	82	$	10
U.S. state debt securities		88		—		—		—		29		—		59
Foreign government debt securities		285		285		—		—		—		—		—
Corporate debt securities		580		496		—		6		23		47		8
Other		101		38		6		45		2		9		1
Total Nuclear Decommissioning Trust Investments	$	1,673	$	1,156	$	133	$	77	$	91	$	138	$	78
Rabbi Trust Investments
Equity securities — financial	$	1	$	—	$	—	$	—	$	—	$	—	$	—
Other		11		—		—		—		—		—		—
Total Rabbi Trust Investments	$	12	$	—	$	—	$	—	$	—	$	—	$	—
Nuclear Fuel Disposal Trust Investments
U.S. state debt securities	$	209	$	—	$	—	$	—	$	209	$	—	$	—
Total Nuclear Fuel Disposal Trust Investments	$	209	$	—	$	—	$	—	$	209	$	—	$	—
NUG Trust Investments
U.S. state debt securities	$	86	$	—	$	—	$	—	$	—	$	—	$	86
Other		6		—		—		—		—		—		6
Total NUG Trust Investments	$	92	$	—	$	—	$	—	$	—	$	—	$	92
Derivatives
Commodity contracts	$	183	$	174	$	—	$	—	$	2	$	5	$	2
Total Derivatives Contracts	$	183	$	174	$	—	$	—	$	2	$	5	$	2
Total Assets(2)	$	2,169	$	1,330	$	133	$	77	$	302	$	143	$	172
Liabilities
Derivatives
Commodity contracts	$	329	$	329	$	—	$	—	$	—	$	—	$	—
Total Liabilities	$	329	$	329	$	—	$	—	$	—	$	—	$	—

	Level 3
	FirstEnergy		FES		OE		TE		JCP&L		Met-Ed		Penelec
	(In millions)
Assets
Derivatives — NUG contracts(3)	$	116	$	—	$	—	$	—	$	7	$	104	$	6
Liabilities
Derivatives — NUG contracts(3)	$	756	$	—	$	—	$	—	$	386	$	175	$	194

(1)	NDT funds hold equity portfolios whose performance is benchmarked against the S&P 500 Index or Russell 3000 Index.
(2)	Excludes $(13) million of receivables, payables and accrued income.
(3)	NUG contracts are subject to regulatory accounting and do not impact earnings.

	Recurring Fair Value Measures as of December 31, 2009
	Level 1
	FirstEnergy		FES		OE		TE		JCP&L		Met-Ed		Penelec
	(In millions)
Assets
Nuclear Decommissioning Trust Investments — equity securities(1)	$	294	$	—	$	—	$	—	$	87	$	133	$	74
Total Assets(2)	$	294	$	—	$	—	$	—	$	87	$	133	$	74
Liabilities
Derivatives — commodity contracts	$	11	$	11	$	—	$	—	$	—	$	—	$	—
Total Liabilities	$	11	$	11	$	—	$	—	$	—	$	—	$	—

31

	Level 2
	FirstEnergy		FES		OE		TE		JCP&L		Met-Ed		Penelec
	(In millions)
Assets
Nuclear Decommissioning Trust Investments
U.S. government debt securities	$	558	$	306	$	118	$	72	$	23	$	30	$	9
U.S. state debt securities		188		15		—		—		41		82		50
Foreign government debt securities		279		279		—		—		—		—		—
Corporate debt securities		484		443		—		—		15		20		6
Other		35		29		2		—		1		2		1
Total Nuclear Decommissioning Trust Investments	$	1,544	$	1,072	$	120	$	72	$	80	$	134	$	66
Rabbi Trust Investments
Equity securities — financial	$	1	$	—	$	—	$	—	$	—	$	—	$	—
Other		9		—		—		—		—		—		—
Total Rabbi Trust Investments	$	10	$	—	$	—	$	—	$	—	$	—	$	—
Nuclear Fuel Disposal Trust Investments
U.S. state debt securities	$	189	$	—	$	—	$	—	$	189	$	—	$	—
Other		11		—		—		—		11		—		—
Total Nuclear Fuel Disposal Trust Investments	$	200	$	—	$	—	$	—	$	200	$	—	$	—
NUG Trust Investments
U.S. state debt securities	$	101	$	—	$	—	$	—	$	—	$	—	$	101
Other		19		—		—		—		—		—		19
Total NUG Trust Investments	$	120	$	—	$	—	$	—	$	—	$	—	$	120
Derivatives — Commodity Contracts	$	34	$	15	$	—	$	—	$	5	$	9	$	5
Other	$	1	$	—	$	—	$	—	$	—	$	—	$	—
Total Assets(2)	$	1,909	$	1,087	$	120	$	72	$	285	$	143	$	191
Liabilities
Derivatives — commodity contracts	$	224	$	224	$	—	$	—	$	—	$	—	$	—
Total Liabilities	$	224	$	224	$	—	$	—	$	—	$	—	$	—

	Level 3
	FirstEnergy		FES		OE		TE		JCP&L		Met-Ed		Penelec
	(In millions)
Assets
Derivatives — NUG contracts(3)	$	200	$	—	$	—	$	—	$	9	$	176	$	15
Liabilities
Derivatives — NUG contracts(3)	$	643	$	—	$	—	$	—	$	399	$	143	$	101

(1)	NDT funds hold equity portfolios whose performance is benchmarked against the S&P 500 Index or Russell 3000 Index.
(2)	Excludes $21 million of receivables, payables and accrued income.
(3)	NUG contracts are subject to regulatory accounting and do not impact earnings.

The determination of the above fair value measures takes into consideration various factors. These factors include nonperformance risk, including counterparty credit risk and the impact of credit enhancements (such as cash deposits, LOCs and priority interests). The impact of nonperformance risk was immaterial in the fair value measurements.

32

The following tables set forth a reconciliation of changes in the fair value of NUG contracts classified as Level 3 in the fair value hierarchy for the three and nine months ended September 30, 2010 and 2009 (in millions):

	FirstEnergy			JCP&L			Met-Ed			Penelec
Balance as of January 1, 2010	$	(444	)	$	(391	)	$	33		$	(86	)
Settlements(1)		209			99			60			50
Unrealized losses(1)		(405	)		(88	)		(164	)		(153	)
Balance as of September 30, 2010	$	(640	)	$	(380	)	$	(71	)	$	(189	)
Balance as of July 1, 2010	$	(557	)	$	(371	)	$	(38	)	$	(148	)
Settlements(1)		63			29			23			11
Unrealized losses(1)		(146	)		(38	)		(56	)		(52	)
Balance as of September 30, 2010	$	(640	)	$	(380	)	$	(71	)	$	(189	)

	FirstEnergy			JCP&L			Met-Ed			Penelec
Balance as of January 1, 2009	$	(332	)	$	(518	)	$	150		$	36
Settlements(1)		273			132			63			78
Unrealized losses(1)		(406	)		(30	)		(178	)		(198	)
Balance as of September 30, 2009	$	(465	)	$	(416	)	$	35		$	(84	)
Balance as of July 1, 2009	$	(536	)	$	(466	)	$	23		$	(93	)
Settlements(1)		93			42			20			31
Unrealized gains (losses)(1)		(22	)		8			(8	)		(22	)
Balance as of September 30, 2009	$	(465	)	$	(416	)	$	35		$	(84	)

⁽¹⁾ Changes in fair value of NUG contracts are subject to regulatory accounting and do not impact earnings.

5. DERIVATIVE INSTRUMENTS

FirstEnergy is exposed to financial risks resulting from fluctuating interest rates and commodity prices, including prices for electricity, natural gas, coal and energy transmission. To manage the volatility relating to these exposures, FirstEnergy uses a variety of derivative instruments, including forward contracts, options, futures contracts and swaps. The derivatives are used for risk management purposes. In addition to derivatives, FirstEnergy also enters into master netting agreements with certain third parties. FirstEnergy’s Risk Policy Committee, comprised of members of senior management, provides general management oversight for risk management activities throughout FirstEnergy. The Committee is responsible for promoting the effective design and implementation of sound risk management programs and oversees compliance with corporate risk management policies and established risk management practices.

FirstEnergy accounts for derivative instruments on its Consolidated Balance Sheets at fair value unless they meet the normal purchases and normal sales criteria. Derivatives that meet those criteria are accounted for at cost under the accrual method of accounting. The changes in the fair value of derivative instruments that do not meet the normal purchases and normal sales criteria are included in purchased power, other expense, unrealized gain (loss) on derivative hedges in other comprehensive income (loss), or as part of the value of the hedged item. Based on derivative contracts held as of September 30, 2010, an adverse 10% change in commodity prices would decrease net income by approximately $6 million ($4 million net of tax) during the next twelve months. A hypothetical 10% increase in the interest rates associated with variable-rate debt would decrease net income by approximately $1 million for the three and nine months ended September 30, 2010.

Cash Flow Hedges

FirstEnergy has used forward starting swap agreements to hedge a portion of the consolidated interest rate risk associated with anticipated issuances of fixed-rate, long-term debt securities of its subsidiaries. These derivatives were treated as cash flow hedges, protecting against the risk of changes in future interest payments resulting from changes in benchmark U.S. Treasury rates between the date of hedge inception and the date of the debt issuance. As of September 30, 2010, no forward starting swap agreements were outstanding.

Total unamortized losses included in AOCL associated with prior interest rate cash flow hedges totaled $95 million ($62 million net of tax) as of September 30, 2010. Based on current estimates, approximately $11 million will be amortized to interest expense during the next twelve months. The table below provides the activity of AOCL related to interest rate cash flow hedges as of September 30, 2010 and 2009.

	Three Months Ended						Nine Months Ended
	September 30						September 30
	2010			2009			2010			2009
	(In millions)						(In millions)
Effective Portion
Gain (Loss) Recognized in AOCL	$	—		$	(17	)	$	—		$	(18	)
Reclassification from AOCL into Interest Expense		(3	)		(26	)		(9	)		(37	)

33

Fair Value Hedges

FirstEnergy has used fixed-for-floating interest rate swap agreements to hedge a portion of the consolidated interest rate risk associated with the debt portfolio of its subsidiaries. These derivatives were treated as fair value hedges of fixed-rate, long-term debt issues, protecting against the risk of changes in the fair value of fixed-rate debt instruments due to lower interest rates. As of September 30, 2010, no fixed-for-floating interest rate swap agreements were outstanding.

Total unamortized gains included in long-term debt associated with prior fixed-for-floating interest rate swap agreements totaled $129 million ($84 million net of tax) as of September 30, 2010. Based on current estimates, approximately $22 million will be amortized to interest expense during the next twelve months. Reclassifications from long-term debt into interest expense totaled $5 million and $7 million for the three and nine months ended September 30, 2010.

Commodity Derivatives

FirstEnergy uses both physically and financially settled derivatives to manage its exposure to volatility in commodity prices. Commodity derivatives are used for risk management purposes to hedge exposures when it makes economic sense to do so, including circumstances where the hedging relationship does not qualify for hedge accounting.

The following tables summarize the fair value of commodity derivatives in FirstEnergy’s Consolidated Balance Sheets:

Cash Flow Hedges
Derivative Assets					Derivative Liabilities
	Fair Value					Fair Value
	September 30,		December 31,			September 30,		December 31,
	2010		2009			2010		2009
	(In millions)					(In millions)
Electricity Forwards					Electricity Forwards
Current Assets	$	77	$	3	Current Liabilities	$	87	$	7
NonCurrent Assets		73		11	NonCurrent Liabilities		70		12
Natural Gas Futures					Natural Gas Futures
Current Assets		—		—	Current Liabilities		1		9
NonCurrent Assets		—		—	NonCurrent Liabilities		—		—
Other					Other
Current Assets		—		—	Current Liabilities		—		2
NonCurrent Assets		—		—	NonCurrent Liabilities		—		—
	$	150	$	14		$	158	$	30

Economic Hedges
Derivative Assets					Derivative Liabilities
	Fair Value					Fair Value
	September 30,		December 31,			September 30,		December 31,
	2010		2009			2010		2009
	(In millions)					(In millions)
NUG Contracts					NUG Contracts
Power Purchase					Power Purchase
Contract Asset	$	116	$	200	Contract Liability	$	756	$	643
Other					Other
Current Assets		17		—	Current Liabilities		138		106
NonCurrent Assets		15		19	NonCurrent Liabilities		34		97
		148		219			928		846
Total Commodity Derivatives	$	298	$	233	Total Commodity Derivatives	$	1,086	$	876

Electricity forwards are used to balance expected sales with expected generation and purchased power. Natural gas futures are entered into based on expected consumption of natural gas, primarily used in FirstEnergy’s peaking units. Heating oil futures are entered into based on expected consumption of oil and the financial risk in FirstEnergy’s coal transportation contracts. Derivative instruments are not used in quantities greater than forecasted needs. The following table summarizes the volume of FirstEnergy’s outstanding derivative transactions as of September 30, 2010:

	Purchases		Sales			Net			Units
	(In thousands)
Electricity Forwards		28,456		(32,604	)		(4,148	)	MWH
Heating Oil Futures		840		—			840		Gallons
Natural Gas Futures		500		(500	)		—		mmBtu

34

The effect of derivative instruments on the consolidated statements of income and comprehensive income for the three and nine months ended September 30, 2010 and 2009, are summarized in the following tables:

	Three Months Ended September 30,
	Electricity			Natural Gas			Heating Oil
Derivatives in Cash Flow Hedging Relationships	Forwards			Futures			Futures			Total
	(In millions)
2010
Gain (Loss) Recognized in AOCL (Effective Portion)	$	(2	)	$	—		$	—		$	(2	)
Effective Gain (Loss) Reclassified to:(1)
Purchased Power Expense		(1	)		—			—			(1	)
Fuel Expense		—			(3	)		(1	)		(4	)
2009
Gain (Loss) Recognized in AOCL (Effective Portion)	$	15		$	(2	)	$	—		$	13
Effective Gain (Loss) Reclassified to:(1)
Purchased Power Expense		11			—			—			11
Fuel Expense		—			(4	)		(2	)		(6	)

	Nine Months Ended September 30,
	Electricity			Natural Gas			Heating Oil
Derivatives in Cash Flow Hedging Relationships	Forwards			Futures			Futures			Total
	(In millions)
2010
Gain (Loss) Recognized in AOCL (Effective Portion)	$	(15	)	$	(1	)	$	—		$	(16	)
Effective Gain (Loss) Reclassified to:(1)
Purchased Power Expense		(12	)		—			—			(12	)
Fuel Expense		—			(9	)		(2	)		(11	)
2009
Gain (Loss) Recognized in AOCL (Effective Portion)	$	19		$	(9	)	$	—		$	10
Effective Gain (Loss) Reclassified to:(1)
Purchased Power Expense		(6	)		—			—			(6	)
Fuel Expense		—			(9	)		(10	)		(19	)

⁽¹⁾ The ineffective portion was immaterial.

	Three Months Ended September 30,
	NUG
Derivatives Not in Hedging Relationships	Contracts			Other			Total
	(In millions)
2010
Unrealized Gain (Loss) Recognized in:
Purchased Power Expense	$	—		$	(13	)	$	(13	)
Regulatory Assets (2)		(145	)		—			(145	)
	$	(145	)	$	(13	)	$	(158	)
Realized Gain (Loss) Reclassified to:
Purchased Power Expense	$	—		$	(30	)	$	(30	)
Regulatory Assets (2)		(63	)		—			(63	)
	$	(63	)	$	(30	)	$	(93	)
2009
Unrealized Gain (Loss) Recognized in:
Fuel Expense (1)	$	—		$	(1	)	$	(1	)
Regulatory Assets (2)		(22	)		—			(22	)
	$	(22	)	$	(1	)	$	(23	)
Realized Gain (Loss) Reclassified to:
Fuel Expense (1)	$	—		$	1		$	1
Regulatory Assets (2)		(93	)		—			(93	)
	$	(93	)	$	1		$	(92	)

35

	Nine Months Ended September 30,
	NUG
Derivatives Not in Hedging Relationships	Contracts			Other			Total
	(In millions)
2010
Unrealized Gain (Loss) Recognized in:
Purchased Power Expense	$	—		$	(30	)	$	(30	)
Regulatory Assets (2)		(405	)		—			(405	)
	$	(405	)	$	(30	)	$	(435	)
Realized Gain (Loss) Reclassified to:
Purchased Power Expense	$	—		$	(86	)	$	(86	)
Regulatory Assets (2)		(209	)		9			(200	)
	$	(209	)	$	(77	)	$	(286	)
2009
Unrealized Gain (Loss) Recognized in:
Fuel Expense (1)	$	—		$	2		$	2
Regulatory Assets (2)		(406	)		—			(406	)
	$	(406	)	$	2		$	(404	)
Realized Gain (Loss) Reclassified to:
Fuel Expense (1)	$	—		$	—		$	—
Regulatory Assets (2)		(273	)		11			(262	)
	$	(273	)	$	11		$	(262	)

(1)	The realized gain (loss) is reclassified upon termination of the derivative instrument.
(2)	Changes in the fair value of NUG contracts are deferred for future recovery from (or refund to) customers.

Total unamortized losses included in AOCL associated with commodity derivatives were $8 million ($5 million net of tax) as of September 30, 2010, as compared to $15 million ($9 million net of tax) as of December 31, 2009. The net of tax change resulted from a net $14 million increase related to current hedging activity and a $10 million decrease due to net hedge losses reclassified to earnings during the first nine months of 2010. Based on current estimates, approximately $7 million (net of tax) of the net deferred losses on derivative instruments in AOCL as of September 30, 2010 are expected to be reclassified to earnings during the next twelve months as hedged transactions occur. The fair value of these derivative instruments fluctuates from period to period based on various market factors.

Many of FirstEnergy’s commodity derivatives contain credit risk features. As of September 30, 2010, FirstEnergy posted $158 million of collateral related to net liability positions and held no counterparties’ funds related to asset positions. The collateral FirstEnergy has posted relates to both derivative and non-derivative contracts. FirstEnergy’s largest derivative counterparties fully collateralize all derivative transactions. Certain commodity derivative contracts include credit risk-related contingent features that would require FirstEnergy to post additional collateral if the credit rating for its debt were to fall below investment grade. The aggregate fair value of derivative instruments with credit risk-related contingent features that are in a liability position on September 30, 2010 was $158 million, for which $192 million in collateral has been posted. If FirstEnergy’s credit rating were to fall below investment grade, it would be required to post $22.5 million of additional collateral related to commodity derivatives.

36

6. PENSION AND OTHER POSTRETIREMENT BENEFITS

FirstEnergy provides noncontributory qualified defined benefit pension plans that cover substantially all of its employees and non-qualified pension plans that cover certain employees. The plans provide defined benefits based on years of service and compensation levels.

FirstEnergy’s net pension and OPEB expense for the three months ended September 30, 2010 and 2009 was $20 million and $36 million, respectively. FirstEnergy’s net pension and OPEB expense for the nine months ended September 30, 2010 and 2009 was $65 million and $117 million, respectively. The components of FirstEnergy’s net pension and other postretirement benefit costs (including amounts capitalized) for the three and nine months ended September 30, 2010 and 2009, consisted of the following:

	Three Months Ended						Nine Months Ended
	September						September 30
Pension Benefit Cost (Credit)	2010			2009			2010			2009
	(In millions)
Service cost	$	25		$	23		$	74		$	66
Interest cost		79			79			236			239
Expected return on plan assets		(90	)		(86	)		(271	)		(248	)
Amortization of prior service cost		3			3			10			10
Recognized net actuarial loss		47			45			141			129
Net periodic cost	$	64		$	64		$	190		$	196

	Three Months Ended						Nine Months Ended
	September 30						September 30
Other Postretirement Benefit Cost (Credit)	2010			2009			2010			2009
	(In millions)
Service cost	$	2		$	15		$	7		$	23
Interest cost		11			13			33			51
Expected return on plan assets		(9	)		(9	)		(27	)		(27	)
Amortization of prior service cost		(48	)		(48	)		(144	)		(127	)
Recognized net actuarial loss		15			15			45			46
Net periodic cost	$	(29	)	$	(14	)	$	(86	)	$	(34	)

Pension and other postretirement benefit obligations are allocated to FirstEnergy’s subsidiaries employing the plan participants. The net periodic pension costs and net periodic other postretirement benefit costs (including amounts capitalized) recognized by FirstEnergy’s subsidiaries for the three and nine months ended September 30, 2010 and 2009 were as follows:

	Three Months Ended				Nine Months Ended
	September 30				September 30
Pension Benefit Cost	2010		2009		2010		2009
	(In millions)
FES	$	22	$	19	$	66	$	56
OE		6		6		17		20
CEI		5		5		16		14
TE		2		2		5		5
JCP&L		6		8		19		26
Met-Ed		3		5		8		16
Penelec		5		4		14		13
Other FirstEnergy Subsidiaries		15		15		45		46
	$	64	$	64	$	190	$	196

37

	Three Months Ended						Nine Months Ended
	September 30						September 30
Other Postretirement Benefit Cost (Credit)	2010			2009			2010			2009
	(In millions)
FES	$	(7	)	$	(4	)	$	(20	)	$	(8	)
OE		(6	)		(3	)		(19	)		(8	)
CEI		(1	)		—			(4	)		1
TE		—			1			(1	)		2
JCP&L		(2	)		(2	)		(5	)		(4	)
Met-Ed		(2	)		(1	)		(6	)		(3	)
Penelec		(2	)		(1	)		(6	)		(2	)
Other FirstEnergy Subsidiaries		(9	)		(4	)		(25	)		(12	)
	$	(29	)	$	(14	)	$	(86	)	$	(34	)

7. VARIABLE INTEREST ENTITIES

FirstEnergy’s consolidated financial statements include the accounts of entities in which it has a controlling financial interest. FirstEnergy consolidates certain VIEs in which it has financial control through disproportionate economics in its equity and debt investments in the entities. These VIEs include: FEV’s joint venture in the Signal Peak mining and coal transportation operations; the PNBV and Shippingport bond trusts that were created to refinance debt originally issued in connection with sale and leaseback transactions; and wholly owned limited liability companies of JCP&L created to sell transition bonds to securitize the recovery of JCP&L’s bondable stranded costs associated with the previously divested Oyster Creek Nuclear Generating Station, of which $319 million was outstanding as of September 30, 2010.

FirstEnergy and its subsidiaries reflect the portion of VIEs not owned by them in the caption noncontrolling interest within the consolidated financial statements. The change in noncontrolling interest within the consolidated balance sheets is the result of net losses of the noncontrolling interests ($19 million) and distributions to owners ($5 million) for the nine months ended September 30, 2010.

On January 1, 2010, FirstEnergy adopted the amendments to the consolidation topic addressing VIEs. This standard requires that FirstEnergy and its subsidiaries perform a qualitative analysis to determine whether a variable interest gives FirstEnergy or its subsidiaries a controlling financial interest in a VIE. This analysis identifies the primary beneficiary of a VIE as the enterprise that has both the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and the obligation to absorb losses of the entity that could potentially be significant to the VIE or the right to receive benefits from the entity that could potentially be significant to the VIE. This standard also requires an ongoing reassessment of the primary beneficiary of a VIE and eliminates the quantitative approach previously required for determining whether an entity is the primary beneficiary. There was no impact to FirstEnergy or its subsidiaries as a result of the adoption of this standard.

In order to evaluate contracts under the consolidation guidance, FirstEnergy aggregated contracts into two categories based on similar risk characteristics and significance as follows:

Power Purchase Agreements

FirstEnergy evaluated its power purchase agreements and determined that certain NUG entities may be VIEs to the extent they own a plant that sells substantially all of its output to the Utilities and the contract price for power is correlated with the plant’s variable costs of production. FirstEnergy, through its subsidiaries JCP&L, Met-Ed and Penelec, maintains 21 long-term power purchase agreements with NUG entities. The agreements were entered into pursuant to the Public Utility Regulatory Policies Act of 1978. FirstEnergy was not involved in the creation of, and has no equity or debt invested in, these entities.

FirstEnergy has determined that for all but two of these NUG entities, neither JCP&L, nor Met-Ed nor Penelec have variable interests in the entities or the entities are governmental or not-for-profit organizations that are not within the scope of consolidation consideration for VIEs. JCP&L may hold variable interests in the remaining two entities, which sell their output at variable prices that correlate to some extent with the operating costs of the plants. However, FirstEnergy applied the scope exception that exempts enterprises unable to obtain the necessary information to evaluate entities.

Since JCP&L has no equity or debt interests in the NUG entities, its maximum exposure to loss relates primarily to the above-market costs it incurs for power. FirstEnergy expects any above-market costs it incurs to be recovered from customers. Purchased power costs related to the two contracts that may contain a variable interest were $73 million and $58 million for the three months ended September 30, 2010, and 2009, respectively and $190 million and $173 million for the nine months ended September 30, 2010 and 2009, respectively.

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Loss Contingencies

FirstEnergy has variable interests in certain sale-leaseback transactions. FirstEnergy is not the primary beneficiary of these interests as it does not have control over the significant activities affecting the economics of the arrangement.

FES and the Ohio Companies are exposed to losses under their applicable sale-leaseback agreements upon the occurrence of certain contingent events that each company considers unlikely to occur. The maximum exposure under these provisions represents the net amount of casualty value payments due upon the occurrence of specified casualty events that render the applicable plant worthless. Net discounted lease payments would not be payable if the casualty loss payments were made. The following table discloses each company’s net exposure to loss based upon the casualty value provisions mentioned above as of September 30, 2010:

	Maximum		Discounted Lease		Net
	Exposure		Payments, net(1)		Exposure
	(In millions)
FES	$	1,376	$	1,185	$	191
OE		672		511		161
CEI(2)		627		71		556
TE(2)		627		346		281

(1)	The net present value of FirstEnergy’s consolidated sale and leaseback operating lease commitments is $1.7 billion.
(2)	CEI and TE are jointly and severally liable for the maximum loss amounts under certain sale-leaseback agreements.

8. INCOME TAXES

FirstEnergy accounts for uncertainty in income taxes recognized in its financial statements. Accounting guidance prescribes a recognition threshold and measurement attribute for financial statement recognition and measurement of tax positions taken or expected to be taken on a company’s tax return. After reaching a settlement at appeals in the second quarter of 2010 related primarily to the capitalization of certain costs for the tax years 2005-2008 and a settlement in the third quarter of 2010 of an unrelated federal tax matter related to prior year gains and losses recognized from the disposition of assets, FirstEnergy recognized approximately $78 million of net tax benefits, including $21 million that favorably affected FirstEnergy’s effective tax rate for the first nine months of 2010. The remaining portion of the tax benefit increased FirstEnergy’s accumulated deferred income taxes. Upon completion of the federal tax examination for the 2007 tax year in the first quarter of 2009, FirstEnergy recognized $13 million in tax benefits, which favorably affected FirstEnergy’s effective tax rate. There were no material changes to FirstEnergy’s unrecognized tax benefits in the third quarter of 2009.

As of September 30, 2010, it is reasonably possible that approximately $44 million of unrecognized benefits may be resolved within the next twelve months, of which less than $1 million, if recognized, would affect FirstEnergy’s effective tax rate. The potential decrease in the amount of unrecognized tax benefits is primarily associated with issues related to gains and losses from the disposition of assets and the capitalization of certain costs.

In 2009, FirstEnergy, on behalf of the Utilities, filed a change in accounting method related to the costs to repair and maintain electric utility network (transmission and distribution) assets. In the third quarter of 2010, approximately $325 million of costs were included as a repair deduction on FirstEnergy’s 2009 consolidated tax return, which reduced taxable income and increased the amount of tax refunds that will be applied to FirstEnergy’s 2010 estimated federal tax payments. Due to Pennsylvania’s state flow through tax benefit for this change in accounting, FirstEnergy’s effective tax rate was reduced by $6 million in the third quarter of 2010. In connection with completing FirstEnergy’s 2009 consolidated tax return, FES recognized an $8 million adjustment that increased its income tax expense in the third quarter of 2010. The effects of the adjustment are not material to the quarterly and annual periods in 2009 or for the nine months ended September 30, 2010.

FirstEnergy recognizes interest expense or income related to uncertain tax positions. That amount is computed by applying the applicable statutory interest rate to the difference between the tax position recognized and the amount previously taken or expected to be taken on the tax return. FirstEnergy includes net interest and penalties in the provision for income taxes. The reversal of accrued interest associated with the recognized tax benefits noted above favorably affected FirstEnergy’s effective tax rate by $13 million in the first nine months of 2010. During the first nine months of 2009, there were no material changes to the amount of interest accrued. The net amount of accumulated interest accrued as of September 30, 2010 was $6 million, as compared to $21 million as of December 31, 2009.

As a result of the Patient Protection and Affordable Care Act and the Health Care and Education Affordability Reconciliation Act signed into law on March 23, 2010 and March 30, 2010, respectively, beginning in 2013 the tax deduction available to FirstEnergy will be reduced to the extent that drug costs are reimbursed under the Medicare Part D retiree subsidy program. As retiree healthcare liabilities and related tax impacts are already reflected in FirstEnergy’s consolidated financial statements, the change resulted in a charge to FirstEnergy’s earnings in the first quarter of 2010 of approximately $13 million and a reduction in accumulated deferred tax assets associated with these subsidies. This change reflects the anticipated increase in income taxes that will occur as a result of the change in tax law.

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On September 27, 2010, the Small Business Jobs Act was signed into law, which extends 50% bonus first-year depreciation for one year to 2010. Management is currently evaluating this tax election which could have a material impact on taxable income for 2010 and could increase the amount of tax refunds to be recognized in 2010 with a corresponding increase to accumulated deferred income taxes for this temporary tax item.

FirstEnergy has tax returns that are under review at the audit or appeals level by the IRS and state tax authorities. Tax returns for all state jurisdictions are open from 2006-2009. The IRS began reviewing returns for the years 2001-2003 in July 2004 and several items were under appeal. In the fourth quarter of 2009, these items were settled at appeals and sent to Joint Committee on Taxation for final review. The federal audits for years 2004-2006 were completed in the third quarter of 2008 and several items are under appeal. The IRS began auditing the year 2007 in February 2007 under its Compliance Assurance Process program and completed the audit in the first quarter of 2009 with two items under appeal. Items under appeal for tax years 2006 and 2007 were settled and sent to Joint Committee on Taxation for final review in the second quarter and subsequently approved in the third quarter of 2010. The IRS began auditing the year 2008 in February 2008 and the audit was completed in July 2010 with one item under appeal. The 2009 tax year audit began in February 2009 and the 2010 tax year audit began in February 2010. Neither audit is expected to close before December 2010. Management believes that adequate reserves have been recognized and final settlement of these audits is not expected to have a material adverse effect on FirstEnergy’s financial condition or results of operations.

9. COMMITMENTS, GUARANTEES AND CONTINGENCIES

(A) GUARANTEES AND OTHER ASSURANCES

As part of normal business activities, FirstEnergy enters into various agreements on behalf of its subsidiaries to provide financial or performance assurances to third parties. These agreements include contract guarantees, surety bonds and LOCs. As of September 30, 2010, outstanding guarantees and other assurances aggregated approximately $3.8 billion, consisting primarily of parental guarantees ($0.8 billion), subsidiaries’ guarantees ($2.5 billion), surety bonds and LOCs ($0.5 billion).

FirstEnergy guarantees energy and energy-related payments of its subsidiaries involved in energy commodity activities principally to facilitate or hedge normal physical transactions involving electricity, gas, emission allowances and coal. FirstEnergy also provides guarantees to various providers of credit support for the financing or refinancing by subsidiaries of costs related to the acquisition of property, plant and equipment. These agreements legally obligate FirstEnergy to fulfill the obligations of those subsidiaries directly involved in energy and energy-related transactions or financing where the law might otherwise limit the counterparties’ claims. If demands of a counterparty were to exceed the ability of a subsidiary to satisfy existing obligations, FirstEnergy’s guarantee enables the counterparty’s legal claim to be satisfied by other FirstEnergy assets. The likelihood is remote that such parental guarantees of $0.3 billion (included in the $0.8 billion discussed above) as of September 30, 2010 would increase amounts otherwise payable by FirstEnergy to meet its obligations incurred in connection with financings and ongoing energy and energy-related activities.

While these types of guarantees are normally parental commitments for the future payment of subsidiary obligations, subsequent to the occurrence of a credit rating downgrade or “material adverse event,” the immediate posting of cash collateral, provision of an LOC or accelerated payments may be required of the subsidiary. As of September 30, 2010, FirstEnergy’s maximum exposure under these collateral provisions was $419 million consisting of $374 million due to a below investment grade credit rating, of which $175 million is due to an acceleration of payment or funding obligation, and $45 million due to “material adverse event” contractual clauses. Additionally, stress case conditions of a credit rating downgrade or “material adverse event” and hypothetical adverse price movements in the underlying commodity markets would increase this amount to $511 million consisting of $463 million due to a below investment grade credit rating, of which $175 million is related to an acceleration of payment or funding obligation, and $48 million due to “material adverse event” contractual clauses.

Most of FirstEnergy’s surety bonds are backed by various indemnities common within the insurance industry. Surety bonds and related guarantees of $84 million provide additional assurance to outside parties that contractual and statutory obligations will be met in a number of areas including construction contracts, environmental commitments and various retail transactions.

In addition to guarantees and surety bonds, FES’ contracts, including power contracts with affiliates awarded through competitive bidding processes, typically contain margining provisions which require the posting of cash or LOCs in amounts determined by future power price movements. Based on FES’ power portfolio as of September 30, 2010, and forward prices as of that date, FES has posted collateral of $244 million. Under a hypothetical adverse change in forward prices (95% confidence level change in forward prices over a one year time horizon), FES would be required to post an additional $46 million. Depending on the volume of forward contracts and future price movements, FES could be required to post higher amounts for margining.

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In connection with FES’ obligations to post and maintain collateral under the two-year PSA entered into by FES and the Ohio Companies following the CBP auction on May 13-14, 2009, NGC entered into a Surplus Margin Guaranty in an amount up to $500 million. The Surplus Margin Guaranty is secured by an NGC FMB issued in favor of the Ohio Companies.

FES’ debt obligations are generally guaranteed by its subsidiaries, FGCO and NGC, and FES guarantees the debt obligations of each of FGCO and NGC. Accordingly, present and future holders of indebtedness of FES, FGCO and NGC will have claims against each of FES, FGCO and NGC regardless of whether their primary obligor is FES, FGCO or NGC.

(B) ENVIRONMENTAL MATTERS

Various federal, state and local authorities regulate FirstEnergy with regard to air and water quality and other environmental matters. Compliance with environmental regulations could have a material adverse effect on FirstEnergy’s earnings and competitive position to the extent that FirstEnergy competes with companies that are not subject to such regulations and, therefore, do not bear the risk of costs associated with compliance, or failure to comply, with such regulations.

CAA Compliance

FirstEnergy is required to meet federally-approved SO2 and NOX emissions regulations under the CAA. FirstEnergy complies with SO₂ and NOx reduction requirements under the CAA and SIP(s) under the CAA by burning lower-sulfur fuel, combustion controls and post-combustion controls, generating more electricity from lower-emitting plants and/or using emission allowances. Violations can result in the shutdown of the generating unit involved and/or civil or criminal penalties.

The Sammis, Burger, Eastlake and Mansfield coal-fired plants are operated under a consent decree with the EPA and DOJ that requires reductions of NO_X and SO₂ emissions through the installation of pollution control devices or repowering. OE and Penn are subject to stipulated penalties for failure to install and operate such pollution controls or complete repowering in accordance with that agreement. Capital expenditures necessary to complete requirements of the consent decree, including repowering Burger Units 4 and 5 for biomass fuel combustion, are currently estimated to be approximately $399 million for 2010-2012.

In 2007, PennFuture filed a citizen suit under the CAA, alleging violations of air pollution laws at the Bruce Mansfield Plant, including opacity limitations, in the U.S. District Court for the Western District of Pennsylvania. In July 2008, three additional complaints were filed against FGCO seeking damages based on Bruce Mansfield Plant air emissions. Two of these complaints also seek to enjoin the Bruce Mansfield Plant from operating except in a “safe, responsible, prudent and proper manner”, one being a complaint filed on behalf of twenty-one individuals and the other being a class action complaint seeking certification as a class action with the eight named plaintiffs as the class representatives. A settlement was reached with PennFuture. FGCO believes the claims of the remaining plaintiffs are without merit and intends to defend itself against the allegations made in those three complaints.

The states of New Jersey and Connecticut filed CAA citizen suits in 2007 alleging NSR violations at the Portland Generation Station against RRI Energy, Inc. (the current owner and operator), Sithe Energy (the purchaser of the Portland Station from Met-Ed in 1999) and Met-Ed. Specifically, these suits allege that “modifications” at Portland Units 1 and 2 occurred between 1980 and 2005 without preconstruction NSR permitting in violation of the CAA’s PSD program, and seek injunctive relief, penalties, attorney fees and mitigation of the harm caused by excess emissions. In September 2009, the Court granted Met-Ed’s motion to dismiss New Jersey’s and Connecticut’s claims for injunctive relief against Met-Ed, but denied Met-Ed’s motion to dismiss the claims for civil penalties. The parties dispute the scope of Met-Ed’s indemnity obligation to and from Sithe Energy.

In January 2009, the EPA issued a NOV to Reliant alleging NSR violations at the Portland Generation Station based on “modifications” dating back to 1986 and also alleged NSR violations at the Keystone and Shawville Stations based on “modifications” dating back to 1984. Met-Ed, JCP&L, as the former owner of 16.67% of the Keystone Station, and Penelec, as former owner and operator of the Shawville Station, are unable to predict the outcome of this matter.

In June 2008, the EPA issued a Notice and Finding of Violation to Mission Energy Westside, Inc. alleging that “modifications” at the Homer City Power Station occurred since 1988 to the present without preconstruction NSR permitting in violation of the CAA’s PSD program. In May 2010, the EPA issued a second NOV to Mission Energy Westside, Inc., Penelec, New York State Electric & Gas Corporation and others that have had an ownership interest in the Homer City Power Station containing in all material respects identical allegations as the June 2008 NOV. On July 20, 2010, the states of New York and Pennsylvania provided Mission Energy Westside, Inc., Penelec, NYSEG and others that have had an ownership interest in the Homer City Power Station a notification required 60 days prior to filing a citizen suit under the CAA. Mission Energy Westside, Inc. is seeking indemnification from Penelec, the co-owner and operator of the Homer City Power Station prior to its sale in 1999. The scope of Penelec’s indemnity obligation to and from Mission Energy Westside, Inc. is under dispute and Penelec is unable to predict the outcome of this matter.

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In August 2009, the EPA issued a Finding of Violation and NOV alleging violations of the CAA and Ohio regulations, including the PSD, NNSR, and Title V regulations at the Eastlake, Lakeshore, Bay Shore and Ashtabula generating plants. The EPA’s NOV alleges equipment replacements occurring during maintenance outages dating back to 1990 triggered the pre-construction permitting requirements under the PSD and NNSR programs. FGCO received a request for certain operating and maintenance information and planning information for these same generating plants and notification that the EPA is evaluating whether certain maintenance at the Eastlake generating plant may constitute a major modification under the NSR provision of the CAA. Later in 2009, FGCO also received another information request regarding emission projections for the Eastlake generating plant. FGCO intends to comply with the CAA, including the EPA’s information requests, but, at this time, is unable to predict the outcome of this matter.

National Ambient Air Quality Standards

The EPA’s CAIR requires reductions of NOX and SO₂ emissions in two phases (2009/2010 and 2015), ultimately capping SO₂ emissions in affected states to 2.5 million tons annually and NOX emissions to 1.3 million tons annually. In 2008, the U.S. Court of Appeals for the District of Columbia vacated CAIR “in its entirety” and directed the EPA to “redo its analysis from the ground up.” In December 2008, the Court reconsidered its prior ruling and allowed CAIR to remain in effect to “temporarily preserve its environmental values” until the EPA replaces CAIR with a new rule consistent with the Court’s opinion. The Court ruled in a different case that a cap-and-trade program similar to CAIR, called the “NOX SIP Call,” cannot be used to satisfy certain CAA requirements (known as reasonably available control technology) for areas in non-attainment under the “8-hour” ozone NAAQS. In July 2010, the EPA proposed the Clean Air Transport Rule (CATR) to replace CAIR, which remains in effect until the EPA finalizes CATR. CATR requires reductions of NOX and SO₂ emissions in two phases (2012 and 2014), ultimately capping SO₂ emissions in affected states to 2.6 million tons annually and NOX emissions to 1.3 million tons annually. The EPA proposed a preferred regulatory approach that allows trading of NOX and SO₂ emission allowances between power plants located in the same state and severely limits interstate trading of NOx and SO₂ emission allowances. The EPA also requested comment on two alternative approaches—the first eliminates interstate trading of NOX and SO₂ emission allowances and the second eliminates trading of NOX and SO₂ emission allowances in its entirety. Depending on the actions taken by the EPA with respect to CATR, the proposed MACT regulations discussed below and any future regulations that are ultimately implemented, FGCO’s future cost of compliance may be substantial. Management is currently assessing the impact of these environmental proposals and other factors on FGCO’s facilities, particularly on the operation of its smaller, non-supercritical units. For example, as disclosed herein, management decided to idle certain units or operate them on a seasonal basis until developments clarify.

Hazardous Air Pollutant Emissions

The EPA’s CAMR provides for a cap-and-trade program to reduce mercury emissions from coal-fired power plants in two phases; initially, capping nationwide emissions of mercury at 38 tons by 2010 (as a “co-benefit” from implementation of SO₂ and NO_X emission caps under the EPA’s CAIR program) and 15 tons per year by 2018. The U.S. Court of Appeals for the District of Columbia, at the urging of several states and environmental groups, vacated the CAMR, ruling that the EPA failed to take the necessary steps to “de-list” coal-fired power plants from its hazardous air pollutant program and, therefore, could not promulgate a cap-and-trade program. On April 29, 2010, the EPA issued proposed maximum achievable control technology (MACT) regulations requiring emissions reductions of mercury and other hazardous air pollutants from non-electric generating unit boilers, including boilers which do not use fossil fuels such as the proposed Burger biomass repowering project. On September 1, 2010, the EPA classified Burger as an existing source for purposes of the industrial Boiler MACT. If finalized, the non-electric generating unit MACT regulations could also provide precedent for MACT standards applicable to electric generating units. The EPA entered into a consent decree requiring it to propose MACT regulations for mercury and other hazardous air pollutants from electric generating units by March 16, 2011, and to finalize the regulations by November 16, 2011. Depending on the action taken by the EPA and on how any future regulations are ultimately implemented, FGCO’s future cost of compliance with MACT regulations may be substantial and changes to FGCO’s operations may result.

Climate Change

There are a number of initiatives to reduce GHG emissions under consideration at the federal, state and international level. At the federal level, members of Congress have introduced several bills seeking to reduce emissions of GHG in the United States, and the House of Representatives passed one such bill, the American Clean Energy and Security Act of 2009, on June 26, 2009. The Senate continues to consider a number of measures to regulate GHG emissions. President Obama has announced his Administration’s “New Energy for America Plan” that includes, among other provisions, ensuring that 10% of electricity used in the United States comes from renewable sources by 2012, increasing to 25% by 2025, and implementing an economy-wide cap-and-trade program to reduce GHG emissions by 80% by 2050. State activities, primarily the northeastern states participating in the Regional Greenhouse Gas Initiative and western states, led by California, have coordinated efforts to develop regional strategies to control emissions of certain GHGs.

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In September 2009, the EPA finalized a national GHG emissions collection and reporting rule that will require FirstEnergy to measure GHG emissions commencing in 2010 and submit reports commencing in 2011. In December 2009, the EPA released its final “Endangerment and Cause or Contribute Findings for Greenhouse Gases under the Clean Air Act.” The EPA’s finding concludes that concentrations of several key GHGs increase the threat of climate change and may be regulated as “air pollutants” under the CAA. In April 2010, the EPA finalized new GHG standards for model years 2012 to 2016 passenger cars, light-duty trucks and medium-duty passenger vehicles and clarified that GHG regulation under the CAA would not be triggered for electric generating plants and other stationary sources until January 2, 2011, at the earliest. In May 2010, the EPA finalized new thresholds for GHG emissions that define when permits under the CAA’s NSR program would be required. The EPA established an emissions applicability threshold of 75,000 tons per year (tpy) of carbon dioxide equivalents (CO2e) effective January 2, 2011 for existing facilities under the CAA’s PSD program, but until July 1, 2011 that emissions applicability threshold will only apply if PSD is triggered by non-carbon dioxide pollutants.

At the international level, the Kyoto Protocol, signed by the U.S. in 1998 but never submitted for ratification by the U.S. Senate, was intended to address global warming by reducing the amount of man-made GHG, including CO₂, emitted by developed countries by 2012. A December 2009 U.N. Climate Change Conference in Copenhagen did not reach a consensus on a successor treaty to the Kyoto Protocol, but did take note of the Copenhagen Accord, a non-binding political agreement which recognized the scientific view that the increase in global temperature should be below two degrees Celsius; include a commitment by developed countries to provide funds, approaching $30 billion over the next three years with a goal of increasing to $100 billion by 2020; and establish the “Copenhagen Green Climate Fund” to support mitigation, adaptation, and other climate-related activities in developing countries. Once they have become a party to the Copenhagen Accord, developed economies, such as the European Union, Japan, Russia and the United States, would commit to quantified economy-wide emissions targets from 2020, while developing countries, including Brazil, China and India, would agree to take mitigation actions, subject to their domestic measurement, reporting and verification.

On September 21, 2009, the U.S. Court of Appeals for the Second Circuit and on October 16, 2009, the U.S. Court of Appeals for the Fifth Circuit reversed and remanded lower court decisions that had dismissed complaints alleging damage from GHG emissions on jurisdictional grounds. However, a subsequent ruling from the U.S. Court of Appeals for the Fifth Circuit reinstated the lower court dismissal of a complaint alleging damage from GHG emissions. These cases involve common law tort claims, including public and private nuisance, alleging that GHG emissions contribute to global warming and result in property damages. While FirstEnergy is not a party to this litigation, FirstEnergy and/or one or more of its subsidiaries could be named in actions making similar allegations.

FirstEnergy cannot currently estimate the financial impact of climate change policies, although potential legislative or regulatory programs restricting CO₂ emissions, or litigation alleging damages from GHG emissions, could require significant capital and other expenditures or result in changes to its operations. The CO₂ emissions per KWH of electricity generated by FirstEnergy is lower than many regional competitors due to its diversified generation sources, which include low or non-CO₂ emitting gas-fired and nuclear generators.

Clean Water Act

Various water quality regulations, the majority of which are the result of the federal Clean Water Act and its amendments, apply to FirstEnergy’s plants. In addition, Ohio, New Jersey and Pennsylvania have water quality standards applicable to FirstEnergy’s operations.

The EPA established new performance standards under Section 316(b) of the Clean Water Act for reducing impacts on fish and shellfish from cooling water intake structures at certain existing electric generating plants. The regulations call for reductions in impingement mortality (when aquatic organisms are pinned against screens or other parts of a cooling water intake system) and entrainment (which occurs when aquatic life is drawn into a facility’s cooling water system). The EPA has taken the position that until further rulemaking occurs, permitting authorities should continue the existing practice of applying their best professional judgment to minimize impacts on fish and shellfish from cooling water intake structures. On April 1, 2009, the U.S. Supreme Court reversed one significant aspect of the Second Circuit’s opinion and decided that Section 316(b) of the Clean Water Act authorizes the EPA to compare costs with benefits in determining the best technology available for minimizing adverse environmental impact at cooling water intake structures. The EPA is developing a new regulation under Section 316(b) of the Clean Water Act consistent with the opinions of the Supreme Court and the Court of Appeals which have created significant uncertainty about the specific nature, scope and timing of the final performance standard. FirstEnergy is studying various control options and their costs and effectiveness, including pilot testing of reverse louvers in a portion of the Bay Shore power plant’s water intake channel to divert fish away from the plant’s water intake system. On March 15, 2010, the EPA issued a draft permit for the Bay Shore power plant requiring installation of reverse louvers in its entire water intake channel by December 31, 2014. Depending on the results of such studies and the EPA’s further rulemaking and any final action taken by the states exercising best professional judgment, the future costs of compliance with these standards may require material capital expenditures.

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In June 2008, the U.S. Attorney’s Office in Cleveland, Ohio advised FGCO that it is considering prosecution under the Clean Water Act and the Migratory Bird Treaty Act for three petroleum spills at the Edgewater, Lakeshore and Bay Shore plants which occurred on November 1, 2005, January 26, 2007 and February 27, 2007. FGCO is unable to predict the outcome of this matter.

Regulation of Waste Disposal

Federal and state hazardous waste regulations have been promulgated as a result of the Resource Conservation and Recovery Act of 1976, as amended, and the Toxic Substances Control Act of 1976. Certain fossil-fuel combustion residuals, such as coal ash, were exempted from hazardous waste disposal requirements pending the EPA’s evaluation of the need for future regulation. In February 2009, the EPA requested comments from the states on options for regulating coal combustion residuals, including whether they should be regulated as hazardous or non-hazardous waste.

On December 30, 2009, in an advanced notice of public rulemaking, the EPA said that the large volumes of coal combustion residuals produced by electric utilities pose significant financial risk to the industry. On May 4, 2010, the EPA proposed two options for additional regulation of coal combustion residuals, including the option of regulation as a special waste under the EPA’s hazardous waste management program which could have a significant impact on the management, beneficial use and disposal of coal combustion residuals. FGCO’s future cost of compliance with any coal combustion residuals regulations which may be promulgated could be substantial and would depend, in part, on the regulatory action taken by the EPA and implementation by the EPA or the states.

The Utilities have been named as potentially responsible parties at waste disposal sites, which may require cleanup under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980. Allegations of disposal of hazardous substances at historical sites and the liability involved are often unsubstantiated and subject to dispute; however, federal law provides that all potentially responsible parties for a particular site may be liable on a joint and several basis. Environmental liabilities that are considered probable have been recognized on the consolidated balance sheet as of September 30, 2010, based on estimates of the total costs of cleanup, the Utilities’ proportionate responsibility for such costs and the financial ability of other unaffiliated entities to pay. Total liabilities of approximately $105 million (JCP&L — $76 million, TE — $1 million, CEI — $1 million, FGCO — $1 million and FirstEnergy — $26 million) have been accrued through September 30, 2010. Included in the total are accrued liabilities of approximately $67 million for environmental remediation of former manufactured gas plants and gas holder facilities in New Jersey, which are being recovered by JCP&L through a non-bypassable SBC.

(C) OTHER LEGAL PROCEEDINGS

Power Outages and Related Litigation

In July 1999, the Mid-Atlantic States experienced a severe heat wave, which resulted in power outages throughout the service territories of many electric utilities, including JCP&L’s territory. Two class action lawsuits (subsequently consolidated into a single proceeding) were filed in New Jersey Superior Court in July 1999 against JCP&L, GPU and other GPU companies, seeking compensatory and punitive damages due to the outages. After various motions, rulings and appeals, the Plaintiffs’ claims for consumer fraud, common law fraud, negligent misrepresentation, strict product liability and punitive damages were dismissed, leaving only the negligence and breach of contract causes of actions. On July 29, 2010, the Appellate Division upheld the trial court’s decision decertifying the class. Plaintiffs have filed, and JCP&L has opposed, a motion for leave to appeal to the New Jersey Supreme Court. JCP&L is waiting for the Court’s decision.

Litigation Relating to the Proposed Allegheny Energy Merger

In connection with the proposed merger (Note 16), purported shareholders of Allegheny Energy have filed putative shareholder class action and/or derivative lawsuits against Allegheny Energy and its directors and certain officers, referred to as the Allegheny Energy defendants, FirstEnergy and Merger Sub. Four putative class action and derivative lawsuits were filed in the Circuit Court for Baltimore City, Maryland (Maryland Court). One was withdrawn. The Maryland Court has consolidated the remaining three cases under the caption: In re Allegheny Energy Shareholder and Derivative Litigation, C.A. No. 24-C-10-1301. Three shareholder lawsuits were filed in the Court of Common Pleas of Westmoreland County, Pennsylvania and the court has consolidated these actions under the caption: In re Allegheny Energy, Inc. Shareholder Class and Derivative, Litigation, Lead Case No. 1101 of 2010. One putative shareholder class action was filed in the U.S. District Court for the Western District of Pennsylvania and is captioned Louisiana Municipal Police Employees’ Retirement System v. Evanson, et al., C.A. No. 10-319 NBF. In summary, the lawsuits allege, among other things, that the Allegheny Energy directors breached their fiduciary duties by approving the merger agreement, and that

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Allegheny Energy, FirstEnergy and Merger Sub aided and abetted in these alleged breaches of fiduciary duty. The complaints seek, among other things, jury trials, money damages and injunctive relief. While FirstEnergy believes the lawsuits are without merit and has defended vigorously against the claims, in order to avoid the costs associated with the litigation, the defendants have agreed to the terms of a disclosure-based settlement of all these shareholder lawsuits and have reached agreement with counsel for all of the plaintiffs concerning fee applications. Under the terms of the settlement, no payments are being made by FirstEnergy or Merger Sub. A formal stipulation of settlement was filed with the Maryland Court on October 18, 2010 and agreements have been signed with plaintiffs in the Pennsylvania proceedings to dismiss those actions once the settlement is approved by the Maryland Court. The Maryland judge has preliminarily approved the stipulation of settlement and set the final approval hearing date for December 13, 2010. If the parties are unable to obtain final approval of the settlement, then litigation will proceed, and the outcome of any such litigation is inherently uncertain. If a dismissal is not granted or a settlement is not reached, these lawsuits could prevent or delay the completion of the merger and result in substantial costs to FirstEnergy. The defense or settlement of any lawsuit or claim that remains unresolved at the time the merger closes may adversely affect FirstEnergy’s business, financial condition or results of operations.

Nuclear Plant Matters

During a planned refueling outage that began on February 28, 2010, FENOC conducted a non destructive examination and testing of the Control Rod Drive Mechanism (CRDM) nozzles of the Davis-Besse reactor pressure vessel head. FENOC identified flaws in CRDM nozzles that required modification. The NRC was notified of these findings, along with federal, state and local officials. On March 17, 2010, the NRC sent a special inspection team to Davis-Besse to assess the adequacy of FENOC’s identification, analyses and resolution of the CRDM nozzle flaws and to ensure acceptable modifications were made prior to placing the RPV head back in service. After successfully completing the modifications, FENOC committed to take a number of corrective actions including strengthening leakage monitoring procedures and shutting Davis-Besse down no later than October 1, 2011, to replace the reactor pressure vessel head with nozzles made of material less susceptible to primary water stress corrosion cracking, further enhancing the safe and reliable operations of the plant. On June 29, 2010, FENOC returned Davis-Besse to service. On September 9, 2010, the NRC held a public exit meeting describing the results of the NRC special inspection team inspection of FENOC’s identification of the CRDM nozzles with flaws and the modifications to those nozzles. On October 22, 2010, the NRC issued its final report of the special inspection. The report contained three findings characterized as very low safety significance that were promptly corrected prior to plant operation.

On April 5, 2010, the Union of Concerned Scientists (UCS) requested that the NRC issue a Show Cause Order, or otherwise delay the restart of the Davis-Besse Nuclear Power Station until the NRC determines that adequate protection standards have been met and reasonable assurance exists that these standards will continue to be met after the plant’s operation is resumed. By a letter dated July 13, 2010, the NRC denied UCS’s request for immediate action because “the NRC has conducted rigorous and independent assessments of returning the Davis-Besse reactor vessel head to service and its continued operation, and determined that it was safe for the plant to restart.” The UCS petition was referred to a petition manager for further review. What additional actions, if any, that the NRC takes in response to the UCS request have not been determined.

Under NRC regulations, FirstEnergy must ensure that adequate funds will be available to decommission its nuclear facilities. As required by the NRC, FirstEnergy annually recalculates and adjusts the amount of obligations. As of September 30, 2010, FirstEnergy had approximately $2.0 billion invested in external trusts to be used for the decommissioning and environmental remediation of Davis-Besse, Beaver Valley, Perry and TMI-2. FirstEnergy provides an additional $15 million parental guarantee associated with the funding of decommissioning costs for these units.

Other Legal Matters

There are various lawsuits, claims (including claims for asbestos exposure) and proceedings related to FirstEnergy’s normal business operations pending against FirstEnergy and its subsidiaries. The other potentially material items not otherwise discussed above are described below.

On February 16, 2010, a class action lawsuit was filed in Geauga County Court of Common Pleas against FirstEnergy, CEI and OE seeking declaratory judgment and injunctive relief, as well as compensatory, incidental and consequential damages, on behalf of a class of customers related to the reduction of a discount that had previously been in place for residential customers with electric heating, electric water heating, or load management systems. The reduction in the discount was approved by the PUCO. On March 18, 2010, the named-defendant companies filed a motion to dismiss the case due to the lack of jurisdiction of the court of common pleas. The court granted the motion to dismiss on September 7, 2010.

FirstEnergy accrues legal liabilities only when it concludes that it is probable that it has an obligation for such costs and can reasonably estimate the amount of such costs. If it were ultimately determined that FirstEnergy or its subsidiaries have legal liability or are otherwise made subject to liability based on the above matters, it could have a material adverse effect on FirstEnergy’s or its subsidiaries’ financial condition, results of operations and cash flows.

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10. REGULATORY MATTERS

(A) RELIABILITY INITIATIVES

Federally-enforceable mandatory reliability standards apply to the bulk power system and impose certain operating, record-keeping and reporting requirements on the Utilities and ATSI. The NERC has delegated day-to-day implementation and enforcement of these reliability standards to eight regional entities, including ReliabilityFirst Corporation. All of FirstEnergy’s facilities are located within the ReliabilityFirst region. FirstEnergy actively participates in the NERC and ReliabilityFirst stakeholder processes, and otherwise monitors and manages its companies in response to the ongoing development, implementation and enforcement of the reliability standards implemented and enforced by the ReliabilityFirst Corporation.

FirstEnergy believes that it generally is in compliance with all currently-effective and enforceable reliability standards. FirstEnergy’s practice is to address and resolve any occasional or isolated incidents of noncompliance as they arise in the normal course of operations. FirstEnergy also believes that the NERC, ReliabilityFirst and the FERC will continue to refine existing reliability standards as well as to develop and adopt new reliability standards. The financial impact of complying with new or amended standards cannot be determined at this time; however, 2005 amendments to the FPA provide that all prudent costs incurred to comply with the new reliability standards be recovered in rates. Still, any future inability on FirstEnergy’s part to comply with the reliability standards for its bulk power system could result in the imposition of financial penalties that could have a material adverse effect on its financial condition, results of operations and cash flows.

On December 9, 2008, a transformer at JCP&L’s Oceanview substation failed, resulting in an outage on certain bulk electric system (transmission voltage) lines out of the Oceanview and Atlantic substations resulting in customers losing power for up to eleven hours. On March 31, 2009, the NERC initiated a Compliance Violation Investigation in order to determine JCP&L’s contribution to the electrical event and to review any potential violation of NERC Reliability Standards associated with the event. NERC has submitted first and second Requests for Information regarding this and another related matter. JCP&L is complying with these requests. JCP&L is not able to predict what actions, if any, that the NERC may take with respect to this matter.

On August 23, 2010, FirstEnergy self-reported a vegetation encroachment event on a Met-Ed 230 kV line to ReliabilityFirst. This event did not result in a fault, outage, operation of protective equipment, or any other meaningful electric effect on any FirstEnergy transmission facilities or systems. On August 25, 2010, ReliabilityFirst issued a Notice of Enforcement to investigate the incident. FirstEnergy submitted a data response to ReliabilityFirst on September 27, 2010. At this time, FirstEnergy is unable to predict the outcome of this investigation.

(B) OHIO

The Ohio Companies operate under an Amended ESP, which expires on May 31, 2011, and provides for generation supplied through a CBP. The Amended ESP also allows the Ohio Companies to collect a delivery service improvement rider (Rider DSI) at an overall average rate of $0.002 per KWH for the period of April 1, 2009 through December 31, 2011. The Ohio Companies currently purchase generation at the average wholesale rate of a CBP conducted in May 2009. FES is one of the suppliers to the Ohio Companies through the May 2009 CBP. The PUCO approved a $136.6 million distribution rate increase for the Ohio Companies in January 2009, which went into effect on January 23, 2009 for OE ($68.9 million) and TE ($38.5 million) and on May 1, 2009 for CEI ($29.2 million). Applications for rehearing of the PUCO order in the distribution case were filed by the Ohio Companies and one other party. The Ohio Companies raised numerous issues in their application for rehearing related to rate recovery of certain expenses, recovery of line extension costs, the level of rate of return and the amount of general plant balances. The PUCO has not yet issued a substantive Entry on Rehearing.

On October 20, 2009, the Ohio Companies filed an MRO to procure, through a CBP, generation supply for customers who do not shop with an alternative supplier for the period beginning June 1, 2011. The CBP would be similar, in all material respects, to the CBP conducted in May 2009 in that it would procure energy, capacity and certain transmission services on a slice of system basis. However, unlike the May 2009 CBP, the MRO would include multiple bidding sessions and multiple products with different delivery periods for generation supply designed to reduce potential volatility and supplier risk and encourage bidder participation. Although the Ohio Companies requested a PUCO determination by January 18, 2010, on February 3, 2010, the PUCO announced that its determination would be delayed. The PUCO has not yet issued an order in this matter.

On March 23, 2010, the Ohio Companies filed an application for a new ESP. The new ESP will go into effect on June 1, 2011 and conclude on May 31, 2014. Attached to the application was a Stipulation and Recommendation signed by the Ohio Companies, the Staff of the PUCO, and an additional fourteen parties signing as Signatory Parties, with two additional parties agreeing not to oppose the adoption of the Stipulation. The material terms of the Stipulation include a CBP similar to the one used in May 2009 and the one proposed in the October 2009 MRO filing; a 6% generation discount to certain low-income customers provided by the Ohio Companies through a bilateral wholesale contract with FES (initial auctions scheduled for October 20, 2010 and January 25, 2011); no increase in base distribution rates through May 31, 2014; load cap of no less than 80%, which also applies to any tranches assigned post auction; and a new distribution rider, Delivery Capital Recovery Rider (Rider DCR), to recover a return of, and on, capital investments in the delivery

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system. This Rider substitutes for Rider DSI which terminates by its own terms. The Ohio Companies also agree not to collect certain amounts associated with RTEP and administrative costs associated with the move to PJM, dependent on the outcome of certain PJM proceedings. Many of the existing riders approved in the previous ESP remain in effect, some with modifications. The new ESP also requests the resolution of current proceedings pending at the PUCO regarding corporate separation, elements of the smart grid proceeding and the move to PJM. FirstEnergy recorded approximately $39.5 million of regulatory asset impairments and expenses related to the ESP. On May 12, 2010, a supplemental stipulation was filed that added two additional parties to the Stipulation, namely the City of Akron, Ohio and Council for Smaller Enterprises, to provide additional energy efficiency benefits. On July 22, 2010, a second supplemental stipulation was filed that, among other provisions provides a commitment that retail customers of the Ohio Companies will not pay certain costs related to the companies’ integration into PJM, for the longer of the five year period from June 1, 2011 through May 31, 2016 or when the amount of costs avoided by customers for certain types of products totals $360 million dependent on the outcome of certain PJM proceedings, and establishes a $12 million fund to assist low income customers over the term of the ESP. Additional parties signing or not opposing the second supplemental stipulation include Northeast Ohio Public Energy Council (NOPEC), Northwest Ohio Aggregation Coalition (NOAC), Environmental Law and Policy Center and a number of low income community agencies. The PUCO modified and approved the new ESP on August 25, 2010. The Companies accepted the PUCO’s decision subject to the implementation of certain elements of the ESP being consistent with the terms as they were included in the stipulation. On September 24, 2010, an application for rehearing was filed by the OCC and two other parties. The Ohio Companies and other parties filed their memorandum contra to that application for rehearing on October 4, 2010. The PUCO granted the application for rehearing on October 22, 2010. The PUCO has yet to rule on the substance of the application for rehearing.

Under the provisions of SB221, the Ohio Companies are required to implement energy efficiency programs that will achieve a total annual energy savings equivalent of approximately 166,000 MWH in 2009, 290,000 MWH in 2010, 410,000 MWH in 2011, 470,000 MWH in 2012 and 530,000 MWH in 2013, with additional savings required through 2025. Utilities are also required to reduce peak demand in 2009 by 1%, with an additional 0.75% reduction each year thereafter through 2018. The Ohio Companies filed an application with the PUCO seeking amendments to these benchmarks. On January 7, 2010, the PUCO amended the Ohio Companies’ 2009 energy efficiency benchmarks to zero, contingent upon the Ohio Companies meeting the revised benchmarks in a period of not more than three years. On March 10, 2010, the PUCO found that the Ohio Companies’ peak demand reduction programs complied with PUCO rules.

On December 15, 2009, the Ohio Companies filed the required three year portfolio plan seeking approval for the programs they intend to implement to meet the energy efficiency and peak demand reduction requirements for the 2010-2012 period. On March 8, 2010, the Ohio Companies filed their 2009 Status Update Report with the PUCO in which they indicated compliance with the 2009 statutory energy efficiency and peak demand benchmarks as those benchmarks were amended as described above. The Ohio Companies expect that all costs associated with compliance will be recoverable from customers. The Ohio Companies’ three year portfolio plan is still awaiting decision from the PUCO. The plan has yet to be approved by the PUCO, which is delaying the launch of the programs described in the plan. Without such approval, the Ohio Companies’ compliance with 2010 benchmarks is jeopardized and if not approved soon may require the Ohio Companies to seek an amendment to their annual benchmark requirements for 2010. Failure to comply with the benchmarks or to obtain such an amendment may subject the Companies to an assessment by the PUCO of a forfeiture.

Additionally under SB221, electric utilities and electric service companies are required to serve part of their load from renewable energy resources equivalent to 0.25% of the KWH they served in 2009. In August and October 2009, the Ohio Companies conducted RFPs to secure RECs. The RFPs sought RECs, including solar RECs and RECs generated in Ohio in order to meet the Ohio Companies’ alternative energy requirements as set forth in SB221 for 2009, 2010 and 2011. The RECs acquired through these two RFPs were used to help meet the renewable energy requirements established under SB221 for 2009, 2010 and 2011. On March 10, 2010, the PUCO found that there was an insufficient quantity of solar energy resources reasonably available in the market. The PUCO reduced the Ohio Companies’ aggregate 2009 benchmark to the level of solar RECs the Ohio Companies acquired through their 2009 RFP processes, provided the Ohio Companies’ 2010 alternative energy requirements be increased to include the shortfall for the 2009 solar REC benchmark. On April 15, 2010, the Ohio Companies and FES (due to its status as an electric service company in Ohio) filed compliance reports with the PUCO setting forth how they individually satisfied the alternative energy requirements in SB221 for 2009. FES also applied for a force majeure determination from the PUCO regarding a portion of their compliance with the 2009 solar energy resource benchmark, which application is still pending. In July 2010, the Ohio Companies initiated an additional RFP to secure RECs and solar RECs needed to meet the Ohio Companies’ alternative energy requirements as set forth in SB221. As a result of this RFP, contracts were executed in August 2010.

On February 12, 2010, OE and CEI filed an application with the PUCO to establish a new credit for all-electric customers. On March 3, 2010, the PUCO ordered that rates for the affected customers be set at a level that will provide bill impacts commensurate with charges in place on December 31, 2008 and authorized the Ohio Companies to defer incurred costs equivalent to the difference between what the affected customers would have paid under previously existing rates and what they pay with the new credit in place. Tariffs implementing this new credit went into effect on March 17, 2010. On April 15, 2010, the PUCO issued a Second Entry on Rehearing that expanded the group of customers to which the new credit would apply and authorized deferral for the associated additional amounts. The PUCO also stated that it expected that the new credit would remain in place through at least the 2011 winter season, and charged its staff to work with parties to seek a long term solution to the issue. Tariffs implementing this newly expanded credit went into effect on May 21, 2010. The Ohio Companies also filed on May 14, 2010 an application for rehearing of the Second Entry on Rehearing, which was granted for purposes of further consideration on June 9, 2010. On September 9, 2010, the OCC filed a motion requesting that a procedural schedule be established. The Ohio Companies filed their motion contra on September 23, 2010. The PUCO Staff issued a report related to the all-electric issue on September 24, 2010, in which it provides background on the issue and sets forth its bill impact analysis under a number of different scenarios for a longer term solution, but it made no specific recommendation to the PUCO.

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(C) PENNSYLVANIA

Met-Ed and Penelec purchase a portion of their POLR and default service requirements from FES through a fixed-price partial requirements wholesale power sales agreement. The agreement allows Met-Ed and Penelec to sell the output of NUG energy to the market and requires FES to provide energy at fixed prices to replace any NUG energy sold to the extent needed for Met-Ed and Penelec to satisfy their POLR and default service obligations.

Met-Ed and Penelec filed with the PPUC a generation procurement plan covering the period January 1, 2011 through May 31, 2013. The plan is designed to provide adequate and reliable service via a prudent mix of long-term, short-term and spot market generation supply, as required by Act 129, with a staggered procurement schedule, which varies by customer class, through the use of a descending clock auction. On August 12, 2009, Met-Ed and Penelec filed a settlement agreement with the PPUC for the generation procurement plan, reflecting the settlement on all but two reserved issues. On November 6, 2009, the PPUC entered an Order approving the settlement and finding in favor of Met-Ed and Penelec on the two reserved issues. Generation procurement began in January 2010.

On February 8, 2010, Penn filed a Petition for Approval of its Default Service Plan for the period June 1, 2011 through May 31, 2013. On July 29, 2010, the parties to the proceeding filed a Joint Petition for Settlement of all issues. The PPUC adopted a Motion approving the Joint Petition for Settlement on October 21, 2010. The Joint Petition resolves all issues relating to Penn’s Default Service Plan for the next program period, including its procurement method, compliance with the Alternative Energy Portfolio Standards Act, rate design and retail market issues. The PPUC’s approval of the Joint Petition is conditioned by holding that the provision relating to the recovery of MISO exit cost fees and one-time PJM integration costs (resulting from Penn’s June 1, 2011 exit of MISO and integration into PJM) be approved, but made subject to the approval of cost recovery by FERC. Penn may not put these provisions into effect until FERC has approved the recovery and allocation of MISO exit fees and PJM integration costs. An Order consistent with the Motion is expected to be entered in the near future.

The PPUC adopted a Motion on January 28, 2010 and subsequently entered an Order on March 3, 2010 which denies the recovery of marginal transmission losses through the TSC rider for the period of June 1, 2007 through March 31, 2008, and directs Met-Ed and Penelec to submit a new tariff or tariff supplement reflecting the removal of marginal transmission losses from the TSC, and instructs Met-Ed and Penelec to work with the various intervening parties to file a recommendation to the PPUC regarding the establishment of a separate account for all marginal transmission losses collected from ratepayers plus interest to be used to mitigate future generation rate increases beginning January 1, 2011. On March 18, 2010, Met-Ed and Penelec filed a Petition with the PPUC requesting that it stay the portion of the March 3, 2010 Order requiring the filing of tariff supplements to end collection of costs for marginal transmission losses. By Order entered March 25, 2010, the PPUC granted the requested stay until December 31, 2010. Pursuant to the PPUC’s order, Met-Ed and Penelec filed the plan to establish separate accounts for marginal transmission loss revenues and related interest and carrying charges and the plan for the use of these funds to mitigate future generation rate increases commencing January 1, 2011. The PPUC approved this plan on June 7, 2010. On April 1, 2010, Met-Ed and Penelec filed a Petition for Review with the Commonwealth Court of Pennsylvania appealing the PPUC’s March 3, 2010 Order. Although the ultimate outcome of this matter cannot be determined at this time, it is the belief of Met-Ed and Penelec that they should prevail in the appeal and therefore expect to fully recover the approximately $199.7 million ($158.5 million for Met-Ed and $41.2 million for Penelec) in marginal transmission losses for the period prior to January 1, 2011. On July 9, 2010, Met-Ed and Penelec filed their briefs with the Commonwealth Court of Pennsylvania. The Office of Small Business Advocate filed its brief on July 9, 2010. On August 24, 2010, the PPUC as well as MEIUG and PICA filed their briefs. Met-Ed and Penelec filed their reply brief on September 9, 2010.

On May 20, 2010, the PPUC approved Met-Ed’s and Penelec’s annual updates to their TSC rider for the period June 1, 2010 through December 31, 2010 including marginal transmission losses as approved by the PPUC, although the recovery of marginal losses will be subject to the outcome of the proceeding related to the 2008 TSC filing as described above. The TSC for Met-Ed’s customers was increased to provide for full recovery by December 31, 2010.

Act 129 was enacted in 2008 to address issues such as: energy efficiency and peak load reduction; generation procurement; time-of-use rates; smart meters; and alternative energy. Among other things, Act 129 required utilities to file with the PPUC an energy efficiency and peak load reduction plan, or EE&C Plan, by July 1, 2009, setting forth the utilities’ plans to reduce energy consumption by a minimum of 1% and 3% by May 31, 2011 and May 31, 2013, respectively, and to reduce peak demand by a minimum of 4.5% by May 31, 2013. The PPUC entered an Order on February 26, 2010 approving the Pennsylvania Companies’ EE&C Plans and the tariff rider with rates effective March 1, 2010.

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Met-Ed, Penelec and Penn jointly filed a Smart Meter Technology Procurement and Installation Plan with the PPUC. This plan proposes a 24-month assessment period in which the Pennsylvania Companies will assess their needs, select the necessary technology, secure vendors, train personnel, install and test support equipment, and establish a cost effective and strategic deployment schedule, which currently is expected to be completed in fifteen years. Met-Ed, Penelec and Penn estimate assessment period costs at approximately $29.5 million, which the Pennsylvania Companies, in their plan, proposed to recover through an automatic adjustment clause. The ALJ’s Initial Decision approved the Smart Meter Plan as modified by the ALJ, including: ensuring that the smart meters to be deployed include the capabilities listed in the PPUC’s Implementation Order; eliminating the provision of interest in the 1307(e) reconciliation; providing for the recovery of reasonable and prudent costs minus resulting savings from installation and use of smart meters; and reflecting that administrative start-up costs be expensed and the costs incurred for research and development in the assessment period be capitalized. On April 15, 2010, the PPUC adopted a Motion by Chairman Cawley that modified the ALJ’s initial decision, and decided various issues regarding the Smart Meter Implementation Plan for the Pennsylvania Companies. The PPUC entered its Order on June 9, 2010, consistent with the Chairman’s Motion. On June 24, 2010, Met-Ed, Penelec and Penn filed a Petition for Reconsideration of a single portion of the PPUC’s Order regarding the future ability to include smart meter costs in base rates. On August 5, 2010, the PPUC granted in part the petition for reconsideration by deleting language from its original order that would have precluded Met-Ed, Penelec and Penn from seeking to include smart meter costs in base rates at a later time.

By Tentative Order entered September 17, 2009, the PPUC provided for an additional 30-day comment period on whether the 1998 Restructuring Settlement allows Met-Ed and Penelec to apply over-collection of NUG costs for select and isolated months to reduce non-NUG stranded costs when a cumulative NUG stranded cost balance exists. In response to the Tentative Order, various parties filed comments objecting to the above accounting method utilized by Met-Ed and Penelec. Met-Ed and Penelec are awaiting further action by the PPUC.

(D) NEW JERSEY

JCP&L is permitted to defer for future collection from customers the amounts by which its costs of supplying BGS to non-shopping customers, costs incurred under NUG agreements, and certain other stranded costs, exceed amounts collected through BGS and NUGC rates and market sales of NUG energy and capacity. As of September 30, 2010, the accumulated deferred cost balance was a credit of approximately $3 million. To better align the recovery of expected costs, on July 26, 2010, JCP&L filed a request to decrease the amount recovered for the costs incurred under the NUG agreements by $180 million annually. If approved as filed, the change would not go into effect until January 1, 2011.

In accordance with an April 28, 2004 NJBPU order, JCP&L filed testimony on June 7, 2004, supporting continuation of the current level and duration of the funding of TMI-2 decommissioning costs by New Jersey customers without a reduction, termination or capping of the funding. On September 30, 2004, JCP&L filed an updated TMI-2 decommissioning study. This study resulted in an updated total decommissioning cost estimate of $729 million (in 2003 dollars) compared to the estimated $528 million (in 2003 dollars) from the prior 1995 decommissioning study. The DPA filed comments on February 28, 2005 requesting that decommissioning funding be suspended. On March 18, 2005, JCP&L filed a response to those comments. JCP&L responded to additional NJBPU staff discovery requests in May and November 2007 and also submitted comments in the proceeding in November 2007. A schedule for further NJBPU proceedings has not yet been set. On March 13, 2009, JCP&L filed its annual SBC Petition with the NJBPU that includes a request for a reduction in the level of recovery of TMI-2 decommissioning costs based on an updated TMI-2 decommissioning cost analysis dated January 2009 estimated at $736 million (in 2003 dollars). This matter is currently pending before the NJBPU.

New Jersey statutes require that the state periodically undertake a planning process, known as the EMP, to address energy related issues including energy security, economic growth, and environmental impact. The NJBPU adopted an order establishing the general process and contents of specific EMP plans that must be filed by New Jersey electric and gas utilities in order to achieve the goals of the EMP. On April 16, 2010, the NJBPU issued an order indefinitely suspending the requirement of New Jersey utilities to submit Utility Master Plans until such time as the status of the EMP has been made clear. At this time, FirstEnergy and JCP&L cannot determine the impact, if any, the EMP may have on their operations.

In support of former New Jersey Governor Corzine’s Economic Assistance and Recovery Plan, JCP&L announced a proposal to spend approximately $98 million on infrastructure and energy efficiency projects in 2009. Under the proposal, an estimated $40 million would be spent on infrastructure projects, including substation upgrades, new transformers, distribution line re-closers and automated breaker operations. In addition, approximately $34 million would be spent implementing new demand response programs as well as expanding on existing programs. Another $11 million would be spent on energy efficiency, specifically replacing transformers and capacitor control systems and installing new LED street lights. The remaining $13 million would be spent on energy efficiency programs that would complement those currently being offered. The project relating to expansion of the existing demand response programs was approved by the NJBPU on August 19, 2009, and implementation began in 2009. Approval for the project related to energy efficiency programs intended to complement those currently being offered was denied by the NJBPU on December 1, 2009. On July 6, 2010, the January 30, 2009 petition directed to infrastructure investment which had been pending before the NJBPU was withdrawn by JCP&L. Implementation of the remaining projects is dependent upon resolution of regulatory issues including recovery of the costs associated with the proposal.

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(E) FERC MATTERS

PJM Transmission Rate

On April 19, 2007, FERC issued an order (Opinion 494) finding that the PJM transmission owners’ existing “license plate” or zonal rate design was just and reasonable and ordered that the current license plate rates for existing transmission facilities be retained. On the issue of rates for new transmission facilities, FERC directed that costs for new transmission facilities that are rated at 500 kV or higher are to be collected from all transmission zones throughout the PJM footprint by means of a postage-stamp rate based on the amount of load served in a transmission zone. Costs for new transmission facilities that are rated at less than 500 kV, however, are to be allocated on a load flow methodology (DFAX), which is generally referred to as a “beneficiary pays” approach to allocating the cost of high voltage transmission facilities.

The FERC’s Opinion 494 order was appealed to the U.S. Court of Appeals for the Seventh Circuit, which issued a decision on August 6, 2009. The court affirmed FERC’s ratemaking treatment for existing transmission facilities, but found that FERC had not supported its decision to allocate costs for new 500+ kV facilities on a load ratio share basis and, based on this finding, remanded the rate design issue back to FERC.

In an order dated January 21, 2010, FERC set the matter for “paper hearings”—meaning that FERC called for parties to submit comments or written testimony pursuant to the schedule described in the order. FERC identified nine separate issues for comments and directed PJM to file the first round of comments on February 22, 2010, with other parties submitting responsive comments and the reply comments. PJM filed certain studies with FERC on April 13, 2010, in response to the FERC order. PJM’s filing demonstrated that allocation of the cost of high voltage transmission facilities on a beneficiary pays basis results in certain eastern utilities in PJM bearing the majority of their costs. Numerous parties filed responsive comments or studies on May 28, 2010 and reply comments on June 28, 2010. FirstEnergy and a number of other utilities, industrial customers and state commissions supported the use of the beneficiary pays approach for cost allocation for high voltage transmission facilities. Certain eastern utilities and their state commissions supported continued socialization of these costs on a load ratio share basis. FERC is expected to act before the end of the year.

RTO Consolidation

On December 17, 2009, FERC issued an order approving, subject to certain future compliance filings, ATSI’s move to PJM. This move, which is expected to be effective on June 1, 2011, allows FirstEnergy to consolidate its transmission assets and operations into PJM. Currently, FirstEnergy’s transmission assets and operations are divided between PJM and MISO. The consolidation will make the transmission assets that are part of ATSI, whose footprint includes the Ohio Companies and Penn, part of PJM. In the order, FERC approved FirstEnergy’s proposal to use a Fixed Resource Requirement Plan (FRR Plan) to obtain capacity to satisfy the PJM capacity requirements for the 2011-12 and 2012-13 delivery years.

On December 17, 2009, ATSI executed the PJM Consolidated Transmission Owners Agreement and on December 18, 2009, the Ohio Companies and Penn executed the PJM Operating Agreement and the PJM Reliability Assurance Agreement. Execution of these agreements committed ATSI, the Ohio Companies and Penn to the move into PJM.

FirstEnergy successfully conducted the FRR auctions on March 19, 2010. Moreover, the ATSI-zone loads participated in the PJM base residual auction for the 2013 delivery year. Successful completion of these steps secured the capacity necessary for the ATSI footprint to meet PJM’s capacity requirements.

On September 4, 2009, the PUCO opened a case to take comments from Ohio’s stakeholders regarding the RTO consolidation. On August 25, 2010, the PUCO issued an order that, among other things, committed the PUCO to close this case and also to withdraw its objections that were filed in the relevant FERC dockets conditioned upon the Ohio Companies not seeking recovery of MISO exit fees or PJM integration costs (estimated to be approximately $37 million as of September 30, 2010). Notwithstanding the PUCO’s actions, certain other parties protested aspects of the move into PJM, and certain of these matters remain outstanding and will be resolved in future FERC proceedings. Under the terms of the ESP order issued on August 25, 2010, the PUCO has agreed to close this docket.

MISO Multi-Value Project Rule Proposal

On July 15, 2010, MISO and certain MISO transmission owners jointly filed with FERC their proposed cost allocation methodology for new transmission projects. The new transmission projects—described as Multi-Value Projects (MVPs)—are a class of MTEP projects. The MISO proposes to allocate the costs of MVPs by means of a usage-based charge that will be applied to all loads within the MISO footprint, and to energy transactions that call for power to be “wheeled through” the MISO as well as to energy transactions that “source” in the MISO but “sink” outside of MISO. MISO expects that its MVP proposal will fund the costs of large transmission projects designed to bring wind generation from the upper Midwest to load centers in the east. MISO has requested that FERC rule on its MVP proposal by December, but has asked for an effective date for its proposal of July 16, 2011. On August 19, 2010, MISO’s Board approved the first MVP project—the so-called “Michigan Thumb Project.” Under MISO’s proposal, the costs of MVP projects approved by MISO’s Board prior to the anticipated June 1, 2011 effective date of FirstEnergy’s integration into PJM would continue to be allocated to FirstEnergy. This approach is reflected in the MISO’s estimated allocations of the costs for the Michigan Thumb Project, where approximately $16 million in annual revenue requirements were allocated to the ATSI zone.

50

On September 10, 2010, FirstEnergy filed a protest to MISO’s MVP proposal. FirstEnergy believes that MISO’s proposal to allocate costs of MVP projects across the entire MISO footprint does not align with the established rule that cost allocation is to be based on cost causation (the “beneficiary pays” approach). FirstEnergy also argued that, in light of progress to date in the ATSI move to PJM, it would be unjust and unreasonable to allocate any MVP costs to the ATSI zone, or to ATSI. Numerous other parties filed pleadings on MISO’s MVP proposal. FirstEnergy is unable to predict the outcome of this matter.

11. NEW ACCOUNTING STANDARDS AND INTERPRETATIONS

In 2010, the FASB amended the Receivable Topic of the FASB Accounting Standards Codification to enhance disclosures about the credit quality of financing receivables and the allowance for credit losses. The update amends existing disclosures to require an entity to provide a greater level of disaggregated information about the credit quality of its financing receivables and its allowance for credit losses. The amendment also requires an entity to disclose credit quality indicators, past due information, and modifications of its financing receivables. The amendment is effective for interim and annual reporting periods ending on or after December 15, 2010. FirstEnergy is currently evaluating the impact of adopting this standard on its financial statements.

12. SEGMENT INFORMATION

Financial information for each of FirstEnergy’s reportable segments is presented in the following table. FES and the Utilities do not have separate reportable operating segments. With the completion of transition to a fully competitive generation market in Ohio in the fourth quarter of 2009, the former Ohio Transitional Generation Services segment was combined with the Energy Delivery Services segment, consistent with how management views the business. Disclosures for FirstEnergy’s operating segments for 2009 have been reclassified to conform to the current presentation.

The Energy Delivery Services segment transmits and distributes electricity through FirstEnergy’s eight utility operating companies, serving 4.5 million customers within 36,100 square miles of Ohio, Pennsylvania and New Jersey, and purchases power for its POLR and default service requirements in Ohio, Pennsylvania and New Jersey. Its revenues are primarily derived from the delivery of electricity within FirstEnergy’s service areas, cost recovery of regulatory assets and the sale of electric generation service to retail customers who have not selected an alternative supplier (default service) in its Ohio, Pennsylvania and New Jersey franchise areas. Its results reflect the commodity costs of securing electric generation from FES and from non-affiliated power suppliers, the net PJM and MISO transmission expenses related to the delivery of the respective generation loads and the deferral and amortization of certain fuel costs.

The Competitive Energy Services segment supplies electric power to end-use customers through retail and wholesale arrangements, including associated company power sales to meet all or a portion of the POLR and default service requirements of FirstEnergy’s Ohio and Pennsylvania utility subsidiaries and competitive retail sales to customers primarily in Ohio, Pennsylvania, Illinois, Maryland, Michigan and New Jersey. This business segment controls approximately 14,000 MW of capacity and also purchases electricity to meet sales obligations. The segment’s net income is primarily derived from affiliated and non-affiliated electric generation sales revenues less the related costs of electricity generation, including purchased power and net transmission (including congestion) and ancillary costs charged by PJM and MISO to deliver energy to the segment’s customers.

The other segment contains corporate items and other businesses that are below the quantifiable threshold for separate disclosure as a reportable segment.

51

Segment Financial Information

	Energy		Competitive
	Delivery		Energy						Reconciling
Three Months Ended	Services		Services			Other			Adjustments			Consolidated
	(In millions)
September 30, 2010
External revenues	$	2,757	$	957		$	11		$	(32	)	$	3,693
Internal revenues		60		599			—			(659	)		—
Total revenues		2,817		1,556			11			(691	)		3,693
Depreciation and amortization		287		62			6			3			358
Investment income (loss), net		23		28			—			(5	)		46
Net interest charges		123		30			2			12			167
Income taxes		137		(17	)		5			(6	)		119
Net income (loss)		224		(27	)		—			(22	)		175
Total assets		22,773		11,076			604			254			34,707
Total goodwill		5,551		24			—			—			5,575
Property additions		208		255			8			(1	)		470
September 30, 2009
External revenues	$	2,942		490			6			(30	)		3,408
Internal revenues		—		617			—			(617	)		—
Total revenues		2,942		1,107			6			(647	)		3,408
Depreciation and amortization		373		69			3			4			449
Investment income (loss), net		46		159			—			(14	)		191
Net interest charges		115		28			2			175			320
Income taxes		99		121			(19	)		(73	)		128
Net income		148		183			17			(118	)		230
Total assets		23,023		10,691			674			286			34,674
Total goodwill		5,551		24			—			—			5,575
Property additions		182		224			14			12			432
Nine Months Ended
September 30, 2010
External revenues	$	7,673		2,453			21			(92	)		10,055
Internal revenues*		79		1,812			—			(1,824	)		67
Total revenues		7,752		4,265			21			(1,916	)		10,122
Depreciation and amortization		888		194			25			7			1,114
Investment income (loss), net		75		42			—			(24	)		93
Net interest charges		369		94			4			39			506
Income taxes		295		106			(14	)		(23	)		364
Net income (loss)		481		174			(3	)		(72	)		580
Total assets		22,773		11,076			604			254			34,707
Total goodwill		5,551		24			—			—			5,575
Property additions		546		860			18			43			1,467
September 30, 2009
External revenues	$	8,755		1,329			18			(89	)		10,013
Internal revenues		—		2,349			—			(2,349	)		—
Total revenues		8,755		3,678			18			(2,438	)		10,013
Depreciation and amortization		1,098		201			7			11			1,317
Investment income (loss), net		111		136			—			(40	)		207
Net interest charges		338		64			5			252			659
Income taxes		190		409			(56	)		(113	)		430
Net income		285		614			52			(197	)		754
Total assets		23,023		10,691			674			286			34,674
Total goodwill		5,551		24			—			—			5,575
Property additions		524		893			133			25			1,575

* Under the accounting standard for the effects of certain types of regulation, internal revenues are not fully offset for sales of RECs by FES to the Ohio Companies that are retained in inventory.

Reconciling adjustments to segment operating results from internal management reporting to consolidated external financial reporting primarily consist of interest expense related to holding company debt, corporate support services revenues and expenses and elimination of intersegment transactions.

52

13. SUPPLEMENTAL GUARANTOR INFORMATION

On July 13, 2007, FGCO completed a sale and leaseback transaction for its 93.825% undivided interest in Bruce Mansfield Unit 1. FES has fully, unconditionally and irrevocably guaranteed all of FGCO’s obligations under each of the leases. The related lessor notes and pass through certificates are not guaranteed by FES or FGCO, but the notes are secured by, among other things, each lessor trust’s undivided interest in Unit 1, rights and interests under the applicable lease and rights and interests under other related agreements, including FES’ lease guaranty. This transaction is classified as an operating lease under GAAP for FES and FirstEnergy and as a financing for FGCO.

The condensed consolidating statements of income for the three month and nine month periods ended September 30, 2010 and 2009, consolidating balance sheets as of September 30, 2010 and December 31, 2009 and consolidating statements of cash flows for the nine months ended September 30, 2010 and 2009 for FES (parent and guarantor), FGCO and NGC (non-guarantor) are presented below. Investments in wholly owned subsidiaries are accounted for by FES using the equity method. Results of operations for FGCO and NGC are, therefore, reflected in FES’ investment accounts and earnings as if operating lease treatment was achieved. The principal elimination entries eliminate investments in subsidiaries and intercompany balances and transactions and the entries required to reflect operating lease treatment associated with the 2007 Bruce Mansfield Unit 1 sale and leaseback transaction.

53

FIRSTENERGY SOLUTIONS CORP.

CONDENSED CONSOLIDATING STATEMENTS OF INCOME
(Unaudited)

For the Three Months Ended September 30, 2010	FES			FGCO			NGC			Eliminations			Consolidated
	(In thousands)
REVENUES	$	1,540,885		$	645,001		$	380,542		$	(1,012,751	)	$	1,553,677
EXPENSES:
Fuel		13,403			329,009			48,675			—			391,087
Purchased power from affiliates		1,058,965			13,404			56,763			(1,012,751	)		116,381
Purchased power from non-affiliates		411,084			—			—			—			411,084
Other operating expenses		84,169			97,322			116,112			12,190			309,793
Provision for depreciation		752			23,845			36,005			(1,304	)		59,298
General taxes		6,216			8,875			6,713			—			21,804
Impairment of long-lived assets		—			291,934			—			—			291,934
Total expenses		1,574,589			764,389			264,268			(1,001,865	)		1,601,381
OPERATING INCOME (LOSS)		(33,704	)		(119,388	)		116,274			(10,886	)		(47,704	)
OTHER INCOME (EXPENSE):
Investment income		256			396			29,243			—			29,895
Miscellaneous income (expense), including net income from equity investees		5,707			2,562			49			(3,553	)		4,765
Interest expense — affiliates		(60	)		(2,021	)		(416	)		—			(2,497	)
Interest expense — other		(24,158	)		(26,243	)		(15,028	)		15,885			(49,544	)
Capitalized interest		95			19,024			3,836			—			22,955
Total other income (expense)		(18,160	)		(6,282	)		17,684			12,332			5,574
INCOME BEFORE INCOME TAXES		(51,864	)		(125,670	)		133,958			1,446			(42,130	)
INCOME TAXES (BENEFITS)		(15,138	)		(44,364	)		51,600			2,498			(5,404	)
NET INCOME (LOSS)	$	(36,726	)	$	(81,306	)	$	82,358		$	(1,052	)	$	(36,726	)

54

FIRSTENERGY SOLUTIONS CORP.

CONDENSED CONSOLIDATING STATEMENTS OF INCOME
(Unaudited)

For the Nine Months Ended September 30, 2010	FES			FGCO			NGC			Eliminations			Consolidated
	(In thousands)
REVENUES	$	4,203,610		$	1,793,986		$	1,145,795		$	(2,886,947	)	$	4,256,444
EXPENSES:
Fuel		25,768			910,739			125,212			—			1,061,719
Purchased power from affiliates		2,940,360			25,646			167,173			(2,886,947	)		246,232
Purchased power from non-affiliates		1,160,119			—			—			—			1,160,119
Other operating expenses		218,278			289,638			371,882			36,568			916,366
Provision for depreciation		2,253			77,838			109,364			(3,920	)		185,535
General taxes		17,432			32,702			20,688			—			70,822
Impairment charges of long-lived assets		—			293,767			—			—			293,767
Total expenses		4,364,210			1,630,330			794,319			(2,854,299	)		3,934,560
OPERATING INCOME (LOSS)		(160,600	)		163,656			351,476			(32,648	)		321,884
OTHER INCOME (EXPENSE):
Investment income		3,964			531			39,483			—			43,978
Miscellaneous income (expense), including net income from equity investees		323,371			1,638			50			(314,591	)		10,468
Interest expense — affiliates		(179	)		(5,917	)		(1,266	)		—			(7,362	)
Interest expense — other		(71,793	)		(80,548	)		(46,152	)		47,933			(150,560	)
Capitalized interest		293			54,930			11,327			—			66,550
Total other income (expense)		255,656			(29,366	)		3,442			(266,658	)		(36,926	)
INCOME BEFORE INCOME TAXES		95,056			134,290			354,918			(299,306	)		284,958
INCOME TAXES (BENEFITS)		(82,069	)		52,144			130,163			7,595			107,833
NET INCOME	$	177,125		$	82,146		$	224,755		$	(306,901	)	$	177,125

55

FIRSTENERGY SOLUTIONS CORP.

CONDENSED CONSOLIDATING STATEMENTS OF INCOME
(Unaudited)

For the Three Months Ended September 30, 2009	FES			FGCO			NGC			Eliminations			Consolidated
	(In thousands)
REVENUES	$	1,087,991		$	477,679		$	170,129		$	(631,227	)	$	1,104,572
EXPENSES:
Fuel		9,278			241,953			43,462			—			294,693
Purchased power from affiliates		621,996			9,233			35,290			(631,229	)		35,290
Purchased power from non-affiliates		205,200			—			—			—			205,200
Other operating expenses		70,246			109,828			113,669			12,192			305,935
Provision for depreciation		1,051			30,469			35,832			(1,311	)		66,041
General taxes		4,351			11,331			6,018			—			21,700
Total expenses		912,122			402,814			234,271			(620,348	)		928,859
OPERATING INCOME		175,869			74,865			(64,142	)		(10,879	)		175,713
OTHER INCOME (EXPENSE):
Investment income		35			319			158,503			—			158,857
Miscellaneous income (expense), including net income from equity investees		100,668			744			1			(98,609	)		2,804
Interest expense to affiliates		(35	)		(1,267	)		(907	)		—			(2,209	)
Interest expense — other		(15,358	)		(26,737	)		(16,205	)		16,113			(42,187	)
Capitalized interest		49			15,381			2,439			—			17,869
Total other income (expense)		85,359			(11,560	)		143,831			(82,496	)		135,134
INCOME BEFORE INCOME TAXES		261,228			63,305			79,689			(93,375	)		310,847
INCOME TAXES		61,545			19,646			27,801			2,172			111,164
NET INCOME	$	199,683		$	43,659		$	51,888		$	(95,547	)	$	199,683

56

FIRSTENERGY SOLUTIONS CORP.

CONDENSED CONSOLIDATING STATEMENTS OF INCOME
(Unaudited)

For the Nine Months Ended September 30, 2009	FES			FGCO			NGC			Eliminations			Consolidated
	(In thousands)
REVENUES	$	3,357,873		$	1,726,715		$	955,452		$	(2,368,210	)	$	3,671,830
EXPENSES:
Fuel		16,400			755,632			99,128			—			871,160
Purchased power from affiliates		2,351,879			16,333			149,746			(2,368,212	)		149,746
Purchased power from non-affiliates		551,155			—			—			—			551,155
Other operating expenses		144,284			313,416			397,284			36,571			891,555
Provision for depreciation		3,087			90,680			103,135			(3,940	)		192,962
General taxes		12,826			35,289			18,246			—			66,361
Total expenses		3,079,631			1,211,350			767,539			(2,335,581	)		2,722,939
OPERATING INCOME		278,242			515,365			187,913			(32,629	)		948,891
OTHER INCOME (EXPENSE):
Investment income		83			758			134,882			—			135,723
Miscellaneous income (expense), including net income from equity investees		509,927			1,209			15			(498,311	)		12,840
Interest expense to affiliates		(103	)		(4,648	)		(3,752	)		—			(8,503	)
Interest expense — other		(20,778	)		(72,762	)		(46,050	)		48,605			(90,985	)
Capitalized interest		146			34,257			7,572			—			41,975
Total other income (expense)		489,275			(41,186	)		92,667			(449,706	)		91,050
INCOME BEFORE INCOME TAXES		767,517			474,179			280,580			(482,335	)		1,039,941
INCOME TAXES		99,751			166,902			98,893			6,629			372,175
NET INCOME	$	667,766		$	307,277		$	181,687		$	(488,964	)	$	667,766

57

FIRSTENERGY SOLUTIONS CORP.

CONDENSED CONSOLIDATING BALANCE SHEETS
(Unaudited)

As of September 30, 2010	FES		FGCO		NGC		Eliminations			Consolidated
	(In thousands)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	—	$	1	$	9	$	—		$	10
Receivables-
Customers		325,265		—		—		—			325,265
Associated companies		299,222		193,951		112,523		(335,710	)		269,986
Other		34,052		4,831		18,524		—			57,407
Notes receivable from associated companies		10,100		329,461		162,087		—			501,648
Materials and supplies, at average cost		28,411		301,761		223,871		—			554,043
Prepayments and other		191,423		9,669		2,973		—			204,065
		888,473		839,674		519,987		(335,710	)		1,912,424
PROPERTY, PLANT AND EQUIPMENT:
In service		94,787		4,640,027		5,313,456		(385,006	)		9,663,264
Less — Accumulated provision for depreciation		16,209		2,173,661		2,098,927		(174,416	)		4,114,381
		78,578		2,466,366		3,214,529		(210,590	)		5,548,883
Construction work in progress		7,523		2,221,270		507,842		—			2,736,635
		86,101		4,687,636		3,722,371		(210,590	)		8,285,518
INVESTMENTS:
Nuclear plant decommissioning trusts		—		—		1,158,376		—			1,158,376
Investment in associated companies		4,825,221		—		—		(4,825,221	)		—
Other		560		6,639		201		—			7,400
		4,825,781		6,639		1,158,577		(4,825,221	)		1,165,776
DEFERRED CHARGES AND OTHER ASSETS:
Accumulated deferred income taxes		71,165		402,397		—		(470,205	)		3,357
Customer intangibles		127,420		—		—		—			127,420
Goodwill		24,248		—		—		—			24,248
Property taxes		—		27,811		22,314		—			50,125
Unamortized sale and leaseback costs		—		—		—		61,934			61,934
Other		142,039		75,033		7,842		(60,582	)		164,332
		364,872		505,241		30,156		(468,853	)		431,416
	$	6,165,227	$	6,039,190	$	5,431,091	$	(5,840,374	)	$	11,795,134
LIABILITIES AND CAPITALIZATION
CURRENT LIABILITIES:
Currently payable long-term debt	$	765	$	487,357	$	927,772	$	(19,102	)	$	1,396,792
Short-term borrowings-
Associated companies		—		9,642		—		—			9,642
Other		100,000		—		—		—			100,000
Accounts payable-
Associated companies		305,726		244,383		227,328		(305,419	)		472,018
Other		95,287		109,641		—		—			204,928
Accrued taxes		1,821		46,889		56,535		(45,823	)		59,422
Other		253,368		110,964		28,383		38,109			430,824
		756,967		1,008,876		1,240,018		(332,235	)		2,673,626
CAPITALIZATION:
Common stockholder’s equity		3,730,964		2,443,222		2,362,711		(4,805,933	)		3,730,964
Long-term debt and other long-term obligations		1,518,779		2,053,532		506,533		(1,259,694	)		2,819,150
		5,249,743		4,496,754		2,869,244		(6,065,627	)		6,550,114
NONCURRENT LIABILITIES:
Deferred gain on sale and leaseback transaction		—		—		—		967,583			967,583
Accumulated deferred income taxes		—		—		410,095		(410,095	)		—
Accumulated deferred investment tax credits		—		34,050		21,217		—			55,267
Asset retirement obligations		—		26,395		851,127		—			877,522
Retirement benefits		36,528		192,251		—		—			228,779
Property taxes		—		27,811		22,314		—			50,125
Lease market valuation liability		—		228,119		—		—			228,119
Other		121,989		24,934		17,076		—			163,999
		158,517		533,560		1,321,829		557,488			2,571,394
	$	6,165,227	$	6,039,190	$	5,431,091	$	(5,840,374	)	$	11,795,134

58

FIRSTENERGY SOLUTIONS CORP.

CONDENSED CONSOLIDATING BALANCE SHEETS
(Unaudited)

As of December 31, 2009	FES		FGCO		NGC		Eliminations			Consolidated
	(In thousands)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	—	$	3	$	9	$	—		$	12
Receivables-
Customers		195,107		—		—		—			195,107
Associated companies		305,298		175,730		134,841		(297,308	)		318,561
Other		28,394		10,960		12,518		—			51,872
Notes receivable from associated companies		416,404		240,836		147,863		—			805,103
Materials and supplies, at average cost		17,265		307,079		215,197		—			539,541
Prepayments and other		80,025		18,356		9,401		—			107,782
		1,042,493		752,964		519,829		(297,308	)		2,017,978
PROPERTY, PLANT AND EQUIPMENT:
In service		90,474		5,478,346		5,174,835		(386,023	)		10,357,632
Less — Accumulated provision for depreciation		13,649		2,778,320		1,910,701		(171,512	)		4,531,158
		76,825		2,700,026		3,264,134		(214,511	)		5,826,474
Construction work in progress		6,032		2,049,078		368,336		—			2,423,446
		82,857		4,749,104		3,632,470		(214,511	)		8,249,920
INVESTMENTS:
Nuclear plant decommissioning trusts		—		—		1,088,641		—			1,088,641
Investment in associated companies		4,477,602		—		—		(4,477,602	)		—
Other		1,137		21,127		202		—			22,466
		4,478,739		21,127		1,088,843		(4,477,602	)		1,111,107
DEFERRED CHARGES AND OTHER ASSETS:
Accumulated deferred income taxes		93,379		381,849		—		(388,602	)		86,626
Customer intangibles		16,566		—		—		—			16,566
Goodwill		24,248		—		—		—			24,248
Property taxes		—		27,811		22,314		—			50,125
Unamortized sale and leaseback costs		—		16,454		—		56,099			72,553
Other		82,845		71,179		18,755		(51,114	)		121,665
		217,038		497,293		41,069		(383,617	)		371,783
	$	5,821,127	$	6,020,488	$	5,282,211	$	(5,373,038	)	$	11,750,788
LIABILITIES AND CAPITALIZATION
CURRENT LIABILITIES:
Currently payable long-term debt	$	736	$	646,402	$	922,429	$	(18,640	)	$	1,550,927
Short-term borrowings-
Associated companies		—		9,237		—		—			9,237
Other		100,000		—		—		—			100,000
Accounts payable-
Associated companies		261,788		170,446		295,045		(261,201	)		466,078
Other		51,722		193,641		—		—			245,363
Accrued taxes		44,213		61,055		22,777		(44,887	)		83,158
Other		173,015		132,314		16,734		36,994			359,057
		631,474		1,213,095		1,256,985		(287,734	)		2,813,820
CAPITALIZATION:
Common stockholder’s equity		3,514,571		2,346,515		2,119,488		(4,466,003	)		3,514,571
Long-term debt and other long-term obligations		1,519,339		1,906,818		554,825		(1,269,330	)		2,711,652
		5,033,910		4,253,333		2,674,313		(5,735,333	)		6,226,223
NONCURRENT LIABILITIES:
Deferred gain on sale and leaseback transaction		—		—		—		992,869			992,869
Accumulated deferred income taxes		—		—		342,840		(342,840	)		—
Accumulated deferred investment tax credits		—		36,359		22,037		—			58,396
Asset retirement obligations		—		25,714		895,734		—			921,448
Retirement benefits		33,144		170,891		—		—			204,035
Property taxes		—		27,811		22,314		—			50,125
Lease market valuation liability		—		262,200		—		—			262,200
Other		122,599		31,085		67,988		—			221,672
		155,743		554,060		1,350,913		650,029			2,710,745
	$	5,821,127	$	6,020,488	$	5,282,211	$	(5,373,038	)	$	11,750,788

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FIRSTENERGY SOLUTIONS CORP.

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
(Unaudited)

For the Nine Months Ended September 30, 2010	FES			FGCO			NGC			Eliminations			Consolidated
	(In thousands)
NET CASH PROVIDED FROM (USED FOR) OPERATING ACTIVITIES	$	(289,503	)	$	402,332		$	520,272		$	(9,174	)	$	623,927
CASH FLOWS FROM FINANCING ACTIVITIES:
New Financing-
Long-term debt		—			249,520			—			—			249,520
Short-term borrowings, net		—			405			—			—			405
Redemptions and Repayments-
Long-term debt		(599	)		(261,965	)		(42,949	)		9,174			(296,339	)
Other		(459	)		(237	)		(102	)		—			(798	)
Net cash used for financing activities		(1,058	)		(12,277	)		(43,051	)		9,174			(47,212	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions		(5,497	)		(417,146	)		(378,595	)		—			(801,238	)
Proceeds from asset sales		—			117,213			—			—			117,213
Sales of investment securities held in trusts		—			—			1,478,086			—			1,478,086
Purchases of investment securities held in trusts		—			—			(1,511,273	)		—			(1,511,273	)
Loans from (to) associated companies, net		406,304			(88,625	)		(14,224	)		—			303,455
Customer acquisition costs		(110,073	)		—			—			—			(110,073	)
Leasehold improvement payments to associated companies		—			—			(51,204	)		—			(51,204	)
Other		(173	)		(1,499	)		(11	)		—			(1,683	)
Net cash provided from (used for) investing activities		290,561			(390,057	)		(477,221	)		—			(576,717	)
Net change in cash and cash equivalents		—			(2	)		—			—			(2	)
Cash and cash equivalents at beginning of period		—			3			9			—			12
Cash and cash equivalents at end of period	$	—		$	1		$	9		$	—		$	10

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FIRSTENERGY SOLUTIONS CORP.

CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
(Unaudited)

For the Nine Months Ended September 30, 2009	FES			FGCO			NGC			Eliminations			Consolidated
	(In thousands)
NET CASH PROVIDED FROM (USED FOR) OPERATING ACTIVITIES	$	(37,990	)	$	520,169		$	408,364		$	(8,732	)	$	881,811
CASH FLOWS FROM FINANCING ACTIVITIES:
New Financing-
Long-term debt		1,498,087			524,710			333,965			—			2,356,762
Short-term borrowings, net		—			—			—			—			—
Equity contributions from parent		—			100,000			150,000			(250,000	)		—
Redemptions and Repayments-
Long-term debt		(1,507	)		(258,583	)		(366,857	)		8,734			(618,213	)
Short-term borrowings, net		(901,119	)		(257,357	)		(6,347	)		—			(1,164,823	)
Other		(11,583	)		(5,261	)		(3,160	)		(2	)		(20,006	)
Net cash provided from financing activities		583,878			103,509			107,601			(241,268	)		553,720
CASH FLOWS FROM INVESTING ACTIVITIES:
Property additions		(2,224	)		(439,531	)		(400,845	)		—			(842,600	)
Proceeds from asset sales		—			16,129			—			—			16,129
Sales of investment securities held in trusts		—			—			2,152,717			—			2,152,717
Purchases of investment securities held in trusts		—			—			(2,175,135	)		—			(2,175,135	)
Loans to associated companies, net		(27,054	)		(178,746	)		(93,041	)		—			(298,841	)
Investment in subsidiary		(250,000	)		—			—			250,000			—
Other		249			(21,470	)		339			—			(20,882	)
Net cash used for investing activities		(279,029	)		(623,618	)		(515,965	)		250,000			(1,168,612	)
Net change in cash and cash equivalents		266,859			60			—			—			266,919
Cash and cash equivalents at beginning of period		—			39			—			—			39
Cash and cash equivalents at end of period	$	266,859		$	99		$	—		$	—		$	266,958

14. INTANGIBLE ASSETS

FES has acquired certain customer contract rights, which were capitalized as intangible assets. These rights allow FES to supply electric generation needs to customers, and the recorded value is being amortized ratably over the term of the related contracts. Net intangible assets of $127 million are included in other assets on FirstEnergy’s Consolidated Balance Sheet as of September 30, 2010.

For the three and nine months ended September 30, 2010, amortization expense was approximately $2 million and $6 million, respectively.

15. IMPAIRMENT OF LONG-LIVED ASSETS

FirstEnergy reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. The recoverability of a long-lived asset is measured by comparing its carrying value to the sum of undiscounted future cash flows expected to result from the use and eventual disposition of the asset. If the carrying value is greater than the undiscounted cash flows, an impairment exists and a loss is recognized for the amount by which the carrying value of the long-lived asset exceeds its estimated fair value.

During the quarter ending September 30, 2010, FirstEnergy announced its intention to make operational changes at certain coal-fired FGCO units. The announcement of the operational change indicated a need to evaluate the future recoverability of the carrying value of the assets associated with the affected FGCO units. As a result of the recoverability evaluation, FirstEnergy recorded an impairment of $292 million to other operating expense within continuing operations of its competitive energy services segment for the quarter ending September 30, 2010. This impairment represents a $285 million write down of the carrying value of the assets associated with the affected FGCO units to their estimated fair value and a charge of $7 million for excessive or obsolete inventory identified as a result of the operational changes.

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FirstEnergy used various assumptions in evaluating whether the FGCO units’ carrying value was recoverable. The estimated undiscounted cash flows were based on assumptions about budgeted net operating income; the impact of current market conditions on future revenues including a long-term view of a continual depression of future market prices; decreased customer demand; and the estimated cost of remedial retro-fitting of the FGCO units to comply with proposed changes in federal environmental laws. The result of this evaluation indicated that the carrying costs of the FGCO units were not fully recoverable.

FirstEnergy further evaluated the extent to which the carrying value of the FGCO units exceeded their estimated fair value. FirstEnergy applied the income approach to estimating fair value under a discounted cash flow valuation technique to convert future cash flows expected over the remaining life of the asset group to a single present value. The assumptions used to estimate the non-recurring fair value measurement of the FGCO units applied significant unobservable inputs considered Level 3 under the fair value hierarchy. The estimated cash flows used during the recoverability test were discounted using the weighted average cost of capital for a market participant.

16. PROPOSED MERGER WITH ALLEGHENY ENERGY, INC.

As previously disclosed, on February 10, 2010, FirstEnergy entered into an Agreement and Plan of Merger, subsequently amended on June 4, 2010 (Merger Agreement), with Element Merger Sub, Inc., a Maryland corporation, its wholly-owned subsidiary (Merger Sub) and Allegheny Energy, Inc., a Maryland corporation (Allegheny Energy). Upon the terms and subject to the conditions set forth in the Merger Agreement, Merger Sub will merge with and into Allegheny Energy with Allegheny Energy continuing as the surviving corporation and a wholly-owned subsidiary of FirstEnergy. Pursuant to the Merger Agreement, upon the closing of the merger, each issued and outstanding share of Allegheny Energy common stock, including grants of restricted common stock, will automatically be converted into the right to receive 0.667 of a share of common stock of FirstEnergy, and Allegheny Energy stockholders will own approximately 27% of the combined company. Based on the closing stock prices for both companies on February 10, 2010, Allegheny Energy shareholders would receive a value of $27.65 per share. On July 15, 2010, the most recent practicable date prior to the effectiveness of the Form S-4 registration statement, the exchange ratio represented approximately $25.06 in value for each share of Allegheny Energy common stock. FirstEnergy will also assume all outstanding Allegheny Energy debt.

Pursuant to the Merger Agreement, completion of the merger is conditioned upon, among other things, shareholder approval of both companies, which was received on September 14, 2010; the SEC’s clearance of a registration statement registering the FirstEnergy common stock to be issued in connection with the merger, which occurred on July 16, 2010; expiration or termination of any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and approval by the FERC, the MDPSC, the PPUC and the PSCWV. On September 9, 2010, the VSCC approved the merger. The Merger Agreement also contains certain termination rights for both FirstEnergy and Allegheny Energy, and further provides for the payment of fees and expenses upon termination under specified circumstances.

FirstEnergy and Allegheny Energy currently anticipate completing the merger in the first half of 2011. Although FirstEnergy and Allegheny Energy believe that they will receive the required authorizations, approvals and consents to complete the merger, there can be no assurance as to the timing of these authorizations, approvals and consents or as to FirstEnergy’s and Allegheny Energy’s ultimate ability to obtain such authorizations, consents or approvals (or any additional authorizations, approvals or consents which may otherwise become necessary) or that such authorizations, approvals or consents will be obtained on terms and subject to conditions satisfactory to Allegheny Energy and FirstEnergy. Further information concerning the proposed merger is included in the Registration Statement filed by FirstEnergy with the SEC in connection with the merger.

In connection with the proposed merger, FirstEnergy recorded approximately $14 million ($11 million after tax) of merger transaction costs in the third quarter and approximately $35 million ($26 million after tax) of merger transaction costs in the first nine months of 2010. These costs are expensed as incurred.

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Item 2. Management’s Discussion and Analysis of Registrant and Subsidiaries

FIRSTENERGY CORP.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

EXECUTIVE SUMMARY

Earnings available to FirstEnergy in the third quarter of 2010 were $179 million, or basic and diluted earnings of $0.59 per share of common stock, compared with $234 million, or basic and diluted earnings of $0.77 per share of common stock in the third quarter of 2009. Results in the third quarter of 2010 were adversely affected by an impairment charge for certain coal-fired generation units. Earnings available to FirstEnergy in the first nine months of 2010 were $599 million or basic earnings of $1.97 ($1.96 diluted) per share of common stock, compared with $768 million, or basic earnings of $2.52 per share of common stock ($2.51 diluted) in the first nine months of 2009.

	Three Months			Nine Months
	Ended			Ended
Change in Basic Earnings Per Share From Prior Year	September 30			September 30
Basic Earnings Per Share — 2009	$	0.77		$	2.52
Non-core asset sales/impairments		(0.60	)		(1.14	)
Trust securities impairments		(0.04	)		—
Regulatory charges		(0.02	)		0.45
Derivative mark-to-market adjustment — 2010		(0.03	)		(0.07	)
Organizational restructuring — 2009		0.08			0.14
Merger transaction costs — 2010		(0.04	)		(0.09	)
Litigation settlements		—			0.04
Debt call premium — 2009		0.30			0.31
Income tax resolution — 2009		—			(0.04	)
Income tax charge from healthcare legislation — 2010		—			(0.04	)
Revenues		0.56			0.72
Fuel and purchased power		(0.09	)		(0.50	)
Transmission expense		(0.18	)		(0.16	)
Amortization of regulatory assets, net		0.17			0.06
Investment income		(0.26	)		(0.23	)
Other expenses		(0.03	)		—
Basic Earnings Per Share — 2010	$	0.59		$	1.97

Pending Merger

As previously disclosed, on February 10, 2010, FirstEnergy entered into an Agreement and Plan of Merger, subsequently amended on June 4, 2010, (Merger Agreement), with Element Merger Sub. Inc., a Maryland corporation, its wholly-owned subsidiary (Merger Sub) and Allegheny Energy, Inc., a Maryland corporation (Allegheny Energy). Upon the terms and subject to the conditions set forth in the Merger Agreement, Merger Sub will merge with and into Allegheny Energy with Allegheny Energy continuing as the surviving corporation and a wholly-owned subsidiary of FirstEnergy. Pursuant to the Merger Agreement, upon the closing of the merger, each issued and outstanding share of Allegheny Energy common stock, including grants of restricted common stock, will automatically be converted into the right to receive 0.667 of a share of common stock of FirstEnergy, and Allegheny Energy stockholders will own approximately 27% of the combined company. Based on the closing stock prices for both companies on February 10, 2010, Allegheny Energy shareholders would receive a value of $27.65 per share. On July 15, 2010, the most recent practicable date prior to the effectiveness of the Form S-4 registration statement, the exchange ratio represented approximately $25.06 in value for each share of Allegheny Energy common stock. FirstEnergy will also assume all outstanding Allegheny Energy debt.

FirstEnergy shareholders and Allegheny Energy stockholders approved the various proposals related to the merger in separate special shareholder meetings on September 14, 2010. FirstEnergy shareholders approved the issuance of shares of FirstEnergy common stock in the merger and the other transactions contemplated by the Merger Agreement and approved the amendment of FirstEnergy’s amended articles of incorporation to increase the number of authorized shares of FirstEnergy common stock. The total votes cast at the FirstEnergy special shareholder meeting represented approximately 80% of FirstEnergy’s outstanding shares of common stock, of which 97% voted in favor of the proposals. Allegheny Energy stockholders approved the merger with total votes representing 80% of Allegheny Energy’s outstanding shares, of which 99% voted in favor of the merger.

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Pursuant to the Merger Agreement, completion of the merger remains conditioned upon, among other things, the expiration or termination of any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and approval by FERC, the MDPSC, the PPUC and the PSCWV. The Merger Agreement also contains certain termination rights for both FirstEnergy and Allegheny Energy, and further provides for the payment of fees and expenses upon termination under specified circumstances.

FirstEnergy and Allegheny Energy currently anticipate completing the merger in the first half of 2011. Although FirstEnergy and Allegheny Energy believe that they will receive the remaining required authorizations, approvals and consents to complete the merger, there can be no assurance as to the timing of these authorizations, approvals and consents or as to FirstEnergy’s and Allegheny Energy’s ultimate ability to obtain such authorizations, consents or approvals (or any additional authorizations, approvals or consents which may otherwise become necessary) or that such authorizations, approvals or consents will be obtained on terms and subject to conditions satisfactory to Allegheny Energy and FirstEnergy. Further information concerning the proposed merger is included in the Registration Statement filed by FirstEnergy with the SEC in connection with the merger.

FirstEnergy incurred approximately $14 million ($11 million after tax) of merger transaction costs in the third quarter and approximately $35 million ($26 million after tax) of merger transaction costs in the first nine months of 2010. These costs are charged to expense as incurred.

FERC

On May 11, 2010, FirstEnergy and Allegheny Energy filed an application with FERC for approval of their proposed merger. Under the Federal Power Act, FERC has 180 days to rule on a completed merger application. FirstEnergy and Allegheny Energy submitted additional information regarding the merger application on June 21, 2010 in response to a request by FERC. Interventions and protests were filed with FERC on July 12, 2010. On July 27, 2010, FirstEnergy filed additional information with FERC in response to the interventions. FERC is expected to complete its review in sufficient time to meet the anticipated merger closing schedule in the first half of 2011.

State Regulatory Merger Filings

On September 9, 2010, the VSCC approved a petition for the FirstEnergy-Allegheny Energy merger.

Pennsylvania Settlement

On October 25, 2010, FirstEnergy and Allegheny Energy filed a comprehensive settlement with the PPUC that addresses issues raised by 18 of the parties to the merger. The filing includes additional commitments related to employment levels, including a five-year commitment to maintain at least 800 jobs in Greensburg and Westmoreland County for the first year after the merger close, 675 jobs for the following 12 months, 650 jobs for the next year and 600 jobs for each of the next two years. The settlement also provides nearly $11 million over a three year time frame in distribution rate credits for West Penn Power customers, a distribution rate freeze for FirstEnergy’s current Pennsylvania utility customers and support for renewable and sustainable energy and customer choice. The settlement is subject to approval by the PPUC, and does not resolve issues raised by parties who did not join in the settlement.

Hart-Scott-Rodino (HSR) Act Filings

On May 25, 2010, FirstEnergy and Allegheny Energy made HSR filings with the DOJ and Federal Trade Commission. On June 24, 2010, FirstEnergy and Allegheny Energy each received a request for additional information from the DOJ. FirstEnergy and Allegheny Energy continue to cooperate with the DOJ and expect DOJ to complete its review in sufficient time to meet the anticipated merger closing schedule in the first half of 2011.

Financial Matters

Financing Activities

On August 20, 2010, FES completed the remarketing of $250 million of PCRBs. Of the $250 million, $235 million of PCRBs were converted from a variable interest rate to a fixed interest rate. The remaining $15 million of PCRBs continue to bear a fixed interest rate. The interest rate conversion minimizes financial risk by converting the long-term debt into a fixed rate and, as a result, reducing exposure to variable interest rates over the short-term. These remarketings included two series: $235 million of PCRBs that now bear a per-annum rate of 2.25% and are subject to mandatory purchase on June 3, 2013; and $15 million of PCRBs that now bear a per-annum rate of 1.5% and are subject to mandatory purchase on June 1, 2011.

On October 1, 2010, FES completed the refinancing and remarketing of six series of PCRBs totaling $313 million. These series of PCRBs were converted from a variable interest rate to a fixed long term interest rate of 3.375% per-annum and are subject to mandatory purchase on July 1, 2015.

On October 22, 2010, Signal Peak and Global Rail entered into a $350 million syndicated two-year senior secured term loan facility among the two limited liability companies that comprise Signal Peak and Global Rail, as borrowers, Sovereign Bank, CoBank, Credit Agricole, U.S. Bank, BBVA Compass, Royal Bank of Canada, Fifth Third, Comerica Bank, CIBC Inc. and First Merit banks, as lenders, and Union Bank, N.A. as lender, administrative agent, collateral agent and syndication agent. FirstEnergy, together with WMB Loan Ventures LLC and WMB Loan Ventures II LLC, the entities that share ownership with FEV in the borrowers, have provided a guaranty of the borrowers’ obligations under the facility. The loan proceeds were used to repay $258 million of notes payable to FirstEnergy, including $9 million of interest and $63 million of bank loans that were scheduled to mature on November 16, 2010. Additional proceeds will be used for general company purposes, including an $11 million repayment of a third-party seller’s note maturing October 29, 2010.

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Operational Matters

Plant Operational Changes

On August 12, 2010, FGCO announced that it would be making operational changes to some of its smaller coal-fired units in response to the continued slow economy and lower demand for electricity and uncertainty related to proposed new federal environmental regulations. The units affected are Bay Shore units 2-4, Eastlake units 1-4, the Lake Shore Plant and the Ashtabula Plant, which together total 1,620 MW of capacity. During the period beginning September 2010 through August 2011 the affected units will operate with minimum three-day notice and in response to consumer demand. Beginning in September 2011, and continuing for approximately 18 months, the Bay Shore and Eastlake units (1,131 MW) will only be available during summer and winter months, and Ashtabula and Lake Shore will be temporarily idled (489 MW). As a result, the company recognized an impairment of $292 million for these assets. Together, these units have a generating capacity of 1,620MW, and in 2009 they produced approximately 6.8% of FGCO’s total generation output. The proposed changes are subject to review by MISO, PJM and the independent market monitors to ensure that there is no negative impact on system reliability.

Davis-Besse License Renewal

On August 30, 2010, FENOC submitted an application to the NRC for renewal of the Davis-Besse operating license. By a letter dated October 18, 2010, the NRC determined that the Davis-Besse license renewal application was complete and acceptable for docketing and further review. Davis-Besse currently is licensed until 2017; if approved, the renewal would extend operations for an additional 20 years, until 2037.

Fremont Energy Center Construction

During the third quarter, FGCO re-evaluated the schedule for completing the Fremont Plant (707 MW) due to current market conditions and the extension of the tax incentives included in the Small Business legislation through 2011. As a result, FGCO is extending the plant’s completion beyond 2010 to reduce overtime labor cost and outside contractor spend for the remainder of the project. We expect the extension of the completion schedule to add $33 million to the 2011 capital budget.

Regulatory Matters — General

DOE Smart Grid Grants and Smart Meter Implementation

On June 3, 2010, FirstEnergy received DOE’s grants totaling $57.4 million, awarded as part of the American Recovery and Reinvestment Act, to be used to introduce smart grid technologies in targeted areas of Pennsylvania, Ohio and New Jersey. The DOE grants represent 50% of the funding for the $114.9 million FE plans to invest in smart grid technologies. The PPUC and the NJBPU previously approved recovery for the applicable utilities portion of smart grid costs, and FirstEnergy has begun implementing smart grid programs in Pennsylvania and New Jersey. Implementation of the program in Ohio is underway following clarification by the PUCO in its entry on rehearing issued August 25, 2010 that the Ohio Companies are entitled to cost recovery for any costs not covered by the DOE grant.

Regulatory Matters — Ohio

New Ohio ESP

On August 25, 2010, the PUCO adopted a Combined Stipulation in the second ESP for the Ohio Companies’ effective June 1, 2011 through May 31, 2014. Under the new ESP, base distribution rates will remain unchanged during the term of the ESP, except in cases of emergencies, subject to riders and other changes provided in the Ohio Companies’ tariffs. Generation rates for each annual delivery period (June 1 to May 31) through May 31, 2014, will be determined through a CBP to be conducted every October and January for generation service.

The ESP provides for recovery of certain costs related to FirstEnergy’s integration into PJM, which is scheduled for June 1, 2011. However, the Ohio Companies will not seek recovery for any MISO exit fees, PJM integration costs, or legacy regional transmission expansion plan costs billed by PJM for the longer of a five year period from June 1, 2011 through May 31, 2016 or when the amount of costs avoided by customers for certain types of products totals $360 million dependent on the outcome of certain PJM proceedings for projects approved prior to June 1, 2011.

The new ESP also establishes a Delivery Capital Recovery Rider effective January 1, 2012, through May 31, 2014, which provides for recovery of property taxes, commercial activity tax and associated income taxes and for the opportunity to earn a return on and of plant in service associated with distribution, subtransmission and general and intangible plant that was not included in the Ohio Companies’ rate base as determined in the last distribution rate case. This rider is limited to expenditures through May 31, 2014, and recovery is capped at $150 million for 2012, $165 million for 2013 and $75 million for the first five months of 2014.

Ohio Generation Auction

On October 20, 2010, the Ohio Companies conducted a CBP to procure generation for customers who choose not to shop with an alternative supplier for delivery beginning June 1, 2011 through May 31, 2014. The auction consisted of one, two and three-year products. Fifty tranches in total were acquired through this auction. Seventeen tranches of the one-year product were acquired at a clearing price of $54.55 per MWh; seventeen tranches of the two-year product were acquired at a clearing price of $54.10 per MWh; and sixteen tranches of the three-year product were acquired at a clearing price of $56.58 per MWh. There were ten registered bidders that participated in the auction, with four bidders winning tranches in the auction. The auction consisted of twelve rounds. On October 22, 2010, the PUCO accepted the results of the auction. The next auction is scheduled for January 2011.

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Regulatory Matters — Pennsylvania

Met-Ed and Penelec Default Service Plan

On October 20, 2010, the PPUC approved the results of the final of four auctions held to procure the default service requirements for Met-Ed and Penelec customers who choose not to shop with an alternative supplier. For the five-month period of January 1, 2011 to May 31, 2011, the tranche-weighted average prices ($/MWh) for Met-Ed’s residential and commercial classes were $67.10 and $68.28, respectively; Penelec’s tranche-weighted average prices were $55.76 and $58.24 for its residential and commercial classes, respectively. The October 2010 auction is the second of four auctions to procure commercial default service requirements for the 12-month period of June 1, 2011 to May 31, 2012 and residential requirements for the 24-month period of June 1, 2011 to May 31, 2013. For Met-Ed and Penelec commercial customers the tranche-weighted average price ($/MWh) was $63.97 and $54.33, respectively, and for residential customers the tranche-weighted average price was $66.66 and $55.74, respectively. In addition, the October 2010 auction procured supply for Met-Ed and Penelec industrial customers choosing the Fixed Price Service. For Met-Ed and Penelec, the average 12-month price ($/MWh) was $95.00 and $83.73, respectively. The remaining two auctions for these products will be conducted in January 2011 and March 2011.

On October 20, 2010, the PPUC also approved the default service RFP for the Residential Fixed Block On-Peak and Off-Peak energy products. For Penelec, the average price ($/MWh) for On-Peak and Off-Peak was $47.25 and $38.62, respectively. For Met-Ed, the average price ($/MWh) for On-Peak and Off-Peak was $55.07 and $40.81, respectively.

Regulatory Matters — FERC

MISO Multi-Value Project Rule Proposal

On September 10, 2010, FirstEnergy filed a protest to MISO’s MVP proposal. FirstEnergy believes that MISO’s proposal to allocate costs of MVP projects across the entire MISO footprint does not align with the established rule that cost allocation is to be based on cost causation (the “beneficiary pays” approach) among other objections. FirstEnergy also argued that, in light of progress to date in the ATSI move to PJM, it would be unjust and unreasonable to allocate any MVP costs to the ATSI zone, or to ATSI. FirstEnergy is unable to predict the outcome of this matter.

FIRSTENERGY’S BUSINESS

FirstEnergy is a diversified energy company headquartered in Akron, Ohio, that operates primarily through two core business segments (see Results of Operations).

• Energy Delivery Services transmits and distributes electricity through our eight utility operating companies, serving 4.5 million customers within 36,100 square miles of Ohio, Pennsylvania and New Jersey and purchases power for its POLR and default service requirements in Ohio, Pennsylvania and New Jersey. Its revenues are primarily derived from the delivery of electricity within our service areas, cost recovery of regulatory assets and the sale of electric generation service to retail customers who have not selected an alternative supplier (default service) in its Ohio, Pennsylvania and New Jersey franchise areas. Its results reflect the commodity costs of securing electric generation from FES and from non-affiliated power suppliers, the net PJM and MISO transmission expenses related to the delivery of the respective generation loads and the deferral and amortization of certain fuel costs.

• Competitive Energy Services supplies electric power to end-use customers through retail and wholesale arrangements, including associated company power sales to meet all or a portion of the POLR and default service requirements of our Ohio and Pennsylvania utility subsidiaries and competitive retail sales to customers primarily in Ohio, Pennsylvania, Illinois, Maryland, Michigan and New Jersey. This business segment controls approximately 14,000 MW of capacity and also purchases electricity to meet sales obligations. The segment’s net income is primarily derived from affiliated and non-affiliated electric generation sales revenues less the related costs of electricity generation, including purchased power, net transmission (including congestion) and ancillary costs charged by PJM and MISO to deliver energy to the segment’s customers.

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RESULTS OF OPERATIONS

The financial results discussed below include revenues and expenses from transactions among FirstEnergy’s business segments. A reconciliation of segment financial results is provided in Note 12 to the consolidated financial statements. Earnings available to FirstEnergy by major business segment were as follows:

	Three Months Ended									Nine Months Ended
	September 30									September 30
							Increase									Increase
	2010			2009			(Decrease)			2010			2009			(Decrease)
	(In millions, except per share data)
Earnings (Loss) By Business Segment:
Energy delivery services	$	224		$	148		$	76		$	481		$	285		$	196
Competitive energy services		(27	)		183			(210	)		174			614			(440	)
Other and reconciling adjustments*		(18	)		(97	)		79			(56	)		(131	)		75
Total	$	179		$	234		$	(55	)	$	599		$	768		$	(169	)
Basic Earnings Per Share	$	0.59		$	0.77		$	(0.18	)	$	1.97		$	2.52		$	(0.55	)
Diluted Earnings Per Share	$	0.59		$	0.77		$	(0.18	)	$	1.96		$	2.51		$	(0.55	)

* Consists primarily of interest expense related to holding company debt, corporate support services revenues and expenses, noncontrolling interests and the elimination of intersegment transactions.

Summary of Results of Operations — Third Quarter 2010 Compared with Third Quarter 2009

Financial results for FirstEnergy’s major business segments in the third quarter of 2010 and 2009 were as follows:

	Energy			Competitive			Other and
	Delivery			Energy			Reconciling			FirstEnergy
Third Quarter 2010 Financial Results	Services			Services			Adjustments			Consolidated
	(In millions)
Revenues:
External
Electric	$	2,609		$	905		$	—		$	3,514
Other		148			52			(21	)		179
Internal		60			599			(659	)		—
Total Revenues		2,817			1,556			(680	)		3,693
Expenses:
Fuel		—			401			(1	)		400
Purchased power		1,473			470			(659	)		1,284
Other operating expenses		422			347			(31	)		738
Provision for depreciation		111			62			9			182
Amortization of regulatory assets		176			—			—			176
Deferral of new regulatory assets		—			—			—			—
Impairment of long lived assets		—			292			—			292
General taxes		174			26			6			206
Total Expenses		2,356			1,598			(676	)		3,278
Operating Income		461			(42	)		(4	)		415
Other Income (Expense):
Investment income		23			28			(5	)		46
Interest expense		(125	)		(53	)		(30	)		(208	)
Capitalized interest		2			23			16			41
Total Other Expense		(100	)		(2	)		(19	)		(121	)
Income Before Income Taxes		361			(44	)		(23	)		294
Income taxes		137			(17	)		(1	)		119
Net Income (Loss)		224			(27	)		(22	)		175
Loss attributable to noncontrolling interest		—			—			(4	)		(4	)
Earnings available to FirstEnergy Corp.	$	224		$	(27	)	$	(18	)	$	179

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	Energy			Competitive			Other and
	Delivery			Energy			Reconciling			FirstEnergy
Third Quarter 2009 Financial Results	Services			Services			Adjustments			Consolidated
	(In millions)
Revenues:
External
Electric	$	2,804		$	444		$	—		$	3,248
Other		138			46			(24	)		160
Internal		—			617			(617	)		—
Total Revenues		2,942			1,107			(641	)		3,408
Expenses:
Fuel		—			302			—			302
Purchased power		1,725			205			(617	)		1,313
Other operating expenses		366			331			(32	)		665
Provision for depreciation		112			69			7			188
Amortization of regulatory assets		261			—			—			261
Deferral of new regulatory assets		—			—			—			—
Impairment of long lived assets		—			—			—			—
General taxes		162			27			3			192
Total Expenses		2,626			934			(639	)		2,921
Operating Income		316			173			(2	)		487
Other Income (Expense):
Investment income		46			159			(14	)		191
Interest expense		(116	)		(46	)		(193	)		(355	)
Capitalized interest		1			18			16			35
Total Other Expense		(69	)		131			(191	)		(129	)
Income Before Income Taxes		247			304			(193	)		358
Income taxes		99			121			(92	)		128
Net Income (Loss)		148			183			(101	)		230
Loss attributable to noncontrolling interest		—			—			(4	)		(4	)
Earnings available to FirstEnergy Corp.	$	148		$	183		$	(97	)	$	234

Changes Between Third Quarter 2010 and	Energy			Competitive			Other and
Third Quarter 2009 Financial Results	Delivery			Energy			Reconciling			FirstEnergy
Increase (Decrease)	Services			Services			Adjustments			Consolidated
	(In millions)
Revenues:
External
Electric	$	(195	)	$	461		$	—		$	266
Other		10			6			3			19
Internal		60			(18	)		(42	)		—
Total Revenues		(125	)		449			(39	)		285
Expenses:
Fuel		—			99			(1	)		98
Purchased power		(252	)		265			(42	)		(29	)
Other operating expenses		56			16			1			73
Provision for depreciation		(1	)		(7	)		2			(6	)
Amortization of regulatory assets		(85	)		—			—			(85	)
Deferral of new regulatory assets		—			—			—			—
Impairment of long lived assets		—			292			—			292
General taxes		12			(1	)		3			14
Total Expenses		(270	)		664			(37	)		357
Operating Income		145			(215	)		(2	)		(72	)
Other Income (Expense):
Investment income		(23	)		(131	)		9			(145	)
Interest expense		(9	)		(7	)		163			147
Capitalized interest		1			5			—			6
Total Other Expense		(31	)		(133	)		172			8
Income Before Income Taxes		114			(348	)		170			(64	)
Income taxes		38			(138	)		91			(9	)
Net Income (Loss)		76			(210	)		79			(55	)
Loss attributable to noncontrolling interest		—			—			—			—
Earnings available to FirstEnergy Corp.	$	76		$	(210	)	$	79		$	(55	)

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Energy Delivery Services — Third Quarter 2010 Compared with Third Quarter 2009

Net income increased by $76 million in the third quarter of 2010, compared to the third quarter of 2009, primarily due to higher distribution revenues. Lower generation revenues were offset by lower purchased power expenses.

Revenues -

The decrease in total revenues resulted from the following sources:

	Three Months
	Ended September 30				Increase
Revenues by Type of Service	2010		2009		(Decrease)
	(In millions)
Distribution services	$	1,041	$	915	$	126
Generation sales:
Retail		1,266		1,551		(285	)
Wholesale		231		195		36
Total generation sales		1,497		1,746		(249	)
Transmission		223		232		(9	)
Other		56		49		7
Total Revenues	$	2,817	$	2,942	$	(125	)

The increase in distribution service revenues reflected an $88 million increase due to higher sales volumes and a $38 million increase due to a change in prices. The increase in distribution deliveries by customer class is summarized in the following table:

Electric Distribution KWH Deliveries
Residential	19	%
Commercial	5	%
Industrial	11	%
Total Distribution KWH Deliveries	12	%

Higher deliveries to residential and commercial customers reflected increased weather-related usage in the third quarter of 2010, as cooling degree days increased by 60% from the same period in 2009. The increase in distribution deliveries to industrial customers was primarily due to recovering economic conditions in FirstEnergy’s service territory compared to the third quarter of 2009. In the industrial sector, KWH deliveries increased to major automotive customers (14%), refinery customers (28%) and steel customers (45%). The increase in distribution service revenues also includes the recovery of Pennsylvania Energy Efficiency and Conservation charges ($21 million) as approved by the PPUC in March 2010.

The following table summarizes the price and volume factors contributing to the $249 million decrease in generation revenues in the third quarter of 2010 compared to the third quarter of 2009:

	Increase
Source of Change in Generation Revenues	(Decrease)
	(In millions)
Retail:
Effect of 19.8% decrease in sales volumes	$	(307	)
Change in prices		22
		(285	)
Wholesale:
Effect of 3.1% increase in sales volumes		6
Change in prices		30
		36
Net Decrease in Generation Revenues	$	(249	)

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The decrease in retail generation sales volumes was primarily due to an increase in customer shopping in the Ohio Companies’ service territories in the third quarter of 2010. That condition is expected to continue to impact the comparative sales levels for the remainder of 2010. Total generation KWH provided by alternative suppliers as a percentage of total KWH deliveries for the Ohio Companies increased to 64% in the third quarter of 2010 from 21% in the third quarter 2009.

The increase in wholesale generation revenues reflected increased capacity sales by Met-Ed and Penelec in the PJM market.

Expenses -

Total expenses decreased by $270 million due to the following:

• Purchased power costs were $252 million lower in the third quarter of 2010 due to a decrease in volumes needed to serve the lower sales volumes. The decrease in power purchased from non-affiliates was partially offset by an increase in purchases from FES. The decrease in purchased power volumes from non-affiliates resulted principally from the termination of a third-party supply contract for Met-Ed and Penelec in January 2010 and from the above described increase in customer shopping in the Ohio Companies’ service territories.

• Prices paid for power purchased from non-affiliates in the third quarter of 2010 resulted from higher capacity prices in the PJM market for Met-Ed and Penelec compared to the third quarter of 2009, which is expected to continue for the remainder of the year. The decrease in unit costs on purchases from FES reflected a lower weighted average unit price under the Ohio Companies’ CBP and was partially offset by an increase in volume due to the replacement of Met-Ed’s and Penelec’s terminated third-party contract with supply from FES.

	Increase
Source of Change in Purchased Power	(Decrease)
	(In millions)
Purchases from non-affiliates:
Change due to increased unit costs	$	155
Change due to decreased volumes		(443	)
		(288	)
Purchases from FES:
Change due to decreased unit costs		(61	)
Change due to increased volumes		45
		(16	)
Decrease in costs deferred		52
Net Decrease in Purchased Power Costs	$	(252	)

• Transmission costs increased by $87 million in the third quarter of 2010 primarily due to higher PJM network transmission expenses and congestion costs for Met-Ed and Penelec. Met-Ed and Penelec defer or amortize the difference between revenues from their transmission rider and transmission costs incurred with no material effect on current period earnings.

• Administrative and general costs, including labor and employee benefit expenses, decreased by $28 million due to restructuring costs recognized in the third quarter of 2009 and lower expenses associated with employee benefit plans.

• A decrease in expenses relating to leasehold interests in Perry and Beaver Valley of $21 million in the third quarter of 2010 compared to the third quarter of 2009.

• Vegetation management costs charged to operating expenses decreased by $10 million in the third quarter of 2010 compared to the third quarter of 2009.

• Energy efficiency program costs increased $16 million in the third quarter of 2010 compared to the third quarter of 2009.

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• Economic development costs associated with the Ohio Companies’ ESP increased by $10 million in the third quarter of 2010.

• Amortization of regulatory assets decreased $85 million in the third quarter of 2010 principally due to lower net MISO and PJM transmission cost amortization compared to the third quarter of 2009.

• General taxes increased $12 million primarily due to higher gross receipts taxes in the third quarter of 2010.

Other Expense -

Other expense increased $31 million in the third quarter of 2010 compared to the third quarter of 2009 due primarily to lower investment income related to OE’s and TE’s nuclear decommissioning trusts ($23 million) and higher interest expense associated with debt issuances by the Utilities since the third quarter of 2009 ($8 million).

Competitive Energy Services — Third Quarter 2010 Compared with Third Quarter 2009

Net income decreased by $210 million in the third quarter of 2010, compared to the third quarter of 2009, primarily due to a $292 million impairment charge ($181 million net of tax) related to operational changes at certain smaller coal-fired units in response to the continued slow economy, lower demand for electricity and uncertainty related to proposed new federal environmental regulations. In addition, net income decreased due to lower investment income from the nuclear decommissioning trusts, partially offset by increased sales margins.

Revenues -

Total revenues increased $449 million in the third quarter of 2010 primarily due to growth in direct and government aggregation sales and POLR sales volumes, partially offset by a decline in wholesale sales.

The increase in total revenues resulted from the following sources:

	Three Months
	Ended September 30				Increase
Revenues by Type of Service	2010		2009		(Decrease)
	(In millions)
Direct and Government Aggregation	$	717	$	232	$	485
POLR		652		636		16
Wholesale		136		192		(56	)
Transmission		22		17		5
Other		29		30		(1	)
Total Revenues	$	1,556	$	1,107	$	449

The increase in direct and government aggregation revenues of $485 million resulted from increased revenue from the acquisition of new commercial and industrial customers as well as new government aggregation contracts with communities in Ohio that provided generation to 1.2 million residential and small commercial customers at the end of September 2010 compared to 500,000 such customers at the end of September 2009. In addition, sales to residential and small commercial customers were bolstered by weather in the delivery area that was 60% warmer than in 2009.

The increase in POLR revenues of $16 million was due to higher sales volumes to the Pennsylvania Companies and non-associated companies, partially offset by decreased sales volumes to the Ohio Companies and lower unit prices to both the Ohio Companies and the Pennsylvania Companies. The increased revenues from the Pennsylvania Companies resulted from FES supplying Met-Ed and Penelec with volumes previously supplied through a third-party contract and at prices that were slightly higher than in the third quarter of 2009.

Wholesale revenues decreased $56 million due to reduced volumes and lower wholesale prices. The lower sales volumes were a result of using available capacity to serve increased retail sales in Ohio. In July 2010, FES entered into financial transactions that offset a portion of the mark-to-market impact of legacy purchased power contracts totaling 500 MW entered into in 2008 for delivery in 2010 and 2011 that have been marked to market since December 2009. These financial transactions mitigate the volatility of these contracts through the end of 2011 and resulted in wholesale revenues of $13 million for the quarter ended September 2010.

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The following tables summarize the price and volume factors contributing to changes in revenues:

	Increase
Source of Change in Direct and Government Aggregation	(Decrease)
	(In millions)
Direct Sales:
Effect of increase in sales volumes	$	277
Change in prices		(28	)
		249
Government Aggregation:
Effect of increase in sales volumes		232
Change in prices		4
		236
Net Increase in Direct and Government Aggregation Revenues	$	485

	Increase
Source of Change in Wholesale Revenues	(Decrease)
	(In millions)
POLR:
Effect of 8.6% increase in sales volumes	$	55
Change in prices		(39	)
		16
Other Wholesale:
Effect of 25.9% decrease in sales volumes		(29	)
Change in prices		(27	)
		(56	)
Net Decrease in Wholesale Revenues	$	(40	)

Transmission revenues increased $5 million due primarily to higher MISO congestion revenue.

Expenses -

Total expenses increased $664 million in the third quarter of 2010 due to the following:

• Fuel costs increased $99 million primarily due to increased volumes, partially offset by unit prices. Volumes increased due to higher generation at the fossil units. Unit prices declined primarily due to coal blend changes partially offset by increased coal transportation expenses and higher nuclear fuel unit prices following the refueling outages that occurred in 2009.

• Purchased power costs increased $265 million due primarily to higher volumes purchased ($246 million) and a power contract mark-to-market adjustment ($26 million), partially offset by lower unit costs ($7 million). The increase in volume primarily relates to the assumption of a 1,300 MW third party contract from Met-Ed and Penelec.

• Fossil operating costs decreased $16 million due primarily to lower staffing levels, more capital related work and reduced coal storage limitation charges.

• Nuclear operating costs decreased $2 million due primarily to lower labor and related benefits, partially offset by higher professional and contractor costs in connection with refueling outages.

• Transmission expenses increased $4 million due primarily to increases in MISO of $46 million from higher network, ancillary and congestion costs, partially offset by lower PJM transmission expenses of $42 million due to lower congestion costs.

• Other expenses increased $314 million primarily due to a $292 million impairment charge ($181 million net of tax) related to operational changes at Bay Shore units 2-4, Eastlake Plant units 1-4, the Lake Shore Plant and the Ashtabula Plant. In addition, increased costs were incurred in uncollectible customer accounts and agent fees associated with the growth in direct and government aggregation sales.

Other Expense -

Total other expense in the third quarter of 2010 was $133 million higher than the third quarter of 2009, primarily due to a decrease in nuclear decommissioning trust investment income ($131 million) and a $2 million increase in net interest expense from new long-term debt issued by FES in August 2009 combined with the restructuring of existing PCRBs.

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Other — Third Quarter of 2010 Compared with Third Quarter of 2009

Financial results from other operating segments and reconciling items, including interest expense on holding company debt and corporate support services revenues and expenses, resulted in a $79 million increase in earnings available to FirstEnergy in the third quarter of 2010 compared to the same period in 2009. The increase resulted primarily from the absence of debt retirement costs that were incurred in the third quarter of 2009 in connection with a September 2009 tender offer for holding company debt ($139 million), decreased interest expense resulting from that tender offer ($13 million) and increased investment income ($9 million), partially offset by increased income tax expense ($91 million).

Summary of Results of Operations — First Nine Months of 2010 Compared with the First Nine Months of 2009

Financial results for FirstEnergy’s major business segments in the first nine months of 2010 and 2009 were as follows:

	Energy			Competitive			Other and
	Delivery			Energy			Reconciling			FirstEnergy
First Nine Months 2010 Financial Results	Services			Services			Adjustments			Consolidated
	(In millions)
Revenues:
External
Electric	$	7,250		$	2,302		$	—		$	9,552
Other		423			151			(71	)		503
Internal*		79			1,812			(1,824	)		67
Total Revenues		7,752			4,265			(1,895	)		10,122
Expenses:
Fuel		—			1,089			(5	)		1,084
Purchased power		4,159			1,239			(1,824	)		3,574
Other operating expenses		1,154			1,031			(73	)		2,112
Provision for depreciation		339			194			32			565
Amortization of regulatory assets		549			—			—			549
Deferral of new regulatory assets		—			—			—			—
Impairment of long lived assets		—			294			—			294
General taxes		481			86			20			587
Total Expenses		6,682			3,933			(1,850	)		8,765
Operating Income		1,070			332			(45	)		1,357
Other Income (Expense):
Investment income		75			42			(24	)		93
Interest expense		(373	)		(161	)		(94	)		(628	)
Capitalized interest		4			67			51			122
Total Other Expense		(294	)		(52	)		(67	)		(413	)
Income Before Income Taxes		776			280			(112	)		944
Income taxes		295			106			(37	)		364
Net Income (Loss)		481			174			(75	)		580
Loss attributable to noncontrolling interest		—			—			(19	)		(19	)
Earnings available to FirstEnergy Corp.	$	481		$	174		$	(56	)	$	599

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	Energy			Competitive			Other and
	Delivery			Energy			Reconciling			FirstEnergy
First Nine Months 2009 Financial Results	Services			Services			Adjustments			Consolidated
	(In millions)
Revenues:
External
Electric	$	8,322		$	929		$	—		$	9,251
Other		433			400			(71	)		762
Internal		—			2,349			(2,349	)		—
Total Revenues		8,755			3,678			(2,420	)		10,013
Expenses:
Fuel		—			890			—			890
Purchased power		5,278			551			(2,349	)		3,480
Other operating expenses		1,191			1,001			(89	)		2,103
Provision for depreciation		331			201			18			550
Amortization of regulatory assets		903			—			—			903
Deferral of new regulatory assets		(136	)		—			—			(136	)
Impairment of long lived assets		—			—			—			—
General taxes		486			84			17			587
Total Expenses		8,053			2,727			(2,403	)		8,377
Operating Income		702			951			(17	)		1,636
Other Income (Expense):
Investment income		111			136			(40	)		207
Interest expense		(341	)		(106	)		(308	)		(755	)
Capitalized interest		3			42			51			96
Total Other Expense		(227	)		72			(297	)		(452	)
Income Before Income Taxes		475			1,023			(314	)		1,184
Income taxes		190			409			(169	)		430
Net Income (Loss)		285			614			(145	)		754
Loss attributable to noncontrolling interest		—			—			(14	)		(14	)
Earnings available to FirstEnergy Corp.	$	285		$	614		$	(131	)	$	768
Changes Between First Nine Months 2010	Energy			Competitive			Other and
and First Nine Months 2009 Financial Results	Delivery			Energy			Reconciling			FirstEnergy
Increase (Decrease)	Services			Services			Adjustments			Consolidated
	(In millions)
Revenues:
External
Electric	$	(1,072	)	$	1,373		$	—		$	301
Other		(10	)		(249	)		—			(259	)
Internal*		79			(537	)		525			67
Total Revenues		(1,003	)		587			525			109
Expenses:
Fuel		—			199			(5	)		194
Purchased power		(1,119	)		688			525			94
Other operating expenses		(37	)		30			16			9
Provision for depreciation		8			(7	)		14			15
Amortization of regulatory assets		(354	)		—			—			(354	)
Deferral of new regulatory assets		136			—			—			136
Impairment of long lived assets		—			294			—			294
General taxes		(5	)		2			3			—
Total Expenses		(1,371	)		1,206			553			388
Operating Income		368			(619	)		(28	)		(279	)
Other Income (Expense):
Investment income		(36	)		(94	)		16			(114	)
Interest expense		(32	)		(55	)		214			127
Capitalized interest		1			25			—			26
Total Other Expense		(67	)		(124	)		230			39
Income Before Income Taxes		301			(743	)		202			(240	)
Income taxes		105			(303	)		132			(66	)
Net Income (Loss)		196			(440	)		70			(174	)
Loss attributable to noncontrolling interest		—			—			(5	)		(5	)
Earnings available to FirstEnergy Corp.	$	196		$	(440	)	$	75		$	(169	)

* Under the accounting standard for the effects of certain types of regulation, internal revenues are not fully offset for sale of RECs by FES to the Ohio Companies that are retained in inventory.

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Energy Delivery Services — First Nine Months of 2010 Compared to First Nine Months of 2009

Net income increased by $196 million in the first nine months of 2010, compared to the first nine months of 2009, primarily due to the absence of CEI’s $216 million regulatory asset impairment in 2009, partially offset by decreases in other operating expenses. Lower generation revenues were offset by lower purchased power expenses.

Revenues -

The decrease in total revenues resulted from the following sources:

	Nine Months
	Ended September 30				Increase
Revenues by Type of Service	2010		2009		(Decrease)
	(In millions)
Distribution services	$	2,774	$	2,578	$	196
Generation sales:
Retail		3,540		4,679		(1,139	)
Wholesale		628		544		84
Total generation sales		4,168		5,223		(1,055	)
Transmission		638		808		(170	)
Other		172		146		26
Total Revenues	$	7,752	$	8,755	$	(1,003	)

The increase in distribution deliveries by customer class is summarized in the following table:

Electric Distribution KWH Deliveries
Residential	7	%
Commercial	3	%
Industrial	10	%
Total Distribution KWH Deliveries	7	%

Higher deliveries to residential and commercial customers reflected increased weather-related usage in the first nine months of 2010. Cooling degree days increased by 69%, partially offset by an 11% decrease in heating degree days from the same period in 2009. In the industrial sector, KWH deliveries increased to major automotive customers (22%), refinery customers (11%) and steel customers (44%) due to recovering economic conditions. The increase in distribution service revenues also reflects the recovery of the Pennsylvania Energy Efficiency and Conservation charges as approved by the PPUC in March 2010 and the accelerated recovery of deferred distribution costs in Ohio, partially offset by a reduction in the transition rate for CEI effective June 1, 2009.

The following table summarizes the price and volume factors contributing to the $1.1 billion decrease in generation revenues in the first nine months of 2010 compared to the same period of 2009:

	Increase
Source of Change in Generation Revenues	(Decrease)
	(In millions)
Retail:
Effect of 26.8% decrease in sales volumes	$	(1,254	)
Change in prices		115
		(1,139	)
Wholesale:
Effect of 7.1% decrease in sales volumes		(38	)
Change in prices		122
		84
Net Decrease in Generation Revenues	$	(1,055	)

The decrease in retail generation sales volumes was primarily due to an increase in customer shopping in the Ohio Companies’ service territories in the first nine months of 2010. That condition is expected to continue to impact the comparative sales levels for the remainder of 2010. Total generation KWH provided by alternative suppliers as a percentage of total KWH deliveries for the Ohio Companies increased to 60% in the first nine months of 2010 from 7% in the same period of 2009. Higher generation revenues related to the recovery of transmission costs now provided for in the generation rate established under the May 2009 Ohio CBP partially offset the decrease in sales volumes.

The increase in wholesale generation revenues reflected higher prices and increased capacity sales by Met-Ed and Penelec in the PJM market.

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Transmission revenues decreased $170 million primarily due to the termination of the Ohio Companies’ transmission tariff effective June 1, 2009; recovery of transmission costs is now through the generation rate established under the May 2009 Ohio CBP.

Expenses -

Total expenses decreased by $1.4 billion due to the following:

• Purchased power costs were $1.1 billion lower in the first nine months of 2010 in large part due to lower requirements to serve the lower sales volumes. The decrease in volumes from non-affiliates resulted principally from the termination of a third-party supply contract for Met-Ed and Penelec in January 2010 and from an increase in customer shopping in the Ohio Companies’ service territories described above. The decrease in volumes from FES also resulted from the increase in customer shopping in Ohio.

• The increase in purchased power unit costs from non-affiliates in the first nine months of 2010 resulted from higher capacity prices in the PJM market for Met-Ed and Penelec compared to the first nine months of 2009. The decrease in unit costs from FES was principally due to the lower weighted average unit price per KWH for the Ohio Companies established under the May 2009 CBP auction effective June 1, 2009.

	Increase
Source of Change in Purchased Power	(Decrease)
	(In millions)
Purchases from non-affiliates:
Change due to increased unit costs	$	506
Change due to decreased volumes		(1,140	)
		(634	)
Purchases from FES:
Change due to decreased unit costs		(230	)
Change due to decreased volumes		(289	)
		(519	)
Decrease in costs deferred		34
Net Decrease in Purchased Power Costs	$	(1,119	)

• Labor and employee benefit expenses decreased by $61 million due to lower pension and OPEB expenses and restructuring expenses recognized in 2009, and lower payroll costs resulting primarily from staffing reductions implemented in 2009.

• Uncollectible expenses decreased $12 million due to lower generation revenues in Ohio in the first nine months of 2010 compared to the same period in 2009.

• Expenses for economic development commitments related to the Ohio Companies’ ESP were lower by $11 million in the first nine months of 2010 compared to the same period of 2009.

• Transmission expenses increased $44 million primarily due to higher PJM network transmission expenses and congestion costs, partially offset by lower MISO network transmission expenses that are not reflected in the generation rate established under the May 2009 Ohio CBP.

• Amortization of regulatory assets decreased $354 million due primarily to the absence of the $216 million impairment of CEI’s regulatory assets in 2009, reduced net MISO and PJM transmission cost amortization and reduced CTC amortization for Met-Ed and Penelec, partially offset by a $35 million regulatory asset impairment associated with the Ohio Companies’ ESP.

• The deferral of new regulatory assets decreased $136 million in the first nine months of 2010 due to the absence of purchased power cost deferrals for CEI in 2009.

• Depreciation expense increased $8 million due to property additions since the third quarter of 2009.

• General taxes decreased $5 million due primarily to favorable Ohio and Pennsylvania tax settlements in 2010 partially offset by higher gross receipts taxes.

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Other Expense -

Other expense increased $67 million in the first nine months of 2010 compared to the first nine months of 2009 primarily due to lower nuclear decommissioning trust investment income ($36 million) and higher interest expense associated with debt issuances by the Utilities since the third quarter of 2009 ($31 million).

Regulatory Assets

FirstEnergy and the Utilities prepare their consolidated financial statements in accordance with the authoritative guidance for accounting for certain types of regulation. Under this guidance, regulatory assets represent incurred or accrued costs that have been deferred because of their probable future recovery from customers through regulated rates. Regulatory liabilities represent the excess recovery of costs or accrued liabilities that have been deferred because it is probable such amounts will be returned to customers through future regulated rates. The following table provides the balance of regulatory assets by Company as of September 30, 2010 and December 31, 2009 and changes during the nine months then ended:

	September 30,		December 31,		Increase
Regulatory Assets	2010		2009		(Decrease)
	(In millions)
OE	$	413	$	465	$	(52	)
CEI		420		546		(126	)
TE		74		70		4
JCP&L		722		888		(166	)
Met-Ed		400		357		43
Penelec		203		9		194
Other		14		21		(7	)
Total	$	2,246	$	2,356	$	(110	)

The following table provides information about the composition of regulatory assets as of September 30, 2010 and December 31, 2009 and the changes during the nine months then ended:

	September 30,			December 31,			Increase
Regulatory Assets by Source	2010			2009			(Decrease)
	(In millions)
Regulatory transition costs	$	1,168		$	1,100		$	68
Customer shopping incentives		26			154			(128	)
Customer receivables for future income taxes		330			329			1
Loss on reacquired debt		50			51			(1	)
Employee postretirement benefits		17			23			(6	)
Nuclear decommissioning, decontamination and spent fuel disposal costs		(173	)		(162	)		(11	)
Asset removal costs		(238	)		(231	)		(7	)
MISO/PJM transmission costs		194			148			46
Deferred generation costs		393			369			24
Distribution costs		392			482			(90	)
Other		87			93			(6	)
Total	$	2,246		$	2,356		$	(110	)

Regulatory assets that do not earn a current return totaled approximately $181 million as of September 30, 2010 (JCP&L — $40 million, Met-Ed — $124 million, Penelec — $9 million and CEI $5 million). Regulatory assets not earning a current return (primarily for certain regulatory transition costs and employee postretirement benefits) are expected to be recovered by 2014 for JCP&L and by 2020 for Met-Ed and Penelec.

Competitive Energy Services — First Nine Months of 2010 Compared to First Nine Months of 2009

Net income decreased by $440 million in the first nine months of 2010, compared to the first nine months of 2009, primarily due to a $292 million impairment charge ($181 million net of tax) related to operational changes at certain smaller coal-fired units in response to the continued slow economy, lower demand for electricity, as well as uncertainty related to proposed new federal environmental regulations. In addition, the absence of a $252 million ($158 million after tax) gain in 2009 from the sale of a 9% participation interest in OVEC, lower investment income from nuclear decommissioning trusts and a decrease in sales margins also contributed to the decline in net income.

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Revenues -

Excluding the impact of the 2009 gain on the OVEC sale, total revenues increased $839 million in the first nine months of 2010 compared to the same period in 2009 primarily due to an increase in direct and government aggregation sales volumes and sales of RECs, partially offset by decreases in POLR sales to the Ohio Companies and wholesale sales.

The increase in reported segment revenues resulted from the following sources:

	Nine Months
	Ended September 30				Increase
Revenues by Type of Service	2010		2009		(Decrease)
	(In millions)
Direct and Government Aggregation	$	1,814	$	406	$	1,408
POLR		1,911		2,369		(458	)
Wholesale		322		503		(181	)
Transmission		58		57		1
RECs		67		—		67
Sale of OVEC participation interest		—		252		(252	)
Other		93		91		2
Total Revenues	$	4,265	$	3,678	$	587

The increase in direct and government aggregation revenues of $1,408 million resulted from increased revenue from the acquisition of new commercial and industrial customers, as well as new government aggregation contracts with communities in Ohio that provide generation to 1.2 million residential and small commercial customers at the end of September 2010 compared to 500,000 such customers at the end of September 2009, partially offset by lower unit prices. In addition, sales to residential and small commercial customers were bolstered by weather in the delivery area that was 69% warmer than in 2009.

The decrease in POLR revenues of $458 million was due to lower sales volumes and lower unit prices to the Ohio Companies, partially offset by increased sales volumes and higher unit prices to the Pennsylvania Companies. The lower sales volumes and unit prices to the Ohio Companies in 2010 reflected the results of the May 2009 CBP. The increased revenues to the Pennsylvania Companies resulted from FES supplying Met-Ed and Penelec with volumes previously supplied through a third-party contract and at prices that were slightly higher than in 2009.

Wholesale revenues decreased $181 million due to reduced volumes and lower prices. The lower sales volumes were due to available capacity serving increased retail sales in Ohio. In July 2010, FES entered into financial transactions that offset the mark-to-market impact of legacy purchased power contracts totaling 500 MW entered into in 2008 for delivery in 2010 and 2011 that have been marked to market since December 2009. These financial transactions mitigate the volatility of these contracts through the end of 2011 and resulted in wholesale revenues of $13 million in 2010.

The sale of RECs resulted in additional gains of $67 million in the nine months ending September 2010.

The following tables summarize the price and volume factors contributing to changes in revenues from generation sales:

	Increase
Source of Change in Direct and Government Aggregation	(Decrease)
	(In millions)
Direct Sales:
Effect of increase in sales volumes	$	909
Change in prices		(73	)
		836
Government Aggregation:
Effect of increase in sales volumes		570
Change in prices		2
		572
Net Increase in Direct and Government Aggregation Revenues	$	1,408

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	Increase
Source of Change in Wholesale Revenues	Decrease
	(In millions)
POLR:
Effect of 8.4% decrease in sales volumes	$	(200	)
Change in prices		(258	)
		(458	)
Other Wholesale:
Effect of 44.6% decrease in sales volumes		(147	)
Change in prices		(34	)
		(181	)
Net Decrease in Wholesale Revenues	$	(639	)

Transmission revenues increased $1 million due primarily to higher MISO congestion revenue, offset by lower PJM congestion revenue.

Expenses -

Total expenses increased $1.2 billion in the first nine months of 2010 due to the following factors:

• Fuel costs increased $199 million due to increased generation volumes ($140 million) and higher unit prices ($59 million). The increase in unit prices was due primarily to increased coal transportation costs and higher nuclear fuel unit prices following the refueling outages that occurred in 2009.

• Purchased power costs increased $688 million due primarily to higher volumes purchased ($606 million), power contract mark-to-market adjustments ($43 million) and higher unit costs ($39 million).

• Fossil operating costs decreased $18 million due primarily to lower labor costs which were partially offset by higher professional and contractor costs and reduced gains on the sale of emission allowances.

• Nuclear operating costs decreased $39 million due primarily to lower labor, consulting and contractor costs. The nine months ended September 2010 had one less refueling outage and fewer extended outages than the same period of 2009.

• Transmission expenses increased $36 million due primarily to increased costs in MISO of $152 million from higher network, ancillary and congestion costs, partially offset by lower PJM transmission expenses of $116 million due to lower congestion costs.

• Other expenses increased $340 million primarily due to a $292 million impairment charge ($181 million net of tax) related to operational changes at Bay Shore units 2-4, Eastlake Plant units 1-4, the Lake Shore Plant and the Ashtabula Plant. In addition, increased costs were incurred in uncollectible customer accounts and agent fees associated with the growth in direct and government aggregation sales.

Other Expense -

Total other expense in the nine months ending September 2010 was $124 million higher than the same period in 2009, primarily due to a decrease in nuclear decommissioning trust investment income ($94 million) and a $30 million increase in net interest expense from new long-term debt issued combined with the restructuring of existing PCRBs.

Other — First Nine Months of 2010 Compared to First Nine Months of 2009

Financial results from other operating segments and reconciling items, including interest expense on holding company debt and corporate support services revenues and expenses, resulted in a $75 million increase in earnings available to FirstEnergy in the first nine months of 2010 compared to the same period in 2009. The increase resulted primarily from the absence of debt retirement costs that were incurred in the third quarter of 2009 in connection with the tender offer for holding company debt ($139 million), decreased interest expense associated with the debt retirement ($56 million) and increased interest income ($16 million), partially offset by increased depreciation and other operating expenses ($30 million) and income tax expense ($132 million).

CAPITAL RESOURCES AND LIQUIDITY

As of September 30, 2010, FirstEnergy had cash and cash equivalents of approximately $632 million available to fund investments, operations and capital expenditures. To fund liquidity and capital requirements for the balance of 2010 and beyond, FirstEnergy will rely on internal and external sources of funds. Short-term cash requirements not met by cash provided from operations are generally satisfied through short-term borrowings. Long-term cash needs may be met through issuances of debt and/or equity securities.

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FirstEnergy expects its existing sources of liquidity to remain sufficient to meet its anticipated obligations and those of its subsidiaries. FirstEnergy’s business is capital intensive, requiring significant resources to fund operating expenses, construction expenditures, scheduled debt maturities and interest and dividend payments. During 2010 and in subsequent years, FirstEnergy expects to satisfy these requirements with a combination of internal cash from operations and external funds from the capital markets as market conditions warrant. FirstEnergy also expects that borrowing capacity under credit facilities will continue to be available to manage working capital requirements along with continued access to long-term capital markets.

A material adverse change in operations, or in the availability of external financing sources, could impact FirstEnergy’s ability to fund current liquidity and capital resource requirements. To mitigate risk, FirstEnergy’s business model stresses financial discipline and a strong focus on execution. Major elements of this business model include the expectation of: projected cash from operations, opportunities for favorable long-term earnings growth as the transition to competitive generation markets continues, operational excellence, retail strategy execution, well-positioned generation fleet, no speculative trading operations, appropriate long-term commodity hedging positions, manageable capital expenditure program, well funded pension, minimal near-term maturities of existing long-term debt, commitment to a strong and secure dividend (dividends declared from time to time on FirstEnergy’s common stock during any annual period may in aggregate vary from the indicated amount due to circumstances considered by FirstEnergy’s Board of Directors at the time of the actual declarations) and a successful merger integration.

As of September 30, 2010, FirstEnergy’s net deficit in working capital (current assets less current liabilities) was principally due to short-term borrowings ($1.0 billion) and the classification of certain variable interest rate PCRBs as currently payable long-term debt. Currently payable long-term debt as of September 30, 2010, included the following (in millions):

Currently Payable Long-term Debt
PCRBs supported by bank LOCs(1)	$	1,318
FGCO and NGC unsecured PCRBs(1)		90
Penelec FMBs(2)		24
NGC collateralized lease obligation bonds		50
Sinking fund requirements		34
Other notes(3)		74
	$	1,590

(1)	Interest rate mode permits individual debt holders to put the respective debt back to the issuer prior to maturity.
(2)	Mature in November 2010.
(3)	Notes represent Signal Peak third-party debt and will be repaid with proceeds from the October 22, 2010 refinancing of Signal Peak debt. As of September 30, 2010, $11 million matures in October 2010 and $63 million matures in November 2010.

Short-Term Borrowings

FirstEnergy had approximately $1.0 billion of short-term borrowings as of September 30, 2010 and $1.2 billion as of December 31, 2009. FirstEnergy’s available liquidity as of October 22, 2010, is summarized in the following table:

						Available
Company	Type	Maturity		Commitment		Liquidity
				(In millions)
FirstEnergy(1)	Revolving	Aug. 2012		$	2,750	$	1,650
FirstEnergy Solutions	Term loan	Mar. 2011			100		—
Ohio and Pennsylvania Companies	Receivables financing	Various	(2)		395		245
		Subtotal		$	3,245	$	1,895
		Cash			—		911
		Total		$	3,245	$	2,806

(1)	FirstEnergy Corp. and subsidiary borrowers.
(2)	Ohio — $250 million matures March 30, 2011; Pennsylvania — $145 million matures December 17, 2010 with optional extension terms.

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On October 22, 2010, Signal Peak and Global Rail entered into a $350 million syndicated two-year senior secured term loan facility among the two limited liability companies that comprise Signal Peak and Global Rail, as borrowers, Sovereign Bank, CoBank, Credit Agricole, U.S. Bank, BBVA Compass, Royal Bank of Canada, Fifth Third, Comerica Bank, CIBC Inc. and First Merit banks, as lenders, and Union Bank, N.A. as lender, administrative agent, collateral agent and syndication agent. FirstEnergy, together with WMB Loan Ventures LLC and WMB Loan Ventures II LLC, the entities that share ownership with FEV in the borrowers, have provided a guaranty of the borrowers’ obligations under the facility. The loan proceeds were used to repay $258 million of notes payable to FirstEnergy, including $9 million of interest and $63 million of bank loans that were scheduled to mature on November 16, 2010. Additional proceeds will be used for general company purposes, including an $11 million repayment of a third-party seller’s note maturing October 29, 2010.

Revolving Credit Facility

FirstEnergy has the capability to request an increase in the total commitments available under the $2.75 billion revolving credit facility (included in the borrowing capability table above) up to a maximum of $3.25 billion, subject to the discretion of each lender to provide additional commitments. A total of 25 banks participate in the facility, with no one bank having more than 7.3% of the total commitment. Commitments under the facility are available until August 24, 2012, unless the lenders agree, at the request of the borrowers, to an unlimited number of additional one-year extensions. Generally, borrowings under the facility must be repaid within 364 days. Available amounts for each borrower are subject to a specified sub-limit, as well as applicable regulatory and other limitations.

The following table summarizes the borrowing sub-limits for each borrower under the facility, as well as the limitations on short-term indebtedness applicable to each borrower under current regulatory approvals and applicable statutory and/or charter limitations as of September 30, 2010:

	Revolving			Regulatory and
	Credit Facility			Other Short-Term
Borrower	Sub-Limit			Debt Limitations
	(In millions)
FirstEnergy	$	2,750		$	—	(1)
FES		1,000			—	(1)
OE		500			500
Penn		50			34	(2)
CEI		250	(3)		500
TE		250	(3)		500
JCP&L		425			410	(2)
Met-Ed		250			300	(2)
Penelec		250			300	(2)
ATSI		50	(4)		50

(1)	No regulatory approvals, statutory or charter limitations applicable.
(2)	Excluding amounts that may be borrowed under the regulated companies’ money pool.
(3)	Borrowing sub-limits for CEI and TE may be increased to up to $500 million by delivering notice to the administrative agent that such borrower has senior unsecured debt ratings of at least BBB by S&P and Baa2 by Moody’s.
(4)	The borrowing sub-limit for ATSI may be increased up to $100 million by delivering notice to the administrative agent that ATSI has received regulatory approval to have short-term borrowings up to the same amount.

Under the revolving credit facility, borrowers may request the issuance of LOCs expiring up to one year from the date of issuance. The stated amount of outstanding LOCs will count against total commitments available under the facility and against the applicable borrower’s borrowing sub-limit.

The revolving credit facility contains financial covenants requiring each borrower to maintain a consolidated debt to total capitalization ratio of no more than 65%, measured at the end of each fiscal quarter. As of September 30, 2010, FirstEnergy’s and its subsidiaries’ debt to total capitalization ratios (as defined under the revolving credit facility) were as follows:

Borrower
FirstEnergy	60.2	%
FES	53.2	%
OE	53.1	%
Penn	30.8	%
CEI	57.6	%
TE	57.7	%
JCP&L	34.4	%
Met-Ed	37.6	%
Penelec	51.8	%
ATSI	48.8	%

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As of September 30, 2010, FirstEnergy could issue additional debt of approximately $2.9 billion, or recognize a reduction in equity of approximately $1.6 billion, and remain within the limitations of the financial covenants required by its revolving credit facility.

The revolving credit facility does not contain provisions that either restrict the ability to borrow or accelerate repayment of outstanding advances as a result of any change in credit ratings. Pricing is defined in “pricing grids,” whereby the cost of funds borrowed under the facility is related to the credit ratings of the company borrowing the funds.

FirstEnergy Money Pools

FirstEnergy’s regulated companies also have the ability to borrow from each other and the holding company to meet their short-term working capital requirements. A similar but separate arrangement exists among FirstEnergy’s unregulated companies. FESC administers these two money pools and tracks surplus funds of FirstEnergy and the respective regulated and unregulated subsidiaries, as well as proceeds available from bank borrowings. Companies receiving a loan under the money pool agreements must repay the principal amount of the loan, together with accrued interest, within 364 days of borrowing the funds. The rate of interest is the same for each company receiving a loan from their respective pool and is based on the average cost of funds available through the pool. The average interest rate for borrowings in the first nine months of 2010 was 0.53% per annum for the regulated companies’ money pool and 0.60% per annum for the unregulated companies’ money pool.

Pollution Control Revenue Bonds

As of September 30, 2010, FirstEnergy’s currently payable long-term debt included approximately $1.3 billion (FES — $1.2 billion, Met-Ed — $29 million and Penelec — $45 million) of variable interest rate PCRBs, the bondholders of which are entitled to the benefit of irrevocable direct pay bank LOCs. The interest rates on the PCRBs are reset daily or weekly. Bondholders can tender their PCRBs for mandatory purchase prior to maturity with the purchase price payable from remarketing proceeds or, if the PCRBs are not successfully remarketed, by drawings on the irrevocable direct pay LOCs. The subsidiary obligor is required to reimburse the applicable LOC bank for any such drawings or, if the LOC bank fails to honor its LOC for any reason, must itself pay the purchase price.

The LOCs for FirstEnergy variable interest rate PCRBs were issued by the following banks as of September 30, 2010:

	Aggregate LOC			Reimbursements of
LOC Bank	Amount(2)		LOC Termination Date	LOC Draws Due
	(In millions)
CitiBank N.A.	$	166	June 2014	June 2014
The Bank of Nova Scotia		284	Beginning April 2011	Multiple dates(3)
The Royal Bank of Scotland		131	June 2012	6 months
Wachovia Bank		152	March 2014	March 2014
Barclays Bank(1)		528	Beginning December 2010	30 days
PNC Bank		70	Beginning November 2010	180 days
Total	$	1,331

(1)	Supported by 18 participating banks, with no one bank having more than 14% of the total commitment.
(2)	Includes approximately $13 million of applicable interest coverage.
(3)	Shorter of 6 months or LOC termination date ($155 million) and shorter of one year or LOC termination date ($129 million).

On August 20, 2010, FES completed the remarketing of $250 million of PCRBs. Of the $250 million, $235 million of PCRBs were converted from a variable interest rate to a fixed interest rate. The remaining $15 million of PCRBs continue to bear a fixed interest rate. The interest rate conversion minimizes financial risk by converting the long-term debt into a fixed rate and, as a result, reducing exposure to variable interest rates over the short-term. These remarketings included two series: $235 million of PCRBs that now bear a per-annum rate of 2.25% and are subject to mandatory purchase on June 3, 2013; and $15 million of PCRBs that now bear a per-annum rate of 1.5% and are subject to mandatory purchase on June 1, 2011.

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On October 1, 2010, FES completed the refinancing and remarketing of six series of PCRBs totaling $313 million. These PCRBs were converted from a variable interest rate to a fixed long term interest rate of 3.375% per annum and are subject to mandatory purchase on July 1, 2015. The LOCs for the refinanced series of PCRBs totaling $208 million terminated as of October 1, 2010. The LOCs for the remarketed series of PCRBs totaling $108 million will terminate on November 1, 2010.

Long-Term Debt Capacity

As of September 30, 2010, the Ohio Companies and Penn had the aggregate capability to issue approximately $2.5 billion of additional FMBs on the basis of property additions and retired bonds under the terms of their respective mortgage indentures. The issuance of FMBs by the Ohio Companies is also subject to provisions of their senior note indentures generally limiting the incurrence of additional secured debt, subject to certain exceptions that would permit, among other things, the issuance of secured debt (including FMBs) supporting pollution control notes or similar obligations, or as an extension, renewal or replacement of previously outstanding secured debt. In addition, these provisions would permit OE and CEI to incur additional secured debt not otherwise permitted by a specified exception of up to $116 million and $25 million, respectively, as of September 30, 2010. As a result of the indenture provisions, TE cannot incur any additional secured debt. Met-Ed and Penelec had the capability to issue secured debt of approximately $380 million and $358 million, respectively, under provisions of their senior note indentures as of September 30, 2010.

Based upon FGCO’s FMB indenture, net earnings and available bondable property additions as of September 30, 2010, FGCO had the capability to issue $1.9 billion of additional FMBs under the terms of that indenture. Based upon NGC’s FMB indenture, net earnings and available bondable property additions, NGC had the capability to issue $294 million of additional FMBs as of September 30, 2010.

FirstEnergy’s access to capital markets and costs of financing are influenced by the ratings of its securities. On February 11, 2010, S&P issued a report lowering FirstEnergy’s and its subsidiaries’ credit ratings by one notch, while maintaining its stable outlook. Moody’s and Fitch affirmed the ratings and stable outlook of FirstEnergy and its subsidiaries on February 11, 2010. On September 28, 2010, S&P issued a report reaffirming the ratings and stable outlook of FirstEnergy and its subsidiaries. The following table displays FirstEnergy’s, FES’ and the Utilities’ securities ratings as of September 30, 2010.

	Senior Secured			Senior Unsecured
Issuer	S&P	Moody’s	Fitch	S&P	Moody’s	Fitch
FirstEnergy Corp.	—	—	—	BB+	Baa3	BBB
FirstEnergy Solutions	—	—	—	BBB-	Baa2	BBB
Ohio Edison	BBB	A3	BBB+	BBB-	Baa2	BBB
Pennsylvania Power	BBB+	A3	BBB+	—	—	—
Cleveland Electric Illuminating	BBB	Baa1	BBB	BBB-	Baa3	BBB-
Toledo Edison	BBB	Baa1	BBB	—	—	—
Jersey Central Power & Light	—	—	—	BBB-	Baa2	BBB+
Metropolitan Edison	BBB	A3	BBB+	BBB-	Baa2	BBB
Pennsylvania Electric	BBB	A3	BBB+	BBB-	Baa2	BBB
ATSI	—	—	—	BBB-	Baa1	—

Changes in Cash Position

As of September 30, 2010, FirstEnergy had $632 million of cash and cash equivalents compared to $874 million as of December 31, 2009. As of September 30, 2010 and December 31, 2009, FirstEnergy had approximately $14 million and $12 million, respectively, of restricted cash included in other current assets on the Consolidated Balance Sheet.

During the first nine months of 2010, FirstEnergy received $730 million of cash dividends from its subsidiaries and paid $503 million in cash dividends to common shareholders.

Cash Flows From Operating Activities

FirstEnergy’s consolidated net cash from operating activities is provided primarily by its competitive energy services and energy delivery services businesses (see Results of Operations above). Net cash provided from operating activities increased by $609 million during the first nine months of 2010 compared to the comparable period in 2009, as summarized in the following table:

	Nine Months
	Ended September 30						Increase
Operating Cash Flows	2010			2009			(Decrease)
	(In millions)
Net income	$	580		$	754		$	(174	)
Non-cash charges and other adjustments		1,648			1,755			(107	)
Pension trust contribution		—			(500	)		500
Working Capital and other		(155	)		(545	)		390
	$	2,073		$	1,464		$	609

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The decrease in non-cash charges and other adjustments is primarily due to lower net amortization of regulatory assets of ($354 million), including the impact of CEI’s $216 million regulatory asset impairment recorded during the first quarter of 2009, a $142 million charge relating to loss on debt redemptions during the third quarter of 2009 and changes in deferred income taxes and investment tax credits of ($162 million). The decrease in non-cash charges and other adjustments was partially offset by impairment of long-lived assets of $294 million, including the impact of the $292 million impairment of certain FGCO facilities and changes in the deferral of new regulatory assets of $136 million.

The change in working capital and other is primarily due to cash proceeds of $129 million received on the termination of fixed-for-floating interest rate swaps during the second and third quarters of 2010, changes in investment securities of $133 million, a decrease in prepaid assets of $345 million and a $250 million increase in accounts receivable.

Cash Flows From Financing Activities

In the first nine months of 2010, cash used for financing activities was $870 million compared to cash provided from financing activities of $617 million in the first nine months of 2009. The decrease was primarily due to activity during the first nine months of 2009 which included new debt issuances and long-term debt retirements associated with a $1.2 billion senior note tender offer completed by FirstEnergy in September 2009. The following table summarizes security issuances (net of any discounts) and redemptions:

	Nine Months
	Ended September 30
Securities Issued or Redeemed	2010			2009
	(In millions)
New Issues
First mortgage bonds		—			398
Pollution control notes		250			859
Senior secured notes		—			297
Unsecured Notes		1			2,597
	$	251		$	4,151
Redemptions
First mortgage bonds		7			—
Pollution control notes		251			687
Senior secured notes		63			54
Unsecured notes		101			1,472
	$	422		$	2,213
Short-term borrowings, net	$	(171	)	$	(764	)

Cash Flows From Investing Activities

Net cash flows used in investing activities resulted primarily from property additions. Additions for the energy delivery services segment primarily represent expenditures related to transmission and distribution facilities. Capital spending by the competitive energy services segment is principally generation-related. The following table summarizes investing activities for the first nine months of 2010 and 2009 by business segment:

Summary of Cash Flows	Property
Provided from (Used for) Investing Activities	Additions			Investments			Other			Total
				(In millions)
Sources (Uses)
Nine Months Ended September 30, 2010
Energy delivery services	$	(546	)	$	82		$	11		$	(453	)
Competitive energy services		(860	)		(26	)		(53	)		(939	)
Other		(18	)		(3	)		34			13
Inter-Segment reconciling items		(43	)		(23	)		—			(66	)
Total	$	(1,467	)	$	30		$	(8	)	$	(1,445	)
Nine Months Ended September 30, 2009
Energy delivery services	$	(524	)	$	(121	)	$	(35	)	$	(680	)
Competitive energy services		(893	)		(6	)		(21	)		(920	)
Other		(133	)					(11	)		(144	)
Inter-Segment reconciling items		(25	)		(25	)		6			(44	)
Total	$	(1,575	)	$	(152	)	$	(61	)	$	(1,788	)

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Net cash used for investing activities in the first nine months of 2010 decreased by $343 million compared to the first nine months of 2009. The decrease was principally due to a $108 million decrease in property additions (principally lower AQC system expenditures) and an increase in cash proceeds from the sale of assets of $98 million, partially offset by $110 million spent by FES in the customer acquisition process.

During the remaining quarter of 2010, capital requirements for property additions and capital leases are expected to be approximately $410 million, including approximately $32 million for nuclear fuel. These cash requirements are expected to be satisfied from a combination of internal cash and short-term credit arrangements.

GUARANTEES AND OTHER ASSURANCES

As part of normal business activities, FirstEnergy enters into various agreements on behalf of its subsidiaries to provide financial or performance assurances to third parties. These agreements include contract guarantees, surety bonds and LOCs. Some of the guaranteed contracts contain collateral provisions that are contingent upon either FirstEnergy or its subsidiaries’ credit ratings.

As of September 30, 2010, FirstEnergy’s maximum exposure to potential future payments under outstanding guarantees and other assurances approximated $3.8 billion, as summarized below:

	Maximum
Guarantees and Other Assurances	Exposure
	(In millions)
FirstEnergy Guarantees on Behalf of its Subsidiaries
Energy and Energy-Related Contracts(1)	$	300
LOC (long-term debt) —Interest coverage(2)		6
FirstEnergy guarantee of OVEC obligations		300
Other(3)		226
		832
Subsidiaries’ Guarantees
Energy and Energy-Related Contracts		54
LOC (long-term debt) —Interest coverage(2)		4
FES’ guarantee of NGC’s nuclear property insurance		70
FES’ guarantee of FGCO’s sale and leaseback obligations		2,413
Other		2
		2,543
Surety Bonds		84
LOC (long-term debt) — Interest coverage(2)		3
LOC (non-debt)(4)(5)		380
		467
Total Guarantees and Other Assurances	$	3,842

(1)	Issued for open-ended terms, with a 10-day termination right by FirstEnergy.
(2)	Reflects the interest coverage portion of LOCs issued in support of floating rate PCRBs with various maturities. The principal amount of floating-rate PCRBs of $1.3 billion is reflected in currently payable long-term debt on FirstEnergy’s consolidated balance sheets.
(3)	Includes guarantees of $15 million for nuclear decommissioning funding assurances, $161 million supporting OE’s sale and leaseback arrangement, and $34 million for railcar leases.
(4)	Includes $201 million issued for various terms pursuant to LOC capacity available under FirstEnergy’s revolving credit facility.
(5)	Includes approximately $135 million pledged in connection with the sale and leaseback of Beaver Valley Unit 2 by OE and $44 million pledged in connection with the sale and leaseback of Perry by OE.

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FirstEnergy guarantees energy and energy-related payments of its subsidiaries involved in energy commodity activities principally to facilitate or hedge normal physical transactions involving electricity, gas, emission allowances and coal. FirstEnergy also provides guarantees to various providers of credit support for the financing or refinancing by its subsidiaries of costs related to the acquisition of property, plant and equipment. These agreements legally obligate FirstEnergy to fulfill the obligations of those subsidiaries directly involved in energy and energy-related transactions or financings where the law might otherwise limit the counterparties’ claims. If demands of a counterparty were to exceed the ability of a subsidiary to satisfy existing obligations, FirstEnergy’s guarantee enables the counterparty’s legal claim to be satisfied by FirstEnergy’s assets. FirstEnergy believes the likelihood is remote that such parental guarantees will increase amounts otherwise paid by FirstEnergy to meet its obligations incurred in connection with ongoing energy and energy-related activities.

While these types of guarantees are normally parental commitments for the future payment of subsidiary obligations, subsequent to the occurrence of a credit rating downgrade to below investment grade, an acceleration or funding obligation or a “material adverse event,” the immediate posting of cash collateral, provision of a LOC or accelerated payments may be required of the subsidiary. As of September 30, 2010, FirstEnergy’s maximum exposure under these collateral provisions was $419 million, as shown below:

Collateral Provisions	FES		Utilities		Total
			(In millions)
Credit rating downgrade to below investment grade (1)	$	306	$	68	$	374
Material adverse event (2)		45		—		45
Total	$	351	$	68	$	419

(1)	Includes $85 million and $57 million that is also considered an acceleration of payment or funding obligation at FES and the Utilities, respectively.
(2)	Includes $33 million that is also considered an acceleration of payment or funding obligation at FES.

Stress case conditions of a credit rating downgrade or “material adverse event” and hypothetical adverse price movements in the underlying commodity markets would increase the total potential amount to $511 million consisting of $463 million due to a below investment grade credit rating, of which $175 million is related to an acceleration of payment or funding obligation, and $48 million due to “material adverse event” contractual clauses.

Most of FirstEnergy’s surety bonds are backed by various indemnities common within the insurance industry. Surety bonds and related guarantees of $84 million provide additional assurance to outside parties that contractual and statutory obligations will be met in a number of areas including construction contracts, environmental commitments and various retail transactions.

In addition to guarantees and surety bonds, FES’ contracts, including power contracts with affiliates awarded through competitive bidding processes, typically contain margining provisions which require the posting of cash or LOCs in amounts determined by future power price movements. Based on FES’ power portfolio as of September 30, 2010, and forward prices as of that date, FES has posted collateral of $244 million. Under a hypothetical adverse change in forward prices (95% confidence level change in forward prices over a one year time horizon), FES would be required to post an additional $46 million. Depending on the volume of forward contracts and future price movements, FES could be required to post higher amounts for margining.

In connection with FES’ obligations to post and maintain collateral under the two-year PSA entered into by FES and the Ohio Companies following the CBP auction on May 13-14, 2009, NGC entered into a Surplus Margin Guaranty in an amount up to $500 million. The Surplus Margin Guaranty is secured by an NGC FMB issued in favor of the Ohio Companies.

FES’ debt obligations are generally guaranteed by its subsidiaries, FGCO and NGC, and FES guarantees the debt obligations of each of FGCO and NGC. Accordingly, present and future holders of indebtedness of FES, FGCO and NGC will have claims against each of FES, FGCO and NGC regardless of whether their primary obligor is FES, FGCO or NGC.

On October 22, 2010, Signal Peak and Global Rail entered into a $350 million syndicated two-year senior secured term loan facility among the two limited liability companies that comprise Signal Peak and Global Rail, as borrowers, Sovereign Bank, CoBank, Credit Agricole, U.S. Bank, BBVA Compass, Royal Bank of Canada, Fifth Third, Comerica Bank, CIBC Inc. and First Merit banks, as lenders, and Union Bank, N.A. as lender, administrative agent, collateral agent and syndication agent. FirstEnergy, together with WMB Loan Ventures LLC and WMB Loan Ventures II LLC, the entities that share ownership with FEV in the borrowers, have provided a guaranty of the borrowers’ obligations under the facility. In addition, FEV and the other entities that directly own the equity interests in the borrowers have pledged those interests to the banks as collateral for the facility.

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OFF-BALANCE SHEET ARRANGEMENTS

FES and the Ohio Companies have obligations that are not included on their Consolidated Balance Sheets related to sale and leaseback arrangements involving the Bruce Mansfield Plant, Perry Unit 1 and Beaver Valley Unit 2, which are satisfied through operating lease payments. The total present value of these sale and leaseback operating lease commitments, net of trust investments, is $1.7 billion as of September 30, 2010.

MARKET RISK INFORMATION

FirstEnergy uses various market risk sensitive instruments, including derivative contracts, primarily to manage the risk of price and interest rate fluctuations. FirstEnergy’s Risk Policy Committee, comprised of members of senior management, provides general oversight for risk management activities throughout the company.

Commodity Price Risk

FirstEnergy is exposed to financial and market risks resulting from the fluctuation of interest rates and commodity prices associated with electricity, energy transmission, natural gas, coal, nuclear fuel and emission allowances. To manage the volatility relating to these exposures, FirstEnergy uses a variety of non-derivative and derivative instruments, including forward contracts, options, futures contracts and swaps. The derivatives are used principally for hedging purposes.

The valuation of derivative contracts is based on observable market information to the extent that such information is available. In cases where such information is not available, FirstEnergy relies on model-based information. The model provides estimates of future regional prices for electricity and an estimate of related price volatility. FirstEnergy uses these results to develop estimates of fair value for financial reporting purposes and for internal management decision making (see Note 5 to the consolidated financial statements). Sources of information for the valuation of commodity derivative contracts as of September 30, 2010 are summarized by year in the following table:

Source of Information-
Fair Value by Contract Year	2010			2011			2012			2013			2014			Thereafter			Total
							(In millions)
Prices actively quoted(1)	$	(2	)	$	—		$	—		$	—		$	—		$	—		$	(2	)
Other external sources(2)		(328	)		(369	)		(164	)		(53	)		7			(10	)		(917	)
Prices based on models		—			—			—			—			(9	)		141			132
Total(3)	$	(330	)	$	(369	)	$	(164	)	$	(53	)	$	(2	)	$	131		$	(787	)

(1)	Represents exchange traded New York Mercantile Exchange futures and options.
(2)	Primarily represents contracts based on broker and IntercontinentalExchange quotes.
(3)	Includes $629 million in non-hedge commodity derivative contracts that are primarily related to NUG contracts. NUG contracts are subject to regulatory accounting and do not impact earnings.

FirstEnergy performs sensitivity analyses to estimate its exposure to the market risk of its commodity positions. Based on derivative contracts held as of September 30, 2010, an adverse 10% change in commodity prices would decrease net income by approximately $6 million ($4 million net of tax) during the next 12 months.

Interest Rate Swap Agreements — Fair Value Hedges

FirstEnergy has used fixed-for-floating interest rate swap agreements to hedge a portion of the consolidated interest rate risk associated with the debt portfolio of its subsidiaries. These derivatives were treated as fair value hedges of fixed-rate, long-term debt issues, protecting against the risk of changes in the fair value of fixed-rate debt instruments due to lower interest rates. As of September 30, 2010, no fixed-for-floating interest rate swap agreements were outstanding.

Total unamortized gains included in long-term debt associated with prior fixed-for-floating interest rate swap agreements totaled $129 million ($84 million net of tax) as of September 30, 2010. Based on current estimates, approximately $22 million will be amortized to interest expense during the next twelve months. Reclassifications from long-term debt into interest expense totaled $5 million and $7 million for the three and nine months ended September 30, 2010.

Equity Price Risk

FirstEnergy provides a noncontributory qualified defined benefit pension plan that covers substantially all of its employees and non-qualified pension plans that cover certain employees. The plan provides defined benefits based on years of service and compensation levels. FirstEnergy also provides health care benefits (which include certain employee contributions, deductibles and co-payments) upon retirement to employees hired prior to January 1, 2005, their dependents, and under certain circumstances, their survivors. The benefit plan assets and obligations are remeasured annually using a December 31 measurement date or as significant triggering events occur. As of September 30, 2010, approximately 44% of the pension plan assets are invested in equity securities and 56% are invested in fixed income securities. The plan is 81% funded on an accumulated benefit obligation basis as of September 30, 2010. A decline in the value of FirstEnergy’s pension plan assets could result in additional funding requirements. FirstEnergy currently estimates that additional cash contributions will be required beginning in 2012.

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Nuclear decommissioning trust funds have been established to satisfy NGC’s and the Utilities’ nuclear decommissioning obligations. As of September 30, 2010, approximately 15% of the funds were invested in equity securities and 85% were invested in fixed income securities, with limitations related to concentration and investment grade ratings. The equity securities are carried at their market value of approximately $305 million as of September 30, 2010. A hypothetical 10% decrease in prices quoted by stock exchanges would result in a $31 million reduction in fair value as of September 30, 2010. The decommissioning trusts of JCP&L and the Pennsylvania Companies are subject to regulatory accounting, with unrealized gains and losses recorded as regulatory assets or liabilities, since the difference between investments held in trust and the decommissioning liabilities will be recovered from or refunded to customers. NGC, OE and TE recognize in earnings the unrealized losses on available-for-sale securities held in their nuclear decommissioning trusts as other-than-temporary impairments. A decline in the value of FirstEnergy’s nuclear decommissioning trusts could result in additional funding requirements. During 2010, $4 million was contributed to the OE and TE nuclear decommissioning trusts to comply with requirements under certain sale-leaseback transactions in which OE and TE continue as lessees, and $4 million was contributed to the JCP&L and Pennsylvania nuclear decommissioning trusts to comply with regulatory requirements. FirstEnergy continues to evaluate the status of its funding obligations for the decommissioning of these nuclear facilities and does not expect to make additional cash contributions to the nuclear decommissioning trusts for the remainder of 2010 other than those to the JCP&L and Pennsylvania Companies’ nuclear decommissioning trusts due to regulatory requirements.

CREDIT RISK

Credit risk is the risk of an obligor’s failure to meet the terms of any investment contract, loan agreement or otherwise perform as agreed. Credit risk arises from all activities in which success depends on issuer, borrower or counterparty performance, whether reflected on or off the balance sheet. FirstEnergy engages in transactions for the purchase and sale of commodities including gas, electricity, coal and emission allowances. These transactions are often with major energy companies within the industry.

FirstEnergy maintains credit policies with respect to its counterparties to manage overall credit risk. This includes performing independent risk evaluations, actively monitoring portfolio trends and using collateral and contract provisions to mitigate exposure. As part of its credit program, FirstEnergy aggressively manages the quality of its portfolio of energy contracts, evidenced by a current weighted average risk rating for energy contract counterparties of BBB (S&P). As of September 30, 2010, the largest credit concentration was with J.P. Morgan Chase & Co., which is currently rated investment grade, representing 9.42% of FirstEnergy’s total approved credit risk.

OUTLOOK

Reliability Initiatives

Federally-enforceable mandatory reliability standards apply to the bulk power system and impose certain operating, record-keeping and reporting requirements on the Utilities and ATSI. The NERC has delegated day-to-day implementation and enforcement of these reliability standards to eight regional entities, including ReliabilityFirst Corporation. All of FirstEnergy’s facilities are located within the ReliabilityFirst region. FirstEnergy actively participates in the NERC and ReliabilityFirst stakeholder processes, and otherwise monitors and manages its companies in response to the ongoing development, implementation and enforcement of the reliability standards implemented and enforced by the ReliabilityFirst Corporation.

FirstEnergy believes that it generally is in compliance with all currently-effective and enforceable reliability standards. FirstEnergy’s practice is to address and resolve any occasional or isolated incidents of noncompliance as they arise in the normal course of operations. FirstEnergy also believes that the NERC, ReliabilityFirst and the FERC will continue to refine existing reliability standards as well as to develop and adopt new reliability standards. The financial impact of complying with new or amended standards cannot be determined at this time; however, 2005 amendments to the FPA provide that all prudent costs incurred to comply with the new reliability standards be recovered in rates. Still, any future inability on FirstEnergy’s part to comply with the reliability standards for its bulk power system could result in the imposition of financial penalties that could have a material adverse effect on its financial condition, results of operations and cash flows.

On December 9, 2008, a transformer at JCP&L’s Oceanview substation failed, resulting in an outage on certain bulk electric system (transmission voltage) lines out of the Oceanview and Atlantic substations resulting in customers losing power for up to eleven hours. On March 31, 2009, the NERC initiated a Compliance Violation Investigation in order to determine JCP&L’s contribution to the electrical event and to review any potential violation of NERC Reliability Standards associated with the event. NERC has submitted first and second Requests for Information regarding this and another related matter. JCP&L is complying with these requests. JCP&L is not able to predict what actions, if any, that the NERC may take with respect to this matter.

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On August 23, 2010, FirstEnergy self-reported a vegetation encroachment event on a Met-Ed 230 kV line to ReliabilityFirst. This event did not result in a fault, outage, operation of protective equipment, or any other meaningful electric effect on any FirstEnergy transmission facilities or systems. On August 25, 2010, ReliabilityFirst issued a Notice of Enforcement to investigate the incident. FirstEnergy submitted a data response to ReliabilityFirst on September 27, 2010. At this time, FirstEnergy is unable to predict the outcome of this investigation.

Ohio

The Ohio Companies operate under an Amended ESP, which expires on May 31, 2011, and provides for generation supplied through a CBP. The Amended ESP also allows the Ohio Companies to collect a delivery service improvement rider (Rider DSI) at an overall average rate of $0.002 per KWH for the period of April 1, 2009 through December 31, 2011. The Ohio Companies currently purchase generation at the average wholesale rate of a CBP conducted in May 2009. FES is one of the suppliers to the Ohio Companies through the May 2009 CBP. The PUCO approved a $136.6 million distribution rate increase for the Ohio Companies in January 2009, which went into effect on January 23, 2009 for OE ($68.9 million) and TE ($38.5 million) and on May 1, 2009 for CEI ($29.2 million). Applications for rehearing of the PUCO order in the distribution case were filed by the Ohio Companies and one other party. The Ohio Companies raised numerous issues in their application for rehearing related to rate recovery of certain expenses, recovery of line extension costs, the level of rate of return and the amount of general plant balances. The PUCO has not yet issued a substantive Entry on Rehearing.

On October 20, 2009, the Ohio Companies filed an MRO to procure, through a CBP, generation supply for customers who do not shop with an alternative supplier for the period beginning June 1, 2011. The CBP would be similar, in all material respects, to the CBP conducted in May 2009 in that it would procure energy, capacity and certain transmission services on a slice of system basis. However, unlike the May 2009 CBP, the MRO would include multiple bidding sessions and multiple products with different delivery periods for generation supply designed to reduce potential volatility and supplier risk and encourage bidder participation. Although the Ohio Companies requested a PUCO determination by January 18, 2010, on February 3, 2010, the PUCO announced that its determination would be delayed. The PUCO has not yet issued an order in this matter.

On March 23, 2010, the Ohio Companies filed an application for a new ESP. The new ESP will go into effect on June 1, 2011 and conclude on May 31, 2014. Attached to the application was a Stipulation and Recommendation signed by the Ohio Companies, the Staff of the PUCO, and an additional fourteen parties signing as Signatory Parties, with two additional parties agreeing not to oppose the adoption of the Stipulation. The material terms of the Stipulation include a CBP similar to the one used in May 2009 and the one proposed in the October 2009 MRO filing; a 6% generation discount to certain low-income customers provided by the Ohio Companies through a bilateral wholesale contract with FES (initial auctions scheduled for October 20, 2010 and January 25, 2011); no increase in base distribution rates through May 31, 2014; load cap of no less than 80%, which also applies to any tranches assigned post auction; and a new distribution rider, Delivery Capital Recovery Rider (Rider DCR), to recover a return of, and on, capital investments in the delivery system. This Rider substitutes for Rider DSI which terminates by its own terms. The Ohio Companies also agree not to collect certain amounts associated with RTEP and administrative costs associated with the move to PJM, dependent on the outcome of certain PJM proceedings. Many of the existing riders approved in the previous ESP remain in effect, some with modifications. The new ESP also requests the resolution of current proceedings pending at the PUCO regarding corporate separation, elements of the smart grid proceeding and the move to PJM. FirstEnergy recorded approximately $39.5 million of regulatory asset impairments and expenses related to the ESP. On May 12, 2010, a supplemental stipulation was filed that added two additional parties to the Stipulation, namely the City of Akron, Ohio and Council for Smaller Enterprises, to provide additional energy efficiency benefits. On July 22, 2010, a second supplemental stipulation was filed that, among other provisions provides a commitment that retail customers of the Ohio Companies will not pay certain costs related to the companies’ integration into PJM, for the longer of the five year period from June 1, 2011 through May 31, 2016 or when the amount of costs avoided by customers for certain types of products totals $360 million dependent on the outcome of certain PJM proceedings, and establishes a $12 million fund to assist low income customers over the term of the ESP. Additional parties signing or not opposing the second supplemental stipulation include Northeast Ohio Public Energy Council (NOPEC), Northwest Ohio Aggregation Coalition (NOAC), Environmental Law and Policy Center and a number of low income community agencies. The PUCO modified and approved the new ESP on August 25, 2010. The Companies accepted the PUCO’s decision subject to the implementation of certain elements of the ESP being consistent with the terms as they were included in the stipulation. On September 24, 2010, an application for rehearing was filed by the OCC and two other parties. The Ohio Companies and other parties filed their memorandum contra to that application for rehearing on October 4, 2010. The PUCO granted the application for rehearing on October 22, 2010. The PUCO has yet to rule on the substance of the application for rehearing.

Under the provisions of SB221, the Ohio Companies are required to implement energy efficiency programs that will achieve a total annual energy savings equivalent of approximately 166,000 MWH in 2009, 290,000 MWH in 2010, 410,000 MWH in 2011, 470,000 MWH in 2012 and 530,000 MWH in 2013, with additional savings required through 2025. Utilities are also required to reduce peak demand in 2009 by 1%, with an additional 0.75% reduction each year thereafter through 2018. The Ohio Companies filed an application with the PUCO seeking amendments to these benchmarks. On January 7, 2010, the PUCO amended the Ohio Companies’ 2009 energy efficiency benchmarks to zero, contingent upon the Ohio Companies meeting the revised benchmarks in a period of not more than three years. On March 10, 2010, the PUCO found that the Ohio Companies’ peak demand reduction programs complied with PUCO rules.

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On December 15, 2009, the Ohio Companies filed the required three year portfolio plan seeking approval for the programs they intend to implement to meet the energy efficiency and peak demand reduction requirements for the 2010-2012 period. On March 8, 2010, the Ohio Companies filed their 2009 Status Update Report with the PUCO in which they indicated compliance with the 2009 statutory energy efficiency and peak demand benchmarks as those benchmarks were amended as described above. The Ohio Companies expect that all costs associated with compliance will be recoverable from customers. The Ohio Companies’ three year portfolio plan is still awaiting decision from the PUCO. The plan has yet to be approved by the PUCO, which is delaying the launch of the programs described in the plan. Without such approval, the Ohio Companies’ compliance with 2010 benchmarks is jeopardized and if not approved soon may require the Ohio Companies to seek an amendment to their annual benchmark requirements for 2010. Failure to comply with the benchmarks or to obtain such an amendment may subject the Companies to an assessment by the PUCO of a forfeiture.

Additionally under SB221, electric utilities and electric service companies are required to serve part of their load from renewable energy resources equivalent to 0.25% of the KWH they served in 2009. In August and October 2009, the Ohio Companies conducted RFPs to secure RECs. The RFPs sought RECs, including solar RECs and RECs generated in Ohio in order to meet the Ohio Companies’ alternative energy requirements as set forth in SB221 for 2009, 2010 and 2011. The RECs acquired through these two RFPs were used to help meet the renewable energy requirements established under SB221 for 2009, 2010 and 2011. On March 10, 2010, the PUCO found that there was an insufficient quantity of solar energy resources reasonably available in the market. The PUCO reduced the Ohio Companies’ aggregate 2009 benchmark to the level of solar RECs the Ohio Companies acquired through their 2009 RFP processes, provided the Ohio Companies’ 2010 alternative energy requirements be increased to include the shortfall for the 2009 solar REC benchmark. On April 15, 2010, the Ohio Companies and FES (due to its status as an electric service company in Ohio) filed compliance reports with the PUCO setting forth how they individually satisfied the alternative energy requirements in SB221 for 2009. FES also applied for a force majeure determination from the PUCO regarding a portion of their compliance with the 2009 solar energy resource benchmark, which application is still pending. In July 2010, the Ohio Companies initiated an additional RFP to secure RECs and solar RECs needed to meet the Ohio Companies’ alternative energy requirements as set forth in SB221. As a result of this RFP, contracts were executed in August 2010.

On February 12, 2010, OE and CEI filed an application with the PUCO to establish a new credit for all-electric customers. On March 3, 2010, the PUCO ordered that rates for the affected customers be set at a level that will provide bill impacts commensurate with charges in place on December 31, 2008 and authorized the Ohio Companies to defer incurred costs equivalent to the difference between what the affected customers would have paid under previously existing rates and what they pay with the new credit in place. Tariffs implementing this new credit went into effect on March 17, 2010. On April 15, 2010, the PUCO issued a Second Entry on Rehearing that expanded the group of customers to which the new credit would apply and authorized deferral for the associated additional amounts. The PUCO also stated that it expected that the new credit would remain in place through at least the 2011 winter season, and charged its staff to work with parties to seek a long term solution to the issue. Tariffs implementing this newly expanded credit went into effect on May 21, 2010. The Ohio Companies also filed on May 14, 2010 an application for rehearing of the Second Entry on Rehearing, which was granted for purposes of further consideration on June 9, 2010. On September 9, 2010, the OCC filed a motion requesting that a procedural schedule be established. The Ohio Companies filed their motion contra on September 23, 2010. The PUCO Staff issued a report related to the all-electric issue on September 24, 2010, in which it provides background on the issue and sets forth its bill impact analysis under a number of different scenarios for a longer term solution, but it made no specific recommendation to the PUCO.

Pennsylvania

Met-Ed and Penelec purchase a portion of their POLR and default service requirements from FES through a fixed-price partial requirements wholesale power sales agreement. The agreement allows Met-Ed and Penelec to sell the output of NUG energy to the market and requires FES to provide energy at fixed prices to replace any NUG energy sold to the extent needed for Met-Ed and Penelec to satisfy their POLR and default service obligations.

Met-Ed and Penelec filed with the PPUC a generation procurement plan covering the period January 1, 2011 through May 31, 2013. The plan is designed to provide adequate and reliable service via a prudent mix of long-term, short-term and spot market generation supply, as required by Act 129, with a staggered procurement schedule, which varies by customer class, through the use of a descending clock auction. On August 12, 2009, Met-Ed and Penelec filed a settlement agreement with the PPUC for the generation procurement plan, reflecting the settlement on all but two reserved issues. On November 6, 2009, the PPUC entered an Order approving the settlement and finding in favor of Met-Ed and Penelec on the two reserved issues. Generation procurement began in January 2010.

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On February 8, 2010, Penn filed a Petition for Approval of its Default Service Plan for the period June 1, 2011 through May 31, 2013. On July 29, 2010, the parties to the proceeding filed a Joint Petition for Settlement of all issues. The PPUC adopted a Motion approving the Joint Petition for Settlement on October 21, 2010. The Joint Petition resolves all issues relating to Penn’s Default Service Plan for the next program period, including its procurement method, compliance with the Alternative Energy Portfolio Standards Act, rate design and retail market issues. The PPUC’s approval of the Joint Petition is conditioned by holding that the provision relating to the recovery of MISO exit cost fees and one-time PJM integration costs (resulting from Penn’s June 1, 2011 exit of MISO and integration into PJM) be approved, but made subject to the approval of cost recovery by FERC. Penn may not put these provisions into effect until FERC has approved the recovery and allocation of MISO exit fees and PJM integration costs. An Order consistent with the Motion is expected to be entered in the near future.

The PPUC adopted a Motion on January 28, 2010 and subsequently entered an Order on March 3, 2010 which denies the recovery of marginal transmission losses through the TSC rider for the period of June 1, 2007 through March 31, 2008, and directs Met-Ed and Penelec to submit a new tariff or tariff supplement reflecting the removal of marginal transmission losses from the TSC, and instructs Met-Ed and Penelec to work with the various intervening parties to file a recommendation to the PPUC regarding the establishment of a separate account for all marginal transmission losses collected from ratepayers plus interest to be used to mitigate future generation rate increases beginning January 1, 2011. On March 18, 2010, Met-Ed and Penelec filed a Petition with the PPUC requesting that it stay the portion of the March 3, 2010 Order requiring the filing of tariff supplements to end collection of costs for marginal transmission losses. By Order entered March 25, 2010, the PPUC granted the requested stay until December 31, 2010. Pursuant to the PPUC’s order, Met-Ed and Penelec filed the plan to establish separate accounts for marginal transmission loss revenues and related interest and carrying charges and the plan for the use of these funds to mitigate future generation rate increases commencing January 1, 2011. The PPUC approved this plan on June 7, 2010. On April 1, 2010, Met-Ed and Penelec filed a Petition for Review with the Commonwealth Court of Pennsylvania appealing the PPUC’s March 3, 2010 Order. Although the ultimate outcome of this matter cannot be determined at this time, it is the belief of Met-Ed and Penelec that they should prevail in the appeal and therefore expect to fully recover the approximately $199.7 million ($158.5 million for Met-Ed and $41.2 million for Penelec) in marginal transmission losses for the period prior to January 1, 2011. On July 9, 2010, Met-Ed and Penelec filed their briefs with the Commonwealth Court of Pennsylvania. The Office of Small Business Advocate filed its brief on July 9, 2010. On August 24, 2010, the PPUC as well as MEIUG and PICA filed their briefs. Met-Ed and Penelec filed their reply brief on September 9, 2010.

On May 20, 2010, the PPUC approved Met-Ed’s and Penelec’s annual updates to their TSC rider for the period June 1, 2010 through December 31, 2010 including marginal transmission losses as approved by the PPUC, although the recovery of marginal losses will be subject to the outcome of the proceeding related to the 2008 TSC filing as described above. The TSC for Met-Ed’s customers was increased to provide for full recovery by December 31, 2010.

Act 129 was enacted in 2008 to address issues such as: energy efficiency and peak load reduction; generation procurement; time-of-use rates; smart meters; and alternative energy. Among other things, Act 129 required utilities to file with the PPUC an energy efficiency and peak load reduction plan, or EE&C Plan, by July 1, 2009, setting forth the utilities’ plans to reduce energy consumption by a minimum of 1% and 3% by May 31, 2011 and May 31, 2013, respectively, and to reduce peak demand by a minimum of 4.5% by May 31, 2013. The PPUC entered an Order on February 26, 2010 approving the Pennsylvania Companies’ EE&C Plans and the tariff rider with rates effective March 1, 2010.

Met-Ed, Penelec and Penn jointly filed a Smart Meter Technology Procurement and Installation Plan with the PPUC. This plan proposes a 24-month assessment period in which the Pennsylvania Companies will assess their needs, select the necessary technology, secure vendors, train personnel, install and test support equipment, and establish a cost effective and strategic deployment schedule, which currently is expected to be completed in fifteen years. Met-Ed, Penelec and Penn estimate assessment period costs at approximately $29.5 million, which the Pennsylvania Companies, in their plan, proposed to recover through an automatic adjustment clause. The ALJ’s Initial Decision approved the Smart Meter Plan as modified by the ALJ, including: ensuring that the smart meters to be deployed include the capabilities listed in the PPUC’s Implementation Order; eliminating the provision of interest in the 1307(e) reconciliation; providing for the recovery of reasonable and prudent costs minus resulting savings from installation and use of smart meters; and reflecting that administrative start-up costs be expensed and the costs incurred for research and development in the assessment period be capitalized. On April 15, 2010, the PPUC adopted a Motion by Chairman Cawley that modified the ALJ’s initial decision, and decided various issues regarding the Smart Meter Implementation Plan for the Pennsylvania Companies. The PPUC entered its Order on June 9, 2010, consistent with the Chairman’s Motion. On June 24, 2010, Met-Ed, Penelec and Penn filed a Petition for Reconsideration of a single portion of the PPUC’s Order regarding the future ability to include smart meter costs in base rates. On August 5, 2010, the PPUC granted in part the petition for reconsideration by deleting language from its original order that would have precluded Met-Ed, Penelec and Penn from seeking to include smart meter costs in base rates at a later time.

By Tentative Order entered September 17, 2009, the PPUC provided for an additional 30-day comment period on whether the 1998 Restructuring Settlement allows Met-Ed and Penelec to apply over-collection of NUG costs for select and isolated months to reduce non-NUG stranded costs when a cumulative NUG stranded cost balance exists. In response to the Tentative Order, various parties filed comments objecting to the above accounting method utilized by Met-Ed and Penelec. Met-Ed and Penelec are awaiting further action by the PPUC.

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New Jersey

JCP&L is permitted to defer for future collection from customers the amounts by which its costs of supplying BGS to non-shopping customers, costs incurred under NUG agreements, and certain other stranded costs, exceed amounts collected through BGS and NUGC rates and market sales of NUG energy and capacity. As of September 30, 2010, the accumulated deferred cost balance was a credit of approximately $3 million. To better align the recovery of expected costs, on July 26, 2010, JCP&L filed a request to decrease the amount recovered for the costs incurred under the NUG agreements by $180 million annually. If approved as filed, the change would not go into effect until January 1, 2011.

In accordance with an April 28, 2004 NJBPU order, JCP&L filed testimony on June 7, 2004, supporting continuation of the current level and duration of the funding of TMI-2 decommissioning costs by New Jersey customers without a reduction, termination or capping of the funding. On September 30, 2004, JCP&L filed an updated TMI-2 decommissioning study. This study resulted in an updated total decommissioning cost estimate of $729 million (in 2003 dollars) compared to the estimated $528 million (in 2003 dollars) from the prior 1995 decommissioning study. The DPA filed comments on February 28, 2005 requesting that decommissioning funding be suspended. On March 18, 2005, JCP&L filed a response to those comments. JCP&L responded to additional NJBPU staff discovery requests in May and November 2007 and also submitted comments in the proceeding in November 2007. A schedule for further NJBPU proceedings has not yet been set. On March 13, 2009, JCP&L filed its annual SBC Petition with the NJBPU that includes a request for a reduction in the level of recovery of TMI-2 decommissioning costs based on an updated TMI-2 decommissioning cost analysis dated January 2009 estimated at $736 million (in 2003 dollars). This matter is currently pending before the NJBPU.

New Jersey statutes require that the state periodically undertake a planning process, known as the EMP, to address energy related issues including energy security, economic growth, and environmental impact. The NJBPU adopted an order establishing the general process and contents of specific EMP plans that must be filed by New Jersey electric and gas utilities in order to achieve the goals of the EMP. On April 16, 2010, the NJBPU issued an order indefinitely suspending the requirement of New Jersey utilities to submit Utility Master Plans until such time as the status of the EMP has been made clear. At this time, FirstEnergy and JCP&L cannot determine the impact, if any, the EMP may have on their operations.

In support of former New Jersey Governor Corzine’s Economic Assistance and Recovery Plan, JCP&L announced a proposal to spend approximately $98 million on infrastructure and energy efficiency projects in 2009. Under the proposal, an estimated $40 million would be spent on infrastructure projects, including substation upgrades, new transformers, distribution line re-closers and automated breaker operations. In addition, approximately $34 million would be spent implementing new demand response programs as well as expanding on existing programs. Another $11 million would be spent on energy efficiency, specifically replacing transformers and capacitor control systems and installing new LED street lights. The remaining $13 million would be spent on energy efficiency programs that would complement those currently being offered. The project relating to expansion of the existing demand response programs was approved by the NJBPU on August 19, 2009, and implementation began in 2009. Approval for the project related to energy efficiency programs intended to complement those currently being offered was denied by the NJBPU on December 1, 2009. On July 6, 2010, the January 30, 2009 petition directed to infrastructure investment which had been pending before the NJBPU was withdrawn by JCP&L. Implementation of the remaining projects is dependent upon resolution of regulatory issues including recovery of the costs associated with the proposal.

FERC Matters

PJM Transmission Rate

On April 19, 2007, FERC issued an order (Opinion 494) finding that the PJM transmission owners’ existing “license plate” or zonal rate design was just and reasonable and ordered that the current license plate rates for existing transmission facilities be retained. On the issue of rates for new transmission facilities, FERC directed that costs for new transmission facilities that are rated at 500 kV or higher are to be collected from all transmission zones throughout the PJM footprint by means of a postage-stamp rate based on the amount of load served in a transmission zone. Costs for new transmission facilities that are rated at less than 500 kV, however, are to be allocated on a load flow methodology (DFAX), which is generally referred to as a “beneficiary pays” approach to allocating the cost of high voltage transmission facilities.

The FERC’s Opinion 494 order was appealed to the U.S. Court of Appeals for the Seventh Circuit, which issued a decision on August 6, 2009. The court affirmed FERC’s ratemaking treatment for existing transmission facilities, but found that FERC had not supported its decision to allocate costs for new 500+ kV facilities on a load ratio share basis and, based on this finding, remanded the rate design issue back to FERC.

In an order dated January 21, 2010, FERC set the matter for “paper hearings”—meaning that FERC called for parties to submit comments or written testimony pursuant to the schedule described in the order. FERC identified nine separate issues for comments and directed PJM to file the first round of comments on February 22, 2010, with other parties submitting responsive comments and the reply comments. PJM filed certain studies with FERC on April 13, 2010, in response to the FERC order. PJM’s filing demonstrated that allocation of the cost of high voltage transmission facilities on a beneficiary pays basis results in certain eastern utilities in PJM bearing the majority of their costs. Numerous parties filed responsive comments or studies on May 28, 2010 and reply comments on June 28, 2010. FirstEnergy and a number of other utilities, industrial customers and state commissions supported the use of the beneficiary pays approach for cost allocation for high voltage transmission facilities. Certain eastern utilities and their state commissions supported continued socialization of these costs on a load ratio share basis. FERC is expected to act before the end of the year.

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RTO Consolidation

On December 17, 2009, FERC issued an order approving, subject to certain future compliance filings, ATSI’s move to PJM. This move, which is expected to be effective on June 1, 2011, allows FirstEnergy to consolidate its transmission assets and operations into PJM. Currently, FirstEnergy’s transmission assets and operations are divided between PJM and MISO. The consolidation will make the transmission assets that are part of ATSI, whose footprint includes the Ohio Companies and Penn, part of PJM. In the order, FERC approved FirstEnergy’s proposal to use a Fixed Resource Requirement Plan (FRR Plan) to obtain capacity to satisfy the PJM capacity requirements for the 2011-12 and 2012-13 delivery years.

On December 17, 2009, ATSI executed the PJM Consolidated Transmission Owners Agreement and on December 18, 2009, the Ohio Companies and Penn executed the PJM Operating Agreement and the PJM Reliability Assurance Agreement. Execution of these agreements committed ATSI, the Ohio Companies and Penn to the move into PJM.

FirstEnergy successfully conducted the FRR auctions on March 19, 2010. Moreover, the ATSI-zone loads participated in the PJM base residual auction for the 2013 delivery year. Successful completion of these steps secured the capacity necessary for the ATSI footprint to meet PJM’s capacity requirements.

On September 4, 2009, the PUCO opened a case to take comments from Ohio’s stakeholders regarding the RTO consolidation. On August 25, 2010, the PUCO issued an order that, among other things, committed the PUCO to close this case and also to withdraw its objections that were filed in the relevant FERC dockets conditioned upon the Ohio Companies not seeking recovery of MISO exit fees or PJM integration costs (estimated to be approximately $37 million as of September 30, 2010). Notwithstanding the PUCO’s actions, certain other parties protested aspects of the move into PJM, and certain of these matters remain outstanding and will be resolved in future FERC proceedings. Under the terms of the ESP order issued August 25, 2010, the PUCO has agreed to close this docket.

MISO Multi-Value Project Rule Proposal

On July 15, 2010, MISO and certain MISO transmission owners jointly filed with FERC their proposed cost allocation methodology for new transmission projects. The new transmission projects—described as Multi-Value Projects (MVPs)—are a class of MTEP projects. The MISO proposes to allocate the costs of MVPs by means of a usage-based charge that will be applied to all loads within the MISO footprint, and to energy transactions that call for power to be “wheeled through” the MISO as well as to energy transactions that “source” in the MISO but “sink” outside of MISO. MISO expects that its MVP proposal will fund the costs of large transmission projects designed to bring wind generation from the upper Midwest to load centers in the east. MISO has requested that FERC rule on its MVP proposal by December, but has asked for an effective date for its proposal of July 16, 2011. On August 19, 2010, MISO’s Board approved the first MVP project—the so-called “Michigan Thumb Project.” Under MISO’s proposal, the costs of MVP projects approved by MISO’s Board prior to the anticipated June 1, 2011 effective date of FirstEnergy’s integration into PJM would continue to be allocated to FirstEnergy. This approach is reflected in the MISO’s estimated allocations of the costs for the Michigan Thumb Project, where approximately $16 million in annual revenue requirements were allocated to the ATSI zone.

On September 10, 2010, FirstEnergy filed a protest to MISO’s MVP proposal. FirstEnergy believes that MISO’s proposal to allocate costs of MVP projects across the entire MISO footprint does not align with the established rule that cost allocation is to be based on cost causation (the “beneficiary pays” approach). FirstEnergy also argued that, in light of progress to date in the ATSI move to PJM, it would be unjust and unreasonable to allocate any MVP costs to the ATSI zone, or to ATSI. Numerous other parties filed pleadings on MISO’s MVP proposal. FirstEnergy is unable to predict the outcome of this matter.

Environmental Matters

Various federal, state and local authorities regulate FirstEnergy with regard to air and water quality and other environmental matters. Compliance with environmental regulations could have a material adverse effect on FirstEnergy’s earnings and competitive position to the extent that FirstEnergy competes with companies that are not subject to such regulations and, therefore, do not bear the risk of costs associated with compliance, or failure to comply, with such regulations.

CAA Compliance

FirstEnergy is required to meet federally-approved SO2 and NOX emissions regulations under the CAA. FirstEnergy complies with SO₂ and NOx reduction requirements under the CAA and SIP(s) under the CAA by burning lower-sulfur fuel, combustion controls and post-combustion controls, generating more electricity from lower-emitting plants and/or using emission allowances. Violations can result in the shutdown of the generating unit involved and/or civil or criminal penalties.

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The Sammis, Burger, Eastlake and Mansfield coal-fired plants are operated under a consent decree with the EPA and DOJ that requires reductions of NO_X and SO₂ emissions through the installation of pollution control devices or repowering. OE and Penn are subject to stipulated penalties for failure to install and operate such pollution controls or complete repowering in accordance with that agreement. Capital expenditures necessary to complete requirements of the consent decree, including repowering Burger Units 4 and 5 for biomass fuel combustion, are currently estimated to be approximately $399 million for 2010-2012.

In 2007, PennFuture filed a citizen suit under the CAA, alleging violations of air pollution laws at the Bruce Mansfield Plant, including opacity limitations, in the U.S. District Court for the Western District of Pennsylvania. In July 2008, three additional complaints were filed against FGCO seeking damages based on Bruce Mansfield Plant air emissions. Two of these complaints also seek to enjoin the Bruce Mansfield Plant from operating except in a “safe, responsible, prudent and proper manner”, one being a complaint filed on behalf of twenty-one individuals and the other being a class action complaint seeking certification as a class action with the eight named plaintiffs as the class representatives. A settlement was reached with PennFuture. FGCO believes the claims of the remaining plaintiffs are without merit and intends to defend itself against the allegations made in those three complaints.

The states of New Jersey and Connecticut filed CAA citizen suits in 2007 alleging NSR violations at the Portland Generation Station against RRI Energy, Inc. (the current owner and operator), Sithe Energy (the purchaser of the Portland Station from Met-Ed in 1999) and Met-Ed. Specifically, these suits allege that “modifications” at Portland Units 1 and 2 occurred between 1980 and 2005 without preconstruction NSR permitting in violation of the CAA’s PSD program, and seek injunctive relief, penalties, attorney fees and mitigation of the harm caused by excess emissions. In September 2009, the Court granted Met-Ed’s motion to dismiss New Jersey’s and Connecticut’s claims for injunctive relief against Met-Ed, but denied Met-Ed’s motion to dismiss the claims for civil penalties. The parties dispute the scope of Met-Ed’s indemnity obligation to and from Sithe Energy.

In January 2009, the EPA issued a NOV to Reliant alleging NSR violations at the Portland Generation Station based on “modifications” dating back to 1986 and also alleged NSR violations at the Keystone and Shawville Stations based on “modifications” dating back to 1984. Met-Ed, JCP&L, as the former owner of 16.67% of the Keystone Station, and Penelec, as former owner and operator of the Shawville Station, are unable to predict the outcome of this matter.

In June 2008, the EPA issued a Notice and Finding of Violation to Mission Energy Westside, Inc. alleging that “modifications” at the Homer City Power Station occurred since 1988 to the present without preconstruction NSR permitting in violation of the CAA’s PSD program. In May 2010, the EPA issued a second NOV to Mission Energy Westside, Inc., Penelec, New York State Electric & Gas Corporation and others that have had an ownership interest in the Homer City Power Station containing in all material respects identical allegations as the June 2008 NOV. On July 20, 2010, the states of New York and Pennsylvania provided Mission Energy Westside, Inc., Penelec, NYSEG and others that have had an ownership interest in the Homer City Power Station a notification required 60 days prior to filing a citizen suit under the CAA. Mission Energy Westside, Inc. is seeking indemnification from Penelec, the co-owner and operator of the Homer City Power Station prior to its sale in 1999. The scope of Penelec’s indemnity obligation to and from Mission Energy Westside, Inc. is under dispute and Penelec is unable to predict the outcome of this matter.

In August 2009, the EPA issued a Finding of Violation and NOV alleging violations of the CAA and Ohio regulations, including the PSD, NNSR, and Title V regulations at the Eastlake, Lakeshore, Bay Shore and Ashtabula generating plants. The EPA’s NOV alleges equipment replacements occurring during maintenance outages dating back to 1990 triggered the pre-construction permitting requirements under the PSD and NNSR programs. FGCO received a request for certain operating and maintenance information and planning information for these same generating plants and notification that the EPA is evaluating whether certain maintenance at the Eastlake generating plant may constitute a major modification under the NSR provision of the CAA. Later in 2009, FGCO also received another information request regarding emission projections for the Eastlake generating plant. FGCO intends to comply with the CAA, including the EPA’s information requests, but, at this time, is unable to predict the outcome of this matter.

National Ambient Air Quality Standards

The EPA’s CAIR requires reductions of NOX and SO₂ emissions in two phases (2009/2010 and 2015), ultimately capping SO₂ emissions in affected states to 2.5 million tons annually and NOX emissions to 1.3 million tons annually. In 2008, the U.S. Court of Appeals for the District of Columbia vacated CAIR “in its entirety” and directed the EPA to “redo its analysis from the ground up.” In December 2008, the Court reconsidered its prior ruling and allowed CAIR to remain in effect to “temporarily preserve its environmental values” until the EPA replaces CAIR with a new rule consistent with the Court’s opinion. The Court ruled in a different case that a cap-and-trade program similar to CAIR, called the “NOX SIP Call,” cannot be used to satisfy certain CAA requirements (known as reasonably available control technology) for areas in non-attainment under the “8-hour” ozone NAAQS. In July 2010, the EPA proposed the Clean Air Transport Rule (CATR) to replace CAIR, which remains in effect until the EPA finalizes CATR. CATR requires reductions of NOX and SO₂ emissions in two phases (2012 and 2014), ultimately capping SO₂ emissions in affected states to 2.6 million tons annually and NOX emissions to 1.3 million tons annually. The EPA proposed a preferred regulatory approach that allows trading of NOX and SO₂ emission allowances between power plants located in the same state and severely limits interstate trading of NOx and SO₂ emission allowances. The EPA also requested comment on two alternative approaches—the first eliminates interstate trading of NOX and SO₂ emission allowances and the second eliminates trading of NOX and SO₂ emission allowances in its entirety. Depending on the actions taken by the EPA with respect to CATR, the proposed MACT regulations discussed below and any future regulations that are ultimately implemented, FGCO’s future cost of compliance may be substantial. Management is currently assessing the impact of these environmental proposals and other factors on FGCO’s facilities, particularly on the operation of its smaller, non-supercritical units. For example, as disclosed herein, management decided to idle certain units or operate them on a seasonal basis until developments clarify.

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Hazardous Air Pollutant Emissions

The EPA’s CAMR provides for a cap-and-trade program to reduce mercury emissions from coal-fired power plants in two phases; initially, capping nationwide emissions of mercury at 38 tons by 2010 (as a “co-benefit” from implementation of SO₂ and NO_X emission caps under the EPA’s CAIR program) and 15 tons per year by 2018. The U.S. Court of Appeals for the District of Columbia, at the urging of several states and environmental groups, vacated the CAMR, ruling that the EPA failed to take the necessary steps to “de-list” coal-fired power plants from its hazardous air pollutant program and, therefore, could not promulgate a cap-and-trade program. On April 29, 2010, the EPA issued proposed maximum achievable control technology (MACT) regulations requiring emissions reductions of mercury and other hazardous air pollutants from non-electric generating unit boilers, including boilers which do not use fossil fuels such as the proposed Burger biomass repowering project. On September 1, 2010, the EPA classified Burger as an existing source for purposes of the industrial Boiler MACT. If finalized, the non-electric generating unit MACT regulations could also provide precedent for MACT standards applicable to electric generating units. The EPA entered into a consent decree requiring it to propose MACT regulations for mercury and other hazardous air pollutants from electric generating units by March 16, 2011, and to finalize the regulations by November 16, 2011. Depending on the action taken by the EPA and on how any future regulations are ultimately implemented, FGCO’s future cost of compliance with MACT regulations may be substantial and changes to FGCO’s operations may result.

Climate Change

There are a number of initiatives to reduce GHG emissions under consideration at the federal, state and international level. At the federal level, members of Congress have introduced several bills seeking to reduce emissions of GHG in the United States, and the House of Representatives passed one such bill, the American Clean Energy and Security Act of 2009, on June 26, 2009. The Senate continues to consider a number of measures to regulate GHG emissions. President Obama has announced his Administration’s “New Energy for America Plan” that includes, among other provisions, ensuring that 10% of electricity used in the United States comes from renewable sources by 2012, increasing to 25% by 2025, and implementing an economy-wide cap-and-trade program to reduce GHG emissions by 80% by 2050. State activities, primarily the northeastern states participating in the Regional Greenhouse Gas Initiative and western states, led by California, have coordinated efforts to develop regional strategies to control emissions of certain GHGs.

In September 2009, the EPA finalized a national GHG emissions collection and reporting rule that will require FirstEnergy to measure GHG emissions commencing in 2010 and submit reports commencing in 2011. In December 2009, the EPA released its final “Endangerment and Cause or Contribute Findings for Greenhouse Gases under the Clean Air Act.” The EPA’s finding concludes that concentrations of several key GHGs increase the threat of climate change and may be regulated as “air pollutants” under the CAA. In April 2010, the EPA finalized new GHG standards for model years 2012 to 2016 passenger cars, light-duty trucks and medium-duty passenger vehicles and clarified that GHG regulation under the CAA would not be triggered for electric generating plants and other stationary sources until January 2, 2011, at the earliest. In May 2010, the EPA finalized new thresholds for GHG emissions that define when permits under the CAA’s NSR program would be required. The EPA established an emissions applicability threshold of 75,000 tons per year (tpy) of carbon dioxide equivalents (CO2e) effective January 2, 2011 for existing facilities under the CAA’s PSD program, but until July 1, 2011 that emissions applicability threshold will only apply if PSD is triggered by non-carbon dioxide pollutants.

At the international level, the Kyoto Protocol, signed by the U.S. in 1998 but never submitted for ratification by the U.S. Senate, was intended to address global warming by reducing the amount of man-made GHG, including CO₂, emitted by developed countries by 2012. A December 2009 U.N. Climate Change Conference in Copenhagen did not reach a consensus on a successor treaty to the Kyoto Protocol, but did take note of the Copenhagen Accord, a non-binding political agreement which recognized the scientific view that the increase in global temperature should be below two degrees Celsius; include a commitment by developed countries to provide funds, approaching $30 billion over the next three years with a goal of increasing to $100 billion by 2020; and establish the “Copenhagen Green Climate Fund” to support mitigation, adaptation, and other climate-related activities in developing countries. Once they have become a party to the Copenhagen Accord, developed economies, such as the European Union, Japan, Russia and the United States, would commit to quantified economy-wide emissions targets from 2020, while developing countries, including Brazil, China and India, would agree to take mitigation actions, subject to their domestic measurement, reporting and verification.

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On September 21, 2009, the U.S. Court of Appeals for the Second Circuit and on October 16, 2009, the U.S. Court of Appeals for the Fifth Circuit reversed and remanded lower court decisions that had dismissed complaints alleging damage from GHG emissions on jurisdictional grounds. However, a subsequent ruling from the U.S. Court of Appeals for the Fifth Circuit reinstated the lower court dismissal of a complaint alleging damage from GHG emissions. These cases involve common law tort claims, including public and private nuisance, alleging that GHG emissions contribute to global warming and result in property damages. While FirstEnergy is not a party to this litigation, FirstEnergy and/or one or more of its subsidiaries could be named in actions making similar allegations.

FirstEnergy cannot currently estimate the financial impact of climate change policies, although potential legislative or regulatory programs restricting CO₂ emissions, or litigation alleging damages from GHG emissions, could require significant capital and other expenditures or result in changes to its operations. The CO₂ emissions per KWH of electricity generated by FirstEnergy is lower than many regional competitors due to its diversified generation sources, which include low or non-CO₂ emitting gas-fired and nuclear generators.

Clean Water Act

Various water quality regulations, the majority of which are the result of the federal Clean Water Act and its amendments, apply to FirstEnergy’s plants. In addition, Ohio, New Jersey and Pennsylvania have water quality standards applicable to FirstEnergy’s operations.

The EPA established new performance standards under Section 316(b) of the Clean Water Act for reducing impacts on fish and shellfish from cooling water intake structures at certain existing electric generating plants. The regulations call for reductions in impingement mortality (when aquatic organisms are pinned against screens or other parts of a cooling water intake system) and entrainment (which occurs when aquatic life is drawn into a facility’s cooling water system). The EPA has taken the position that until further rulemaking occurs, permitting authorities should continue the existing practice of applying their best professional judgment to minimize impacts on fish and shellfish from cooling water intake structures. On April 1, 2009, the U.S. Supreme Court reversed one significant aspect of the Second Circuit’s opinion and decided that Section 316(b) of the Clean Water Act authorizes the EPA to compare costs with benefits in determining the best technology available for minimizing adverse environmental impact at cooling water intake structures. The EPA is developing a new regulation under Section 316(b) of the Clean Water Act consistent with the opinions of the Supreme Court and the Court of Appeals which have created significant uncertainty about the specific nature, scope and timing of the final performance standard. FirstEnergy is studying various control options and their costs and effectiveness, including pilot testing of reverse louvers in a portion of the Bay Shore power plant’s water intake channel to divert fish away from the plant’s water intake system. On March 15, 2010, the EPA issued a draft permit for the Bay Shore power plant requiring installation of reverse louvers in its entire water intake channel by December 31, 2014. Depending on the results of such studies and the EPA’s further rulemaking and any final action taken by the states exercising best professional judgment, the future costs of compliance with these standards may require material capital expenditures.

In June 2008, the U.S. Attorney’s Office in Cleveland, Ohio advised FGCO that it is considering prosecution under the Clean Water Act and the Migratory Bird Treaty Act for three petroleum spills at the Edgewater, Lakeshore and Bay Shore plants which occurred on November 1, 2005, January 26, 2007 and February 27, 2007. FGCO is unable to predict the outcome of this matter.

Regulation of Waste Disposal

Federal and state hazardous waste regulations have been promulgated as a result of the Resource Conservation and Recovery Act of 1976, as amended, and the Toxic Substances Control Act of 1976. Certain fossil-fuel combustion residuals, such as coal ash, were exempted from hazardous waste disposal requirements pending the EPA’s evaluation of the need for future regulation. In February 2009, the EPA requested comments from the states on options for regulating coal combustion residuals, including whether they should be regulated as hazardous or non-hazardous waste.

On December 30, 2009, in an advanced notice of public rulemaking, the EPA said that the large volumes of coal combustion residuals produced by electric utilities pose significant financial risk to the industry. On May 4, 2010, the EPA proposed two options for additional regulation of coal combustion residuals, including the option of regulation as a special waste under the EPA’s hazardous waste management program which could have a significant impact on the management, beneficial use and disposal of coal combustion residuals. FGCO’s future cost of compliance with any coal combustion residuals regulations which may be promulgated could be substantial and would depend, in part, on the regulatory action taken by the EPA and implementation by the EPA or the states.

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The Utilities have been named as potentially responsible parties at waste disposal sites, which may require cleanup under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980. Allegations of disposal of hazardous substances at historical sites and the liability involved are often unsubstantiated and subject to dispute; however, federal law provides that all potentially responsible parties for a particular site may be liable on a joint and several basis. Environmental liabilities that are considered probable have been recognized on the consolidated balance sheet as of September 30, 2010, based on estimates of the total costs of cleanup, the Utilities’ proportionate responsibility for such costs and the financial ability of other unaffiliated entities to pay. Total liabilities of approximately $105 million (JCP&L — $76 million, TE — $1 million, CEI — $1 million, FGCO — $1 million and FirstEnergy — $26 million) have been accrued through September 30, 2010. Included in the total are accrued liabilities of approximately $67 million for environmental remediation of former manufactured gas plants and gas holder facilities in New Jersey, which are being recovered by JCP&L through a non-bypassable SBC.

Other Legal Proceedings

Power Outages and Related Litigation

In July 1999, the Mid-Atlantic States experienced a severe heat wave, which resulted in power outages throughout the service territories of many electric utilities, including JCP&L’s territory. Two class action lawsuits (subsequently consolidated into a single proceeding) were filed in New Jersey Superior Court in July 1999 against JCP&L, GPU and other GPU companies, seeking compensatory and punitive damages due to the outages. After various motions, rulings and appeals, the Plaintiffs’ claims for consumer fraud, common law fraud, negligent misrepresentation, strict product liability and punitive damages were dismissed, leaving only the negligence and breach of contract causes of actions. On July 29, 2010, the Appellate Division upheld the trial court’s decision decertifying the class. Plaintiffs have filed, and JCP&L has opposed, a motion for leave to appeal to the New Jersey Supreme Court. JCP&L is waiting for the Court’s decision.

Litigation Relating to the Proposed Allegheny Energy Merger

In connection with the proposed merger (Note 16), purported shareholders of Allegheny Energy have filed putative shareholder class action and/or derivative lawsuits against Allegheny Energy and its directors and certain officers, referred to as the Allegheny Energy defendants, FirstEnergy and Merger Sub. Four putative class action and derivative lawsuits were filed in the Circuit Court for Baltimore City, Maryland (Maryland Court). One was withdrawn. The Maryland Court has consolidated the remaining three cases under the caption: In re Allegheny Energy Shareholder and Derivative Litigation, C.A. No. 24-C-10-1301. Three shareholder lawsuits were filed in the Court of Common Pleas of Westmoreland County, Pennsylvania and the court has consolidated these actions under the caption: In re Allegheny Energy, Inc. Shareholder Class and Derivative, Litigation, Lead Case No. 1101 of 2010. One putative shareholder class action was filed in the U.S. District Court for the Western District of Pennsylvania and is captioned Louisiana Municipal Police Employees’ Retirement System v. Evanson, et al., C.A. No. 10-319 NBF. In summary, the lawsuits allege, among other things, that the Allegheny Energy directors breached their fiduciary duties by approving the merger agreement, and that Allegheny Energy, FirstEnergy and Merger Sub aided and abetted in these alleged breaches of fiduciary duty. The complaints seek, among other things, jury trials, money damages and injunctive relief. While FirstEnergy believes the lawsuits are without merit and has defended vigorously against the claims, in order to avoid the costs associated with the litigation, the defendants have agreed to the terms of a disclosure-based settlement of all these shareholder lawsuits and have reached agreement with counsel for all of the plaintiffs concerning fee applications. Under the terms of the settlement, no payments are being made by FirstEnergy or Merger Sub. A formal stipulation of settlement was filed with the Maryland Court on October 18, 2010 and agreements have been signed with plaintiffs in the Pennsylvania proceedings to dismiss those actions once the settlement is approved by the Maryland Court. The Maryland judge has preliminarily approved the stipulation of settlement and set the final approval hearing date for December 13, 2010. If the parties are unable to obtain final approval of the settlement, then litigation will proceed, and the outcome of any such litigation is inherently uncertain. If a dismissal is not granted or a settlement is not reached, these lawsuits could prevent or delay the completion of the merger and result in substantial costs to FirstEnergy. The defense or settlement of any lawsuit or claim that remains unresolved at the time the merger closes may adversely affect FirstEnergy’s business, financial condition or results of operations.

Nuclear Plant Matters

During a planned refueling outage that began on February 28, 2010, FENOC conducted a non destructive examination and testing of the Control Rod Drive Mechanism (CRDM) nozzles of the Davis-Besse reactor pressure vessel head. FENOC identified flaws in CRDM nozzles that required modification. The NRC was notified of these findings, along with federal, state and local officials. On March 17, 2010, the NRC sent a special inspection team to Davis-Besse to assess the adequacy of FENOC’s identification, analyses and resolution of the CRDM nozzle flaws and to ensure acceptable modifications were made prior to placing the RPV head back in service. After successfully completing the modifications, FENOC committed to take a number of corrective actions including strengthening leakage monitoring procedures and shutting Davis-Besse down no later than October 1, 2011, to replace the reactor pressure vessel head with nozzles made of material less susceptible to primary water stress corrosion cracking, further enhancing the safe and reliable operations of the plant. On June 29, 2010, FENOC returned Davis-Besse to service. On September 9, 2010, the NRC held a public exit meeting describing the results of the NRC special inspection team inspection of FENOC’s identification of the CRDM nozzles with flaws and the modifications to those nozzles. On October 22, 2010, the NRC issued its final report of the special inspection. The report contained three findings characterized as very low safety significance that were promptly corrected prior to plant operation.

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On April 5, 2010, the Union of Concerned Scientists (UCS) requested that the NRC issue a Show Cause Order, or otherwise delay the restart of the Davis-Besse Nuclear Power Station until the NRC determines that adequate protection standards have been met and reasonable assurance exists that these standards will continue to be met after the plant’s operation is resumed. By a letter dated July 13, 2010, the NRC denied UCS’s request for immediate action because “the NRC has conducted rigorous and independent assessments of returning the Davis-Besse reactor vessel head to service and its continued operation, and determined that it was safe for the plant to restart.” The UCS petition was referred to a petition manager for further review. What additional actions, if any, that the NRC takes in response to the UCS request have not been determined.

Under NRC regulations, FirstEnergy must ensure that adequate funds will be available to decommission its nuclear facilities. As required by the NRC, FirstEnergy annually recalculates and adjusts the amount of obligations. As of September 30, 2010, FirstEnergy had approximately $2.0 billion invested in external trusts to be used for the decommissioning and environmental remediation of Davis-Besse, Beaver Valley, Perry and TMI-2. FirstEnergy provides an additional $15 million parental guarantee associated with the funding of decommissioning costs for these units.

Other Legal Matters

There are various lawsuits, claims (including claims for asbestos exposure) and proceedings related to FirstEnergy’s normal business operations pending against FirstEnergy and its subsidiaries. The other potentially material items not otherwise discussed above are described below.

On February 16, 2010, a class action lawsuit was filed in Geauga County Court of Common Pleas against FirstEnergy, CEI and OE seeking declaratory judgment and injunctive relief, as well as compensatory, incidental and consequential damages, on behalf of a class of customers related to the reduction of a discount that had previously been in place for residential customers with electric heating, electric water heating, or load management systems. The reduction in the discount was approved by the PUCO. On March 18, 2010, the named-defendant companies filed a motion to dismiss the case due to the lack of jurisdiction of the court of common pleas. The court granted the motion to dismiss on September 7, 2010.

FirstEnergy accrues legal liabilities only when it concludes that it is probable that it has an obligation for such costs and can reasonably estimate the amount of such costs. If it were ultimately determined that FirstEnergy or its subsidiaries have legal liability or are otherwise made subject to liability based on the above matters, it could have a material adverse effect on FirstEnergy’s or its subsidiaries’ financial condition, results of operations and cash flows.

NEW ACCOUNTING STANDARDS AND INTERPRETATIONS

See Note 11 of the Combined Notes to the Consolidated Financial Statements (Unaudited) for discussion of new accounting pronouncements.

98

FIRSTENERGY SOLUTIONS CORP.

MANAGEMENT’S NARRATIVE
ANALYSIS OF RESULTS OF OPERATIONS

FES is a wholly owned subsidiary of FirstEnergy. FES provides energy-related products and services, and through its subsidiaries, FGCO and NGC, owns or leases and operates and maintains FirstEnergy’s fossil and hydroelectric generation facilities, and owns FirstEnergy’s nuclear generation facilities, respectively. FENOC, a wholly owned subsidiary of FirstEnergy, operates and maintains the nuclear generating facilities.

FES’ revenues are derived from sales to individual retail customers, sales to communities in the form of government aggregation programs, the sale of electricity to Met-Ed and Penelec to meet all of their POLR and default service requirements, and its participation in affiliated and non-affiliated POLR auctions. FES sales are concentrated in Ohio, Pennsylvania, Illinois, Maryland, Michigan and New Jersey.

The demand for electricity produced and sold by FES, along with the price of that electricity, is impacted by conditions in competitive power markets, global economic activity, economic activity in the Midwest and Mid-Atlantic regions and weather conditions.

For additional information with respect to FES, please see the information contained in FirstEnergy’s Management’s Discussion and Analysis of Financial Condition and Results of Operations above under the following subheadings, which information is incorporated by reference herein: Capital Resources and Liquidity, Guarantees and Other Assurances, Off-Balance Sheet Arrangements, Market Risk Information, Credit Risk, Outlook and New Accounting Standards and Interpretations.

Results of Operations

Net income decreased by $491 million in the first nine months of 2010, compared to the same period of 2009. The decrease was primarily due to a $292 million impairment charge ($181 million net of tax) related to operational changes at certain smaller coal-fired units in response to the continued slow economy, lower demand for electricity and uncertainty related to proposed new federal environmental regulations. In addition, the absence of a $252 million ($158 million after tax) gain in 2009 from the sale of a 9% participation interest in OVEC, lower investment income from the nuclear decommissioning trusts and a decrease in sales margins also contributed to the decline in net income.

Revenues

Excluding the impact of the 2009 gain on the OVEC sale, total revenues increased $836 million in the first nine months of 2010, compared to the same period of 2009, primarily due to an increase in direct and government aggregation sales volumes and sales of RECs, partially offset by decreases in POLR sales to the Ohio Companies and wholesale sales.

The increase in revenues resulted from the following sources:

	Nine Months
	Ended September 30				Increase
Revenues by Type of Service	2010		2009		(Decrease)
	(In millions)
Direct and Government Aggregation	$	1,814	$	406	$	1,408
POLR		1,911		2,369		(458	)
Other Wholesale		322		503		(181	)
Transmission		58		57		1
RECs		67		—		67
Sale of OVEC participation interest		—		252		(252	)
Other		84		85		(1	)
Total Revenues	$	4,256	$	3,672	$	584

The increase in direct and government aggregation revenues of $1,408 million resulted from increased revenue from the acquisition of new commercial and industrial customers, as well as new government aggregation contracts with communities in Ohio that provided generation to 1.2 million residential and small commercial customers at the end of September 2010 compared to 500,000 such customers at the end of September 2009, partially offset by lower unit prices. In addition, sales to residential and small commercial customers were bolstered by weather in the delivery area that was 69% warmer than in 2009.

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The decrease in POLR revenues of $458 million was due to lower sales volumes to the Ohio Companies and lower unit prices, partially offset by increased sales volumes and higher unit prices to the Pennsylvania Companies. The lower sales volumes and unit prices to the Ohio Companies in 2010 reflected the results of the May 2009 power procurement process. The increased revenues from the Pennsylvania Companies resulted from FES supplying Met-Ed and Penelec with volumes previously supplied through a third-party contract and at prices that were slightly higher than in 2009.

Other wholesale revenues decreased $181 million due to reduced volumes and lower prices. The lower sales volumes were due to available capacity serving increased retail sales in Ohio. In July 2010, FES entered into financial transactions that offset the mark-to-market impact of legacy purchased power contracts totaling 500 MW entered into in 2008 for delivery in 2010 and 2011 and which have been marked to market since December 2009. These financial transactions mitigate the volatility of these contracts through the end of 2011 and resulted in revenues of $13 million in 2010.

The following tables summarize the price and volume factors contributing to changes in revenues from generation sales:

	Increase
Source of Change in Direct and Government Aggregation	(Decrease)
	(In millions)
Direct Sales:
Effect of increase in sales volumes	$	909
Change in prices		(73	)
		836
Government Aggregation
Effect of increase in sales volumes		570
Change in prices		2
		572
Net Increase in Direct and Gov’t Aggregation Revenues	$	1,408

	Increase
Source of Change in Wholesale Revenues	(Decrease)
	(In millions)
POLR:
Effect of decrease in sales volumes	$	(200	)
Change in prices		(258	)
		(458	)
Other Wholesale:
Effect of decrease in sales volumes		(147	)
Change in prices		(34	)
		(181	)
Net Decrease in Wholesale Revenues	$	(639	)

The sale of RECs resulted in gains of $67 million in the nine months ended September 2010.

Transmission revenues increased $1 million due primarily to higher MISO congestion revenue, offset by lower PJM congestion revenue.

Expenses

Total expenses increased $1.2 billion in the first nine months of 2010, compared with the same period of 2009.

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The following table summarizes the factors contributing to the changes in fuel and purchased power costs in the first nine months of 2010, from the same period last year:

	Increase
Source of Change in Fuel and Purchased Power	(Decrease)
	(In millions)
Fossil Fuel:
Change due to increased unit costs	$	30
Change due to volume consumed		135
		165
Nuclear Fuel:
Change due to increased unit costs		23
Change due to volume consumed		3
		26
Non-affiliated Purchased Power:
Power contract mark-to-market adjustment		43
Change due to decreased unit costs		(84	)
Change due to volume purchased		650
		609
Affiliated Purchased Power:
Change due to increased unit costs		81
Change due to volume purchased		15
		96
Net Increase in Fuel and Purchased Power Costs	$	896

Fossil fuel costs increased $165 million in the first nine months of 2010, compared to the same period of 2009, as a result of higher generation volumes consumed combined with increased unit prices. Increased volume reflects higher generation in the first nine months of 2010, compared to the same period last year due to improving economic conditions. The increased costs reflect higher coal and transportation charges in the first nine months of 2010, compared to the same period last year. Nuclear fuel costs increased $26 million primarily due to the replacement of nuclear fuel at higher unit costs following the refueling outages that occurred in 2009.

Non-affiliated purchased power costs increased $609 million due primarily to higher volumes purchased and a power contract mark-to-market adjustment, partially offset by lower unit costs. The increase in volume primarily relates to the assumption of a 1,300 MW third party contract from Met-Ed and Penelec. Affiliated purchased power increased $96 million primarily due to higher unit costs combined with higher volumes purchased from affiliated companies.

Other operating expenses increased $25 million in the first nine months of 2010, compared to the same period of 2009, primarily due to increased transmission expenses ($36 million), from $111 million in the first nine months of 2009 to $147 million in the same time period of 2010, primarily due to increased sales volumes and increased uncollectible customer accounts and agent fees ($22 million) associated with the growth in direct and government aggregation sales, partially offset by lower nuclear ($39 million) and fossil ($18 million) operating costs. Nuclear operating costs decreased primarily due to lower labor, consulting and contractor costs. The first nine months of 2010 had one less refueling outage and fewer extended outages than the same period of 2009. Fossil operating costs decreased primarily due to lower labor costs.

In the first nine month of 2010 impairment charges of long-lived assets increased expenses by $294 million primarily due to a $292 million impairment charge ($181 million net of tax) related to operational changes at certain smaller coal-fired units in response to the continued slow economy, lower demand for electricity, as well as uncertainty related to proposed new federal environmental regulations. As a result of this impairment depreciation expense decreased in the first nine month of 2010 compared to the same time period of 2009.

General taxes increased $5 million due to sales taxes associated with increased revenues.

Other Expense

Total other expense increased $128 million in the first nine months of 2010, compared to the same period of 2009, primarily due to a decrease in nuclear decommissioning trust investment income ($94 million) combined with an increase in interest expense (net of capitalized interest). Interest expense increased primarily due to new long-term debt issued combined with the restructuring of existing PCRBs.

101

OHIO EDISON COMPANY

MANAGEMENT’S NARRATIVE
ANALYSIS OF RESULTS OF OPERATIONS

OE is a wholly owned electric utility subsidiary of FirstEnergy. OE and its wholly owned subsidiary, Penn, conduct business in portions of Ohio and Pennsylvania, providing regulated electric distribution services. They procure generation services for those franchise customers electing to retain OE and Penn as their power supplier.

For additional information with respect to OE, please see the information contained in FirstEnergy’s Management’s Discussion and Analysis of Financial Condition and Results of Operations above under the following subheadings, which information is incorporated by reference herein: Capital Resources and Liquidity, Guarantees and Other Assurances, Off-Balance Sheet Arrangements, Market Risk Information, Credit Risk, Outlook and New Accounting Standards and Interpretations.

Results of Operations

Earnings available to parent increased by $40 million in the first nine months of 2010, compared to the same period of 2009. The increase primarily resulted from lower purchased power costs and other operating costs, partially offset by lower revenues and investment income.

Revenues

Revenues decreased $589 million, or 29%, in the first nine months of 2010, compared with the same period in 2009, due primarily to a decrease in generation revenues.

Retail generation revenues decreased $584 million primarily due to a decrease in KWH sales in all customer classes. Lower KWH sales were primarily the result of a 42% increase in customer shopping in the first nine months of 2010. That condition is expected to continue to impact the comparative sales levels for the remainder of 2010. Lower KWH sales to residential customers were partially offset by increased weather-related usage in the first nine months of 2010, reflecting an 87% increase in cooling degree days in OE’s service territory. Decreased volumes were partially offset by higher average prices in the commercial and industrial classes. Higher average prices in the commercial and industrial classes resulted from the CBP auction for the service period beginning June 1, 2009.

Changes in retail generation KWH sales and revenues in the first nine months of 2010, compared to the same period in 2009, are summarized in the following tables:

Retail Generation KWH Sales	Decrease
Residential		(26.0	)%
Commercial		(60.0	)%
Industrial		(62.7	)%
Decrease in Retail Generation Sales		(45.7	)%

Retail Generation Revenues	Decrease
	(In millions)
Residential	$	(166	)
Commercial		(236	)
Industrial		(182	)
Decrease in Retail Generation Revenues	$	(584	)

Wholesale generation revenues increased $4 million primarily due to an increase in sales to FES from OE’s leasehold interests in Perry Unit 1 and Beaver Valley Unit 2, partially offset by lower unit prices.

Distribution revenues decreased $1 million in the first nine months of 2010, compared to the same period in 2009, due to lower commercial and industrial revenues, partially offset by higher residential revenues. Commercial and industrial revenues were primarily impacted by lower average unit prices, resulting from lower transmission rates in 2010. Residential distribution revenues were higher due to higher average unit prices resulting from the 2009 ESP and higher KWH deliveries resulting from the warmer conditions described above. Increased industrial deliveries were the result of an increase in KWH deliveries to major steel customers (42%) and automotive customers (25%), reflecting improving economic conditions.

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Changes in distribution KWH deliveries and revenues in the first nine months of 2010, compared to the same period in 2009, are summarized in the following tables:

Distribution KWH Sales	Increase
Residential		6.3	%
Commercial		2.1	%
Industrial		10.6	%
Increase in Distribution Deliveries		6.2	%

	Increase
Distribution Revenues	(Decrease)
	(In millions)
Residential	$	27
Commercial		(9	)
Industrial		(19	)
Net Decrease in Distribution Revenues	$	(1	)

Expenses

Total expenses decreased $674 million in the first nine months of 2010, from the same period of 2009. The following table presents changes from the prior period by expense category:

	Increase
Expenses - Changes	(Decrease)
	(In millions)
Purchased power costs	$	(564	)
Other operating expenses		(100	)
Amortization of regulatory assets, net		(11	)
General taxes		1
Net Decrease in Expenses	$	(674	)

Purchased power costs decreased in the first nine months of 2010, compared to the same period of 2009, primarily due to lower KWH purchases resulting from reduced requirements from increased customer shopping in the first nine months of 2010 and slightly lower unit costs. The decrease in other operating costs for the first nine months of 2010, was primarily due to lower MISO transmission expenses ($48 million) (assumed by third party suppliers beginning June 1, 2009) and lower costs associated with regulatory obligations for economic development and energy efficiency programs under OE’s 2009 ESP ($18 million). The amortization of regulatory assets decreased primarily due to lower MISO transmission cost amortization, partially offset by the recovery of certain regulatory assets.

Other Expense

Other expense increased $21 million in the first nine months of 2010, compared to the same period of 2009, primarily due to lower nuclear decommissioning trust investment income.

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THE CLEVELAND ELECTRIC ILLUMINATING COMPANY

MANAGEMENT’S NARRATIVE
ANALYSIS OF RESULTS OF OPERATIONS

CEI is a wholly owned, electric utility subsidiary of FirstEnergy. CEI conducts business in northeastern Ohio, providing regulated electric distribution services. CEI also procures generation services for those customers electing to retain CEI as their power supplier.

For additional information with respect to CEI, please see the information contained in FirstEnergy’s Management’s Discussion and Analysis of Financial Condition and Results of Operations under the following subheadings, which information is incorporated by reference herein: Capital Resources and Liquidity, Guarantees and Other Assurances, Off-Balance Sheet Arrangements, Market Risk Information, Credit Risk, Outlook and New Accounting Standards and Interpretations.

Results of Operations

Earnings available to parent increased by $93 million in the first nine months of 2010, compared to the same period of 2009. The increase in earnings was primarily due to the absence in 2010 of one-time regulatory charges recognized in 2009, and decreased purchased power and other operating costs, partially offset by decreased revenues and deferred regulatory assets.

Revenues

Revenues decreased $406 million, or 30%, in the first nine months of 2010, compared to the same period of 2009, due to decreased retail generation and distribution revenues.

Distribution revenues decreased $76 million in the first nine months of 2010, compared to the same period of 2009, due to lower average unit prices for all customer classes offset by increased KWH deliveries in all sectors. The lower average unit prices were the result of lower transition rates in 2010. Higher residential deliveries resulted from increased weather-related usage in the first nine months of 2010, reflecting a 73% increase in cooling degree days. Increased industrial deliveries were the result of an increase in KWH deliveries to major steel customers (168%) and automotive customers (12%), reflecting improving economic conditions.

Changes in distribution KWH deliveries and revenues in the first nine months of 2010, compared to the same period of 2009, are summarized in the following tables:

Distribution KWH Sales	Increase
Residential		7.3	%
Commercial		2.4	%
Industrial		14.4	%
Increase in Distribution Deliveries		8.8	%

Distribution Revenues	Decrease
	(In millions)
Residential	$	—
Commercial		(29	)
Industrial		(47	)
Decrease in Distribution Revenues	$	(76	)

Retail generation revenues decreased $321 million in the first nine months of 2010, compared to the same period of 2009, primarily due to lower KWH sales across all customer classes. Reduced KWH sales were primarily the result of increased customer shopping in the first nine months of 2010. That condition is expected to continue to impact the comparative sales levels for the remainder of 2010. Lower KWH sales to residential customers were partially offset by increased KWH deliveries resulting from the warmer weather conditions described above. Decreased volumes were partially offset by higher average unit prices in all customer classes. Retail generation prices increased in 2010 as a result of the CBP auction for the service period beginning June 1, 2009.

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Changes in retail generation sales and revenues in the first nine months of 2010, compared to the same period of 2009, are summarized in the following tables:

Retail Generation KWH Sales	Decrease
Residential		(51.7	)%
Commercial		(69.4	)%
Industrial		(47.4	)%
Decrease in Retail Generation Sales		(54.2	)%

Retail Generation Revenues	Decrease
	(In millions)
Residential	$	(78	)
Commercial		(126	)
Industrial		(117	)
Decrease in Retail Generation Revenues	$	(321	)

Expenses

Total expenses decreased $561 million in the first nine months of 2010, compared to the same period of 2009. The following table presents the change from the prior period by expense category:

	Increase
Expenses - Changes	(Decrease)
	(In millions)
Purchased power costs	$	(441	)
Other operating costs		(45	)
Amortization of regulatory assets, net		(205	)
Deferral of new regulatory assets		135
General taxes		(5	)
Net Decrease in Expenses	$	(561	)

Purchased power costs decreased in the first nine months of 2010, primarily due to lower KWH sales requirements as discussed above. Other operating costs decreased due to lower transmission expenses (assumed by third party suppliers beginning June 1, 2009), labor and employee benefit expenses and the absence in 2010 of $12 million of costs incurred in the first nine months of 2009 associated with regulatory obligations for economic development and energy efficiency programs. Decreased amortization of regulatory assets was due primarily to the 2009 impairment of CEI’s Extended RTC regulatory asset of $216 million in accordance with the PUCO-approved ESP. A decrease in the deferral of new regulatory assets was primarily due to CEI’s contemporaneous recovery of purchased power costs in 2010. General taxes decreased in the first nine months of 2010, primarily due to a 2010 favorable tax settlement in Ohio.

Other Expense

Other expense increased $4 million in the first nine months of 2010, compared to the same period of 2009 due primarily to lower investment income.

105

THE TOLEDO EDISON COMPANY

MANAGEMENT’S NARRATIVE
ANALYSIS OF RESULTS OF OPERATIONS

TE is a wholly owned electric utility subsidiary of FirstEnergy. TE conducts business in northwestern Ohio, providing regulated electric distribution services. TE also procures generation services for those customers electing to retain TE as their power supplier.

For additional information with respect to TE, please see the information contained in FirstEnergy’s Management’s Discussion and Analysis of Financial Condition and Results of Operations under the following subheadings, which information is incorporated by reference herein: Capital Resources and Liquidity, Guarantees and Other Assurances, Off-Balance Sheet Arrangements, Market Risk Information, Credit Risk, Outlook and New Accounting Standards and Interpretations.

Results of Operations

Earnings available to parent increased by $13 million in the first nine months of 2010, compared to the same period of 2009. The increase was primarily due to decreased net amortization of regulatory assets, purchased power and other operating costs, partially offset by an increase in interest expense and decreases in revenues and investment income.

Revenues

Revenues decreased $287 million, or 42%, in the first nine months of 2010, compared to the same period of 2009, primarily due to lower retail generation and distribution revenues, partially offset by an increase in wholesale generation revenues.

Distribution revenues decreased $22 million in the first nine months of 2010, compared to the same period of 2009, primarily due to lower unit prices, partially offset by increased KWH deliveries to all customer classes. Lower unit prices are primarily due to lower transmission rates. Higher KWH deliveries were influenced by weather-related usage in the first nine months of 2010, reflecting an 84% increase in cooling degree days in TE’s service territory. Increased industrial deliveries were the result of an increase in KWH deliveries to major automotive customers (29%) and steel customers (27%), reflecting improving economic conditions.

Changes in distribution KWH deliveries and revenues in the first nine months of 2010, compared to the same period of 2009, are summarized in the following tables:

Distribution KWH Sales	Increase
Residential		9.8	%
Commercial		2.2	%
Industrial		15.5	%
Increase in Distribution Deliveries		10.3	%

	Increase
Distribution Revenues	(Decrease)
	(In millions)
Residential	$	2
Commercial		(7	)
Industrial		(17	)
Net Decrease in Distribution Revenues	$	(22	)

Retail generation revenues decreased $282 million in the first nine months of 2010, compared to the same period of 2009, primarily due to lower KWH sales across all customer classes and lower unit prices to industrial customers. Lower KWH sales to all customer classes were primarily the result of a 59% increase in customer shopping in the first nine months of 2010. That condition is expected to continue to impact the comparative sales levels for the remainder of 2010. Lower unit prices for industrial customers were primarily due to the absence of TE’s fuel cost recovery and rate stabilization riders that were effective from January through May 2009, partially offset by increased generation prices resulting from the CBP auction, effective June 1, 2009.

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Changes in retail generation KWH sales and revenues in the first nine months of 2010, compared to the same period of 2009, are summarized in the following tables:

Retail Generation KWH Sales	Decrease
Residential		(45.1	)%
Commercial		(72.5	)%
Industrial		(59.4	)%
Decrease in Retail Generation Sales		(59.0	)%

Retail Generation Revenues	Decrease
	(In millions)
Residential	$	(57	)
Commercial		(104	)
Industrial		(121	)
Decrease in Retail Generation Revenues	$	(282	)

Wholesale revenues increased $14 million in the first nine months of 2010, compared to the same period of 2009, primarily due to higher revenues from sales to NGC from TE’s leasehold interest in Beaver Valley Unit 2.

Expenses

Total expenses decreased $328 million in the first nine months of 2010, compared to the same period of 2009. The following table presents changes from the prior period by expense category:

	Increase
Expenses - Changes	(Decrease)
	(In millions)
Purchased power costs	$	(263	)
Other operating expenses		(31	)
Provision for depreciation		1
Amortization (deferral) of regulatory assets, net		(35	)
Net Decrease in Expenses	$	(328	)

Purchased power costs decreased in the first nine months of 2010, compared to the same period of 2009, due to lower volume as a result of decreased KWH sales requirements. Other operating costs decreased primarily due to reduced transmission expense (assumed by third party suppliers beginning June 1, 2009), lower costs associated with regulatory obligations for economic development and energy efficiency programs and decreased labor expenses. The amortization of regulatory assets decreased primarily due to PUCO-approved cost deferrals and lower MISO transmission cost amortization in the first nine months of 2010, compared to the same period of 2009.

Other Expense

Other expense increased $17 million in the first nine months of 2010, compared to the same period of 2009, primarily due to higher interest expense associated with the April 2009 issuance of $300 million senior secured notes and lower nuclear decommissioning trust investment income.

107

JERSEY CENTRAL POWER & LIGHT COMPANY

MANAGEMENT’S NARRATIVE
ANALYSIS OF RESULTS OF OPERATIONS

JCP&L is a wholly owned, electric utility subsidiary of FirstEnergy. JCP&L conducts business in New Jersey, providing regulated electric transmission and distribution services. JCP&L also procures generation services for franchise customers electing to retain JCP&L as their power supplier. JCP&L procures electric supply to serve its BGS customers through a statewide auction process approved by the NJBPU.

For additional information with respect to JCP&L, please see the information contained in FirstEnergy’s Management’s Discussion and Analysis of Financial Condition and Results of Operations under the following subheadings, which information is incorporated by reference herein: Capital Resources and Liquidity, Guarantees and Other Assurances, Market Risk Information, Credit Risk, Outlook and New Accounting Standards and Interpretations.

Results of Operations

Net income increased by $34 million in the first nine months of 2010, compared to the same period of 2009. The increase was primarily due to higher revenues, lower purchased power costs and decreased net amortization of regulatory assets, partially offset by increased other operating costs.

Revenues

In the first nine months of 2010, revenues increased $43 million, or 2%, compared to the same period of 2009. The increase in revenues is primarily due to higher distribution, wholesale generation and other revenues, partially offset by a decrease in retail generation revenues.

Distribution revenues increased $63 million in the first nine months of 2010, compared to the same period of 2009, due to higher KWH deliveries in all customer classes. Increased usage was due to warmer weather and improved economic conditions in JCP&L’s service territory. Decreased composite unit prices in the commercial and industrial classes partially offset the increased volume.

Changes in distribution KWH deliveries and revenues in the first nine months of 2010 compared to the same period of 2009 are summarized in the following tables:

Distribution KWH Sales	Increase
Residential		10.6	%
Commercial		2.9	%
Industrial		3.0	%
Increase in Distribution Deliveries		6.3	%

Distribution Revenues	Increase
	(In millions)
Residential	$	58
Commercial		5
Industrial		—
Increase in Distribution Revenues	$	63

Retail generation revenues decreased $54 million due to lower retail generation KWH sales in the commercial and industrial classes, partially offset by higher KWH sales in the residential class. Lower sales to the commercial and industrial classes were primarily due to an increase in the number of shopping customers. Higher KWH sales to the residential class reflected increased weather-related usage resulting from a 60% increase in cooling degree days during the first nine months of 2010.

108

Changes in retail generation KWH sales and revenues in the first nine months of 2010, compared to the same period of 2009, are summarized in the following tables:

	Increase
Retail Generation KWH Sales	(Decrease)
Residential		10.1	%
Commercial		(27.7	)%
Industrial		(21.4	)%
Net Decrease in Retail Generation Sales		(5.0	)%

	Increase
Retail Generation Revenues	(Decrease)
	(In millions)
Residential	$	81
Commercial		(127	)
Industrial		(8	)
Net Decrease in Retail Generation Revenues	$	(54	)

Wholesale generation revenues increased $22 million in the first nine months of 2010, compared to the same period of 2009, due primarily to higher wholesale energy prices.

Other revenues increased $8 million in the first nine months of 2010, compared to the same period of 2009, primarily due to an increase in transition bond revenues as a result of higher KWH deliveries in all customer classes.

Expenses

Total expenses decreased $18 million in the first nine months of 2010, compared to the same period of 2009. The following table presents changes from the prior period by expense category:

	Increase
Expenses - Changes	(Decrease)
	(In millions)
Purchased power costs	$	(33	)
Other operating costs		19
Provision for depreciation		5
Amortization of regulatory assets, net		(12	)
General taxes		3
Net Decrease in Expenses	$	(18	)

Purchased power costs decreased in the first nine months of 2010 primarily due to the lower retail generation KWH sales requirements. Other operating costs increased in the first nine months of 2010 primarily due to major storm clean up costs in JCP&L’s service territory, partially offset by a favorable settlement of $7 million for collective bargaining agreement recognized in the second quarter of 2010. Depreciation expense increased due to an increase in depreciable property since the third quarter of 2009. The amortization of regulatory assets decreased in the first nine months of 2010 primarily due to the deferral of storm costs.

109

METROPOLITAN EDISON COMPANY

MANAGEMENT’S NARRATIVE
ANALYSIS OF RESULTS OF OPERATIONS

Met-Ed is a wholly owned electric utility subsidiary of FirstEnergy. Met-Ed conducts business in eastern Pennsylvania, providing regulated electric transmission and distribution services. Met-Ed also procures generation service for those customers electing to retain Met-Ed as their power supplier. Met-Ed has a wholesale power sales agreement with FES, to supply all of its energy requirements at fixed prices through the end of 2010.

For additional information with respect to Met-Ed, please see the information contained in FirstEnergy’s Management’s Discussion and Analysis of Financial Condition and Results of Operations under the following subheadings, which information is incorporated by reference herein: Capital Resources and Liquidity, Guarantees and Other Assurances, Market Risk Information, Credit Risk, Outlook and New Accounting Standards and Interpretations.

Results of Operations

Net income increased by $6 million in the first nine months of 2010, compared to the same period of 2009. The increase was primarily due to increased revenues and decreased amortization of net regulatory assets, partially offset by increased purchased power and other operating expenses.

Revenues

Revenue increased $147 million, or 12%, in the first nine months of 2010 compared to the same period of 2009, reflecting higher distribution and generation revenues, partially offset by a decrease in transmission revenues.

Distribution revenues increased $82 million in the first nine months of 2010, compared to the same period of 2009, primarily due to higher rates resulting from the annual update to Met-Ed’s TSC rider effective June 1, 2010, partially offset by lower CTC rates for the residential class. Higher KWH deliveries to industrial customers were due to improving economic conditions in Met-Ed’s service territory. Higher residential and commercial KWH deliveries reflect increased weather-related usage due to a 59% increase in cooling degree days in the first nine months of 2010, partially offset by an 11% decrease in heating degree days for the same period.

Changes in distribution KWH deliveries and revenues in the first nine months of 2010, compared to the same period of 2009, are summarized in the following tables:

Distribution KWH Deliveries	Increase
Residential		5.0	%
Commercial		4.4	%
Industrial		4.0	%
Increase in Distribution Deliveries		4.6	%

Distribution Revenues	Increase
	(In millions)
Residential	$	40
Commercial		27
Industrial		15
Increase in Distribution Revenues	$	82

Retail generation revenues increased $36 million in the first nine months of 2010, compared to the same period of 2009, due to higher composite unit prices in the residential and commercial customer classes and higher KWH sales to all customer classes. The higher unit prices were primarily due to an increase in the generation rate, effective January 1, 2010. Higher KWH sales to residential and commercial customers increased primarily due to weather-related usage described above. Increased customer shopping in the commercial and industrial classes partially offset the higher KWH sales in these classes.

110

Changes in retail generation KWH sales and revenues in the first nine months of 2010, compared to the same period of 2009, are summarized in the following tables:

Retail Generation KWH Sales	Increase
Residential		5.0	%
Commercial		2.8	%
Industrial		1.1	%
Increase in Retail Generation Sales		3.3	%

Retail Generation Revenues	Increase
	(In millions)
Residential	$	30
Commercial		5
Industrial		1
Increase in Retail Generation Revenues	$	36

Wholesale revenues increased $42 million in the first nine months of 2010 compared to the same period of 2009, primarily reflecting higher PJM capacity prices.

Transmission revenues decreased $13 million in the first nine months of 2010 compared to the same period of 2009 primarily due to decreased Financial Transmission Rights revenues. Met-Ed defers the difference between transmission revenues and transmission costs incurred, resulting in no material effect to current period earnings.

Expenses

Total expenses increased $130 million in the first nine months of 2010 compared to the same period of 2009. The following table presents changes from the prior year by expense category:

	Increase
Expenses - Changes	(Decrease)
	(In millions)
Purchased power costs	$	78
Other operating costs		112
Provision for depreciation		1
Amortization of regulatory assets, net		(61	)
Net Increase in Expenses	$	130

Purchased power costs increased $78 million in the first nine months of 2010 due to an increase in unit costs and increased KWH purchased to source increased generation sales requirements. Other operating costs increased $112 million in the first nine months of 2010 compared to the same period in 2009 primarily due to higher transmission congestion and transmission loss expenses (see reference to deferral accounting above). Depreciation expense increased $1 million due to an increase in depreciable property since September of 2009. The amortization of regulatory assets decreased $61 million in the first nine months of 2010 primarily due to higher PJM deferrals resulting from increased transmission costs and reduced amortization from decreasing asset balances.

Other Expense

In the first nine months of 2010, interest income decreased $4 million due to reduced CTC stranded asset balances.

111

PENNSYLVANIA ELECTRIC COMPANY

MANAGEMENT’S NARRATIVE
ANALYSIS OF RESULTS OF OPERATIONS

Penelec is a wholly owned electric utility subsidiary of FirstEnergy. Penelec conducts business in northern and south central Pennsylvania, providing regulated transmission and distribution services. Penelec also procures generation services for those customers electing to retain Penelec as their power supplier. Penelec has a wholesale power sales agreement with FES, to supply all of its energy requirements at fixed prices through the end of 2010.

For additional information with respect to Penelec, please see the information contained in FirstEnergy’s Management’s Discussion and Analysis of Financial Condition and Results of Operations under the following subheadings, which information is incorporated by reference herein: Capital Resources and Liquidity, Guarantees and Other Assurances, Off-Balance Sheet Arrangements, Market Risk Information, Credit Risk, Outlook and New Accounting Standards and Interpretations.

Results of Operations

Net income increased by $1 million in the first nine months of 2010, compared to the same period of 2009. The increase was primarily due to higher revenues and net deferral of regulatory assets, partially offset by higher purchased power, other operating costs and interest expense.

Revenues

In the first nine months of 2010, revenues increased $84 million, or 7.8%, compared to the same period of 2009. The increase in revenue was primarily due to higher generation revenues, partially offset by lower distribution and transmission revenues.

Distribution revenues decreased by $2 million in the first nine months of 2010, compared to the same period of 2009, primarily due to a decrease in the CTC rate in all customer classes, partially offset by an increase in the universal service and energy efficiency rates for the residential customer class and increased KWH sales in all customer classes.

Changes in distribution KWH deliveries and revenues in the first nine months of 2010, compared to the same period of 2009, are summarized in the following tables:

Distribution KWH Deliveries	Increase
Residential		4.6	%
Commercial		4.6	%
Industrial		6.3	%
Increase in Distribution Deliveries		5.1	%

	Increase
Distribution Revenues	(Decrease)
	(In millions)
Residential	$	19
Commercial		(12	)
Industrial		(9	)
Net Decrease in Distribution Revenues	$	(2	)

Retail generation revenues increased $66 million in the first nine months of 2010, compared to the same period of 2009, primarily due to higher unit prices and KWH sales in all customer classes. The higher unit prices were primarily due to an increase in the generation rate, effective January 1, 2010. Higher KWH sales to industrial customers were due to improved economic conditions in Penelec’s service territory. Higher KWH sales to residential and commercial customers increased primarily due to weather-related usage, reflecting a 94% increase in cooling degree days in the first nine months of 2010, partially offset by a 10% decrease in heating degree days for the same period.

112

Changes in retail generation sales and revenues in the first nine months of 2010 compared to the same period of 2009 are summarized in the following tables:

Retail Generation KWH Sales	Increase
Residential		4.6	%
Commercial		4.3	%
Industrial		6.9	%
Increase in Retail Generation Sales		5.1	%

Retail Generation Revenues	Increase
	(In millions)
Residential	$	17
Commercial		26
Industrial		23
Increase in Retail Generation Revenues	$	66

Wholesale generation revenues increased $39 million in the first nine months of 2010, compared to the same period of 2009, due primarily to higher PJM capacity prices.

Transmission revenues decreased by $13 million in the first nine months of 2010, compared to the same period of 2009, primarily due to lower Financial Transmission Rights revenue. Penelec defers the difference between transmission revenues and transmission costs incurred, resulting in no material effect to current period earnings.

Expenses

Total expenses increased by $71 million in the first nine months of 2010, as compared with the same period of 2009. The following table presents changes from the prior period by expense category:

	Increase
Expenses - Changes	(Decrease)
	(In millions)
Purchased power costs	$	111
Other operating costs		27
Provision for depreciation		1
Amortization (deferral) of regulatory assets, net		(66	)
General taxes		(2	)
Net Increase in Expenses	$	71

Purchased power costs increased $111 million in the first nine months of 2010, compared to the same period of 2009, primarily due to an increase in unit costs and increased KWH purchased to source increased generation sales requirements. Other operating costs increased $27 million in the first nine months of 2010, primarily due to higher transmission congestion and transmission loss expenses (see reference to deferral accounting above). The amortization (deferral) of net regulatory assets decreased $66 million in the first nine months of 2010, primarily due to increased cost deferrals resulting from higher transmission expenses and decreased amortization of regulatory assets resulting from lower CTC revenues. General taxes decreased $2 million primarily due to a favorable ruling on a property tax appeal in the first quarter of 2010.

Other Expense

In the first nine months of 2010, other expense increased $14 million primarily due to an increase in interest expense on long-term debt due to a $500 million debt issuance in September 2009.

113

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Market Risk Information” in Item 2 above.

ITEM 4. CONTROLS AND PROCEDURES

(a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES — FIRSTENERGY

FirstEnergy’s management, with the participation of its chief executive officer and chief financial officer, have reviewed and evaluated the effectiveness of the registrant’s disclosure controls and procedures, as defined in the Securities Exchange Act of 1934, as amended, Rules 13a-15(e) and 15(d)-15(e), as of the end of the period covered by this report. Based on that evaluation, the chief executive officer and chief financial officer have concluded that the registrant’s disclosure controls and procedures were effective as of the end of the period covered by this report.

(b) CHANGES IN INTERNAL CONTROLS

During the quarter ended September 30, 2010, there were no changes in FirstEnergy’s internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.

ITEM 4T. CONTROLS AND PROCEDURES — FES, OE, CEI, TE, JCP&L, MET-ED AND PENELEC

(a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

Each registrant’s management, with the participation of its chief executive officer and chief financial officer, have reviewed and evaluated the effectiveness of such registrant’s disclosure controls and procedures, as defined in the Securities Exchange Act of 1934, as amended, Rules 13a-15(e) and 15(d)-15(e), as of the end of the period covered by this report. Based on that evaluation, each registrant’s chief executive officer and chief financial officer have concluded that such registrant’s disclosure controls and procedures were effective as of the end of the period covered by this report.

(b) CHANGES IN INTERNAL CONTROLS

During the quarter ended September 30, 2010, there were no changes in the registrants’ internal control over financial reporting that has materially affected, or are reasonably likely to materially affect, the registrants’ internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Information required for Part II, Item 1 is incorporated by reference to the discussions in Notes 9 and 10 of the Consolidated Financial Statements in Part I, Item 1 of this Form 10-Q.

ITEM 1A. RISK FACTORS

FirstEnergy’s Annual Report on Form 10-K for the year ended December 31, 2009, includes a detailed discussion of its risk factors. There have been no material changes to these risk factors for the quarter ended September 30, 2010.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

(c) FirstEnergy

The table below includes information on a monthly basis regarding purchases made by FirstEnergy of its common stock during the third quarter of 2010.

	Period
	July		August		September		Third Quarter
Total Number of Shares Purchased(a)		38,180		43,103		460,312		541,595
Average Price Paid per Share	$	36.41	$	37.28	$	36.76	$	36.78
Total Number of Shares Purchased As Part of Publicly Announced Plans or Programs		—		—		—		—
Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs		—		—		—		—

(a) Share amounts reflect purchases on the open market to satisfy FirstEnergy’s obligations to deliver common stock under its 2007 Incentive Compensation Plan, Deferred Compensation Plan for Outside Directors, Executive Deferred Compensation Plan, Savings Plan and Stock Investment Plan. In addition, such amounts reflect shares tendered by employees to pay the exercise price or withholding taxes upon exercise of stock options granted under the 2007 Incentive Compensation Plan and the Executive Deferred Compensation Plan.

ITEM 5. OTHER INFORMATION

Signal Peak and Global Rail Credit Facility

On October 22, 2010, FEV, WMB Loan Ventures LLC and WMB Loan Ventures II LLC, the entities that own mining and coal transportation operations near Roundup, Montana (Signal Peak and Global Rail) entered into a $350 million syndicated two-year senior secured term loan facility among the two limited liability companies that comprise Signal Peak and Global Rail, as borrowers Sovereign Bank, CoBank, Credit Agricole, U.S. Bank, BBVA Compass, Royal Bank of Canada, Fifth Third, Comerica Bank, CIBC Inc. and First Merit banks, as lenders, and Union Bank, N.A., as lender, administrative agent, collateral agent and syndication agent. FirstEnergy, together with WMB Loan Ventures LLC and WMB Loan Ventures II LLC, the entities that share ownership with FEV in the borrowers have provided a guaranty of the borrowers’ obligations under the facility. In addition, FEV and the other entities that directly own the equity interests in the borrowers have pledged those interests to the banks as collateral for the facility. The loan matures on October 22, 2012. The loan proceeds were used by the borrowers primarily to repay $258 million of notes payable to FirstEnergy, including $9 million of interest, and $63 million of bank loans that were scheduled to mature on November 16, 2010. Additional proceeds will be used for general company purposes, including an $11 million repayment of a third-party seller’s note maturing October 29, 2010.

114

The facility contains customary representations, warranties, covenants and events of defaults of the borrowers, the guarantors and the pledgors and the foregoing description of the facility is qualified in its entirety by reference to the copy of the credit agreement, including the forms of the guaranty and pledge agreement attached as exhibits thereto, included with this report as Exhibit 10.3.

ITEM 6. EXHIBITS

Exhibit Number

FirstEnergy
	10.1		Amended FirstEnergy Corp. Deferred Compensation Plan for Outside Directors, amended and restated as of September 21, 2010.
	10.2		Amended FirstEnergy Corp. Executive Deferred Compensation Plan, amended and restated as of September 21, 2010.
	10.3		Signal Peak Credit Agreement, including the forms of the guaranty and pledge agreement attached as exhibits thereto
	12		Fixed charge ratios
	31.1		Certification of chief executive officer, as adopted pursuant to Rule 13a-14(a)
	31.2		Certification of chief financial officer, as adopted pursuant to Rule 13a-14(a)
	32		Certification of chief executive officer and chief financial officer, pursuant to 18 U.S.C. Section 1350
	101	*	The following materials from the Quarterly Report on Form 10-Q of FirstEnergy Corp. for the period ended September 30, 2010, formatted in XBRL (extensible Business Reporting Language): (i) Consolidated Statements of Income and Comprehensive Income, (ii) Consolidated Balance Sheets, (iii) Consolidated Statements of Cash Flows, (iv) related notes to these financial statements tagged as blocks of text and (v) document and entity information.
FES
	12		Fixed charge ratios
	31.1		Certification of chief executive officer, as adopted pursuant to Rule 13a-14(a)
	31.2		Certification of chief financial officer, as adopted pursuant to Rule 13a-14(a)
	32		Certification of chief executive officer and chief financial officer, pursuant to 18 U.S.C. Section 1350
OE
	12		Fixed charge ratios
	31.1		Certification of chief executive officer, as adopted pursuant to Rule 13a-14(a)
	31.2		Certification of chief financial officer, as adopted pursuant to Rule 13a-14(a)
	32		Certification of chief executive officer and chief financial officer, pursuant to 18 U.S.C. Section 1350
CEI
	12		Fixed charge ratios
	31.1		Certification of chief executive officer, as adopted pursuant to Rule 13a-14(a)
	31.2		Certification of chief financial officer, as adopted pursuant to Rule 13a-14(a)
	32		Certification of chief executive officer and chief financial officer, pursuant to 18 U.S.C. Section 1350
TE
	12		Fixed charge ratios
	31.1		Certification of chief executive officer, as adopted pursuant to Rule 13a-14(a)
	31.2		Certification of chief financial officer, as adopted pursuant to Rule 13a-14(a)
	32		Certification of chief executive officer and chief financial officer, pursuant to 18 U.S.C. Section 1350
JCP&L
	12		Fixed charge ratios
	31.1		Certification of chief executive officer, as adopted pursuant to Rule 13a-14(a)
	31.2		Certification of chief financial officer, as adopted pursuant to Rule 13a-14(a)
	32		Certification of chief executive officer and chief financial officer, pursuant to 18 U.S.C. Section 1350

115

Met-Ed
	12	Fixed charge ratios
	31.1	Certification of chief executive officer, as adopted pursuant to Rule 13a-14(a)
	31.2	Certification of chief financial officer, as adopted pursuant to Rule 13a-14(a)
	32	Certification of chief executive officer and chief financial officer, pursuant to 18 U.S.C. Section 1350
Penelec
	12	Fixed charge ratios
	31.1	Certification of chief executive officer, as adopted pursuant to Rule 13a-14(a)
	31.2	Certification of chief financial officer, as adopted pursuant to Rule 13a-14(a)
	32	Certification of chief executive officer and chief financial officer, pursuant to 18 U.S.C. Section 1350

* Users of these data are advised pursuant to Rule 401 of Regulation S-T that the financial information contained in the XBRL-Related Documents is unaudited and, as a result, investors should not rely on the XBRL-Related Documents in making investment decisions. Furthermore, users of these data are advised in accordance with Rule 406T of Regulation S-T promulgated by the Securities and Exchange Commission that this Interactive Data File is deemed not filed or part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

Pursuant to reporting requirements of respective financings, FirstEnergy, FES, OE, CEI, TE, JCP&L, Met-Ed and Penelec are required to file fixed charge ratios as an exhibit to this Form 10-Q.

Pursuant to paragraph (b)(4)(iii)(A) of Item 601 of Regulation S-K, neither FirstEnergy, FES, OE, CEI, TE, JCP&L, Met-Ed nor Penelec have filed as an exhibit to this Form 10-Q any instrument with respect to long-term debt if the respective total amount of securities authorized thereunder does not exceed 10% of its respective total assets, but each hereby agrees to furnish to the SEC on request any such documents.

116

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, each Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

October 26, 2010

FIRSTENERGY CORP.

Registrant

FIRSTENERGY SOLUTIONS CORP.

Registrant

OHIO EDISON COMPANY

Registrant

THE CLEVELAND ELECTRIC

ILLUMINATING COMPANY

Registrant

THE TOLEDO EDISON COMPANY

Registrant

METROPOLITAN EDISON COMPANY

Registrant

PENNSYLVANIA ELECTRIC COMPANY

Registrant  

/s/ Harvey L. Wagner  

Harvey L. Wagner 

Vice President, Controller
and Chief Accounting Officer 

JERSEY CENTRAL POWER & LIGHT COMPANY

Registrant
 

/s/ K. Jon Taylor  

K. Jon Taylor 

Controller
(Principal Accounting Officer) 

117

EX-10.1

Exhibit 10.1

Execution Copy

Amendment No. 1 to

FirstEnergy Corp. Deferred Compensation Plan for Outside Directors

WHEREAS, FirstEnergy Corp. (the “Company”), established the FirstEnergy Corp. Deferred Compensation Plan for Outside Directors, effective December 31, 1997, as amended and restated January 1, 2005 (the “Plan”); and

WHEREAS, Section 9.1 of the Plan generally provides that, prior to a Special Circumstance (as defined in the Plan) and subject to certain conditions, the Plan may be amended from time to time by the Board of Directors of the Company (the “Board”); and

WHEREAS, the Board now desires to amend the Plan to eliminate the twenty percent bonus credit for directors’ fees deferred into the Deferred Stock Fund of the Plan;

NOW, THEREFORE, in accordance with Section 9.1 of the Plan, the Plan is amended, effective as of January 1, 2011, as follows:

1. Section 3.5(b)(1) is hereby amended by the deletion of said Section 3.5(b)(1) in its entirety and the substitution in lieu thereof of a new Section 3.5(b)(1) to read as follows:

“(1) Bonus Credit. With respect to deferrals of Director’s Fees earned for services performed during the calendar years ending prior to January 1, 2011 and that otherwise would have been payable no later than December 31, 2010, at the time such Director’s Fees are initially deferred under this Plan and credited for investment into the Deferred Stock Fund, such Director’s Fees except equity retainer fees shall be increased by a Bonus Credit equal to twenty percent (20%) of such Director’s Fees credited to the Deferred Stock Fund. Any account balance transferred to this Plan from another plan in accordance with Section 2.4 that may be credited to the Deferred Stock Fund shall not be increased by the Bonus Credit.”

2. Section 9.3 is hereby amended by the deletion of said Section 9.3 in its entirety and the substitution in lieu thereof of a new Section 9.3 to read as follows:

“9.3 Automatic Cessation of Bonus Credit and Dividends

Unless the Plan is terminated by the Company prior to the following, the crediting of the 20% Bonus Credit feature of this Plan with respect to Company common stock will automatically cease on January 1, 2011 with respect to Director’s Fees earned for services performed during any calendar years that commence on or after January 1, 2011 and that otherwise would have been payable later than December 31, 2010, or earlier if the maximum share reserve of 500,000 shares of Company common stock is reached.

Unless the Plan is terminated by the Company prior to the following, the crediting of the dividend equivalent feature of this Plan with respect to Company common stock will automatically cease on May 17, 2014 or earlier if the maximum share reserve of 500,000 shares of Company common stock is reached, unless shareholders reapprove this feature the earlier of the prior date or prior to the depletion of the maximum share reserve.”

IN WITNESS WHEREOF, the Board of Directors of FirstEnergy Corp., has caused this Amendment No. 1 to FirstEnergy Corp. Deferred Compensation Plan for Outside Directors to be executed on this 19th day of October, 2010, effective as of the date set forth above.

FIRSTENERGY CORP.
By:	/s/ Anthony J. Alexander
	Anthony J. Alexander,
	President and Chief Executive Officer of FirstEnergy Corp.

2

EX-10.2

Exhibit 10.2

Execution Copy

Amendment No. 1 to

FirstEnergy Corp. Executive Deferred Compensation Plan

WHEREAS, FirstEnergy Corp. (the “Company”), established the FirstEnergy Corp. Executive Deferred Compensation Plan, effective September 28, 1985 as amended and restated as of January 1, 2005 (the “Plan”); and

WHEREAS, Section 10.1 of the Plan provides that the Plan may be amended, subject to certain conditions, at any time by action of the Board of Directors of the Company (the “Board”) or Compensation Committee of the Board (the “Compensation Committee”) or by a writing executed on behalf of the Board or the Compensation Committee by the Company’s duly elected officers; and

WHEREAS, Section 10.1 of the Plan also provides that any amendment to the Plan will be effective on the first day of the calendar year following the adoption by the Company of such amendment, provided that all participants are notified of such amendment no later than November 15 of the year in which such amendment is adopted; and

WHEREAS, the Board now desires to amend the Plan, effective January 1, 2011, to eliminate the credit of a twenty percent stock premium for compensation participants choose to defer into the Stock Account of the Plan on and after January 1, 2011; and

WHEREAS, the participants under the Plan will be notified of this Amendment prior to November 15, 2010;

NOW, THEREFORE, in accordance with Section 10.1 of the Plan, the Plan is amended, effective as of January 1, 2011, as follows:

1. Section 3.1(a) is hereby amended by the deletion of said Section 3.1(a) in its entirety and the substitution in lieu thereof of a new Section 3.1(a) to read as follows:

“(a) Eligibility. The Chief Executive Officer of the Company may designate any key executive who is an employee of any Employer as eligible to make a Deferral Election as of the first (1^st) day of any month following the employee’s date of hire, and, with respect to deferrals of any Short-Term Incentive Award and/or Long-Term Incentive Award that is earned during a Deferral Period that ends prior to January 1, 2011 and that otherwise would have been payable no later than December 31, 2011, to receive Stock Premiums in accordance with Section 4.3.”

2. Section 4.3 is hereby amended by the deletion of said Section 4.3 in its entirety and the substitution in lieu thereof of a new Section 4.3 to read as follows:

“4.3 Stock Account

(a) Establishing a Stock Account. A Participant may establish an annual Stock Account, which shall be maintained solely for recordkeeping purposes, by making a Deferral Election.

(b) Maximum Deferral. A Participant may elect to defer up to one hundred percent (100%) of the Short-Term Incentive Award and Long-Term Incentive Award into the Stock Account.

(c) Stock Premium. With respect to deferrals of any Short-Term Incentive Award and/or Long-Term Incentive Award that is earned during a Deferral Period that ends prior to January 1, 2011 and that otherwise would have been payable no later than December 31, 2011, amounts deferred into the Stock Account shall be credited with an amount equal to twenty percent (20%) of the amount deferred into the Stock Account. Such premium shall be credited as of the date the corresponding Elected Deferred Compensation is credited to the Stock Account.

(d) Stock Units and Earnings. Amounts deferred into the Stock Account shall be converted into units of Company common stock. The number of stock units credited to the Stock Account shall be determined by dividing the amount deferred into the Stock Account, plus, with respect to deferrals of any Short-Term Incentive Award and/or Long-Term Incentive Award that is earned during a Deferral Period that ends prior to January 1, 2011 and that otherwise would have been payable no later than December 31, 2011, the Stock Premium described in (c) above, by the average daily closing price of Company common stock during February of the Deferral Period in which the Elected Deferred Compensation is credited to the Account.

(e) Dividends. Additional stock units shall be credited to each Stock Account at the time dividend payments are made to Company shareholders. The number of additional units credited shall be based on the number of units in the Stock Account and the market price of Company stock at the close of that business day.

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(f) Automatic Cessation of Stock Premium and Dividends.

(i) Unless the Plan is terminated by the Company prior to the following, the crediting of the 20% stock premium in Company common stock will automatically cease on January 1, 2011 with respect to deferrals of any Short-Term Incentive Award and/or Long-Term Incentive Award that is earned during a Deferral Period that commences on or after January 1, 2011 and that otherwise would have been payable later than December 31, 2011, or earlier if the maximum share reserve of 1,000,000 shares is reached.

(ii) Unless the Plan is terminated by the Company prior to the following, the crediting of the dividends under Section 4.3(e) in Company common stock will automatically cease on May 17, 2014 or earlier if the maximum share reserve of 1,000,000 shares is reached, unless shareholders reapprove this feature on the earlier of the prior date or prior to the depletion of the maximum share reserve.”

IN WITNESS WHEREOF, the Board of Directors of FirstEnergy Corp., has caused this Amendment No. 1 to FirstEnergy Corp. Executive Deferred Compensation Plan to be executed on this 19th day of October, 2010, effective as of the date set forth above.

FIRSTENERGY CORP.
By:	/s/ Anthony J. Alexander
	Anthony J. Alexander,
	President and Chief Executive Officer of FirstEnergy Corp.

3

EX-10.3

Exhibit 10.3

[EXECUTION COPY]

CREDIT AGREEMENT

dated as of October 22, 2010

among

SIGNAL PEAK ENERGY, LLC,
a Delaware limited liability company,

and

GLOBAL RAIL GROUP, LLC,
a Delaware limited liability company,
as Borrowers,

and

THE LENDERS PARTY HERETO,

and

COBANK, ACB and SOVEREIGN BANK,
as Co-Syndication Agents,

and

BANCO BILBAO VIZCAYA ARGENTARIA, S.A., NEW YORK BRANCH,
CREDIT AGRICOLE CORPORATE AND INVESTMENT BANK and
U.S. BANK NATIONAL ASSOCIATION,
as Co-Documentation Agents,

and

UNION BANK, N.A.,
as Administrative Agent and Collateral Agent

UNION BANK, N.A.,
as Sole Lead Arranger and Sole Bookrunner

TABLE OF CONTENTS

	Page
ARTICLE I Definitions
SECTION 1.01. Defined Terms		1
SECTION 1.02. Classification of Loans and Borrowings		16
SECTION 1.03. Terms Generally		16
SECTION 1.04. Accounting Terms; GAAP		16
SECTION 1.05. Pro Forma Calculations		17
ARTICLE II The Credits
SECTION 2.01. Commitments		17
SECTION 2.02. Loans and Borrowings		17
SECTION 2.03. Request for Initial Borrowing		18
SECTION 2.04. Funding of Initial Borrowing		18
SECTION 2.05. Interest Elections		19
SECTION 2.06. Termination of Commitments		20
SECTION 2.07. Repayment of Loans; Evidence of Debt		20
SECTION 2.08. Prepayment of Loans		21
SECTION 2.09. Fees		22
SECTION 2.10. Interest		22
SECTION 2.11. Alternate Rate of Interest		23
SECTION 2.12. Increased Costs		23
SECTION 2.13. Break Funding Payments		24
SECTION 2.14. Taxes		25
SECTION 2.15. Payments Generally; Pro Rata Treatment; Sharing of Set-offs		27
SECTION 2.16. Mitigation Obligations; Replacement of Lenders		28
SECTION 2.17. Illegality		29
SECTION 2.18 Joint and Several Obligations; Subrogation Rights; Savings Clause		29
ARTICLE III Representations and Warranties
SECTION 3.01. Organization; Powers		31
SECTION 3.02. Authorization; Enforceability		31
SECTION 3.03. Governmental Approvals; No Conflicts		31
SECTION 3.04. Financial Condition; No Material Adverse Change		32
SECTION 3.05. Title to Properties, Etc		32
SECTION 3.06. Litigation		33
SECTION 3.07. Compliance with Laws and Agreements		33
SECTION 3.08. Margin Regulations		33
SECTION 3.09. Regulatory Status		33
SECTION 3.10. Taxes		34
SECTION 3.11. ERISA		34
SECTION 3.12. Security Documents		34
SECTION 3.13. Disclosure		35

i

TABLE OF CONTENTS
(Continued)

	Page
SECTION 3.14. Solvency		35
SECTION 3.15. Labor Matters		35
SECTION 3.16. Anti-Terrorism Laws		35
SECTION 3.17. No Subsidiaries		36
SECTION 3.18. Environmental Matters		36
SECTION 3.19. Insurance		37
SECTION 3.20. Hedging Agreements		37
SECTION 3.21. No Default or Event of Default		37
SECTION 3.22. Use of Proceeds		37
ARTICLE IV Conditions Precedent
SECTION 4.01. Effective Date		38
ARTICLE V Affirmative Covenants
SECTION 5.01. Financial Statements and Other Information		40
SECTION 5.02. Notices of Material Events		41
SECTION 5.03. Existence; Conduct of Business		42
SECTION 5.04. Payment of Obligations		42
SECTION 5.05. Maintenance of Properties; Insurance		42
SECTION 5.06. Books and Records; Inspection Rights		43
SECTION 5.07. Compliance with Laws		43
SECTION 5.08. Use of Proceeds		43
SECTION 5.09. Environmental Matters		43
SECTION 5.10. Further Assurances		44
SECTION 5.11. Subsidiaries		44
ARTICLE VI Negative Covenants
SECTION 6.01. Indebtedness		44
SECTION 6.02. Liens		45
SECTION 6.03. Fundamental Changes		46
SECTION 6.04. Investments, Loans, Advances and Acquisitions		46
SECTION 6.05. Asset Sales		46
SECTION 6.06. Sale and Leaseback Transactions		47
SECTION 6.07. Limitation on Hedge Agreements		47
SECTION 6.08. Restricted Payments; Certain Payments of Indebtedness		47
SECTION 6.09. Transactions with Affiliates		48
SECTION 6.10. Restrictive Agreements		48
SECTION 6.11. Accounting Changes		48

ii

TABLE OF CONTENTS
(Continued)

	Page
ARTICLE VII Events of Default		49
ARTICLE VIII The Agents		51
ARTICLE IX Miscellaneous
SECTION 9.01. Notices		54
SECTION 9.02. Waivers; Amendments		55
SECTION 9.03. Expenses; Indemnity; Damage Waiver		56
SECTION 9.04. Successors and Assigns		57
SECTION 9.05. Survival		60
SECTION 9.06. Counterparts; Integration; Effectiveness		60
SECTION 9.07. Severability		60
SECTION 9.08. Right of Setoff		61
SECTION 9.09. Governing Law; Jurisdiction; Consent to Service of Process		61
SECTION 9.10. WAIVER OF JURY TRIAL		62
SECTION 9.11. Headings		62
SECTION 9.12. Confidentiality		62
SECTION 9.13. Interest Rate Limitation		63
SECTION 9.14 Patriot Act Notice		63
SCHEDULES:
Schedule 2.01 — Commitments
Schedule 3.04 — Sales and Acquisitions
Schedule 3.05 — Properties
Schedule 3.06 — Litigation
Schedule 3.07 — Compliance with Laws
Schedule 3.19 — Insurance
Schedule 3.20 — Hedging Agreements
Schedule 6.02 — Existing Liens
EXHIBITS:
Exhibit A — Form of Assignment and Assumption
Exhibit B — Form of Pledge Agreement
Exhibit C — Form of Note
Exhibit D — Form of Guaranty
Exhibit E — Form of Borrowing Request

iii

CREDIT AGREEMENT

This CREDIT AGREEMENT, dated as of October 22, 2010, among SIGNAL PEAK ENERGY, LLC, GLOBAL RAIL GROUP, LLC, the LENDERS party hereto and UNION BANK, N.A., as Administrative Agent and as Collateral Agent.

The parties hereto agree as follows:

ARTICLE I
Definitions

SECTION 1.01. Defined Terms. As used in this Agreement, the following terms have the meanings specified below:

“ABR”, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Alternate Base Rate.

“ABR Default Rate” has the meaning assigned to such term in Section 2.10(c).

“Adjusted LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest Period, an interest rate per annum equal to (a) the LIBO Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate.

“Administrative Agent” means Union Bank, in its capacity as administrative agent for the Lenders.

“Administrative Questionnaire” means an Administrative Questionnaire in a form supplied by the Administrative Agent.

“Affiliate” means, with respect to a specified Person, another Person that directly, or indirectly through one or more intermediaries, Controls or is Controlled by or is under common Control with the Person specified.

“Agents” means, collectively, the Administrative Agent and the Collateral Agent.

“Agreement” means this Credit Agreement, dated as of October 22, 2010, by and among the Borrowers, the Lenders party hereto, the Administrative Agent and the Collateral Agent.

“Alternate Base Rate” means, for any day, a rate per annum equal to the greatest of (a) the Reference Rate in effect on such day, (b) the Federal Funds Effective Rate in effect on such day plus ¹/2 of 1%, and (c) the then-applicable Adjusted LIBO Rate for a Eurodollar Loan with an Interest Period of one month (assuming that the first day of such Interest Period was the first day of the calendar month in which such day occurs) plus 1% per annum. Any change in the Alternate Base Rate due to a change in the Reference Rate or the Federal Funds Effective Rate shall be effective from and including the effective date of such change in the Reference Rate or the Federal Funds Effective Rate, respectively.

“Anti-Terrorism Laws” has the meaning assigned to such term in Section 3.16(a).

“Applicable Percentage” means with respect to any Lender, the percentage of the total Commitments represented by such Lender’s Commitment. If the Commitments have terminated, the Applicable Percentage of each Lender shall equal the ratio of (i) the aggregate outstanding principal amount of all Loans made by such Lender to (ii) the aggregate outstanding principal amount of all Loans (or, if the Loans have been repaid in full, the Applicable Percentages shall equal the Applicable Percentages in effect immediately prior to such repayment).

“Applicable Margin” means, with respect to any Eurodollar Loan or ABR Loan, as the case may be, the applicable per annum percentage set forth at the appropriate intersection in the table shown below, based on the Rating as in effect from time to time:

				LEVEL 2			LEVEL 3
	LEVEL 1			Ratings lower than Level 1			Ratings lower than BBB-
	Ratings at least BBB by			but at least BBB- by S&P			by S&P and Baa3 by
BASIS FOR PRICING	S&P or Baa2 by Moody’s.			or Baa3 by Moody’s.			Moody’s.
Applicable Margin for Eurodollar Loans		2.00	%		2.25	%		3.00	%
Applicable Margin for ABR Loans		1.00	%		1.25	%		2.00	%

For purposes of the foregoing, (i) if there is a difference of one level in Ratings of S&P and Moody’s and the higher of such Ratings falls in Level 1 or Level 2, then the higher Rating will be used to determine the Applicable Margin, and (ii) if there is a difference of more than one level in Ratings of S&P and Moody’s, the Rating that is one level above the lower of such Ratings will be used to determine the Applicable Margin, unless the lower of such Ratings falls in Level 3, in which case the lower of such Ratings will be used to determine the Applicable Margin. If there is only one Rating, such Rating shall be used to determine the Applicable Margin.

“Approved Fund” means any Fund that is administered or managed by (a) a Lender or (b) an Affiliate of a Lender.

“Assignment and Assumption” means an assignment and assumption entered into by a Lender and an assignee (with the consent of any party whose consent is required by Section 9.04), and accepted by the Administrative Agent, in the form of Exhibit A or any other form approved by the Administrative Agent.

“Board” means the Board of Governors of the Federal Reserve System of the United States of America.

“Boich” means Boich Companies, LLC, a Delaware limited liability company.

2

“Borrowers” means, collectively, SPE and RailCo, and each individually, a “Borrower”.

“Borrowing” means Loans of the same Type, made, converted or continued on the same date and, in the case of Eurodollar Loans, as to which a single Interest Period is in effect.

“Borrowing Request” means a request by the Borrowers for the Initial Borrowing in accordance with Section 2.03 and substantially in the form of Exhibit E.

“Business Day” means any day that is not a Saturday, Sunday or other day on which commercial banks in Los Angeles, California or New York City are authorized or required by law to remain closed; provided that, when used in connection with a Eurodollar Loan, the term “Business Day” shall also exclude any day on which banks are not open for dealings in dollar deposits in the London interbank market.

“Call Option” has the meaning assigned thereto in the Guaranty by and between FirstEnergy and the Administrative Agent.

“Capital Lease” means any lease of real or personal property, the obligations under which lease to pay rent or other amounts are required to be capitalized under GAAP.

“Capital Lease Obligations” of any Person means the obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal Property, or a combination thereof, which obligations are required to be classified and accounted for as Capital Leases, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP.

“Change in Law” means the occurrence, after the date of this Agreement, of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation or application thereof by any Governmental Authority or (c) the making or issuance of any request, guideline or directive (whether or not having the force of law) by any Governmental Authority, to the extent that such request, guideline or directive sets forth any new or modified policy, interpretation, request, guideline or directive as compared to any applicable requests, guidelines or directives made or issued by such Governmental Authority on or before the date of this Agreement.

“Charges” has the meaning assigned to such term in Section 9.13.

“Closing Distribution” has the meaning assigned to such term in Section 5.08.

“Code” means the Internal Revenue Code of 1986, as amended from time to time.

“Collateral” means all “Collateral”, as defined in any applicable Security Document.

“Collateral Agent” means Union Bank, in its capacity as collateral agent for the Lenders.

3

“Commitment” means, with respect to each Lender, the commitment of such Lender to make Loans hereunder, expressed as an amount representing the maximum aggregate permitted amount of such Lender’s Exposure hereunder, as set forth on Schedule 2.01. The aggregate amount of the Lenders’ Commitments is $350,000,000.

“Compliance Certificate” has the meaning assigned to such term in Section 5.01(c).

“Control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ability to exercise voting power, by contract or otherwise. “Controlling” and “Controlled” have meanings correlative thereto.

“Default” means any event or condition which constitutes an Event of Default or which upon notice, lapse of time or both would, unless cured or waived, become an Event of Default.

“dollars” or “$” refers to lawful money of the United States of America.

“Effective Date” means the date on which the conditions specified in Section 4.01 are satisfied (or waived in accordance with Section 9.02).

“Environmental Laws” means any and all laws, rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into by any Governmental Authority, relating in any way to the environment, preservation or reclamation of natural resources, the management, release or threatened release of any Hazardous Material, or to human health and safety, including, without limitation, the Clean Air Act, as amended, the Comprehensive Environmental, Response, Compensation, and Liability Act of 1980 (“CERCLA”), as amended, the Federal Water Pollution Control Act, as amended, the Occupational Safety and Health Act of 1970, as amended, the Resource Conservation and Recovery Act of 1976, as amended, the Safe Drinking Water Act, as amended, the Toxic Substances Control Act, as amended, the Superfund Amendments and Reauthorization Act of 1986, as amended, the Hazardous Materials Transportation Act, as amended, and other environmental conservation or protection laws.

“Environmental Liability” means any liability, contingent or otherwise (including any liability for damages, costs of environmental remediation, fines, penalties or indemnities), directly or indirectly resulting from or based upon (a) violation of any Environmental Law, (b) the generation, use, handling, transportation, storage, treatment or disposal of any Hazardous Materials, (c) exposure to any Hazardous Materials, (d) the release or threatened release of any Hazardous Materials into the environment or (e) any contract, agreement or other consensual arrangement pursuant to which liability is assumed or imposed with respect to any of the foregoing.

“Equity Interests” means shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity ownership interests in a Person, and any warrants, options or other rights entitling the holder thereof to purchase or acquire any such equity interest.

4

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time.

“ERISA Affiliate” means any trade or business (whether or not incorporated) that, together with either Borrower, is treated as a single employer under Section 414(b) or (c) of the Code or, solely for purposes of Section 302 and 303 of ERISA and Section 412 and 430 of the Code, is treated as a single employer under Section 414 of the Code.

“ERISA Event” means (a) any “reportable event”, as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Plan (other than an event for which the 30-day notice period is waived); (b) a determination that any Plan is in “at risk” status (within the meaning of Section 430 of the Code or Section 303 of ERISA); (c) the filing pursuant to Section 412(c) of the Code or Section 302(c) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by either Borrower or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to the termination of any Plan; (e) the receipt by either Borrower or any ERISA Affiliate from the PBGC of any notice of its intent to institute proceedings to terminate any Plan or to appoint a trustee to administer any Plan under Section 4042 of ERISA or the providing of notice by a plan administrator of the intent to terminate any Plan under Section 4041 of ERISA; (f) the incurrence by either Borrower or any of its ERISA Affiliates of any liability with respect to the withdrawal or partial withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by either Borrower or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from either Borrower or any ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA.

“Eurodollar”, when used in reference to any Loan or Borrowing, refers to whether such Loan, or the Loans comprising such Borrowing, are bearing interest at a rate determined by reference to the Adjusted LIBO Rate.

“Event of Default” has the meaning assigned to such term in Article VII.

“Excluded Taxes” means, with respect to the Administrative Agent, any Lender or any other recipient of any payment to be made by or on account of any obligation of either Borrower hereunder, (a) income or franchise taxes imposed on (or measured by) its net income by the United States of America, or by the jurisdiction under the laws of which such recipient is organized or in which its principal office is located or, in the case of any Lender, in which its applicable lending office is located or in which such Taxes would not be imposed in the absence of activities by such Lender in such jurisdiction unrelated to the transactions contemplated by the Loan Documents, (b) any branch profits taxes imposed by the United States of America or any similar tax imposed by any other jurisdiction in which such recipient is located, (c) in the case of a Foreign Lender (other than an assignee pursuant to a request by the Borrowers under Section 2.16(b)), any withholding tax that is imposed on amounts payable to such Foreign Lender, (d) any withholding Taxes attributable to a Lender’s or the Administrative Agent’s failure or inability to comply with Section 2.14(d), or to the extent the documentation provided pursuant to such Section does not establish a complete exemption from withholding Taxes, other than, in each case described in (c) or (d), as a result of a Change in Law that occurred after the date that such Lender or the Administrative Agent became a party to this Agreement and that (i) rendered such Lender or the Administrative Agent no longer legally entitled to deliver the form or forms required pursuant to such Section, (ii) rendered such Lender or the Administrative Agent ineligible for a complete exemption from U.S. federal withholding or backup withholding Tax, or (iii) rendered the information or the certifications made in such form or forms untrue or inaccurate in a material respect.

5

“Executive Order” has the meaning assigned to such term in Section 3.16(a).

“Exposure” means, with respect to any Lender at any time, the sum of the aggregate outstanding principal amount of such Lender’s Loans at such time.

“Extraction Charge Agreement” means that certain Extraction Charge Agreement, dated July 16, 2008, between SPE and WMB Marketing Ventures, LLC.

“Fair Value” means, with respect to any Property owned by either Borrower, the fair market value thereof as determined from time to time by the members (or the Board of Directors or any corresponding body, or a duly constituted committee thereof) of such Borrower in good faith.

“Federal Bankruptcy Code” means Title 11 of the United States Code entitled “Bankruptcy”, as amended and any successor statute thereto.

“Federal Funds Effective Rate” means, for any day, the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for such day for such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it.

“Fee Letter” has the meaning assigned to that term in Section 2.09(a).

“FE Indebtedness” has the meaning assigned to the term “Indebtedness” set forth in Section 1.01 of the FirstEnergy Credit Agreement as in effect on the date hereof (and as such term may hereafter be amended from time to time, but only to the extent that the effect of any such amendment on the Loan Documents has been consented to in accordance with Section 9.02).

“Final Maturity Date” means the second anniversary of the Effective Date.

“Financial Officer” means, with respect to either Borrower, the chief financial officer, principal accounting officer, treasurer or controller of such Borrower.

“FirstEnergy” means FirstEnergy Corp., an Ohio corporation.

“FirstEnergy Credit Agreement” has the meaning assigned to that term in the Guaranty.

6

“FirstEnergy Ventures” means FirstEnergy Ventures Corp., an Ohio corporation.

“Foreign Lender” means any Lender that is organized under the laws of a jurisdiction other than that in which the Borrowers are resident for tax purposes. For purposes of this definition, the United States of America, each State thereof and the District of Columbia shall be deemed to constitute a single jurisdiction.

“Fund” means any Person (other than (i) a natural person and (ii) a hedge fund) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business.

“GAAP” means generally accepted accounting principles in the United States of America.

“Global Mining Group” means Global Mining Group, LLC, a Delaware limited liability company.

“Governmental Authority” means the government of the United States of America or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union, the European Central Bank or NAFTA Binational Panel).

“Granting Lender” has the meaning assigned to such term in Section 9.04(h).

“Guarantee” of or by any Person (the “guarantor”) means any obligation, contingent or otherwise, of the guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, and including any obligation of the guarantor, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof, (b) to purchase or lease Property, securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof, (c) to maintain working capital, equity capital or any other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness or other obligation or (d) as an account party in respect of any letter of credit or letter of guaranty issued to support such Indebtedness or obligation; provided, that the term “Guarantee” shall not include endorsements for collection or deposit in the ordinary course of business. The term “Guarantee” as a verb has a corresponding meaning.

“Guarantors” means, collectively, FirstEnergy, Global Mining Group, WMB and WMB II.

“Guaranty” means the Guaranty Agreement in the form of Exhibit D, to be executed and delivered by each Guarantor.

7

“Hazardous Materials” means all explosive or radioactive substances or wastes and all hazardous or toxic substances, wastes or other pollutants, including petroleum or petroleum distillates, asbestos or asbestos containing materials, polychlorinated biphenyls, radon gas, and infectious or medical wastes, regulated pursuant to any Environmental Law.

“Hedging Agreement” means any commodity, interest rate or currency swap, cap, floor, collar, forward agreement or other exchange or protection agreements or any option with respect to any such transaction (including, without limitation, commodity price swap agreements, forward agreements or contracts of sale which provide for prepayment for deferred shipment or delivery of oil, gas or other commodities).

“Indebtedness” means, for any Person, at any date of determination, without duplication, all (i) secured or unsecured indebtedness of such Person for borrowed money or obligations of such Person for the deferred purchase price of property or services or obligations of such Person evidenced by notes, bonds, debentures or other instruments, (ii) Capital Lease Obligations of such Person, (iii) obligations secured by any Lien existing on any Property owned or held by such Person, whether or not such Person has assumed or become liable for the obligations secured thereby, (iv) obligations of such Person in respect of letters of credit, bankers’ acceptances, surety bonds, performance bonds and similar extensions of credit and obligations (other than any such obligation in support of other Indebtedness already included in this definition), including, without duplication of the foregoing, reimbursement obligations of such Person in respect thereof, (v) obligations of such Person under any Hedging Agreements (the amount of any such obligation to be the amount that is or would be payable upon settlement, liquidation, termination or acceleration thereof, giving effect to any netting agreements), and (vi) obligations of such Person under Guarantees in respect of, and obligations of such Person otherwise to assure a creditor against loss in respect of, indebtedness or obligations of others of the kinds referred to in clauses (i) through (v) above. The Indebtedness of any Person shall include the Indebtedness of any other entity (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person’s ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness provide that such Person is not liable therefor.

“Indemnified Taxes” means Taxes other than Excluded Taxes.

“Indemnitee” has the meaning assigned to such term in Section 9.03(b).

“Information” has the meaning assigned to such term in Section 9.12.

“Initial Borrowing” has the meaning assigned to such term in Section 2.02(a).

“Interest Election Request” means a request by the Borrowers to convert or continue a Borrowing in accordance with Section 2.05.

“Interest Payment Date” means (a) with respect to any ABR Loan, the last Business Day of each March, June, September and December, and (b) with respect to any Eurodollar Loan, the last day of the Interest Period applicable to the Borrowing of which such Loan is a part and, in the case of a Eurodollar Borrowing with an Interest Period of more than three months’ duration, each day prior to the last day of such Interest Period that occurs at intervals of three months’ duration after the first day of such Interest Period.

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“Interest Period” means, with respect to any Eurodollar Borrowing, the period commencing on the date of such Borrowing (which initially shall be the date on which such Borrowing is made and thereafter shall be the effective date of the most recent conversion or continuation of such Borrowing) and ending on the corresponding day of the week that is one, two or three weeks thereafter or on the numerically corresponding day in the calendar month that is one, two, three or six months thereafter, as the Borrowers may elect; provided, that (i) if any such Interest Period would end on a day other than a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless such next succeeding Business Day would fall in the next calendar month, in which case such Interest Period shall end on the next preceding Business Day and (ii) any such Interest Period of one, two, three or six months that commences on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the last calendar month of such Interest Period) shall end on the last Business Day of the last calendar month of such Interest Period.

“Lead Arranger” means Union Bank, as Sole Lead Arranger and Sole Bookrunner for the credit facilities established by this Agreement.

“Lenders” means the Persons listed on Schedule 2.01 and any other Person that shall have become a party hereto pursuant to an Assignment and Assumption in accordance with Section 9.04, other than any such Person that ceases to be a party hereto pursuant to an Assignment and Assumption.

“LIBO Rate” means, with respect to any Eurodollar Borrowing for any Interest Period, the rate per annum determined by the Administrative Agent at approximately 11:00 a.m., London time, on the date that is two Business Days prior to the commencement of such Interest Period by reference to the British Bankers’ Association Interest Settlement Rates for deposits in dollars (as set forth by the Bloomberg Information Service or any successor thereto or any other service selected by the Administrative Agent which has been nominated by the British Bankers’ Association as an authorized information vendor for the purpose of displaying such rates) for a period equal to such Interest Period; provided that, to the extent that an interest rate is not ascertainable pursuant to the foregoing provisions of this definition, the “LIBO Rate” with respect to such Eurodollar Borrowing for such Interest Period shall be the rate per annum at which dollar deposits for loans of similar size to such Eurodollar Borrowing and for a maturity comparable to such Interest Period would be offered to the Administrative Agent in the London interbank market at approximately 12:00 noon, London time, on the date that is two Business Days prior to the beginning of such Interest Period.

“Lien” means, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset, (b) the interest of a vendor or a lessor under any conditional sale agreement, Capital Lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset and (c) in the case of securities, any purchase option, call or similar right of a third party with respect to such securities.

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“Loan Documents” means this Agreement, each Note, the Fee Letter, each Security Document, the Guaranty, each Specified Hedge Agreement, and all other agreements, instruments and documents now or hereafter executed and/or delivered pursuant hereto or thereto.

“Loan Parties” means the Borrowers and the Guarantors.

“Loans” means the loans made by the Lenders to the Borrowers pursuant to this Agreement.

“MarketCo” means Global Coal Sales Group, LLC, a Delaware limited liability company.

“Material Adverse Effect” means a material adverse effect on (a) the financial condition, assets, operations or business of the Loan Parties taken as a whole, (b) the ability of the Loan Parties to perform any of their material obligations under any Loan Document or (c) the rights of or benefits available to any Agent or the Lenders under any Loan Document.

“Material Indebtedness” means (a) Indebtedness (other than the Loans) of any Loan Party (other than FirstEnergy) in an aggregate principal amount exceeding $15,000,000 and (b) FE Indebtedness of FirstEnergy or any of its Significant Subsidiaries in an aggregate principal amount exceeding $50,000,000.

“Maximum Rate” has the meaning assigned to such term in Section 9.13.

“Moody’s” means Moody’s Investors Service, Inc. or any successor thereto.

“Multiemployer Plan” means a multiemployer plan as defined in Section 4001(a)(3) of ERISA.

“Notes” means, collectively, the promissory notes delivered pursuant to Section 2.07(e), together with any and all renewals, extensions for any period, increases, rearrangements, substitutions or modifications thereof.

“Obligations” means (a) the principal of and premium, if any, and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Loans, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, and (b) all other monetary obligations, including fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), of the Borrowers under this Agreement and the other Loan Documents.

“Other Taxes” means any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made under any Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to, any Loan Document.

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“Participant” has the meaning assigned to such term in Section 9.04(e).

“Patriot Act” has the meaning assigned to such term in Section 9.14.

“PBGC” means the Pension Benefit Guaranty Corporation referred to and defined in ERISA and any successor entity performing similar functions.

“Permitted Encumbrances” means:

(a) Liens imposed by law for taxes, assessments or other governmental charges which are not yet due and payable or are being contested in compliance with Section 5.04;

(b) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s and other like Liens imposed by law, arising in the ordinary course of business and securing obligations that are not overdue by more than 30 days or are being contested in compliance with Section 5.04;

(c) pledges and deposits made in the ordinary course of business in compliance with workers’ compensation, unemployment insurance and other social security laws or regulations;

(d) deposits to secure the performance of bids, trade contracts, leases (other than Capital Leases), statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case in the ordinary course of business (but not incurred or made in connection with the borrowing of money, the obtaining of advances or credit or the payment of the deferred purchase price of Property);

(e) judgment liens in respect of judgments that do not constitute an Event of Default under clause (j) of Article VII;

(f) leases or subleases granted to others, easements, rights-of-way, restrictions and other similar charges or encumbrances, in each case incidental to, and not interfering with, the ordinary conduct of the business of the Borrowers, provided that such Liens do not, in the aggregate, materially detract from the value of the Property subject to any such leases, subleases, easements, rights-of-way, restrictions or other similar charges or encumbrances;

(g) Liens arising by virtue of any statutory or common law provision relating to banker’s liens, rights of set-off or similar rights and remedies as to deposit accounts or other funds maintained with a creditor depository institution;

(h) Liens existing on the Effective Date and described in Schedule 6.02; and

(i) Liens created pursuant to the Security Documents.

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“Permitted Investments” means:

(a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States of America (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States of America), in each case maturing within 12 months from the date of acquisition thereof;

(b) investments in commercial paper maturing within 12 months from the date of acquisition thereof and having, at such date of acquisition, a credit rating of at least A-1 or P-1 from S&P or Moody’s (or, if at any time neither S&P nor Moody’s shall be rating such obligations, an equivalent rating from another nationally recognized rating service);

(c) investments in certificates of deposit, banker’s acceptances and time deposits maturing within 12 months from the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, any domestic office of any commercial bank organized under the laws of the United States of America or any State thereof which has a combined capital and surplus and undivided profits of not less than $500,000,000;

(d) fully collateralized repurchase agreements with a term of not more than 30 days for securities described in clause (a), (b) or (c) above and entered into with a financial institution satisfying the criteria described in clause (c) above or a securities dealer of nationally recognized standing; and

(e) shares of investment companies that are registered under the Investment Company Act of 1940 and invest solely in one or more of the types of securities described in clauses (a) through (d) above.

“Person” means any natural person, corporation, limited liability company, trust, joint venture, association, company, partnership, Governmental Authority or other entity.

“Plan” means any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Sections 412 and 430 of the Code or Sections 302 and 303 of ERISA, and in respect of which either Borrower or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA.

“Pledge Agreement” means the Pledge and Security Agreement in the form of Exhibit B, to be executed and delivered by the Pledgors.

“Pledgors” means, collectively, FirstEnergy Ventures, WMB II and Global Mining Group.

“Property” shall mean any interest in any kind of property or asset, whether real, personal or mixed, moveable or immoveable, tangible or intangible, including without limitation cash, securities, accounts and contract rights.

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“Qualified Counterparty” means, with respect to any Specified Hedge Agreement, any counterparty thereto that, at the time such Specified Hedge Agreement was entered into, was a Lender or an Affiliate of a Lender.

“RailCo” means Global Rail Group, LLC, a Delaware limited liability company.

“RailCo Credit Agreement” means that certain Credit Agreement, dated as of November 17, 2008, among RailCo, the lenders from time to time party thereto, and Union Bank (formerly known as Union Bank of California, N.A.), as administrative agent and collateral agent.

“Rating” means a rating issued by S&P and/or Moody’s with respect to FirstEnergy’s senior unsecured debt (without credit enhancement or a third person guarantee); provided that if there is no such rating, “Rating” shall mean the rating(s) one level below the rating assigned by S&P and/or Moody’s to FirstEnergy’s senior secured debt.

“Reference Rate” means the variable rate of interest per annum established by Union Bank from time to time as its “reference rate”. Such “reference rate” is set by Union Bank as a general reference rate of interest, taking into account such factors as Union Bank may deem appropriate, it being understood that many of Union Bank’s commercial or other loans are priced in relation to such rate, that it is not necessarily the lowest or best rate actually charged to any customer and that Union Bank may make various commercial or other loans at rates of interest having no relationship to such rate. For purposes of this Agreement, each change in the Reference Rate shall be effective as of the opening of business on the date announced as the effective date of any change in such “reference rate”.

“Register” has the meaning assigned to such term in Section 9.04(c).

“Regulation D” means Regulation D of the Board.

“Regulation U” means Regulation U of the Board.

“Related Parties” means, with respect to any specified Person, such Person’s Affiliates and the respective directors, trustees, officers, employees, agents and advisors of such Person and such Person’s Affiliates.

“Required Lenders” means, at any time, Lenders having Exposures and unused Commitments representing more than 50% of the sum of the total Exposures and unused Commitments at such time; provided that if there are only two Lenders, “Required Lenders” shall mean both such Lenders.

“Requirement of Law” means, as to any Person, the certificate of formation and limited liability company agreement or other organizational or governing documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its Property or to which such Person or any of its Property is subject.

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“Responsible Officer” means, with respect to any Loan Party, the chief executive officer, president, chief financial officer, treasurer, assistant treasurer or controller of such Loan Party. Any document delivered hereunder or under any other Loan Document that is signed by a Responsible Officer of a Loan Party shall be conclusively presumed to have been authorized by all necessary limited liability company action on the part of such Loan Party and such Responsible Officer shall be conclusively presumed to have acted on behalf of such Loan Party.

“Restricted Payment” means (a) any payment or other distribution (whether in cash, securities or other Property) in respect of any Equity Interest in either Borrower (including any payment or other distribution to or on behalf of any member of either Borrower in respect of taxes paid or payable by such member), (b) any payments on account of the purchase, redemption, retirement or other acquisition of any Equity Interest in either Borrower, or any warrants or options therefor, whether in cash or in property or in obligations or securities, (c) principal, interest and other amounts required or permitted to be paid by either Borrower pursuant to the Subordinated Debt (including, without limitation, any prepayment of the Subordinated Debt) or (d) any payment of management fees, extraction fees (including any such fee payable under the Extraction Charge Agreement), royalties or such other payments of similar substance or effect by either Borrower to any of its Affiliates.

“S&P” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc., or any successor thereto.

“Security Documents” means the Pledge Agreement and each of the other security agreements, pledges, mortgages, assignments (collateral or otherwise) and consents, if any, and each other security agreement or other instrument or document executed and delivered pursuant to any of the foregoing documents, in each case to secure any of the Obligations.

“Significant Subsidiaries” has the meaning assigned to such term in Section 1.01 of the FirstEnergy Credit Agreement as in effect on the date hereof (and as such term may hereafter be amended from time to time, but only to the extent that the effect of any such amendment on the Loan Documents has been consented to in accordance with Section 9.02).

“Solvent” means, with respect to any Person, as of any date of determination, that (a) the amount of the “present fair saleable value” of the assets of such Person will, as of such date, exceed the amount of all “liabilities of such Person, contingent or otherwise”, as of such date, as such quoted terms are determined in accordance with applicable federal and state laws governing determinations of the insolvency of debtors, (b) the present fair saleable value of the assets of such Person will, as of such date, be greater than the amount that will be required to pay the liability of such Person on its debts as such debts become absolute and matured, (c) such Person will not have, as of such date, an unreasonably small amount of capital with which to conduct its business, and (d) such Person will be able to pay its debts as they mature. For purposes of this definition, (i) “debt” means liability on a “claim”, and (ii) “claim” means any (x) right to payment, whether or not such a right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured or (y) right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured or unmatured, disputed, undisputed, secured or unsecured.

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“SPC” has the meaning assigned to such term in Section 9.04(h).

“SPE” means Signal Peak Energy, LLC, a Delaware limited liability company.

“SPE Credit Agreement” means that certain Credit Agreement, dated as of November 17, 2008, among SPE, the lenders from time to time party thereto, and Union Bank (formerly known as Union Bank of California, N.A.), as administrative agent and collateral agent.

“Specified Hedge Agreement” means any Hedging Agreement entered into by either Borrower and any Qualified Counterparty.

“Statutory Reserve Rate” means a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Board with respect to the Adjusted LIBO Rate, for eurocurrency funding (currently referred to as “Eurocurrency Liabilities” in Regulation D of the Board). Such reserve percentages shall include those imposed pursuant to such Regulation D. Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under such Regulation D or any comparable regulation. The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage.

“Subordinated Debt” has the meaning assigned to such term in Section 6.01(e).

“Subsidiary” means, with respect to any Person (the “parent”) at any date, any corporation, limited liability company, partnership, association or other entity the accounts of which would be consolidated with those of the parent in the parent’s consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, limited liability company, partnership, association or other entity (a) of which securities or other ownership interests representing more than 50% of the equity or more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the general partnership interests are, as of such date, owned, controlled or held, or (b) that is, as of such date, otherwise Controlled, by the parent or one or more Subsidiaries of the parent.

“Taxes” means any and all present or future taxes, levies, imposts, duties, deductions, charges or withholdings imposed by any Governmental Authority (including any interest, penalties or additions to tax imposed by such Governmental Authority with respect thereto).

“Transactions” means the execution, delivery and performance by the Borrowers of this Agreement and the other Loan Documents, the borrowing of Loans and the use of the proceeds thereof.

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“Type”, when used in reference to any Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the Adjusted LIBO Rate or the Alternate Base Rate.

“Union Bank” means Union Bank, N.A., a national banking association.

“Withdrawal Liability” means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.

“WMB” means WMB Loan Ventures, LLC, a Delaware limited liability company.

“WMB II” means WMB Loan Ventures II, LLC, a Delaware limited liability company

SECTION 1.02. Classification of Loans and Borrowings. For purposes of this Agreement, Loans may be classified and referred to by Type (e.g., a “Eurodollar Loan” or “ABR Loan”). Borrowings also may be classified and referred to by Type (e.g., a “Eurodollar Borrowing” or “ABR Borrowing”).

SECTION 1.03. Terms Generally. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”. The word “will” shall be construed to have the same meaning and effect as the word “shall”. Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (c) the words “herein”, “hereof” and “hereunder”, and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, and (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, this Agreement.

SECTION 1.04. Accounting Terms; GAAP. Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided that, if the Borrowers notify the Administrative Agent that the Borrowers request an amendment to any provision hereof to eliminate the effect of any change occurring after the date hereof in GAAP or in the application thereof on the operation of such provision (including the effects of the application or discontinuance of the application of accounting for the effects of regulation to all or any portion of either Borrower’s operations), or if the Administrative Agent notifies the Borrowers that the Required Lenders request an amendment to any provision hereof for such purpose, regardless of whether any such notice is given before or after such change in GAAP or in the application thereof, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith.

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SECTION 1.05. Pro Forma Calculations. All pro forma calculations permitted or required to be made by the Borrowers pursuant to this Agreement shall (a) include only those adjustments that would be permitted or required by Regulation S-X under the Securities Act of 1933, as amended, and (b) be certified to by a Financial Officer of each Borrower as having been prepared in good faith based upon assumptions believed to be reasonable.

ARTICLE II
The Credits

SECTION 2.01. Commitments. Subject to the terms and conditions set forth in this Agreement, each Lender severally agrees to make Loans to the Borrowers in a single advance on the Effective Date in an aggregate principal amount up to but not exceeding the amount of such Lender’s Commitment. Amounts repaid or prepaid in respect of the Loans may not be reborrowed.

SECTION 2.02. Loans and Borrowings.

(a) The Loans shall be made in a single disbursement to the Borrowers on the Effective Date as part of a single Borrowing (the “Initial Borrowing”) consisting of Loans of the same Type made by the Lenders ratably in accordance with their respective Commitments. The failure of any Lender to make any Loan required to be made by it shall not relieve any other Lender of its obligations hereunder; provided that the Commitments of the Lenders are several and no Lender shall be responsible for any other Lender’s failure to make Loans as required.

(b) Each Borrowing shall be comprised entirely of ABR Loans or Eurodollar Loans, as the Borrowers may request in accordance herewith. Each Lender at its option may make any Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; provided that any exercise of such option shall not affect the obligation of the Borrowers to repay such Loan in accordance with the terms of this Agreement.

(c) At the commencement of each Interest Period for any Eurodollar Borrowing, such Borrowing shall be in an aggregate amount that is an integral multiple of $1,000,000 and not less than $5,000,000. At the time that each ABR Borrowing is made, such Borrowing shall be in an aggregate amount that is an integral multiple of $500,000 and not less than $2,500,000. Borrowings of more than one Type may be outstanding at the same time; provided that there shall not at any time be more than a total of six (6) Eurodollar Borrowings outstanding.

(d) Notwithstanding the amount of the Loans borrowed by either Borrower, or whether either Borrower has requested a Borrowing, the Borrowers shall be jointly and severally liable for the repayment of the principal amount of each Loan and all interest thereon, fees, expenses and other amounts payable hereunder, in accordance with Section 2.18.

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(e) Notwithstanding any other provision of this Agreement, the Borrowers shall not be entitled to request, or to elect to convert or continue, any Borrowing if the Interest Period requested with respect thereto would end after the Final Maturity Date.

SECTION 2.03. Request for Initial Borrowing. To request the Initial Borrowing, the Borrowers shall notify the Administrative Agent of such request in writing, pursuant to a written Borrowing Request signed by the Borrowers, (a) in the case of a Eurodollar Borrowing, not later than 11:00 a.m., Los Angeles, California time, two (2) Business Days before the date of such Borrowing (provided, that the Borrowers shall have executed and delivered to the Administrative Agent, together with such Borrowing Request, a breakage cost indemnity letter in form and substance satisfactory to the Administrative Agent) or (b) in the case of an ABR Borrowing, not later than 10:00 a.m., Los Angeles, California time, on the date of such Borrowing. Such Borrowing Request shall be irrevocable and shall specify the following information in compliance with Section 2.02:

(i) the aggregate amount of the Initial Borrowing (which amount shall not exceed the aggregate amount of the Lenders’ Commitments), and the portion thereof to be borrowed by each Borrower;

(ii) the date of such Borrowing, which shall be a Business Day;

(iii) whether such Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing;

(iv) in the case of a Eurodollar Borrowing, the initial Interest Period to be applicable thereto, which shall be a period contemplated by the definition of the term “Interest Period”; and

(v) the location and number of each Borrower’s account(s) to which funds are to be disbursed.

If no election as to the Type of Borrowing is specified, then the requested Borrowing shall be an ABR Borrowing. If no Interest Period is specified with respect to any requested Eurodollar Borrowing, then the Borrowers shall be deemed to have selected an Interest Period of one (1) month’s duration. Promptly following receipt of a Borrowing Request in accordance with this Section, the Administrative Agent shall advise each Lender of the details thereof and of the amount of such Lender’s Loan to be made as part of the requested Borrowing.

SECTION 2.04. Funding of Initial Borrowing.

(a) Each Lender shall make each Loan to be made by it hereunder on the Effective Date by wire transfer of immediately available funds by 11:00 a.m., Los Angeles, California time, on the Effective Date to the account of the Administrative Agent most recently designated by it for such purpose by notice to the Lenders. The Administrative Agent will make such Loans available to the Borrowers by promptly crediting the amounts so received, in like funds, to such account(s) of the Borrowers designated in the Borrowing Request delivered pursuant to Section 2.03.

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(b) Unless the Administrative Agent shall have received notice from a Lender prior to the proposed date of the Initial Borrowing that such Lender will not make available to the Administrative Agent such Lender’s share of the Initial Borrowing, the Administrative Agent may in its sole discretion assume that such Lender has made such share available on such date in accordance with paragraph (a) of this Section and may, in reliance upon such assumption, make available to the Borrowers a corresponding amount. In such event, if a Lender has not in fact made its share of the Initial Borrowing available to the Administrative Agent, then the applicable Lender and the Borrowers severally agree to pay to the Administrative Agent forthwith on demand such corresponding amount with interest thereon, for each day from and including the date such amount is made available to the Borrowers to but excluding the date of payment to the Administrative Agent, at (i) in the case of such Lender, the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation or (ii) in the case of the Borrowers, the interest rate applicable to ABR Loans. If such Lender pays such amount to the Administrative Agent, then such amount shall constitute such Lender’s Loan included in the Initial Borrowing.

SECTION 2.05. Interest Elections.

(a) The Initial Borrowing shall initially be of the Type(s) specified in the Borrowing Request delivered pursuant to Section 2.03 and, in the case of a Eurodollar Borrowing, shall have an initial Interest Period as specified in such Borrowing Request. Thereafter, the Borrowers may elect to convert each Borrowing to a different Type or to continue such Borrowing and, in the case of a Eurodollar Borrowing, may elect Interest Periods therefor, all as provided in this Section. The Borrowers may elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding the Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing.

(b) To make an election pursuant to this Section, the Borrowers shall notify the Administrative Agent of such election by telephone (i) in the case of a conversion to, or continuation of, a Eurodollar Borrowing, not later than 11:00 a.m., Los Angeles, California time, three (3) Business Days before the date of such proposed conversion or continuation (as the case may be), or (ii) in the case of a conversion to an ABR Borrowing, not later than 11:00 a.m., Los Angeles, California time, one (1) Business Day before the date of such proposed conversion. Each such telephonic Interest Election Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Interest Election Request in a form approved by the Administrative Agent and signed by the Borrowers.

(c) Each telephonic and written Interest Election Request shall specify the following information in compliance with Section 2.02:

(i) the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) below shall be specified for each resulting Borrowing);

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(ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day;

(iii) whether the resulting Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; and

(iv) if the resulting Borrowing is a Eurodollar Borrowing, the Interest Period to be applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of the term “Interest Period”.

If any such Interest Election Request requests a Eurodollar Borrowing but does not specify an Interest Period, then the Borrowers shall be deemed to have selected an Interest Period of one (1) month’s duration.

(d) Promptly following receipt of an Interest Election Request, the Administrative Agent shall advise each Lender of the details thereof and of such Lender’s portion of each resulting Borrowing.

(e) If the Borrowers fail to deliver a timely Interest Election Request with respect to a Eurodollar Borrowing prior to the end of the Interest Period applicable thereto, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period such Borrowing shall be converted to an ABR Borrowing. Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is continuing (i) no outstanding Borrowing may be converted to or continued as a Eurodollar Borrowing and (ii) unless repaid, each Eurodollar Borrowing shall be converted to an ABR Borrowing at the end of the Interest Period applicable thereto.

SECTION 2.06. Termination of Commitments. The Commitments of the Lenders shall terminate in whole on the Effective Date immediately after the making of the Loans pursuant to Section 2.01.

SECTION 2.07. Repayment of Loans; Evidence of Debt.

(a) The Borrowers, jointly and severally, hereby unconditionally promise to pay to the Administrative Agent for the account of each Lender the then unpaid principal amount of each Loan on the Final Maturity Date.

(b) Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrowers to such Lender resulting from each Loan made by such Lender, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder.

(c) The Administrative Agent shall maintain accounts in which it shall record (i) the amount of each Loan made hereunder, the Type thereof and the Interest Period applicable thereto, (ii) the amount of any principal or interest due and payable or to become due and payable from the Borrowers to each Lender hereunder and (iii) the amount of any sum received by the Administrative Agent hereunder for the account of the Lenders and each Lender’s share thereof.

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(d) The entries made in the accounts maintained pursuant to paragraph (b) or (c) of this Section shall be prima facie evidence of the existence and amounts of the obligations recorded therein; provided that the failure of any Lender or the Administrative Agent to maintain such accounts or any error therein shall not in any manner affect the obligation of the Borrowers to repay the Loans in accordance with the terms of this Agreement.

(e) Any Lender may request that Loans be evidenced by a Note. In such event, the Borrowers shall prepare, execute and deliver to such Lender a Note payable to the order of such Lender (or, if requested by such Lender, to such Lender and its registered assigns). Thereafter, the Loans evidenced by such Note(s) and interest thereon shall at all times (including after assignment pursuant to Section 9.04) be represented by one or more Notes in such form payable to the order of the payee named therein (or, if any such Note is a registered note, to such payee and its registered assigns).

SECTION 2.08. Prepayment of Loans.

(a) Subject to prior notice in accordance with paragraph (d) of this Section, the Borrowers shall have the right at any time and from time to time to prepay any Borrowing in whole or in part, without premium or penalty (subject, in the case of any prepayment of a Eurodollar Borrowing, to Section 2.13).

(b) The Borrowers shall prepay the Loans if either Borrower conveys, sells, leases, assigns, transfers or otherwise disposes of any of its Property other than as permitted by Section 6.05 hereof in an amount equal to the greater of (A) the Fair Value of the Property sold and (B) the consideration received by such Borrower from such transaction; provided that no payment made pursuant to this paragraph (b) need be made in an amount greater than the aggregate amount of Loans outstanding.

(c) Prior to any optional prepayment of Borrowings hereunder, the Borrowers shall select the Borrowing or Borrowings to be prepaid and shall specify such selection in the notice of such prepayment pursuant to paragraph (d) of this Section.

(d) The Borrowers shall notify the Administrative Agent by telephone (confirmed by telecopy) of any optional prepayment hereunder (i) in the case of prepayment of a Eurodollar Borrowing, not later than 11:00 a.m., Los Angeles, California time, three (3) Business Days before the date of prepayment, or (ii) in the case of prepayment of an ABR Borrowing, not later than 11:00 a.m., Los Angeles, California time, on the date of prepayment. Each such notice shall be irrevocable and shall specify the prepayment date and the principal amount of each Borrowing or portion thereof to be prepaid. Promptly following receipt of any such notice, the Administrative Agent shall advise the Lenders of the contents thereof. Each partial prepayment of any Borrowing shall be in an aggregate principal amount that is an integral multiple of $1,000,000 and not less than $5,000,000. Each prepayment of a Borrowing shall be applied ratably to the Loans included in the prepaid Borrowing. Prepayments shall be accompanied by accrued interest to the extent required by Section 2.10 and any amounts required to be paid pursuant to Section 2.13 in connection with such prepayment.

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SECTION 2.09. Fees.

(a) The Borrowers jointly and severally agree to pay to the Lead Arranger and each Agent, for their own account and for the account of the Lenders, as applicable, such fees as are provided for in that certain letter agreement, dated the date hereof, among the Borrowers and the Agents (the “Fee Letter”), in each case, in the amounts and at the times specified therein.

(b) All fees payable hereunder shall be paid on the dates due, in immediately available funds, to the Administrative Agent for distribution, in the case of the up-front fees, to the Lenders entitled thereto. Fees paid shall be fully earned upon payment and shall not be refundable under any circumstances.

SECTION 2.10. Interest.

(a) The Loans comprising each ABR Borrowing shall bear interest at the Alternate Base Rate plus the Applicable Margin.

(b) The Loans comprising each Eurodollar Borrowing shall bear interest at the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus the Applicable Margin.

(c) Notwithstanding the foregoing, upon the occurrence and during the continuance of an Event of Default, each Loan shall bear interest at a rate equal to the higher of (i) 2.0% per annum in excess of the rate otherwise applicable to such Loan, as provided in paragraph (a) or (b) above, as applicable, or (ii) a per annum rate equal to the Alternate Base Rate plus the Applicable Margin for ABR Loans plus 2.0% (such rate, the “ABR Default Rate”). In addition, if any interest on any Loan, any fee or any other amount payable by the Borrowers hereunder is not paid when due, whether at stated maturity, upon acceleration or otherwise, such overdue amount shall bear interest, after as well as before judgment, at a rate per annum equal to the ABR Default Rate.

(d) Accrued interest on each Loan shall be payable in arrears on each Interest Payment Date for such Loan; provided that (i) interest accrued pursuant to paragraph (c) of this Section shall be payable on demand, (ii) in the event of any repayment or prepayment of any Loan, accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment and (iii) in the event of any conversion of any Eurodollar Loan prior to the end of the current Interest Period therefor, accrued interest on such Loan shall be payable on the effective date of such conversion. The Administrative Agent agrees to provide an invoice to the Borrowers for each interest payment due on an Interest Payment Date (provided, that the failure to provide any such invoice shall not in any manner affect the obligation of the Borrowers to pay interest on each Loan in accordance with the terms of this Agreement).

(e) All interest hereunder shall be computed on the basis of a year of 360 days, except that interest computed by reference to the Alternate Base Rate at times when the Alternate Base Rate is based on the Reference Rate shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and in each case shall be payable for the actual number of days elapsed (including the first day but excluding the last day). The applicable Alternate Base Rate, Adjusted LIBO Rate or LIBO Rate shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error.

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SECTION 2.11. Alternate Rate of Interest. If prior to the commencement of any Interest Period for a Eurodollar Borrowing:

(a) the Administrative Agent determines (which determination shall be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the Adjusted LIBO Rate for such Interest Period; or

(b) the Administrative Agent is advised by the Required Lenders that the Adjusted LIBO Rate for such Interest Period will not adequately and fairly reflect the cost to such Lenders of making or maintaining their Loans included in such Eurodollar Borrowing for such Interest Period;

then the Administrative Agent shall give notice thereof to the Borrowers and the Lenders by telephone or telecopy as promptly as practicable thereafter and, until the Administrative Agent notifies the Borrowers and the Lenders that the circumstances giving rise to such notice no longer exist, any Interest Election Request that requests the conversion of any Borrowing to, or continuation of any Borrowing as, a Eurodollar Borrowing shall be ineffective.

SECTION 2.12. Increased Costs.

(a) If any Change in Law shall:

(i) impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Lender or the Administrative Agent (except any such reserve requirement reflected in the Adjusted LIBO Rate);

(ii) subject any Lender to any Tax of any kind whatsoever with respect to this Agreement or any Eurodollar Loan made by it, or change the basis of taxation of payments to such Lender in respect thereof (except for (A) Indemnified Taxes or Other Taxes covered by Section 2.14 and (B) the imposition of, or any change in the rate of, any Excluded Tax payable by such Lender); or

(iii) impose on any Lender, the Administrative Agent or the London interbank market any other condition affecting this Agreement or Eurodollar Loans made by such Lender;

and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Eurodollar Loan (or of maintaining its obligation to make any such Loan) or to reduce the amount of any sum received or receivable by such Lender or the Administrative Agent hereunder in respect of any Eurodollar Loan (whether of principal, interest or otherwise), then the Borrowers will pay to such Lender or the Administrative Agent, as the case may be, such additional amount or amounts as will compensate such Lender or the Administrative Agent, as the case may be, for such additional costs incurred or reduction suffered.

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(b) If any Lender determines that any Change in Law regarding capital requirements has or would have the effect of reducing the rate of return on such Lender’s capital or on the capital of such Lender’s holding company, if any, as a consequence of this Agreement or the Loans made by such Lender, to a level below that which such Lender or such Lender’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s policies and the policies of such Lender’s holding company with respect to capital adequacy), then from time to time the Borrowers will pay to such Lender such additional amount or amounts as will compensate such Lender or such Lender’s holding company for any such reduction suffered.

(c) A certificate of a Lender setting forth the amount or amounts necessary to compensate such Lender or its holding company, as the case may be, as specified in paragraph (a) or (b) of this Section and containing a reasonable explanation thereof (to the extent permitted by law), shall be delivered to the Borrowers and shall be conclusive absent manifest error. The Borrowers jointly and severally agree to pay such Lender the amount shown as due on any such certificate within ten (10) Business Days after receipt thereof.

(d) No Lender shall be entitled to demand compensation or be compensated under this Section to the extent that such compensation relates to any period of time more than six (6) months prior to the date upon which such Lender first notified the Borrowers of the occurrence of the event entitling such Lender to such compensation (unless, and to the extent, that any such compensation so demanded shall relate to the retroactive application of any event so notified to the Borrowers).

SECTION 2.13. Break Funding Payments. In the event of (a) the payment of any principal of any Eurodollar Loan other than on the last day of an Interest Period applicable thereto (including as a result of an Event of Default), (b) the conversion of any Eurodollar Loan other than on the last day of the Interest Period applicable thereto, (c) the failure to borrow, convert, continue or prepay any Loan on the date specified in any notice delivered pursuant hereto, or (d) the assignment of any Eurodollar Loan other than on the last day of the Interest Period applicable thereto as a result of a request by the Borrowers pursuant to Section 2.16, then, in any such event, the Borrowers shall compensate each Lender for the loss, cost and expense attributable to such event. In the case of a Eurodollar Loan, such loss, cost or expense to any applicable Lender shall be deemed to include an amount determined by such Lender to be the excess, if any, of (i) the amount of interest which would have accrued on the principal amount of such Loan had such event not occurred, at the Adjusted LIBO Rate that would have been applicable to such Loan, for the period from the date of such event to the last day of the then current Interest Period therefor (or, in the case of a failure to borrow, convert or continue, for the period that would have been the Interest Period for such Loan), over (ii) the amount of interest which would accrue on such principal amount for such period at the interest rate which such Lender would bid were it to bid, at the commencement of such period, for dollar deposits of a comparable amount and period from other banks in the Eurodollar market. A certificate of any Lender setting forth any amount or amounts that such Lender is entitled to receive pursuant to this Section and containing a reasonably detailed calculation thereof shall be delivered to the Borrowers and shall be conclusive absent manifest error. The Borrowers shall pay such Lender the amount shown as due on any such certificate within ten (10) Business Days after receipt thereof.

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SECTION 2.14. Taxes.

(a) Any and all payments by or on account of any obligation of either Borrower hereunder or under any other Loan Document shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes; provided that if either Borrower shall be required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section) the Administrative Agent or applicable Lender (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) such Borrower shall make such deductions and (iii) such Borrower shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law; provided, however, that the Borrowers shall not be required to increase any such amounts payable to any Lender with respect to any Indemnified Taxes (i) that are attributable to such Lender’s failure to comply with the requirements of paragraph (d) of this Section, or (ii) that are United States withholding taxes imposed on amounts payable to such Lender at the time such Lender becomes a party to this Agreement, except to the extent such Lender’s assignor (if any) was entitled, at the time of assignment, to receive additional amounts from the Borrowers with respect to such Indemnified Taxes pursuant to this paragraph (a).

(b) The Borrowers jointly and severally agree to indemnify the Administrative Agent and each Lender, within ten (10) Business Days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes paid by the Administrative Agent or such Lender, as the case may be, on or with respect to any payment by or on account of any obligation of the Borrowers hereunder or under any other Loan Document (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section) and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrowers by a Lender, or by the Administrative Agent on its own behalf or on behalf of a Lender, containing a reasonably detailed calculation thereof, shall be conclusive absent manifest error.

(c) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by either Borrower to a Governmental Authority, such Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt (if any) issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent and reasonably available to such Borrower.

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(d) To the extent legally able to do so, each Lender shall deliver to the Borrowers (with a copy to the Administrative Agent), on or prior to the date on which such Lender becomes a Lender under this Agreement, promptly upon the occurrence of any event that would result in the invalidity or obsolescence of any information provided upon previously-provided documentation, and from time to time thereafter as reasonably requested by the Borrowers or the Administrative Agent, such properly completed and executed documentation prescribed by the law of the United States, or as otherwise reasonably requested by the Borrowers, as will permit such payments to be made without withholding. Without limiting the generality of the foregoing:

(i) Each Foreign Lender shall, to the extent legally able to do so:

(A) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement, deliver to the Borrowers and the Administrative Agent two copies of either (1) in the case of a Foreign Lender claiming exemption from U.S. federal withholding tax under Section 871(h) or 881(c) of the Code with respect to payments of “portfolio interest”, United States Internal Revenue Service Form W-8BEN (together with a certificate representing that such Foreign Lender is not a bank for purposes of Section 881(c) of the Code, is not a 10-percent shareholder (within the meaning of Section 871(h)(3)(B) of the Code) of either Borrower and is not a controlled foreign corporation related to either Borrower (within the meaning of Section 864(d)(4) of the Code)), or (2) Internal Revenue Service Form W-8BEN or Form W-8ECI, in each case properly completed and duly executed by such Foreign Lender claiming complete exemption from, or a reduced rate of, U.S. federal withholding tax on payments by the Borrowers under this Agreement; and

(B) deliver to the Borrowers and the Administrative Agent two further copies of any such form or certification (or any applicable successor form) promptly upon the obsolescence or invalidity of any form previously delivered by such Foreign Lender and from time to time thereafter upon the reasonable request of the Borrowers or the Administrative Agent.

(ii) Each Lender other than a Foreign Lender shall deliver to the Borrowers (with a copy to the Administrative Agent) a duly executed and properly completed copy of Internal Revenue Service Form W-9 (or applicable successor form) establishing an exemption from United States federal backup withholding tax at the following times: (x) on or prior to the date such Lender becomes a party to this Agreement with respect to such Lender; (y) promptly upon the occurrence of any event that would result in the invalidity or obsolescence of any previously-provided form; and (z) from time to time thereafter upon the reasonable request of the Borrowers or the Administrative Agent.

(e) In addition, the Borrowers shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law.

(f) If any Lender or the Administrative Agent determines, in its reasonable discretion, that is has received a refund of a Tax for which an additional payment has been made by either Borrower pursuant to this Section 2.14, then such Lender or the Administrative Agent, as the case may be, shall reimburse such Borrower for such amount (but only to the extent of indemnity payments made, or additional amounts paid, by such Borrower under this Section 2.14 with respect to the Tax giving rise to such refund), net of all out-of-pocket expenses of the Administrative Agent or such Lender and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund). This paragraph shall not be construed to require the Administrative Agent or any Lender to make available its tax returns (or any other information relating to its taxes which it deems confidential) to the Borrowers or any other Person.

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SECTION 2.15. Payments Generally; Pro Rata Treatment; Sharing of Set-offs.

(a) The Borrowers shall make each payment required to be made by it hereunder or under any other Loan Document (whether of principal, interest or fees, or of amounts payable under Section 2.12, 2.13 or 2.14, or otherwise) prior to 10:00 a.m., Los Angeles, California time, on the date when due, in immediately available funds, without set-off, counterclaim, recoupment or deduction of any kind. Any amounts received after such time on any date shall be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to the Administrative Agent at its offices located at 445 South Figueroa Street, Los Angeles, California 90071 (or such other office as the Administrative Agent shall from time to time designate to the Borrowers), except that payments pursuant to Sections 2.12, 2.13, 2.14 and 9.03 shall be made directly to the Persons entitled thereto and payments pursuant to other Loan Documents shall be made to the Persons specified therein. The Administrative Agent shall distribute any such payments received by it for the account of any other Person to the appropriate recipient promptly following receipt thereof. If any payment hereunder or under any other Loan Document shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, such interest shall be payable for the period of such extension. All payments under each Loan Document shall be made in dollars.

(b) If at any time insufficient funds are received by and available to the Administrative Agent to pay fully all amounts of principal, interest and fees then due hereunder, such funds shall be applied (i) first, towards payment of interest and fees then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of interest and fees then due to such parties, and (ii) second, towards payment of principal then due hereunder, ratably among the parties entitled thereto in accordance with the amounts of principal then due to such parties.

(c) If any Lender shall, by exercising any right of set-off or counterclaim or otherwise, obtain payment in respect of any principal of or interest on any of its Loans resulting in such Lender receiving payment of a greater proportion of the aggregate amount of its Loans and accrued interest thereon than the proportion received by any other Lender, then the Lender receiving such greater proportion shall purchase (for cash at face value) participations in the Loans of other Lenders to the extent necessary so that the benefit of all such payments shall be shared by the Lenders ratably in accordance with the aggregate amount of principal of and accrued interest on their respective Loans; provided that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this paragraph shall not be construed to apply to any payment made by either Borrower pursuant to and in accordance with the express terms of this Agreement or any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans to any assignee or participant, other than to either Borrower or any Affiliate thereof (as to which the provisions of this paragraph shall apply). Each Borrower consents to the foregoing and agrees, to the extent it may effectively do so under applicable law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against such Borrower rights of set-off and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of such Borrower in the amount of such participation.

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(d) Unless the Administrative Agent shall have received notice from the Borrowers prior to the date on which any payment is due to the Administrative Agent for the account of the Lenders hereunder that the Borrowers will not make such payment, the Administrative Agent may assume that the Borrowers have made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders the amount due. In such event, if the Borrowers have not in fact made such payment, then each of the Lenders severally agrees to repay to the Administrative Agent forthwith on demand the amount so distributed to such Lender with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Administrative Agent, at the greater of the Federal Funds Effective Rate and a rate determined by the Administrative Agent in accordance with banking industry rules on interbank compensation.

(e) If any Lender shall fail to make any payment required to be made by it pursuant to Section 2.04(b) or 2.15(c), then the Administrative Agent may, in its discretion (notwithstanding any contrary provision hereof), apply any amounts thereafter received by the Administrative Agent for the account of such Lender to satisfy such Lender’s obligations under such Sections until all such unsatisfied obligations are fully paid.

SECTION 2.16. Mitigation Obligations; Replacement of Lenders.

(a) If any Lender requests and is entitled to compensation under Section 2.12, or if either Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.14, then such Lender shall use reasonable efforts to designate a different lending office for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.12 or 2.14, as the case may be, in the future and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrowers jointly and severally hereby agree to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.

(b) If (i) any Lender requests and is entitled to compensation under Section 2.12, (ii) either Borrower is required to pay any additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.14, (iii) any Lender defaults in its obligation to fund Loans hereunder, or (iv) any Lender has not consented to a proposed amendment, waiver or modification under this Agreement that requires the consent of all Lenders and which has been approved by the Required Lenders, then the Borrowers may, at their sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions and consent requirements contained in Section 9.04), all of its interests, rights and obligations under this Agreement to an assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (A) no Event of Default has occurred and is continuing, (B) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrowers (in the case of all other amounts), and (C) in the case of any such assignment resulting from a claim for compensation under Section 2.12 or payments required to be made pursuant to Section 2.14, such assignment will result in a reduction in such compensation or payments. A Lender shall not be required to make any such assignment and delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrowers to require such assignment and delegation cease to apply.

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SECTION 2.17. Illegality. Notwithstanding any other provision of this Agreement, if any Change in Law makes it unlawful, or any Governmental Authority asserts that it is unlawful, for any Lender to perform its obligations hereunder to make, continue or convert into Eurodollar Loans, then, on notice thereof and demand therefor by such Lender to the Borrowers through the Administrative Agent, (a) the obligation of such Lender to make, continue or convert into Eurodollar Loans shall be suspended until the Administrative Agent notifies the Borrowers that such Lender has determined that the circumstances causing such suspension no longer exist, and (b) the Borrowers shall forthwith prepay in full all Eurodollar Loans of such Lender then outstanding, together with accrued and unpaid interest thereon, unless the Borrowers, within five (5) Business Days of such notice and demand, convert all Eurodollar Loans of all Lenders then outstanding into ABR Loans in accordance with the terms hereof.

SECTION 2.18. Joint and Several Obligations; Subrogation Rights; Savings Clause.

(a) Notwithstanding anything to the contrary set forth herein or in any other Loan Document, the obligations of the Borrowers hereunder and under the other Loan Documents are joint and several, regardless of which of the Borrowers actually receives the proceeds of the Loans, or the manner in which the Borrowers, the Administrative Agent or the Lenders account therefor in their respective books and records. Neither the joint and several liability of a Borrower for the obligations of the other Borrower, nor the Liens granted to the Collateral Agent under the Security Documents by the Pledgors, shall be impaired or released by: (a) the failure of any Agent or any Lender, any successor or assign thereof or any holder of any Note to assert any claim or demand or to exercise or enforce any right, power or remedy against either Borrower, any other Person, the Collateral or otherwise, (b) any extension or renewal for any period (whether or not longer than the original period) or exchange of any of the obligations under the Loan Documents or the release or compromise of any obligation of any nature of any Person with respect thereto, (c) the surrender, release or exchange of all or any part of any Property (including, without limitation, the Collateral) securing payment, performance and/or observance of any of the obligations under the Loan Documents or the compromise or extension or renewal for any period (whether or not longer than the original period) of any obligations of any nature of any Person with respect to any such Property, (d) any action or inaction on the part of any Agent or any Lender, or any other event or condition with respect to either Borrower, which might otherwise constitute a defense available to, or a discharge of, either Borrower or a guarantor or surety of or for any or all of the obligations under the Loan Documents, (e) any action or inaction by either Borrower under any Loan Documents, (f) the avoidance or unenforceability of (i) any Lien granted to the Collateral Agent under the Security Documents, (ii) any transfer made by or on behalf of either Borrower for or on account of any obligation under the Loan Documents or (iii) any obligation incurred under the Loan Documents, or (g) any other act, matter or thing which would or might, in the absence of this provision, operate to release, discharge or otherwise prejudicially affect the obligations of either Borrower. Each Borrower waives all defenses based on suretyship or impairment of collateral.

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(b) Each Borrower hereby unconditionally and irrevocably agrees not to exercise any rights that it may now have or hereafter acquire against the other Borrower or any Guarantor that arise from the existence, payment, performance or enforcement of the Obligations under or in respect of this Agreement and the other Loan Documents, including, without limitation, any right of subrogation, reimbursement, exoneration, contribution or indemnification and any right to participate in any claim or remedy of any Agent or any Lender against such other Borrower or any Guarantor, whether or not such claim, remedy or right arises in equity or under contract, statute or common law, including, without limitation, the right to take or receive from such other Borrower or any Guarantor, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim, remedy or right, unless and until all of the Obligations shall have been paid in full in cash. If any amount shall be paid to a Borrower in violation of the immediately preceding sentence at any time prior to the later of (i) the payment in full in cash of the Obligations, and (ii) the termination of all Commitments in accordance with the terms hereof, such amount shall be received and held in trust for the benefit of the Agents and the Lenders, shall be segregated from other property and funds of such Borrower and shall forthwith be paid or delivered to the Administrative Agent in the same form as so received (with any necessary endorsement or assignment) to be credited and applied to the Obligations, whether matured or unmatured, in accordance with the terms of this Agreement and the other Loan Documents, or to be held as collateral for any Obligations thereafter arising. Each Borrower hereby acknowledges and agrees that the agreements set forth in this paragraph (b) are intended to benefit the other Borrower, the Agents and the Lenders and shall not limit or otherwise affect any Borrower’s liability hereunder or the enforceability hereof.

(c) Each of the Borrowers, the Agents and the Lenders hereby confirms that it is the intention of all such Persons that this Agreement and the Obligations of each Borrower hereunder and under the other Loan Documents to which it is a party not constitute a fraudulent transfer or fraudulent conveyance for purposes of the Federal Bankruptcy Code, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any other federal, state or foreign bankruptcy, insolvency, receivership or similar law to the extent applicable to this Agreement, the other Loan Documents and the Obligations of each Borrower hereunder and thereunder. To effectuate the foregoing intention, the Agents, the Lenders and the Borrowers hereby irrevocably agree that the Obligations of each Borrower under this Agreement and the other Loan Documents to which it is a party at any time shall be limited to the maximum amount as will result in such Obligations of such Borrower not constituting a fraudulent transfer or fraudulent conveyance.

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ARTICLE III
Representations and Warranties

Each Borrower represents and warrants to the Agents and the Lenders that:

SECTION 3.01. Organization; Powers. Such Borrower (a) is a limited liability company duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (b) has all requisite limited liability company power and authority to carry on its business as now conducted or as proposed to be conducted, (c) has all material governmental licenses, authorizations, consents and approvals necessary to own its assets and carry on its business as now conducted or as proposed to be conducted, except for those which are not necessary during the term of this Agreement and are expected to be obtained in the ordinary course of business by the time necessary, and (d) except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, is qualified to do business, and is in good standing, in every jurisdiction in which the nature of the business conducted by it makes such qualification necessary.

SECTION 3.02. Authorization; Enforceability. The Transactions are within such Borrower’s limited liability company powers and have been duly authorized by all necessary limited liability company action. Each of the Loan Documents to which such Borrower is a party has been duly executed and delivered by such Borrower and constitutes, and each other Loan Document to which such Borrower is to be a party, when executed and delivered by such Borrower, will constitute, a legal, valid and binding obligation of such Borrower, enforceable against such Borrower in accordance with its terms, subject to applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law.

SECTION 3.03. Governmental Approvals; No Conflicts. The Transactions (a) do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority or any other Person, except such as have been obtained or made and are in full force and effect, and except filings necessary to perfect Liens created under the Loan Documents, (b) will not violate any Requirement of Law, except where such violation (other than any such violation of the certificate of formation, limited liability company agreement or other organizational document or governing document of any of the Loan Parties or any of the Pledgors) could not reasonably be expected to have a Material Adverse Effect, (c) will not violate or result in a default under any indenture, agreement or other instrument binding upon such Borrower or its assets, or give rise to a right thereunder to require any payment to be made by such Borrower, except where such violation, default or right to require payment could not reasonably be expected to have a Material Adverse Effect, and (d) will not result in the creation or imposition of any Lien on any of the revenues or assets of such Borrower other than Liens permitted hereunder.

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SECTION 3.04. Financial Condition; No Material Adverse Change.

(a) The audited balance sheet and related statements of income, retained earnings and cash flows of such Borrower as of and for the fiscal year ended December 31, 2009 present fairly, in all material respects, the financial position and results of operations and cash flows of such Borrower as of such date and for such fiscal year in accordance with GAAP, as applied on a consistent basis. The unaudited balance sheet and related statements of income, retained earnings and cash flows of such Borrower as of and for the fiscal quarterly period ended June 30, 2010 and the most recent financial statements delivered by such Borrower pursuant to Section 5.01(a) or 5.01(b) present fairly, in all material respects, the financial position and results of operations and cash flows of such Borrower as of such dates and for such periods in accordance with GAAP, as applied on a consistent basis, subject to year-end audit adjustments and the absence of footnotes in the case of such June 30, 2010 financial information or the statements delivered pursuant to Section 5.01(b). Such Borrower had not, at the date of the most recent balance sheet referred to above, any Guarantee, contingent liability or liability for taxes, or any long-term lease or unusual forward or long-term commitments, including any interest rate or foreign currency swap or exchange transaction, which, taken as a whole, were material to such Borrower, and which were not reflected in the foregoing statements or in the notes thereto. Except as disclosed in Schedule 3.04, during the period from June 30, 2010 to and including the Effective Date there has been no sale, transfer or other disposition by such Borrower of any part of its business or Property, and no purchase or other acquisition of any business or Property (including any Equity Interests of any other Person), which, in any case, is material in relation to the financial condition of such Borrower taken as a whole at June 30, 2010.

(b) Since December 31, 2009, there has been no event or change in facts or circumstances affecting such Borrower that individually or in the aggregate has had or could reasonably be expected to have a Material Adverse Effect.

SECTION 3.05. Title to Properties, Etc. Except as disclosed in Schedule 3.05:

(a) Such Borrower has good, sufficient and clear title to, or valid leasehold interests in, all Property material to its business, free and clear of all adverse possession or abandonment claims and Liens, except Permitted Encumbrances and other Liens permitted hereunder.

(b) All leases, rights of way, permits, licenses, franchises, and agreements necessary for the conduct of the business of such Borrower and for the Transactions are valid and subsisting and in full force and effect, and there exists no default or event or circumstance which with the giving of notice or the passage of time or both would give rise to a default under any such leases, rights of way, permits, licenses, franchises or agreements, which would adversely affect in any material respect the conduct of the business of such Borrower, including the Transactions.

(c) The rights, Properties and other assets presently owned, leased or licensed by such Borrower, including, without limitation, all easements and rights of way, include all rights, Properties and other assets necessary to permit such Borrower to conduct its business in all material respects in substantially the same manner as its business has been conducted prior to the Effective Date.

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(d) All of the Properties of such Borrower which are reasonably necessary for the operation of its business are in good working condition and are maintained in accordance with Section 5.05(a).

(e) Such Borrower owns, or is licensed or permitted to use, all trademarks, tradenames, copyrights, patents and other intellectual property material to its business, and the use thereof by it does not infringe upon the rights of any other Person, except for any such infringements that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

SECTION 3.06. Litigation. Except as disclosed in Schedule 3.06, there are no actions, suits or proceedings by or before any arbitrator or Governmental Authority pending against or, to the knowledge of such Borrower, threatened against such Borrower (a) as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, would, individually or in the aggregate, result in a Material Adverse Effect, or (b) that involve any of the Loan Documents or the Transactions.

SECTION 3.07. Compliance with Laws and Agreements. Except as disclosed in Schedule 3.07 and not including Environmental Liabilities, which are addressed in Section 3.18:

(a) Such Borrower has obtained all licenses, permits, franchises and other governmental authorizations necessary for the ownership of its Properties and the conduct of its business, including the Transactions, except where the failure to obtain such licenses, permits, franchises or governmental authorizations would not have (in the event such failure were asserted by any Person through appropriate action) a Material Adverse Effect and, in each case, except for those which are not necessary during the term of this Agreement and which are expected to be obtained in the ordinary course of business by the time necessary.

(b) Such Borrower is in compliance with all Requirements of Law, including the Fair Labor Standards Act, the Americans with Disabilities Act, the Foreign Corrupt Practices Act and Anti-Terrorism Laws, applicable to it or its Property and all indentures, agreements and other instruments binding upon it or its Property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

SECTION 3.08. Margin Regulations. No part of the proceeds of any Loans will be used for “purchasing” or “carrying” any “margin stock” within the respective meanings of each of the quoted terms under Regulation U as now and from time to time hereafter in effect or for any purpose that violates the provisions of the regulations of the Board. If requested by any Lender or the Administrative Agent, each Borrower will furnish to the Administrative Agent and each Lender a statement to the foregoing effect in conformity with the requirements of FR Form G-3 or FR Form U-1 referred to in Regulation U.

SECTION 3.09. Regulatory Status.

(a) Such Borrower is not an “investment company” or a company “controlled” by an “investment company” as defined in, or subject to regulation under, the Investment Company Act of 1940, as amended.

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(b) Such Borrower is not subject to regulation under any Requirement of Law (other than Regulation X of the Board) which purports to restrict or regulate its ability to borrow money or otherwise incur Indebtedness.

SECTION 3.10. Taxes. Such Borrower has filed all United States federal income tax returns and all other material tax returns which are required to be filed by it, or otherwise obtained appropriate extensions to file, and has paid all Taxes shown as due on such returns or pursuant to any assessment received by such Borrower, except such Taxes not yet due and payable or that are being contested in good faith by appropriate proceedings and for which such Borrower has set aside on its books adequate reserves in accordance with GAAP.

SECTION 3.11. ERISA. No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other such ERISA Events for which liability is reasonably expected to occur, could reasonably be expected to result in a Material Adverse Effect. The present value of all accumulated benefit obligations under each Plan (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed the fair market value of the assets of such Plan by an amount that has resulted or could reasonably be expected to result in a Material Adverse Effect. The present value of all accumulated benefit obligations of all underfunded Plans (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed the fair market value of the assets of all such underfunded Plans by an amount that has resulted or could reasonably be expected to result in a Material Adverse Effect.

SECTION 3.12. Security Documents.

(a) On the Effective Date, the provisions of the Security Documents are effective to create, in favor of the Collateral Agent for the benefit of the secured parties thereunder, legal, valid and enforceable Liens on or in all of the Collateral subject thereto, and all necessary deliveries of property to the Collateral Agent and all necessary recordings and filings have been made in all necessary public offices so that the Liens created by such Security Documents constitute perfected Liens on or in all rights, titles, estates and interests of the applicable Loan Party in the Collateral covered thereby, prior and superior to all other Liens, and all necessary consents to the creation and perfection of such Liens have been obtained. No financing statement or other instrument or recordation covering all or any part of the Collateral is on file in any recording office which has not been terminated or released, except as may have been filed in favor of the Collateral Agent.

(b) Such Borrower is not a party to any agreement or arrangement (other than any Loan Document), or subject to any order, judgment, writ or decree, which either restricts or purports to restrict its ability to grant Liens to other Persons on or in respect of its Properties other than such restrictions which have been waived or will have been waived, as of the date this representation is made, by the party to such agreement who is entitled to waive such restriction.

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SECTION 3.13. Disclosure. Such Borrower has disclosed to the Administrative Agent all agreements, instruments and corporate or other restrictions to which it is subject, and all other matters known to it, that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect. None of the reports, financial statements, certificates or other information furnished by or on behalf of such Borrower to any Agent or Lender in connection with the negotiation of this Agreement or any other Loan Document or delivered hereunder (as modified or supplemented by, and taken together with, other information so furnished) contained, as of the date of such report, financial statement, certificate or other information so furnished, any material misstatement of a fact or omits to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that, with respect to forward looking statements, such Borrower represents only that such information represents such Borrower’s best estimate of future performance and was prepared in good faith based upon assumptions believed to be reasonable at the time, it being recognized by the Agents and the Lenders that there can be no assurance that such expectations, beliefs or projections will be achieved or accomplished and that such projections are subject to an increasing degree of uncertainty as they relate to later periods of time.

SECTION 3.14. Solvency. Both before and after giving effect to the Transactions, the Borrowers, taken as a whole, are Solvent. Such Borrower has received fair consideration and reasonably equivalent value for its respective obligations under this Agreement and the other Loan Documents.

SECTION 3.15. Labor Matters. There are no strikes or other labor disputes against such Borrower pending or, to the knowledge of such Borrower, threatened that (individually or in the aggregate) could reasonably be expected to have a Material Adverse Effect. Hours worked by and payment made to employees of such Borrower have not been in violation of the Fair Labor Standards Act or any other applicable Requirement of Law dealing with such matters that (individually or in the aggregate) could reasonably be expected to have a Material Adverse Effect. All payments due from such Borrower on account of employee health and welfare insurance that (individually or in the aggregate) could reasonably be expected to have a Material Adverse Effect if not paid have been paid or accrued as a liability on the books of such Borrower.

SECTION 3.16. Anti-Terrorism Laws.

(a) Neither such Borrower nor, to the knowledge of such Borrower, any of its Affiliates is in violation of any Requirement of Law relating to terrorism, sanctions or money laundering (“Anti-Terrorism Laws”), including Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001 (the “Executive Order”), and the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56.

(b) Neither such Borrower nor, to the knowledge of such Borrower, any of its Affiliates is any of the following:

(i) a Person that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order;

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(ii) a Person owned or controlled by, or acting for or on behalf of, any Person that is listed on the Annex to, or is otherwise subject to the provisions of, the Executive Order;

(iii) a Person with whom such Borrower is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law;

(iv) a Person who commits, threatens or conspires to commit or supports “terrorism” as defined in the Executive Order; or

(v) a Person that is named as a “specially designated national or blocked person” on the most current list published by the U.S. Treasury Department Office of Foreign Assets Control at its official website or any replacement website or other replacement official publication of such list.

(c) Neither such Borrower nor, to the knowledge of such Borrower, any of its Affiliates (i) conducts any business or engages in making or receiving any contribution of funds, goods or services to or for the benefit of any Person described in clause (b)(i), (ii), (iii) or (v) above or, to the knowledge of such Borrower, clause (b)(iv) above; (ii) deals in, or otherwise engages in any transaction relating to, any Property or interest in Property blocked pursuant to the Executive Order; or (iii) engages in or conspires to engage in any transaction that evades or avoids, or has the purposes of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Law.

(d) No broker or other agent (other than the Lead Arranger in connection with the syndication of the credit facilities established by this Agreement) is acting for the benefit of such Borrower or any of its Affiliates, or, to the knowledge of such Borrower, benefiting in any capacity, in each case in connection with the Loan Documents.

SECTION 3.17. No Subsidiaries. Such Borrower has no Subsidiaries.

SECTION 3.18. Environmental Matters. Except as could not reasonably be expected to have a Material Adverse Effect (or with respect to paragraphs (b) and (c) below, where the failure to take such actions could not reasonably be expected to have a Material Adverse Effect):

(a) Such Borrower is not subject to any existing, pending or, to its knowledge, threatened action, suit, investigation, inquiry or proceeding by or before any Governmental Authority, or to any remedial obligations under Environmental Laws;

(b) Such Borrower has obtained or filed, and is in compliance with the terms and conditions of, all notices, permits, licenses and similar authorizations required under applicable Environmental Laws;

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(c) (i) To the best knowledge of such Borrower, all Hazardous Materials, if any, generated at any and all Property of such Borrower in the past have been transported, treated and disposed of in accordance with Environmental Laws and so as not to pose an imminent and substantial endangerment to public health or welfare or the environment, (ii) to the best knowledge of such Borrower, all such transport carriers and treatment and disposal facilities have been and are operating in compliance with Environmental Laws and so as not to pose an imminent and substantial endangerment to public health or welfare or the environment, and (iii) any Hazardous Materials generated by the operation of its Property have been transported, treated and disposed of in accordance with Environmental Laws and so as not to pose an imminent and substantial endangerment to public health or welfare or the environment;

(d) Such Borrower (i) has complied with all Environmental Laws and obtained, maintained and complied with all permits, licenses or other approvals required under any Environmental Law, (ii) is not subject to any Environmental Liability, (iii) has not received notice of any claim against it with respect to any Environmental Liability or (iv) does not know of any basis for any Environmental Liability on its part; and

(e) There has been no release or threatened release of Hazardous Materials on, at, under or from any Property presently owned, leased, or operated by such Borrower that has resulted in, or is reasonably likely to result in, liability or obligations of such Borrower under any Environmental Laws.

SECTION 3.19. Insurance. Schedule 3.19 contains an accurate description of all material policies of fire, liability, workers’ compensation and other forms of insurance owned or held by such Borrower as of the Effective Date. All such policies are in full force and effect, all premiums with respect thereto covering all periods up to and including the Effective Date have been paid, and no notice of cancellation or termination has been received with respect to any such policy. Such policies are sufficient for compliance with all Requirements of Law and of all material agreements to which such Borrower is a party; are valid, outstanding and enforceable policies; provide adequate insurance coverage for the assets and operations of such Borrower in at least such amounts and against at least such risks (but including in any event public liability) as are usually insured against in the same general area by companies engaged in the same or a similar business; will remain in full force and effect through the respective dates set forth in Schedule 3.19 without the payment of additional premiums; and will not in any way be affected by, or terminate or lapse by reason of, the transactions contemplated by this Agreement. Schedule 3.19 identifies all material risks, if any, which such Borrower has designated as being self-insured.

SECTION 3.20. Hedging Agreements. Schedule 3.20 sets forth, as of the Effective Date, a true and complete list of all Hedging Agreements of such Borrower, the material terms thereof (including the type, term, effective date, termination date and notional amounts or volumes), the net mark to market value thereof, all credit support agreements relating thereto (including any margin required or supplied), and the counterparty to each such agreement.

SECTION 3.21. No Default or Event of Default. No Default or Event of Default has occurred and is continuing.

SECTION 3.22. Use of Proceeds. The proceeds of the Loans will be used in accordance with Section 5.08.

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ARTICLE IV
Conditions Precedent

SECTION 4.01. Effective Date. The obligations of the Lenders under this Agreement shall not become effective until the date on which each of the following conditions is satisfied (or waived in accordance with Section 9.02), and upon such satisfaction or waiver, the Administrative Agent shall notify the Borrowers in writing of the date that constitutes the Effective Date:

(a) The Administrative Agent (or its counsel) shall have received:

(i) from each party hereto either (A) a counterpart of this Agreement signed by such party or (B) written evidence satisfactory to the Administrative Agent (which may include telecopy transmission of a signed signature page of this Agreement) that such party has signed a counterpart of this Agreement;

(ii) from the Borrowers either (A) the Notes signed by the Borrowers (to the extent requested by any Lender pursuant to Section 2.07(e)) or (B) written evidence satisfactory to the Administrative Agent (which may include telecopy transmission of a signed signature page of the Notes) that the Borrowers have signed such Notes;

(iii) from each party thereto either (A) a counterpart of the Guaranty signed by such party or (B) written evidence satisfactory to the Administrative Agent (which may include telecopy transmission of a signed signature page of the Notes) that such party has signed a counterpart of the Guaranty;

(iv) a counterpart of the Pledge Agreement signed on behalf of each Pledgor, together with (A) all documents, instruments and filings creating or perfecting the Liens of the Pledge Agreement; (B) certificates (if any) representing the Equity Interests of the Pledgors in the Borrowers, accompanied by instruments of transfer and stock powers endorsed in blank; and (C) all other documents and instruments required by law or reasonably requested by the Collateral Agent to be filed, registered or recorded to create or perfect the Liens intended to be created under the Pledge Agreement;

(v) (A) a favorable written opinion (addressed to each Agent and the Lenders and dated the Effective Date) of Akin Gump Strauss Hauer & Feld, LLP, New York counsel for the Loan Parties, in form and substance satisfactory to the Lenders, (B) a favorable written opinion (addressed to each Agent and the Lenders and dated the Effective Date) of Robert P. Reffner, Vice President, Legal for FirstEnergy Service Company, in form and substance satisfactory to the Lenders, and (C) a favorable written opinion (addressed to each Agent and the Lenders and dated the Effective Date) of Calfee, Halter & Griswold LLP, counsel to certain of the Loan Parties and Pledgors, in form and substance satisfactory to the Lenders. The Borrowers hereby request such counsel to deliver such opinions;

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(vi) (A) certified copies of the resolutions of the board of directors (or other equivalent body) of each Loan Party and (without duplication) each Pledgor authorizing the execution, delivery and performance of each Loan Document to which it is or is intended to be a party and any other matters with respect to the Transactions and the Loan Documents (including, without limitation, evidence of the consent of each Loan Party’s and (without limitation) each Pledgor’s members or Board of Directors, as the case may be, to the Transactions and the other Loan Documents, to the extent such consent is required pursuant to the terms of such Person’s operating agreement or other formation and governing documents), (B) certified copies of the organizational documents (including any certificate of formation, certificate of incorporation, operating agreement, or by-laws, as the case may be) of each Loan Party and each Pledgor and all amendments thereto, (C) a certificate for each Loan Party and each Pledgor certifying the name, incumbency and signature of each individual authorized to execute the Loan Documents to which it is a party and the other documents or certificates to be delivered pursuant hereto or thereto, on which each Agent may conclusively rely until a revised certificate is similarly so delivered, and (D) good standing certificates with respect to each Loan Party and each Pledgor issued no earlier than ten (10) days prior to the Effective Date;

(vii) Uniform Commercial Code, tax and judgment lien searches as to FirstEnergy Ventures in the State of Ohio, and as to the Borrowers, Global Mining Group and WMB II in the State of Delaware;

(viii) satisfactory evidence that (A) all Indebtedness under the SPE Credit Agreement and the RailCo Credit Agreement, together with all accrued interest, fees, costs, expenses and other amounts payable by the Borrowers thereunder, have been (or will be, contemporaneously with the making of the Loans on the Effective Date) paid in full, (B) such agreements and all commitments thereunder have been irrevocably terminated, and (C) all Liens securing payment of the obligations thereunder have been terminated and released;

(ix) a Borrowing Request with respect to the Initial Borrowing; and

(x) such other statements, certificates, approvals, opinions, documents and information with respect to the matters contemplated by this Agreement as the Agents or any Lender may reasonably request.

(b) The representations and warranties of the Loan Parties and the Pledgors set forth in this Agreement and the other Loan Documents shall be true and correct, no Default or Event of Default shall have occurred and be continuing, and the Administrative Agent shall have received a certificate, dated the Effective Date and signed by a Financial Officer or the President or a Vice President of each Borrower, confirming the same as of the Effective Date.

(c) Since June 30, 2010, there shall have been no material adverse change in the financial condition, results of operations or business of either Borrower.

(d) The Administrative Agent and the Lenders shall have received all documentation and other information required by bank regulatory authorities under applicable “know your customer” and anti-money laundering rules and regulations, including, without limitation, the Patriot Act.

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(e) The Administrative Agent and Lead Arranger shall have received all fees and other amounts due and payable on or prior to the Effective Date, including all up-front fees and, to the extent invoiced, reimbursement or payment of all out-of-pocket expenses (including, without limitation, the reasonable fees and expenses of counsel to the Administrative Agent and the Lead Arranger) required to be reimbursed or paid by the Borrowers hereunder or under any other Loan Document.

(f) All requisite Governmental Authorities and third parties, if any, shall have approved or consented to this Agreement, the other Loan Documents and the Transactions to the extent required (and the Administrative Agent shall have received certified copies of all such approvals and consents, which shall be in form and substance satisfactory to the Administrative Agent and the Lenders), no stay of any applicable regulatory approval shall have been issued and there shall be no litigation, governmental, administrative or judicial action, actual or threatened, that could reasonably be expected to restrain, prevent or impose burdensome conditions on this Agreement and the other Loan Documents or the Transactions.

ARTICLE V
Affirmative Covenants

Until the Commitments have been terminated and the principal of and interest on each Loan and all fees and other Obligations payable by the Borrowers hereunder and under the other Loan Documents shall have been paid in full, each Borrower covenants and agrees with the Administrative Agent and the Lenders that:

SECTION 5.01. Financial Statements and Other Information. Such Borrower will furnish to the Administrative Agent (and the Administrative Agent will forward such copies to the Lenders):

(a) as soon as available and in any event within one hundred and twenty (120) days after the end of each fiscal year of such Borrower, audited statements of income, retained earnings and cash flows of such Borrower for such year and the related balance sheet as of the end of such year, setting forth in each case in comparative form the corresponding figures for the preceding fiscal year, and accompanied by an opinion of the accounting firm of PricewaterhouseCoopers LLP or such other independent public accountants of recognized regional or national standing selected by such Borrower and reasonably acceptable to the Required Lenders, which opinion shall not contain any qualification or exception as to the scope of such audit and shall state that the financial statements fairly present in all material respects the financial condition and results of operations of such Borrower as of the end of, and for, such fiscal year and have been prepared in accordance with GAAP, consistently applied (except where noted);

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(b) as soon as available and in any event within sixty (60) days after the end of each of the first three (3) fiscal quarterly periods of each fiscal year of such Borrower, unaudited statements of income, retained earnings and cash flows of such Borrower for such period and for the period from the beginning of the fiscal year to the end of such period, and the related balance sheets as of the end of such period, setting forth in each case in comparative form the corresponding figures as of the end of and for the corresponding period in the preceding fiscal year, accompanied by a certificate of a Financial Officer of such Borrower which certificate shall state that the financial statements fairly present in all material respects the financial condition and results of operations, as the case may be, of such Borrower in accordance with GAAP, consistently applied (except where noted), as of the end of, and for, such period (subject to normal year-end audit adjustments and the absence of footnotes);

(c) concurrently with any delivery of financial statements of such Borrower under clause (a) or (b) above, a certificate (a “Compliance Certificate”) of a Financial Officer of such Borrower (i) certifying as to whether a Default has occurred and is continuing, and in such event, specifying the details thereof and any action taken or proposed to be taken with respect thereto, (ii) setting forth either or each Rating for FirstEnergy as of the end of the respective fiscal quarter or fiscal year, as applicable, and (iii) stating whether any change in GAAP or in the application thereof not disclosed in any prior such certificate has occurred since June 30, 2010 and, if any such change has occurred, specifying the effect of such change on the financial statements accompanying such certificate;

(d) promptly upon their becoming available, copies of any written notices from any Governmental Authority of non-compliance by such Borrower with any material decision of the applicable Governmental Authority, or with any other material rules, regulations or orders of the applicable Governmental Authority, and any written notices of any extraordinary audit or investigation by any applicable Governmental Authority into the business, affairs or operations of such Borrower; and

(e) promptly following any request therefor, such other information regarding the operations, business affairs and financial condition of such Borrower (including, without limitation, any Plan or Multiemployer Plan and any reports or other information required to be filed under ERISA to the extent reasonably available to such Borrower after such Borrower’s demand therefor), or compliance with the terms of any Loan Document, as the Administrative Agent or any Lender may reasonably request.

SECTION 5.02. Notices of Material Events. To the extent such Borrower becomes aware of any of the following, such Borrower will furnish to the Administrative Agent and each Lender written notice of the following, promptly (and in any event within ten (10) Business Days) after the occurrence thereof:

(a) the occurrence of any Default or Event of Default not previously notified to such Borrower by the Administrative Agent;

(b) the filing or commencement of any action, suit or proceeding by or before any arbitrator or Governmental Authority against or affecting such Borrower or any Affiliate thereof that, if adversely determined, could reasonably be expected to result in a Material Adverse Effect;

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(c) the occurrence of any ERISA Event that, alone or together with any other ERISA Events that have occurred, could reasonably be expected to result in a Material Adverse Effect; and

(d) any other development that results in, or could reasonably be expected to result in, a Material Adverse Effect.

Each notice delivered under this Section shall be accompanied by a statement of a Financial Officer or other executive officer of the applicable Borrower setting forth the details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto.

SECTION 5.03. Existence; Conduct of Business. Such Borrower will do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence and all rights, licenses, permits, privileges, franchises and government approvals and authorizations material to the conduct, maintenance and operation of its Property and the conduct of its business, except to the extent the failure to do so could not reasonably be expected to result in a Material Adverse Effect.

SECTION 5.04. Payment of Obligations. Such Borrower will pay its obligations, including Tax liabilities and assessments, before the same shall become delinquent or in default, except where (a) the validity or amount thereof is being contested in good faith by appropriate proceedings, (b) such Borrower has set aside on its books adequate reserves with respect thereto to the extent required by and otherwise in accordance with GAAP and (c) the failure to make payment pending such contest could not reasonably be expected to result in a Material Adverse Effect.

SECTION 5.05. Maintenance of Properties; Insurance. Such Borrower will:

(a) except where the failure to do so could not reasonably be expected to result in a Material Adverse Effect, do all that is necessary to preserve and keep in good repair, working order and efficiency all of its Properties including, without limitation, all equipment, machinery and facilities, and from time to time will make all the necessary repairs, renewals and replacements so that at all times the state and condition of its Properties will be fully preserved and maintained. Except where the failure to do so could not reasonably be expected to result in a Material Adverse Effect, such Borrower will promptly: (i) pay and discharge, or make reasonable and customary efforts to cause to be paid and discharged, all rentals, royalties, expenses and indebtedness accruing under the rights of way, licenses, leases or other agreements affecting or pertaining to its Properties, (ii) perform or make reasonable and customary efforts to cause to be performed, in accordance with industry standards, the obligations required by each and all of the rights of way, deeds, leases, sub-leases, contracts and agreements affecting its interests in its Properties, and (iii) do all other things necessary to keep unimpaired, except for Liens permitted under Section 6.02, its rights with respect to its Properties and prevent any forfeiture thereof or a default thereunder, except for any sale, lease, transfer or other disposition thereof permitted by Section 6.05. Such Borrower will cause its Properties to be operated in a careful and efficient manner in accordance in all material respects with the practices of the industry and in compliance in all material respects with all applicable contracts and agreements and all Requirement of Laws; and

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(b) maintain, with financially sound and reputable insurance companies, or through its own program of self-insurance, insurance in such amounts (with no greater risk retention) and against such risks and with such self insurance as are customarily maintained by companies of established reputations engaged in the same or similar businesses operating in the same or similar locations. Such Borrower will furnish to the Lenders, upon reasonable request of the Administrative Agent, information in reasonable detail as to the insurance so maintained.

SECTION 5.06. Books and Records; Inspection Rights. Such Borrower will keep proper books of record and account in which entries are made of all dealings and transactions in relation to its business and activities, all in accordance with GAAP and with customary and prudent business practices. Such Borrower will permit any representatives designated by an Agent or any Lender, upon reasonable prior notice during ordinary business hours, to visit and inspect its Properties, and, subject to contractual or statutory limitations regarding confidential or proprietary information, to examine and make extracts from its books and records, and to discuss its affairs, finances and condition with its officers and independent accountants, as often as reasonably requested.

SECTION 5.07. Compliance with Laws. Such Borrower will comply with all laws, rules, regulations and orders of any Governmental Authority applicable to it or its Property (including, without limitation, ERISA and Environmental Laws), except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect.

SECTION 5.08. Use of Proceeds. The proceeds of the Loans will be used only: (a) for the repayment in full on the Effective Date of all Indebtedness and other obligations of the Borrowers payable under the SPE Credit Agreement and the RailCo Credit Agreement; and (b) for other general corporate purposes, including the repayment on the Effective Date of any outstanding obligations of SPE or RailCo to FirstEnergy or any of its Affiliates (such repayment, the “Closing Distribution”). No part of the proceeds of any Loan will be used, whether directly or indirectly, for any purpose that entails a violation of any of the Regulations of the Board, including Regulations T, U and X.

SECTION 5.09. Environmental Matters. Such Borrower will:

(a) conduct and complete all investigations, studies, sampling and testing, and all remedial, removal and other actions required under Environmental Laws, except to the extent that the failure to take such actions could not reasonably be expected to have a Material Adverse Effect, and promptly comply with all lawful orders and directives of all Governmental Authorities respecting Environmental Laws, except to the extent that the same are being contested in good faith by appropriate proceedings and the pendency of such proceedings, or failure to comply with such orders or directives, could not reasonably be expected to have a Material Adverse Effect;

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(b) establish and implement such procedures as may be reasonably necessary to continuously determine and assure that any failure of the following does not have a Material Adverse Effect: (i) all Property of such Borrower and the operations conducted thereon and other activities of such Borrower are in compliance with and do not violate the requirements of any Environmental Laws, (ii) such Borrower is in compliance with and maintains any and all licenses, approvals, registrations or permits required by Environmental Laws, (iii) no Hazardous Materials are disposed of or otherwise released on or to any Property owned by such Borrower, except in compliance with Environmental Laws, and (iv) no Hazardous Materials will be released on or to any such Property by such Borrower in a quantity equal to or exceeding that quantity which requires reporting pursuant to Section 103 of CERCLA; and

(c) promptly notify the Administrative Agent and the Lenders in writing of any threatened action, investigation or inquiry by any Governmental Authority of which such Borrower has knowledge in connection with any Environmental Laws, excluding routine testing and corrective action, that might result in such Borrower being liable for the payment or performance of obligations in an amount that, individually or in the aggregate, could reasonably be expected to result in a Material Adverse Effect.

SECTION 5.10. Further Assurances. Such Borrower will execute any and all further documents, agreements and instruments, and take all such further actions which may be required under any applicable law, or which any Agent or the Required Lenders may reasonably request, to effectuate the transactions contemplated by the Loan Documents, or to correct any omissions or errors in any Loan Document, all at the expense of the Borrowers.

SECTION 5.11. Subsidiaries. Such Borrower shall have no Subsidiaries.

ARTICLE VI
Negative Covenants

Until the Commitments have been terminated and the principal of and interest on each Loan and all fees and other Obligations payable by the Borrowers hereunder and under the other Loan Documents shall have been paid in full, each Borrower covenants and agrees with the Administrative Agent and the Lenders that:

SECTION 6.01. Indebtedness. Such Borrower will not create, incur, assume or permit to exist any Indebtedness, except:

(a) Indebtedness created under the Loan Documents;

(b) accounts payable (for the deferred purchase price of Property or services) or other usual and customary payables from time to time incurred in the ordinary course of business which, if greater than thirty (30) days past the due date, are being contested in good faith by appropriate proceedings if reserves adequate under GAAP shall have been established therefor;

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(c) (i) Indebtedness of such Borrower incurred to finance the acquisition, construction or improvement of any fixed or capital assets, including Capital Lease Obligations, and any Indebtedness assumed in connection with the acquisition by such Borrower of any such assets or secured by a Lien on any such assets prior to the acquisition thereof by such Borrower, provided that such Indebtedness is incurred or assumed prior to or within ninety (90) days after such acquisition or the completion of such construction or improvement, and (ii) any extensions, renewals and replacements of any such Indebtedness that do not increase the outstanding principal amount, or decrease the tenor, thereof;

(d) Indebtedness under Hedging Agreements permitted under Section 6.07; and

(e) (i) unsecured Indebtedness of such Borrower in favor of FirstEnergy; (ii) unsecured Indebtedness of SPE to RailCo in an aggregate amount equal to or less than (A) the toll payments charged by RailCo to SPE pursuant to the Tolling Agreement, dated July 16, 2008, between SPE and RailCo, plus (B) the toll payments charged by RailCo to FirstEnergy pursuant to the Toll Payment Agreement, dated July 16, 2008, between FirstEnergy and RailCo, less (C) all operating, maintenance, and capital expenses of RailCo, and, without duplication, any amounts that RailCo is required to pay to service its indebtedness; (iii) unsecured Indebtedness of SPE to MarketCo in an aggregate amount equal to or less than (A) the price per ton received by MarketCo for the sale of coal by SPE, less (B) the minimum price per ton agreed upon by MarketCo and SPE for MarketCo’s sale of such coal; and (iv) other unsecured Indebtedness of such Borrower in an aggregate amount not exceeding $15,000,000; in each case, on terms and conditions acceptable to the Required Lenders and provided that such Indebtedness shall be at all times subordinated in right of payment to the Obligations pursuant to a subordination agreement in form and substance acceptable to the Required Lenders (it being understood that, solely with respect to Indebtedness of either Borrower in favor of FirstEnergy, the terms of subordination set forth in Section 15 of the Guaranty are acceptable to the Lenders) (collectively, “Subordinated Debt”).

SECTION 6.02. Liens. Such Borrower will not create, incur, assume or permit to exist any Lien on any Property now owned or hereafter acquired by it, or assign or sell any income or revenues or rights in respect of any thereof, except:

(a) Permitted Encumbrances;

(b) (i) Liens on fixed or capital assets acquired, constructed or improved by such Borrower in an amount not exceeding, individually or in the aggregate, $15,000,000, and (ii) Liens on moveable or non-fixed assets acquired by such Borrower; provided, in each case, that (i) such Liens secure Indebtedness permitted by Section 6.01(c), and (ii) such Liens shall not apply to Property of such Borrower other than Property financed by such Indebtedness;

(c) Liens comprised by escrow arrangements entered into in connection with assets sales, transfers or other dispositions permitted pursuant to Section 6.05; and

(d) additional Liens on Property of such Borrower so long as the aggregate principal amount of the obligations secured by such Liens does not exceed $10,000,000.

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SECTION 6.03. Fundamental Changes.

(a) Such Borrower will not merge into or consolidate with any other Person, or permit any other Person to merge into or consolidate with it, or sell, transfer, lease or otherwise dispose of (in one transaction or in a series of transactions) all or any substantial part of its assets, or liquidate or dissolve.

(b) Such Borrower will not engage to any material extent in any business other than businesses of the type conducted by such Borrower on the date of execution of this Agreement and businesses reasonably related thereto.

SECTION 6.04. Investments, Loans, Advances and Acquisitions. Such Borrower will not purchase, hold or acquire any Equity Interests, evidences of indebtedness or other securities (including any option, warrant or other right to acquire any of the foregoing) of, make or permit to exist any loans or advances to, or make or permit to exist any investment or any other interest in, any other Person, or purchase or otherwise acquire (in one transaction or a series of transactions) any assets of any other Person constituting a business unit, except:

(a) Permitted Investments;

(b) investments received in connection with the bankruptcy or reorganization of, or settlement of delinquent accounts and disputes with, customers and suppliers, in each case in the ordinary course of business;

(c) extensions of trade credit in the ordinary course of business;

(d) investments permitted pursuant to Section 6.08;

(e) unsecured and subordinated loans by RailCo to SPE permitted pursuant to Section 6.01(e)(ii); and

(f) acquisitions by SPE of coal reserves.

SECTION 6.05. Asset Sales. Such Borrower will not convey, sell, lease, assign, transfer or otherwise dispose of any of its Property or business (including leasehold interests), whether now owned or hereafter acquired, except:

(a) inventory and other Property in the ordinary course of business;

(b) dispositions of Property of such Borrower to the extent that such Property is replaced by such Borrower within ninety (90) days after the date of such disposition with Property (A) of substantially the same character and at least equivalent quality, utility and useful life and (B) having a Fair Value equal to or greater that the Fair Value of the disposed Property;

(c) dispositions of Property of such Borrower to the extent that, contemporaneously with such disposition, such Property is exchanged by such Borrower for other Property having a Fair Value equal to or greater that the Fair Value of the disposed Property, as determined in the good faith judgment of the members (or the Board of Directors, Managers or any corresponding body, or a duly constituted committee thereof) of such Borrower (as applicable) and certified in writing to the Administrative Agent by a Responsible Officer of such Borrower; and

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(d) such Borrower may sell, transfer or otherwise dispose of other assets for Fair Value in transactions not permitted under clauses (a), (b) or (c) above; provided that (i) the aggregate consideration for all sales, transfers and disposals by such Borrower pursuant to this clause (d) during any fiscal year of such Borrower shall not exceed $1,000,000; (ii) with respect to any such sale, transfer or disposition (or series of related sales, transfers or dispositions) with an aggregate consideration in excess of $500,000, the members (or the Manager, Managing Board or any corresponding body, or a duly constituted committee thereof) of such Borrower shall have approved such sale, transfer or disposition, as the case may be; and (iii) no Default is then existing and, after giving effect to any such sale, transfer or disposition, as the case may be, no Default shall have occurred and be continuing.

SECTION 6.06. Sale and Leaseback Transactions. Such Borrower will not enter into any arrangement, directly or indirectly, whereby it shall sell, transfer or otherwise dispose of any Property used or useful in its business, whether now owned or hereafter acquired, and thereafter rent or lease such Property or other Property that it intends to use for substantially the same purpose or purposes as the Property sold or transferred, except for any such sale of any fixed or capital assets that is made for Fair Value and is consummated within ninety (90) days after such Borrower acquires or completes the construction of such fixed or capital asset.

SECTION 6.07. Limitation on Hedging Agreements.

(a) Such Borrower will not enter into any Hedging Agreement other than Hedging Agreements entered into in the ordinary course of business and not for speculative purposes.

(b) Any Indebtedness incurred under any Specified Hedge Agreement shall be treated as Indebtedness pari passu with all Indebtedness otherwise incurred hereunder or under the other Loan Documents and shall be secured under the Security Documents.

SECTION 6.08. Restricted Payments; Certain Payments of Indebtedness. Such Borrower will not declare or make, or agree to pay or make, directly or indirectly, any Restricted Payment (other than the Closing Distribution), except for:

(a) (i) payments of cash dividends or cash distributions to its members, (ii) payments to a member of such Borrower to pay for consolidated, combined or similar Federal, state or local taxes payable by such member and directly attributable to (or arising as a result of) the operation of such Borrower, (iii) payments of principal, interest or other amounts required or permitted to be paid pursuant to the Subordinated Debt to the holders of the Subordinated Debt (other than FirstEnergy) (provided, that such payments are permitted under the subordination provisions applicable thereto), and (iv) payments of management fees, extraction fees, royalties or such other payments of similar substance or effect by such Borrower to Boich, First Energy, any Affiliates of Boich or FirstEnergy, or any other Affiliates of such Borrower, in each case, so long as both before and after giving effect to such payment, no Default has occurred and is continuing; and

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(b) payments of principal, interest or other amounts required or permitted to be paid pursuant to Subordinated Debt incurred pursuant to Section 6.01(e)(i) to FirstEnergy, so long as (A) both before and after giving effect to such payment, no Default has occurred and is continuing, (B) such payments are permitted under the subordination provisions applicable thereto and (C) the representations and warranties of the Loan Parties and the Pledgors set forth in this Agreement and the other Loan Documents shall be true and correct in all material respects on and as of the date of such payment, both before and after giving effect to such payment and to the application of the proceeds thereof, as though made on and as of such date (except where such representations and warranties expressly relate to an earlier date, in which case such representations and warranties shall have been true and correct in all material respects as of such earlier date).

SECTION 6.09. Transactions with Affiliates. Such Borrower will not sell, lease or otherwise transfer any Property to, or purchase, lease or otherwise acquire any Property from, or otherwise engage in any other transactions with, any of its Affiliates, except (a) at prices and on terms and conditions no less favorable to such Borrower than could be obtained on an arm’s length basis from unrelated third parties, (b) any Restricted Payment permitted by Section 6.08, and (c) shared corporate or administrative services and staffing with Affiliates, including accounting, legal, human resources and treasury operations, provided on customary terms for similarly situated companies.

SECTION 6.10. Restrictive Agreements. Such Borrower will not, directly or indirectly, create, assume, enter into, incur or permit to exist any contract, agreement, understanding or other arrangement that prohibits, restricts or imposes any condition upon the granting, conveying, creation, imposition or maintenance of any Lien on any of its Property or which requires the consent of or notice to other Persons in connection therewith; provided that the foregoing shall not apply to restrictions and conditions imposed by law or by any Loan Document.

SECTION 6.11. Accounting Changes. Such Borrower will not make any significant change in accounting treatment or reporting practices except as required by GAAP, or change its fiscal year.

SECTION 6.12. Compliance with ERISA. Such Borrower will not (a) enter into any “prohibited transaction” (as defined in Section 4975 of the Code, and in ERISA) involving any Plan that could reasonably be expected to result in a Material Adverse Effect or (ii) allow or suffer to exist any other event or condition known to such Borrower that results in any liability of such Borrower to the PBGC that could reasonably be expected to result in a Material Adverse Effect For purposes of this Section 6.12, “liability” shall not include termination insurance premiums payable under Section 4007 of ERISA.

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ARTICLE VII
Events of Default

If any of the following events (“Events of Default”) shall occur:

(a) the Borrowers shall fail to make any payment of (i) principal of any Loan when the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment or otherwise, or (ii) interest on any Loan or any other amount payable by either Borrower hereunder within five (5) days after the same shall become due and payable, whether at the due date thereof or at a date fixed for prepayment thereof or otherwise;

(b) any representation or warranty made or deemed made by or on behalf of any Loan Party in or in connection with any Loan Document or any amendment or modification hereof or waiver hereunder, or in any report, certificate, financial statement or other document furnished pursuant to or in connection with any Loan Document or any amendment or modification hereof or waiver hereunder, shall prove to have been incorrect in any material respect when made or deemed made;

(c) (i) any Borrower shall fail to observe or perform any covenant, condition or agreement contained in (A) Section 5.01, and such failure shall continue unremedied for a period of five (5) Business Days after such Borrower has received written notice of such failure from the Administrative Agent or any Lender, or (B) Section 5.02, 5.03 (as to the legal existence of such Borrower), 5.04, 5.08 or 5.11 or in Article VI, or (ii) any Loan Party (other than the Borrowers) shall fail to perform the financial covenant (Debt to Capitalization Ratio) or negative covenants contained, or incorporated by reference, in the Guaranty;

(d) any Loan Party or any Pledgor shall fail to observe or perform any covenant, condition or agreement contained in any Loan Document (other than those specified in clause (a) or (c) of this Article), and such failure shall continue unremedied for a period of 30 days after the earlier of (i) the date that any Responsible Officer of such Loan Party or Pledgor, as the case may be, has actual knowledge thereof or (ii) the date of notice thereof from the Administrative Agent to the Borrowers (which notice will be given at the request of any Lender);

(e) any Loan Party or any Significant Subsidiary of FirstEnergy shall fail to make any payment (whether of principal or interest and regardless of amount) in respect of any Material Indebtedness, when and as the same shall become due and payable after giving effect to any applicable grace period;

(f) any event or condition occurs that results in any Material Indebtedness becoming due prior to its scheduled maturity or that enables or permits (after giving effect to any applicable notice requirement and/or grace period) the holder or holders of any Material Indebtedness or any trustee or agent on its or their behalf to cause any Material Indebtedness to become due, or to require the prepayment, repurchase, redemption (other than pursuant to provisions permitting the tendering of such Indebtedness from time to time for repurchase or redemption without regard to the occurrence or non-occurrence of any event or condition) or defeasance thereof, prior to its scheduled maturity; provided that this clause (f) shall not apply to secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the Property securing such Indebtedness;

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(g) an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of any Loan Party or any Pledgor or the debts of any such Person, or of a substantial part of its assets, under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect, or (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for any Loan Party or for any Pledgor or for a substantial part of such Person’s assets, and, in any such case, such proceeding or petition shall continue undismissed for sixty (60) days or an order or decree approving or ordering any of the foregoing shall be entered;

(h) any Loan Party or any Pledgor shall (i) voluntarily commence any proceeding or file any petition seeking liquidation, reorganization or other relief under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in clause (g) of this Article, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for itself or for a substantial part of its assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors or (vi) take any action for the purpose of effecting any of the foregoing;

(i) any Loan Party or any Pledgor shall become unable, admit in writing its inability or fail generally to pay its debts as they become due;

(j) one or more judgments for the payment of money in an aggregate amount in excess of (i) with respect to FirstEnergy of any of its Significant Subsidiaries, $50,000,000, and (ii) with respect to any Loan Party (other than FirstEnergy), $15,000,000, shall be rendered against any Loan Party, any Pledgor or any Significant Subsidiary of FirstEnergy and the same shall remain undischarged for a period of thirty (30) consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to attach or levy upon any assets of such Person to enforce any such judgment;

(k) an ERISA Event shall have occurred that, when taken together with all other ERISA Events that have occurred, has resulted or could reasonably be expected to result in a Material Adverse Effect;

(l) any Lien purported to be created under any Security Document shall cease to be, or shall be asserted by any Loan Party or any Pledgor not to be, a valid and perfected first priority Lien on any Collateral subject thereto;

(m) any material provision of this Agreement or any other Loan Document to which any Loan Party or any Pledgor is a party shall for any reason, except to the extent permitted by the express terms hereof or thereof, cease to be valid and binding on or enforceable against such Person or otherwise cease to be in full force and effect, or any Loan Party, any Affiliate of a Loan Party, any Pledgor or a Governmental Authority shall so assert in writing;

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(n) (i) FirstEnergy and Boich shall cease to own, directly or indirectly, legally and beneficially, the majority of the Equity Interests of the Loan Parties (other than FirstEnergy) and the Pledgors, or (ii) FirstEnergy and Boich shall cease to control the management of any Loan Party (other than FirstEnergy) or any Pledgor, or (iii) FirstEnergy reduces its current level of ownership, direct or indirect, beneficial or otherwise, in any Loan Party (other than FirstEnergy) or any Pledgor, in each case without prior approval by the Required Lenders; or

(o) Any Change in Law shall occur that has the effect of making the Transactions unauthorized, illegal or otherwise contrary to Requirement of Law with respect to the Loan Parties;

then, and in every such event (other than an event with respect to either Borrower described in clause (g) or (h) of this Article), and at any time thereafter during the continuance of such event, the Administrative Agent may, and at the request of the Required Lenders shall, by notice to the Borrowers, take any or all of the following actions, at the same or different times: (i) terminate the Commitments, and thereupon the Commitments shall terminate immediately, and/or (ii) declare the Loans then outstanding to be due and payable in whole (or in part, in which case any principal not so declared to be due and payable may thereafter be declared to be due and payable), and thereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and all fees and other obligations of the Borrowers accrued hereunder, shall become due and payable immediately, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrowers and/or (iii) instruct the Collateral Agent, in accordance with the terms of the Pledge Agreement, to exercise in respect of the Collateral, in addition to the other rights and remedies provided for herein and in the Security Documents or otherwise available to the Agents or the Lenders, all the rights and remedies of a secured party on default under the Uniform Commercial Code in effect in the State of New York and in effect in any other jurisdiction in which any Collateral is located at that time; and in case of any event with respect to either Borrower described in clause (g) or (h) of this Article, the Commitments shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon and all fees and other obligations of the Borrowers accrued hereunder, shall automatically become due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrowers.

ARTICLE VIII
The Agents

Each of the Lenders hereby irrevocably appoints the Agents as their agents and authorizes the Agents to take such actions on its behalf and to exercise such powers as are delegated to the Agents by the terms of the Loan Documents, together with such actions and powers as are reasonably incidental thereto. The Required Lenders may at any time, with the consent of the Borrowers (which consent shall not be unreasonably withheld or delayed, and shall not be required if an Event of Default shall have occurred and be continuing), replace the Administrative Agent (it being understood that any such replacement of the Administrative Agent shall be a Person that serves as agent for other credit facilities of a comparable size), provided that the Required Lenders may not replace the Administrative Agent unless, after giving effect to such replacement and each contemporaneous assignment, the Required Lenders or the Borrowers shall have arranged in connection with such replacement that (i) neither the Administrative Agent nor any of its Affiliates shall have outstanding any Loan or Commitment or other obligation of any kind under this Agreement or any other Loan Document, unless such Person shall consent otherwise, and (ii) each of the Administrative Agent and its Affiliates shall have received any required payment in full of all amounts owing to it under or in respect of this Agreement and each other Loan Document. The Lenders may replace the Collateral Agent in accordance with the provisions of the Security Documents.

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Any bank serving as an Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not an Agent, and such bank may accept deposits from, lend money to and generally engage in any kind of business with the Borrowers or any of their respective Affiliates as if it were not an Agent hereunder.

No Agent shall have any duties or obligations except those expressly set forth in the Loan Documents. Without limiting the generality of the foregoing, (a) no Agent shall be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing, (b) no Agent shall have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated by the Loan Documents that such Agent is required to exercise as directed by the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 9.02 or in the Security Documents), and (c) except as expressly set forth in the Loan Documents, no Agent shall have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to either Borrower that is communicated to or obtained by a bank serving as an Agent or any of its Affiliates in any capacity. No Agent shall be liable for any action taken or not taken by it with the consent or at the request of the Required Lenders (or such other number or percentage of the Lenders as shall be necessary under the circumstances as provided in Section 9.02 or in the Security Documents) or in the absence of its own gross negligence or willful misconduct as determined by non-appealable final judgment of a court of competent jurisdiction. No Agent shall be deemed to have knowledge of any Default unless and until written notice thereof is given to such Agent by either Borrower or a Lender (or communicated by such Agent to any Person), and no Agent shall be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with any Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or in connection with any Loan Document, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth in any Loan Document, (iv) the validity, enforceability, effectiveness or genuineness of any Loan Document or any other agreement, instrument or document, or (v) the satisfaction of any condition set forth in Article IV or elsewhere in any Loan Document, other than to confirm receipt of items expressly required to be delivered to any Agent.

Each Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing believed by it to be genuine and to have been signed or sent by the proper Person. Each Agent also may rely upon any statement made to it orally or by telephone and believed by it to be made by the proper Person, and shall not incur any liability for relying thereon. Each Agent may consult with legal counsel (who may be counsel for either Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.

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Each Agent may perform any and all its duties and exercise its rights and powers by or through any one or more sub-agents appointed by such Agent. Each Agent and any such sub-agent may perform any and all its duties and exercise its rights and powers through their respective Related Parties. The exculpatory provisions of the preceding paragraphs shall apply to any such sub-agent and to the Related Parties of such Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Agent.

Subject to the appointment and acceptance of a successor Administrative Agent as provided in this paragraph, the Administrative Agent may resign at any time by notifying the Lenders and the Borrowers. Upon any such resignation, the Required Lenders shall have the right, subject to the approval of the Borrowers (such approval not to be unreasonably withheld or delayed, and shall not be required upon the occurrence and during the continuance of an Event of Default), to appoint a successor. If no successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within thirty (30) days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative Agent may, on behalf of the Lenders and subject to the approval of the Borrowers (such approval not to be unreasonably withheld or delayed, and shall not be required upon the occurrence and during the continuance of an Event of Default), appoint a successor Administrative Agent, which shall be any commercial bank organized under the laws of the United States of America or any State thereof having a combined capital and surplus and undivided profits of not less than $500,000,000. Upon the acceptance of its appointment as the Administrative Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. The fees payable by the Borrowers to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrowers and such successor. After the Administrative Agent’s resignation hereunder, the provisions of this Article and Section 9.03 shall continue in effect for the benefit of such retiring Administrative Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while it was acting as the Administrative Agent. The Collateral Agent may resign in accordance with the provisions of the Security Documents.

Each Lender acknowledges that it has, independently and without reliance upon any Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon any Agent or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or any related agreement or any document furnished hereunder or thereunder.

Anything herein to the contrary notwithstanding, no Co-Syndication Agent or Co-Documentation Agent listed on the cover page hereof shall have any rights, powers, duties or responsibilities under this Agreement or any of the other Loan Documents, except in its capacity as a Lender hereunder.

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ARTICLE IX
Miscellaneous

SECTION 9.01. Notices.

(a) Except in the case of notices and other communications expressly permitted to be given by telephone (and subject to paragraph (b) below), all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows:

(i) if to any Borrower, to it at 100 Portal Drive, Roundup, Montana 59072, Attention of Darrell Roland (Telephone No. 406-248-4267; Telecopy No. 406-248-4270), with a copy to each of (A) FirstEnergy Corp., 76 South Main Street, Akron, Ohio 44308, Attention: Treasurer (Telecopy No. 330-384-3772), (B) FirstEnergy Corp., 76 South Main Street, Akron, Ohio 44308, Attention: Legal (Telecopy No. 330-384-3875, and (C) Boich Companies, LLC, 41 South High Street, Suite 3750-South, Columbus, Ohio 43215, Attention of Brian T. Murphy, Chief Financial Officer (Telecopy No. 614-221-0117);

(ii) if to the Administrative Agent or the Collateral Agent, to Union Bank, N.A., 445 South Figueroa Street, 15^th Floor, Los Angeles, California 90071, Attention of Kevin Zitar (Telecopy No. (213) 236-4096); and

(iii) if to any Lender, to it at its address (or telecopy number) set forth in its Administrative Questionnaire.

(b) Notices and other communications to the Lenders hereunder may be delivered or furnished by electronic communications pursuant to procedures approved by the Administrative Agent and the Collateral Agent; provided that the foregoing shall not apply to notices pursuant to Article II unless otherwise agreed by the Administrative Agent and the applicable Lender. The Administrative Agent or the Borrowers may, in their discretion, agree to accept notices and other communications to it hereunder by electronic communications pursuant to procedures approved by it; provided that approval of such procedures may be limited to particular notices or communications.

(c) Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt.

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SECTION 9.02. Waivers; Amendments.

(a) No failure or delay by any Agent or Lender in exercising any right or power hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of the Agents and the Lenders hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of any Loan Document or consent to any departure by either Borrower therefrom shall in any event be effective unless the same shall be permitted by paragraph (b) of this Section, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the generality of the foregoing, the making of a Loan or a Borrowing shall not be construed as a waiver of any Default, regardless of whether any Agent or any Lender may have had notice or knowledge of such Default at the time.

(b) Neither this Agreement nor any other Loan Document nor any provision hereof or thereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Loan Parties or Pledgors (as the case may be) party thereto and the Required Lenders or by such Loan Parties or Pledgors (as the case may be) and the Administrative Agent with the consent of the Required Lenders; provided that no such agreement shall (i) increase the Commitment of any Lender without the written consent of such Lender; (ii) reduce the principal amount of any Loan or reduce the rate of interest thereon, or reduce any fees payable hereunder (other than fees payable to the Agents and the Lead Arranger pursuant to the Fee Letter), without the written consent of each Lender affected thereby; (iii) postpone the scheduled date of payment of the principal amount of any Loan, or any interest thereon, or reduce the amount of, waive or excuse any such payment, or postpone the scheduled date of termination of any Commitment, without the written consent of each Lender affected thereby; (iv) change Section 2.15(b) or (c) in a manner that would alter the pro rata sharing of payments required thereby, without the written consent of each Lender; (v) change any of the provisions of this Section or the definition of “Required Lenders” or any other provision of any Loan Document (other than the Security Documents) specifying the number or percentage of Lenders required to waive, amend or modify any rights hereunder or make any determination or grant any consent hereunder, without the written consent of each Lender; (vi) change any provisions of any Loan Document (other than the Security Documents) in a manner that by its terms adversely affects the rights in respect of payments of Lenders, without the written consent of each Lender; (vii) release any Collateral or change any provision of any Security Document providing for the release of Collateral, without the written consent of each Lender; (viii) release all or any portion of any Guarantor’s obligations under the Guaranty or change any provision of the Guaranty providing for the release or termination of the Guaranty, without the written consent of each Lender; or (ix) amend, modify or waive any condition precedent set forth in Section 4.01, without the written consent of each Lender; provided further that (A) no such agreement shall amend, modify or otherwise affect the rights or duties of any Agent hereunder without the prior written consent of the affected Agent; and (B) any waiver, amendment or modification of this Agreement that by its terms affects the rights or duties under this Agreement of the Lenders may be effected by an agreement or agreements in writing entered into by the Borrowers and the requisite percentage in interest of the affected Lenders. Notwithstanding the foregoing, any provision of this Agreement requiring the consent of a Lender unwilling to provide such consent may be amended by an agreement in writing entered into by the Borrowers, the Required Lenders and the Administrative Agent if (1) by the terms of such agreement the Commitment of each such opposing Lender shall terminate upon the effectiveness of such amendment and (2) at the time such amendment becomes effective, each such opposing Lender receives payment in full of the principal of and interest accrued on each Loan made by it and all other amounts owing to it or accrued for its account under the Loan Documents.

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SECTION 9.03. Expenses; Indemnity; Damage Waiver.

(a) The Borrowers jointly and severally agree to pay (i) all reasonable out-of-pocket expenses incurred by the Agents (including due diligence expenses and the reasonable fees, charges and disbursements of counsel for the Agents) in connection with the preparation, negotiation, syndication, execution, delivery and administration of the Loan Documents or any amendments, modifications or waivers of the provisions thereof (whether or not the transactions contemplated hereby or thereby shall be consummated), and (ii) all reasonable out-of-pocket expenses incurred by the Agents, the Lead Arranger or any Lender, including the reasonable fees, charges and disbursements of any counsel for any Agent, the Lead Arranger or any Lender, in connection with the enforcement or protection of their respective rights in connection with the Loan Documents whether or not the Effective Date occurs, including their respective rights under this Section, or in connection with the Loans made hereunder, including all such out-of-pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans.

(b) The Borrowers jointly and severally agree to indemnify each Agent, the Lead Arranger and each Lender, and each Related Party of any of the foregoing Persons (each such Person being called an “Indemnitee”), against, and hold each Indemnitee harmless from, any and all losses, claims, damages, costs, liabilities, expenses (including the fees, charges and disbursements of any counsel for any Indemnitee), incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of (i) the execution or delivery of any Loan Document or any agreement or instrument contemplated hereby, the performance by the parties to the Loan Documents of their respective obligations thereunder or the consummation of the Transactions or any other transactions contemplated thereby, (ii) any Loan or the use of the proceeds therefrom, (iii) any actual or alleged presence or release, or threatened release, of Hazardous Materials on or from any Property owned or operated by either Borrower, or any Environmental Liability related in any way to either Borrower, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted primarily from the gross negligence or willful misconduct of such Indemnitee as determined by the final non-appealable judgment of a court of competent jurisdiction.

(c) To the extent that the Borrowers fail to pay any amount required to be paid by the Borrowers to any Agent under paragraph (a) or (b) of this Section, each Lender severally agrees to pay to such Agent such Lender’s Applicable Percentage (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against such Agent in its capacity as such.

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(d) TO THE EXTENT PERMITTED BY APPLICABLE LAW, NO BORROWER SHALL ASSERT, AND EACH BORROWER HEREBY WAIVES, ANY CLAIM AGAINST ANY INDEMNITEE, ON ANY THEORY OF LIABILITY, FOR SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES (AS OPPOSED TO DIRECT OR ACTUAL DAMAGES) ARISING OUT OF, IN CONNECTION WITH, OR AS A RESULT OF, THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR ANY AGREEMENT OR INSTRUMENT CONTEMPLATED HEREBY OR THEREBY, THE TRANSACTIONS, ANY LOAN OR THE USE OF THE PROCEEDS THEREOF.

(e) All amounts due under this Section shall be payable within ten (10) Business Days after delivery to the Borrowers of a reasonably detailed statement therefor.

SECTION 9.04. Successors and Assigns.

(a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that the Borrowers may not assign or otherwise transfer any of their respective rights or obligations hereunder without the prior written consent of each Lender (and any attempted assignment or transfer by either Borrower without such consent shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby and, to the extent expressly contemplated hereby, the Related Parties of the Agents, the Lead Arranger and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.

(b) Any Lender may assign to one or more assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it); provided that (i) except in the case of an assignment to a Lender, an Affiliate of a Lender or an Approved Fund of any Lender, the Administrative Agent must give its prior written consent to such assignment (which consent shall not be unreasonably withheld), (ii) except in the case of an assignment to a Lender, an Affiliate of a Lender or an Approved Fund of any Lender, the Borrowers must give their prior written consent to such assignment (which consent shall not be unreasonably withheld), (iii) except in the case of an assignment to a Lender, an Affiliate of a Lender or an Approved Fund of any Lender or an assignment of the entire remaining amount of the assigning Lender’s Commitments and Loans, the aggregate amount of the Commitments and Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Assumption with respect to such assignment is delivered to the Administrative Agent) shall be in an aggregate amount of not less than $5,000,000 unless each of the Borrowers and the Administrative Agent otherwise consent, (iv) each partial assignment by a Lender of its Commitment and Exposure shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement in respect of its Commitment and Exposure, as the case may be, (v) the parties to each assignment shall execute and deliver to the Administrative Agent an Assignment and Assumption, together with a processing and recordation fee of $3,500, and (vi) the assignee, if it shall not be a Lender, shall deliver to the Administrative Agent an Administrative Questionnaire; and provided further that any consent of the Borrowers otherwise required under this paragraph shall not be required if an Event of Default shall have occurred and be continuing or if such assignment be made to FirstEnergy as a result

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of its exercise of the Call Option. Subject to acceptance and recording thereof pursuant to paragraph (d) of this Section, from and after the effective date specified in each Assignment and Assumption the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.12, 2.13, 2.14 and 9.03). Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this paragraph shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (e) of this Section.

(c) The Administrative Agent, acting for this purpose as an agent of the Borrowers, shall maintain at one of its offices in California a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amount of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive, and the Borrowers, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by the Borrowers and any Lender at any reasonable time and from time to time upon reasonable prior notice.

(d) Upon its receipt of a duly completed Assignment and Assumption executed by an assigning Lender and an assignee, the assignee’s completed Administrative Questionnaire (unless the assignee shall already be a Lender hereunder), the processing and recordation fee referred to in paragraph (b) of this Section and any written consent to such assignment required by paragraph (b) of this Section, the Administrative Agent shall accept such Assignment and Assumption and record the information contained therein in the Register. No assignment shall be effective for purposes of this Agreement unless it has been recorded in the Register as provided in this paragraph.

(e) Any Lender may, without the consent of the Borrowers or the Administrative Agent, sell participations to one or more banks or other entities (a “Participant”) in all or a portion of such Lender’s rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans owing to it); provided that (i) such Lender’s obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Borrowers, the Administrative Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce the Loan Documents and to approve any amendment, modification or waiver of any provision of the Loan Documents; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver described in the first proviso to Section 9.02(b) or the Security Documents that affects such Participant. Subject to paragraph (f) of this Section, each Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.12, 2.13 and 2.14 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 9.08 as though it were a Lender, provided such Participant agrees to be subject to Section 2.15(c) as though it were a Lender.

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(f) A Participant shall not be entitled to receive any greater payment under Section 2.12 or 2.14 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with the Borrowers’ prior written consent. A Participant that would be a Foreign Lender if it were a Lender shall not be entitled to the benefits of Section 2.14 unless the Borrowers are notified of the participation sold to such Participant and such Participant agrees, for the benefit of the Borrowers, to comply with Section 2.14(d) as though it were a Lender.

(g) Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank, and this Section shall not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment of a security interest shall release a Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto. In the case of any Lender that is a fund that invests in bank loans, such Lender may, without the consent of the Borrowers or the Administrative Agent, assign or pledge all or any portion of its rights under this Agreement, including the Loans and Notes or any other instrument evidencing its rights as a Lender under this Agreement, to any holder of, trustee for, or any other representative of holders of, obligations owed or securities issued by such fund, as security for such obligations or securities; provided that any foreclosure or similar action by such trustee or representative shall be subject to the provisions of Section 9.04(b) concerning assignments.

(h) Notwithstanding anything to the contrary contained herein, any Lender (a “Granting Lender”) may grant to a special purpose funding vehicle (an “SPC”), identified as such in writing from time to time by the Granting Lender to the Administrative Agent and the Borrowers, the option to provide to the Borrowers all or any part of any Loan that such Granting Lender would otherwise be obligated to make to the Borrowers pursuant to this Agreement; provided that (i) nothing herein shall constitute a commitment by any SPC to make any Loan and (ii) if an SPC elects not to exercise such option or otherwise fails to provide all or any part of such Loan, the Granting Lender shall be obligated to make such Loan pursuant to the terms hereof. The making of a Loan by an SPC shall utilize the Commitment of the Granting Lender to the same extent, and as if, such Loan were made by such Granting Lender. Each party hereto hereby agrees that no SPC shall be liable for any indemnity or similar payment obligation under this Agreement (all liability for which shall remain with the Granting Lender). In furtherance of the foregoing, each party hereto hereby agrees (which agreement shall survive the termination of this Agreement) that, prior to the date that is one year and one day after the payment in full of all outstanding commercial paper or other senior indebtedness of any SPC, it will not institute against, or join any other person in instituting against, such SPC in connection with its activities as an SPC hereunder any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings under the laws of the United States or any State thereof. In addition,

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notwithstanding anything to the contrary in this Section 9.04, any SPC may (i) with notice to, but without the prior written consent of, the Borrowers and the Administrative Agent and without paying any processing fee therefor, assign all or a portion of its interests in any Loans to the Granting Lender or to any financial institutions (consented to by the Borrowers and the Administrative Agent) providing liquidity and/or credit support to or for the account of such SPC to support the funding or maintenance of Loans and (ii) disclose on a confidential basis consistent with the provisions of Section 9.12 any non-public information relating to its Loans to any rating agency, commercial paper dealer or provider of any surety, guarantee or credit or liquidity enhancement to such SPC. The provisions of this Section relating any SPC may not be amended without the written consent of such SPC.

SECTION 9.05. Survival. All covenants, agreements, representations and warranties made by the Borrowers in the Loan Documents and in the certificates or other instruments delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of the Loan Documents and the making of any Loans, regardless of any investigation made by any such other party or on its behalf and notwithstanding that any Agent or Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under this Agreement is outstanding and unpaid and so long as any Commitment has not expired or terminated. The provisions of Sections 2.12, 2.13, 2.14 and 9.03 and Article VIII shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans, the termination of the Commitments or the termination of this Agreement or any provision hereof.

SECTION 9.06. Counterparts; Integration; Effectiveness. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement, the other Loan Documents and any separate letter agreements with respect to fees payable to the Agents and the Lead Arranger constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in Section 4.01, this Agreement shall become effective when it shall have been executed by the Agents and when the Administrative Agent shall have received counterparts hereof which, when taken together, bear the signatures of each of the other parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Delivery of an executed counterpart of a signature page of this Agreement by telecopy or other electronic transmission shall be effective as delivery of a manually executed counterpart of this Agreement.

SECTION 9.07. Severability. Any provision of this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof, and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.

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SECTION 9.08. Right of Setoff. If an Event of Default shall have occurred and be continuing, each Lender is hereby authorized at any time and from time to time, to the fullest extent permitted by law, upon any amount becoming due and payable by the Borrowers hereunder (whether at the stated maturity, by acceleration or otherwise), to set off and apply any and all deposits (general or special, time or demand, provisional or final) at any time held and other obligations at any time owing by such Lender to or for the credit or the account of either Borrower against any of and all the obligations of the Borrowers now or hereafter existing under this Agreement held by such Lender, irrespective of whether or not such Lender shall have made any demand under this Agreement and although such obligations may be unmatured. The rights of each Lender under this Section are in addition to other rights and remedies (including other rights of setoff) which such Lender may have.

SECTION 9.09. Governing Law; Jurisdiction; Consent to Service of Process.

(a) This Agreement shall be construed in accordance with and governed by the law of the State of New York.

(b) Each of the Borrowers, the Agents and the Lenders hereby irrevocably and unconditionally submits, for itself and its Property, to the nonexclusive jurisdiction of the Supreme Court of the State of New York sitting in New York County and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to any Loan Document, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State court or, to the extent permitted by law, in such Federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement or any other Loan Document shall affect any right that any Agent or Lender may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against one or both of the Borrowers or their respective Properties in the courts of any other jurisdiction.

(c) Each of the Borrowers, the Agents and the Lenders hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or any other Loan Document in any court referred to in paragraph (b) of this Section. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such suit, action or proceeding in any such court.

(d) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 9.01. Nothing in this Agreement or any other Loan Document will affect the right of any party to this Agreement to serve process in any other manner permitted by law.

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SECTION 9.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

SECTION 9.11. Headings. Article and Section headings and the Table of Contents used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement.

SECTION 9.12. Confidentiality. Each of the Agents and the Lenders agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its and its Affiliates’ directors, officers, employees and agents, including accountants, auditors, legal counsel and other advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential), (b) to the extent requested by any regulatory authority, (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party to this Agreement, (e) in connection with any suit, action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder, (f) subject to an agreement containing provisions substantially the same as those of this Section, to (i) any permitted assignee of or Participant in, or any prospective permitted assignee of or Participant in, any of its rights or obligations under this Agreement or (ii) any actual or prospective counterparty (or its advisors) to any swap or derivative transaction relating to either Borrower and its obligations, (g) with the consent of the Borrowers or (h) to the extent such Information (i) becomes publicly available other than as a result of a breach of this Section or (ii) becomes available to any Agent or Lender on a nonconfidential basis from a source other than either Borrower. For the purposes of this Section, “Information” means all information received from either Borrower relating to a Borrower or its business, other than any such information that is available to any Agent or Lender on a nonconfidential basis prior to disclosure by either Borrower. Any Person required to maintain the confidentiality of Information as provided in this Section shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Information as such Person would accord to its own confidential information.

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SECTION 9.13. Interest Rate Limitation. Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Loan, together with all fees, charges and other amounts which are treated as interest on such Loan under applicable law (collectively the “Charges”), shall exceed the maximum lawful rate (the “Maximum Rate”) which may be contracted for, charged, taken, received or reserved by the Lender holding such Loan in accordance with applicable law, the rate of interest payable in respect of such Loan hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent lawful, the interest and Charges that would have been payable in respect of such Loan but were not payable as a result of the operation of this Section shall be cumulated and the interest and Charges payable to such Lender in respect of other Loans or periods shall be increased (but not above the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the Federal Funds Effective Rate to the date of repayment, shall have been received by such Lender.

SECTION 9.14. Patriot Act Notice. Each Lender and the Administrative Agent (for itself and not on behalf of any other party) hereby notifies the Borrowers that, pursuant to the requirements of the USA PATRIOT Act, Title III of Pub. L. 107-56, signed into law October 26, 2001 (the “Patriot Act”), it is required to obtain, verify and record information that identifies each Borrower, which information includes the name and address of each Borrower and other information that will allow such Lender or the Administrative Agent, as applicable, to identify each Borrower in accordance with the Patriot Act.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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

SIGNAL PEAK ENERGY, LLC
By:	/s/ Brian T. Murphy
	Name:	Brian T. Murphy
	Title:	Secretary and Treasurer

GLOBAL RAIL GROUP, LLC
By:	/s/ Brian T. Murphy
	Name:	Brian T. Murphy
	Title:	Secretary and Treasurer

Signature Page to Signal Peak Energy, LLC/Global Rail Group, LLC Credit Agreement

S-1

UNION BANK, N.A., as Administrative Agent, Collateral Agent and a Lender
By:	/s/ Jeff Fesenmaier
	Name:	Jeff Fesenmaier
	Title:	Vice President

Signature Page to Signal Peak Energy, LLC/Global Rail Group, LLC Credit Agreement

S-2

BANCO BILBAO VIZCAYA ARGENTARIA, S.A. NEW YORK BRANCH, as a Lender
By:	/s/ Alex Mayral		/s/ Michael Oka
	Name:	Alex Mayral	Michael Oka
	Title:	V. P.	Executive Director

Signature Page to Signal Peak Energy, LLC/Global Rail Group, LLC Credit Agreement

S-3

CIBC INC., as a Lender
By:	/s/ Robert W. Casey, Jr.
	Name:	Robert W. Casey, Jr.
	Title:	Executive Director

Signature Page to Signal Peak Energy, LLC/Global Rail Group, LLC Credit Agreement

S-4

COBANK, ACB, as a Lender
By:	/s/ Josh Batchelder
	Name:	Josh Batchelder
	Title:	Vice President

Signature Page to Signal Peak Energy, LLC/Global Rail Group, LLC Credit Agreement

S-5

COMERICA BANK, as a Lender
By:	/s/ Brandon Welling
	Name:	Brandon Welling
	Title:	Assistant Vice President

Signature Page to Signal Peak Energy, LLC/Global Rail Group, LLC Credit Agreement

S-6

CREDIT AGRICOLE CORPORATE AND INVESTMENT BANK, as a Lender
By:	/s/ Dixon Schultz
	Name:	Dixon Schultz
	Title:	Director
By:	/s/ Sharada Manne
	Name:	Sharada Manne
	Title:	Director

Signature Page to Signal Peak Energy, LLC/Global Rail Group, LLC Credit Agreement

S-7

FIFTH THIRD BANK, as a Lender
By:	/s/ Martin H. McGinty
	Name:	Martin H. McGinty
	Title:	Vice President

Signature Page to Signal Peak Energy, LLC/Global Rail Group, LLC Credit Agreement

S-8

FIRSTMERIT BANK, N.A., as a Lender
By:	/s/ Robert G. Morlan
	Name:	Robert G. Morlan
	Title:	Senior Vice President

Signature Page to Signal Peak Energy, LLC/Global Rail Group, LLC Credit Agreement

S-9

ROYAL BANK OF CANADA, as a Lender
By:	/s/ Meredith Majesty
	Name:	Meredith Majesty
	Title:	Authorized Signatory

Signature Page to Signal Peak Energy, LLC/Global Rail Group, LLC Credit Agreement

S-10

SOVEREIGN BANK, as a Lender
By:	/s/ Robert D. Lanigan
	Name:	Robert D. Lanigan
	Title:	Senior Vice President

Signature Page to Signal Peak Energy, LLC/Global Rail Group, LLC Credit Agreement

S-11

U.S. BANK NATIONAL ASSOCIATION, as a Lender
By:	/s/ Eric J. Cosgrove
	Name:	Eric J. Cosgrove
	Title:	Vice President

Signature Page to Signal Peak Energy, LLC/Global Rail Group, LLC Credit Agreement

S-12

RBC BANK (USA), as a Lender
By:	/s/ Richard Marshall
	Name:	Richard Marshall
	Title:	Market Executive — National Division

Signature Page to Signal Peak Energy, LLC/Global Rail Group, LLC Credit Agreement

S-13

Schedule 2.01

Commitments

Lender	Commitment Amount
Union Bank, N.A.	$	55,000,000.00
Sovereign Bank	$	52,500,000.00
CoBank, ACB	$	52,500,000.00
Credit Agricole Corporate and Investment Bank	$	30,000,000.00
U.S. Bank National Association	$	30,000,000.00
Banco Bilbao Vizcaya Argentaria, S.A. New York Branch	$	30,000,000.00
CIBC Inc.	$	20,000,000.00
Comerica Bank	$	20,000,000.00
Fifth Third Bank	$	20,000,000.00
Royal Bank of Canada	$	15,000,000.00
RBC Bank (USA)	$	15,000,000.00
FirstMerit Bank, N.A.	$	10,000,000.00

Schedule 3.04

Sales and Acquisitions

None.

Schedule 3.05

Properties

None.

Schedule 3.06

Litigation

1. Scion Energy Partners, LLC and Scion Capital Partners, LLC (collectively “Scion”) v. Signal Peak Energy, LLC, et al., Delaware Court of Chancery, Civil Action No. 3220-VCP; Montana Fourteenth Judicial District Court, Musselshell County, Cause No. DV-08-105

On July 18, 2008, a joint venture owned by FirstEnergy Ventures Corp. and affiliates of the Boich Group purchased an 80% interest in Signal Peak Energy, LLC (“Signal Peak”), the owner of the Bull Mountain coal mine. The joint venture has since acquired the remaining 20% interest. At the same time, Global Rail Group LLC (“Global Rail”) purchased land for the purpose of building a rail line and power line servicing the mine. The purchase agreements for the transactions provide that the seller thereunder (the “Seller”) agrees to indemnify Signal Peak, Global Rail and certain affiliates against losses arising out of the following described claims asserted by Scion, provided however that the remedies under the indemnity are limited to offsetting indemnified losses against royalties payable by Signal Peak for coal from the mine, plus future payments under the purchase price note delivered for the recent acquisition of the last 20% interest in Signal Peak. The Seller has acknowledged its obligation to indemnify the joint venture entities and Signal Peak against the Scion claims, and has assumed the defense of the Montana case and agreed to the retention by Signal Peak and Global Rail of their own counsel to defend the Delaware case, with the expense of defense being offset against the royalties as they accrue.

Scion filed a complaint in the Superior Court of the State of Delaware on March 14, 2007 (which case was subsequently transferred to the Delaware Court of Chancery on September 10, 2007) against various entities (the “Bull Mountain Entities”) that were involved in the development and operation of the Bull Mountain coal mine in Roundup, Montana. Scion’s complaint sought, among other things: (i) money damages in the amount of approximately $18.5 million, reflecting unpaid loans in the amount of $500,000, as well as various fees and commissions; (ii) 25.5% of the equity in the Bull Mountain Entities and options to purchase an additional 15%; and (iii) coal royalties totaling $0.48 per ton; all allegedly owed for, inter alia, loans made by Scion and financial advisory and brokerage services performed by Scion for the Bull Mountain Entities. Scion further claims that its monetary damages are secured by a lien on “as extracted” coal produced by the Bull Mountain mine. The complaint, as most recently amended, claims that the transfer of the land purchased by Global Rail to the predecessor in title was voidable as a fraudulent transfer to the predecessor and also as against Global Rail and seeks to unwind such transfers or, in the alternative, seeks damages in the amount of the value of the assets.

Scion’s claims arise from a series of agreements that Scion allegedly entered into with BMP Investments, Inc. (Signal Peak’s predecessor entity) and the other Bull Mountain Entities prior to the purchase by the FirstEnergy and Boich Group joint venture. Certain former defendants in this case have confessed judgment in exchange for a release of liability of the individual former promoters of the Bull Mountain coal mine.

After their motion to dismiss the Second Amended Complaint became moot upon the filing of the Third Amended Complaint, the remaining defendants, including the Borrowers, filed Answers to the Third Amended Complaint on September 29, 2009. FirstEnergy and the Boich Group have been dismissed from the case without prejudice, under a Tolling Agreement with the plaintiffs. Litigation counsel for the Borrowers anticipates that discovery will not be completed until sometime in 2011, and expects that the defendants will move for partial summary judgment at that time with respect to the claim for equity in Signal Peak.

Scion filed suit in November of 2008 in Musselshell County, Montana (the location of the coal mine), seeking to foreclose on a claimed lien on mining equipment, “as extracted” coal and other minerals, royalty interests and coal leases . The Seller and the current owner of the reserves have acknowledged their obligation to indemnify and defend Global Rail and Signal Peak in the Montana action as well. Certain defendants in that action, including, inter alia, Signal Peak, FirstEnergy Corp. and Global Rail, have filed an Amended Motion to Dismiss, which is currently pending.

The Loan Parties and Pledgors believe that these claims in the Delaware and Montana actions are without merit and are not reasonably likely to materially impair their ability to pay and perform their Obligations under the Loan Documents.

Schedule 3.07

Compliance with Laws

None.

Schedule 3.19

Insurance

[See Attached]

Property & Casualty Summary

for

Signal Peak Energy LLC
100 Portal Drive
Roundup, MT 59072

Hoiness LaBar Insurance
A Member of Payne Financial Group, Inc.

Presented by:

Chris Hoiness, CPCU, CIC
Senior Vice President

Laurie Preitauer, AU, AIS, CPSR
Client Account Manager

Sandy Meyers
Service Account Manager

July 13, 2010

This document is not a legal interpretation or a complete description of the coverage provided under the actual insurance policies. Please refer to the actual policies for specific terms, conditions, limitations and exclusions that will govern in the event of a loss. Specimen policies are available for review prior to binding coverage.

Table of Contents

Commercial Property Coverage	3
Commercial General Liability Coverage	5
Commercial Pollution Liability Coverage	7
Commercial Auto Coverage	8
Commercial Equipment Coverage	10
Commercial Umbrella Coverage	16
Commercial Excess Coverage	19

Commercial Property Coverage

Policy Period:	7/16/2010 — 7/16/2011
Insurance Company:	Federal Insurance Company
Schedule of Named Insureds:	An entity must be named to receive coverage under the policy Signal Peak Energy LLC Global Rail Group LLC

Schedule of Locations:
Loc. No. 1 — 100 Portal Drive Roundup MT 59072

Bldg No.	Description
4	Building #4-Shop
2	Building #2-Office (house)
6	Pipe-Personal Property of Others
7	Office/Bathhouse
8	Shop and Warehouse
9	Coal Prep Plant

Loc. No. 3 — 16432 Van Sky Road — 7 miles E of Broadview Broadview MT 59015

Bldg No.	Description
1	Dwelling — Tenant Occupied

Location Provisions:

Location No.1 100 Portal Drive Roundup MT 59072

Bldg			Agreed
No.	Subject of Insurance	Valuation	Amt.	Deductible		Limit
2	Building-Office (house)	Replacement Cost	Yes	$	2,500	$	118,000
4	Building-Shop	Replacement Cost	Yes	$	2,500	$	53,000
7	Building-Office/Bathhouse	Replacement Cost	Yes	$	50,000	$	1,500,000
7	Business Personal Property	Replacement Cost	Yes	$	50,000	$	350,000
8	Building-Shop and Warehouse	Replacement Cost	Yes	$	50,000	$	800,000
8	Business Personal Property	Replacement Cost	Yes	$	50,000	$	400,000
9	Building-Coal Prep Plant	Replacement Cost	Yes	$	100,000	$	65,850,000

Location No. 3 16432 Van Sky Road — 7 miles E of Broadview Broadview MT 59015

Bldg.			Agreed
No.	Subject of Insurance	Valuation	Amt.	Deductible		Limit
1	Building — Dwelling	Replacement Cost	Yes	$	5,000	$	100,000

Page 3

Covered Causes of Loss:	Special causes of loss subject to policy exclusions
Exclusions:	Refer to policy for exclusions
Coverage Modifications:	Refer to policy for specific information pertaining to these modifications

Description	Limit		Deductible(*)
Earthquake	$	15,000,000	$	100,000
Flood	$	15,000,000	$	100,000
Personal Property Any Other Location	$	250,000	$	25,000
Transit Coverage-Personal Property	$	1,000,000	$	50,000
Blanket Business Income/Extra Expense — Above ground only	$	50,000,000	30 day waiting period
Business Income — Dependent Business Premises	$	25,000	$	2,500
Business Income — Fees	$	5,000	$	2,500
Business Income — Loss of Utilities	$	15,000	$	2,500
Business Income — Pollutant Cleanup or Removal	$	5,000	$	2,500
Business Income — Newly Acquired Premises	$	100,000	$	2,500
Blanket Limit includes-Accounts Receivable, Electronic Data Processing Property, Valuable Papers, Extra Expense, Personal Property of Others & Employees, Leasehold Interest — Undamaged Tenants’ Improvements & Betterments	$	100,000	$	2,500
Debris Removal	$	50,000	$	2,500
EDP Exhibition, Fair, Tradeshow	$	2,500	$	2,500
Personal Property Exhibition, Fair, Tradeshow	$	2,500	$	2,500
Fine Arts — Exhibition, Fair or Trade Show	$	2,500	$	2,500
Fine Arts	$	5,000	$	2,500
Fire Department Service Charge	$	25,000	$	2,500
Installation Any Job Site	$	1,000	$	2,500
Installation Coverage — In Transit	$	1,000	$	2,500
Accounts Receivable in Transit	$	10,000	$	2,500
EDP Property in Transit	$	10,000	$	2,500
Fine Arts in Transit	$	1,000	$	2,500
Valuable Papers in Transit	$	10,000	$	2,500
Inventory or Appraisals	$	5,000	$	2,500
Loss Prevention Expenses	$	5,000	$	2,500
Money And Securities On Premises	$	10,000	$	2,500
Money And Securities Off Premises	$	5,000	$	2,500
Trees, Shrubs & Plants or lawns — outdoor	$	25,000	$	2,500
Pollutant Cleanup and Removal	$	25,000	$	2,500
Exclusion — Building Under Construction
Newly Acquired or Constructed Building	$	1,000,000	$	2,500
Newly Acquired Personal Property	$	500,000	$	2,500
Newly Acquired Electronic Data Processing Equipment	$	250,000	$	2,500
Newly Acquired Electronic Data Processing Media	$	25,000	$	2,500
Newly Acquired Electronic Data Processing Media Duplicates	$	25,000	$	2,500
Newly Acquired Telephone Equipment	$	25,000	$	2,500
Newly Acquired Fine Arts	$	10,000	$	2,500
Personal Property Of Others-Pipe	$	60,000	$	2,500

* The policy deductible applies unless a specific deductible is shown.

Page 4

Commercial General Liability Coverage

Policy Period:	7/16/2010 – 7/16/2011
Insurance Company:	Federal Insurance Company
Schedule of Named Insureds:	An entity must be named to receive coverage under the policy Signal Peak Energy LLC Global Rail Group LLC

Schedule of Locations:
Loc. No. 1 — 100 Portal Drive Roundup MT 59072

Bldg No.	Description
4	Building #4-Shop
2	Building #2-Office (house)
7	Office/Bathhouse
8	Shop and Warehouse
9	Coal Prep Plant

Loc. No. 3 — 16432 Van Sky Road — 7 miles E of Broadview Broadview MT 59015

Bldg No.	Description
1	Dwelling — Tenant Occupied

Limits of Insurance
General Aggregate	$	2,000,000
Products/Completed Operations Aggregate	$	1,000,000
Personal and Advertising Injury	$	1,000,000
Each Occurrence	$	1,000,000
Damage to Rented Premises	$	1,000,000
Medical Expense	$	10,000

Coverage Trigger:	General Liability — Occurrence
	Employee Benefits — When Claim is Made

Deductible:

Coverage	Amount		Deductible Type	Deductible Basis
General Liability	$	5,000	Per Claim	Property Damage

Exclusions: Refer to policy for exclusions

Page 5

Coverage Modifications: See policy for specific information pertaining to these modifications

Description	Occurrence		Aggregate		Deductible
Employee Benefits Liability-Retroactive Date 7/16/08	$	1,000,000	$	1,000,000	$	1,000
Blanket Waiver of Subrogation — for ongoing operations only
Exclusion-Subsidence
Professional Liability Exclusion
Exclusion-Asbestos, Silica & Similar Compounds Including Mixed Dust
Who is Insured-Designated Person or Organization
Personal And Advertising Injury — Aggregate	$	1,000,000
Non Accumulation of Limits of Insurance
Additional Insured — lessor of leased equipment
Notice of cancellation — 90 days other than 10 days for non-pay
Employers Liability Total Exclusion

Audit Basis: Annual

Schedule of Exposures and Rates:

Loc.	Class					Last Year
No.	Code	Class Description	Rating Basis	Exposure		Exposure
1	00160-01	Coal Mining — Surface	Raw Tons	If Any		If Any
1	00160-02	Coal Mining — Underground	Raw Tons		12,000,000		11,500,000
1	00160-03	Clean Production Processing	Clean Ton		9,137,000		9,660,000
1	00176-01	Employee Benefits Liability	Employees		225		154
1	91581	Contractors — Subcontracted Work (Not Buildings)	Cost of Work		2,000,000	If Any
3	63010	Dwellings — One-Family (Lessor’s Risk Only)	Units		1		1
1	97223	Machinery or Equipment — NOC — Installation, Service, Repair	Payroll	If Any		If Any

Page 6

Commercial Pollution Liability Coverage

Policy Period:	7/16/2010 – 7/16/2011
Insurance Company:	Federal Insurance Co.
Schedule of Named Insureds:	An entity must be named to receive coverage under the policy Signal Peak Energy LLC Global Rail Group LLC

Schedule of Locations:
Loc No. 1 — 100 Portal Road Roundup MT 59072

Limits of Insurance
General Aggregate	$	1,000,000
Each Pollution Incident	$	1,000,000

Coverage Trigger:

Coverage	Ded.		Deductible Type
Pollution Liability	$	10,000	When Claim is Made

Exclusions:	Refer to policy for exclusions
Coverage Modifications:	See policy for specific information pertaining to these modifications

Description

Exclusion — Asbestos

Exclusion — Biological Agents — Total

Exclusion — Water Operations

Retroactive Date: July 16, 2008

Cap on Certified Terrorism Losses

Audit Basis: Annual

Page 7

Commercial Auto Coverage

Policy Period:	7/16/2010 – 7/16/2011
Insurance Company:	Federal Insurance Co.
Schedule of Named Insureds:	An entity must be named to receive coverage under the policy
	Signal Peak Energy LLC
	Global Rail Group LLC

	Covered
Coverage	Auto Symbol	Limits of Insurance
Liability	1	$	1,000,000	Each Accident
Medical Payment	7	$	5,000	Per Person
Uninsured Motorist	7	$	350,000	Per Accident
Underinsured Motorists	7	$	350,000	Per Accident
Physical Damage — Comprehensive	7 8	Valuation:		ACV or Cost of Repair
		Deductible:		See attached schedule
Physical Damage — Collision	7 8	Valuation:		ACV or Cost of Repair
		Deductible:		See attached schedule

Covered Auto Symbols

1	2	3	4	5	6	7	8	9
Any Auto	Owned Autos Only	Owned Private Passenger Autos Only	Owned Autos other than Private Passenger Autos Only	Owned Autos Subject to No- Fault	Owned Autos Subject to Compulsory Uninsured Motorists Laws	Specifically Described Autos Only	Hired Autos Only	Nonowned Autos Only

Exclusions:	Refer to policy for exclusions
Coverage Modifications:	See policy for specific information pertaining to these modifications

Description

Blanket Addtl Insd-by written contract for interest of lessor

Ninety Day Notice of Cancellation except 10 day for non-pay of premium

Fellow Employee Coverage

Blanket Waiver of Subrogation — required by contract only

Employees as Insureds

Hired Auto Physical Damage

Comprehensive Deductible: $1000
Collision Deductible: $1000

Page 8

Schedule of Vehicles:

Veh							Comp.		Coll.
#	Year	Make	Model	Vehicle I.D. Number	City	St.	Ded.		Ded.
1	2000	Chevrolet(Engr-Voice)	1500	1GCEK19T1YE148921	Billings	MT	$	1,000	$	1,000
2	2006	GMC (DeMichiei)	Denali	1 GKET63M662142255	Billings	MT	$	1,000	$	1,000
3	2005	GMC (Surface)	1500	1GTEK14T95Z260099	Billings	MT	$	1,000	$	1,000
4	2005	GMC (Surface)	1500	1GTEK14T25Z309739	Billings	MT	$	1,000	$	1,000
5	2005	GMC (Surface)	1500	1 GTEK14T45Z349031	Billings	MT	$	1,000	$	1,000
6	2005	GMC (Surface)	1500	1GTEK14T05Z266843	Billings	MT	$	1,000	$	1,000
7	2006	Chevrolet (Ochsner)	Trailblazer	1GNDT13S362196371	Billings	MT	$	1,000	$	1,000
8	2006	Chevrolet (Viren)	Trailblazer	1GNDT13S762203905	Billings	MT	$	1,000	$	1,000
9	1997	GMC (Engr)	Yukon	1GKEK13R9VJ710133	Billings	MT
10	2006	Chevrolet (Valentes)	Trailblazer	1GNDT13S062194402	Billings	MT	$	1,000	$	1,000
11	2008	Chevrolet (Roland)	Suburban	3GNFK16328G101017	Billings	MT	$	1,000	$	1,000

Note: Comprehensive, specific perils and collision coverage apply only when a deductible is shown on the vehicle

Schedule of Drivers:

					License
No.	Driver Name	Date of Birth		License Number	State
1	Robert Ochsner		5/19/1953	0501919534119	MT
2	Darrell H. Roland		4/27/1954	R453135298323	MD
3	Edward A Viren		1/22/1957	106885254	WY
4	John DeMichiei		2/21/1949	D520429585136	MD
5	Bradley Allen Voise		2/21/1955	0202419554121	MT
6	Magnus Lopes Valente		9/12/1963	IAA202601LGN	Int’l
7	Byron Kinn		5/19/1968	0503119684119	MT

Page 9

Commercial Equipment Coverage

Policy Period:	7/16/2010 – 7/16/2011
Insurance Company:	Federal Insurance Company

			Maximum Limit per
Description of Equipment	Total Limit		Item
Employee Tools & Clothing	$	10,000	$	2,500

Scheduled Equipment: Under Ground

Item
No.	Year	Description	Serial #	Limit
1	1997	CCHDR 13 Fletcher Roof Bolter (FA204)		$	155,000
2		MSA Trickle Duster (FA215)		$	7,000
3		MCI Section Power Center (FA210)	MMSE10140	$	65,000
4		Joy Shuttle Car (FA205)	ET15862	$	275,000
5		Joy Shuttle Car (FA206)	ET15195	$	275,000
6		Section Power Center (FA213)	MMSE1040	$	38,000
7		Wet Duster (FA218)	S115-S60T	$	13,000
8		Water Pressure Station (FA233)	BYM 16-20	$	6,000
9		Stamler Feeder Breaker (FA209)	BF14A4253	$	22,000
10		Fletcher DDR Roof Bolter (FA203)	13830	$	225,000
11		Joy Continuous Miner (FA201)	JM4882	$	800,000
12		Power Center Pemco (FA212)		$	59,000
13		Continuous Miner (FA202)	JM4276	$	800,000
14		Biopak Self Res & Access (FA234)		$	142,000
15		Mine Self Rescuer w/pouch (FA458)		$	21,000
16		Slinger Duster (FA217)		$	10,000
17		Bantam Dusters (2) (FA216)		$	21,000
18		Joy Shuttle Car 10SC32 (FA381)	ET17736	$	570,000
19		Wagner 3 1/2 yard scoop (FA388)		$	266,000
20		Power Center 1500 KVA (FA403)	1PC-R	$	102,000
21		Joy Feeder Breaker (FA452)	14200	$	500,000
22		Section Fan CR-60 (FA454)	401-1	$	75,000
23		Section Fan CR-60 (FA455)	401-2	$	75,000
24		Power Center Section 1500 KVA (FA457)		$	103,000
25		Power Center Belt 1500 KVA (FA460)		$	100,000
26		Wagner 3 1/2 yard scoop (FA472)	LHD-1	$	347,000
27		Getman LRD226 Tow Tractor (FA474)	7074	$	340,000
28		Getman LRD226 Tow Tractor (FA475)	7085	$	340,000
29		Getman Supply Tractor (FA476)	HH1005	$	125,000
30		Getman Supply Tractor (FA477)	HH1006	$	125,000
31		Genco Mantrip (FA401)	195	$	28,000
32		Dodge Mantrip (FA451)	3D7ML467496537747	$	25,000
33		Genco Mantrip (FA459)	213	$	28,000
34		Cap Lamps (FA526)		$	13,000
35		Continuous Miner JM6192 (FA527)	12CM12-11BX	$	1,871,000
36		Atlas Copco Compressor (FA528)	GA250-125	$	55,000
37		Fletcher Roof Bolter CCDDR-13 (FA531)	2008070	$	685,000
38		Transformers 300 KVA (FA529)		$	7,000
39		Slinger Duster (FA533)		$	46,000
40		Scoop (FA832)	LS195	$	517,000
41		Gator Mantrip (FA504)	WO4X2ED003586	$	10,000
42		Dodge 3500 Mantrip (FA521)	3D7ML46719G554134	$	25,000

Page 10

Item
No.	Year	Description	Serial #	Limit
43		Dodge 3500 Mantrip (FA522)	3D7ML46789G554132	$	25,000
44		Dodge 3500 Mantrip (FA523)	3D7ML467X9G554133	$	25,000
45		Genco Mantrip (FA524)	218	$	36,000
46		Dodge 3500 Mantrip (FA552)	3D7ML467496537747	$	33,000
47		42” Conveyor System w/motor (FA386)		$	200,000
48		60” Conveyor Belt 1410’ (FA402)		$	70,000
49		60” Conveyor Belt 2160’ (FA456)		$	40,000
50		Transformer fan 500 KVA (FA461)		$	14,000
51		Joy Shuttle Car (FA559)	ET17737	$	575,000
52		Rescue Chamber (FA582)		$	108,000
53		Belt Structure 60” 1000(FA592)		$	49,000
54		Shield Hauler (FA663)		$	116,000
55		Dodge 3500 Mantrip (FA 556)	3D7ML46789G554132	$	31,000
56		Dodge 3500 Mantrip (FA 557)	3D7ML46719G554134	$	31,000
57		Dodge 3500 Mantrip (FA558)	3D7ML467X9G554133	$	31,000
58		Dodge 3500 Mantrip (FA590)	9G558926	$	31,000
59		Feeder Breaker (FA708)		$	557,000
60		Mantrip (FA709)		$	26,000
61		Mantrip (FA710)		$	52,000
62		Mantrip (FA711)		$	52,000
			Total	$	11,414,000
Scheduled Equipment: Above Ground
Item
No.	Year	Description	Serial #	Limit
1	1983	Cat 980G Front End Loader (FA253)	AWH00597		369,000
2		Cat Backhoe BLN01721 (FA252)	420P1T		48,000
3		Cat 980G Front End Loader (FA250)	2KR04677		199,000
4		Cat Road Grader (FA251)	9DJ00659		385,000
5		Telehandler (FA553)	SLH00540		64,000
6		Komatsu 40 Ton Truck (FA247)	HD325-6A		292,000
7		CAT Dozer D10T (FA385)	RJG01548		1,100,000
8		Coal Lab Equipment (FA462)			151,000
9		Coal Lab Equipment (FA506)			5,000
10		Skid Steer (FA277)			25,000
11		Truck Scale (FA280)			47,000
12		GPS System (FA304)			44,000
13		CAT D10T Dozer (FA574)	RJG02055		1,175,000
14		Yale Pneumatic Lift Truck (FA576)			15,750
15		Gehl Skid Loader (FA591)			59,883
16		Getman Motor Grader (FA594)	7095		433,000
17		Madison #2 Water Well pump & line (FA560/FA561)			750,000
18		Skid Loader (FA721)			60,000
19		50KV Powerline Upgrade (FA586)			65,000
20		1000 KVA Transformer (FA680)			24,000
21		1000 KVA Transformer (FA681)			24,000
22		1000 KVA Transformer (FA682)			27,000
23		200 KVA Transformer (FA683)			37,000
24		Main Substation (FA684)			3,000,000
25		Surface Switchgear (FA685)			1,000,000
26		Cat D8T Dozer (FA824)	OKPZ01906		325,000
27		Cat 815F Wheel Compactor (FA825)	OBKL00992		199,500
28		Cat 330DL Excavator (FA826)	OMWP00339		153,500

Page 11

Item
No.	Year	Description	Serial #	Limit
29		Madison Deep Water Well Pump/Pipe (FA272)			500,000
30		Cat 924G Wheel Loader (FA827)	ODDA03664		72,500
31		Main Mine Fan (FA387)			350,000
			Total	$	11,000,133

Exclusions:	Refer to policy for exclusions
Coverage Modifications:	See policy for specific information pertaining to these modifications

Description	Limit		Deductible
Rental Expense	$	25,000
Scheduled Equipment-Aboveground-Deductible Per Occurrence	$	11,000,133	10% subject to $5,000 Min., $100,000 Max
Scheduled Equipment-Underground-Deductible Per Occurrence	$	11,414,000	10% subject to $10,000 Min.,
Maximum Loss Limit $5,000,000			$100,000 Max
Coverage-Direct Physical Loss
Mobile Equipment Aboveground of Others	$	100,000
Rented/Leased Equipment Coverage	$	500,000
Cap On Certified Terrorism Losses
Pull Back Warranty Endorsement

Page 12

Commercial Umbrella Coverage

Policy Period:	7/16/2010 — 7/16/2011
Insurance Company:	National Union Fire Ins Co of Pittsburgh
Schedule of Named Insureds:	An entity must be named to receive coverage under the policy Signal Peak Energy LLC Global Rail Group LLC
Limits of Insurance:	$5,000,000     Each Occurrence Limit $5,000,000     General Aggregate Limit
Self-Insured Retention:	$10,000
Coverage Form:	Follow Form Umbrella
Coverage Modifications:	Refer to policy for specific information pertaining to these modifications

Description	Limit
Crisis Response Coverage Enhancement	$	250,000
Excess Casualty Crisis Fund Limit of Insurance	$	50,000
Professional Liability Exclusion
Cross Suits Exclusion
Employers’ Liability For Occupational Disease Exclusion
Silica Exclusion
Total Pollution Exclusion
Foreign Liability Exclusion
Products-Completed Operations Aggregate	$	5,000,000
Act of Terrorism Self-Insured Retention	$	1,000,000
Mining Limitation Endorsement
Fungus Exclusion
Lead Exclusion
Radioactive Matter Exclusion
Commercial Umbrella Liability Policy With CrisisResponse
Coverage Territory
Violation of Economic or Trade Sanctions Conditions Amendment
Duties in the Event of an Occurrence, Claim or Suit and Schedule A — Approved Crisis Management Firms
Employee Benefits Liability Limitation (Claims-Made)
Employers’ Liability Limitation
Marine Liability Exclusion

Audit Basis: Annual

Page 16

Umbrella Coverage — Schedule of Underlying Insurance

Commercial Auto Coverage:

Ins. Company	Effective Date		Expiration Date		Limit
Federal Insurance Co		7/16/2010		7/16/2011	$	1,000,000

Employers Liability Coverage:

	Effective		Expiration		Each Acc.		Disease Each
Ins. Company	Date		Date		Limit		Emp. Limit		Disease Policy Limit
Commerce & Industry		7/16/2010		7/16/2011	$	1,000,000	$	1,000,000	$	1,000,000

General Liability Coverage:

Prod. /

Effective

Gen. Agg.

Comp.

Per Occ.

Per. / Adv.

Ins. Company

Date

Exp. Date

Limit

Ops Agg

Limit

Limit

Federal Insurance Co

7/16/2010

7/16/2011

$

2,000,000

$

1,000,000

$

1,000,000

$

1,000,000

Miscellaneous Coverages:

Ins. Company	Effective Date		Exp. Date		Coverage	Limit
Federal Insurance Co		7/16/2010		7/16/2011	EBL	$	1,000,000
Travelers Cas & Sur.		7/16/2010		7/16/2011	EBL	$	3,000,000

Page 17

Commercial Excess Coverage

Policy Period:	7/16/2010 — 7/16/2011
Insurance Company:	Lexington Insurance Company
Schedule of Named Insureds:	An entity must be named to receive coverage under the policy
Limits of Insurance:	$5,000,000     Each Occurrence Limit $5,000,000     General Aggregate Limit
Self-Insured Retention:
Coverage Form:	Umbrella
Coverage Modifications:	Refer to policy for specific information pertaining to these modifications

Description	Limit
Terrorism Coverage Provided Under the Federal Terrorism Risk Insurance Act of 2002, USA (certified acts)	$	5,000,000
Following Form — Excess Liability
Patrol Access Endorsement
Accident Insurance Endorsement
Amendment to Insuring Agreements
Defense Cost Payments (shall not reduce limits of liability)
Employment-Related Practices Exclusion
Minimum Earned Premium — $22,810
Occupational Disease Exclusion
Securities and Financial Interest Exclusion
Exclusion — Violation of Statutes in Connection With Sending, Transmitting or Communicating Any Material or Information
Unimpaired Aggregate
War Exclusion

Audit Basis: Annual

Page 18

Excess Coverage — Schedule of Underlying Insurance

Commercial Auto Coverage:

Ins. Company Effective Date Expiration Date Limit

Employers Liability Coverage:

Ins.	Effective	Expiration	Each Acc.	Disease Each Emp.	Disease Policy
Company	Date	Date	Limit	Limit	Limit

General Liability Coverage:

				Prod. /
Ins.	Effective	Exp.	Gen. Agg	Comp	Per Occ.	Per. / Adv.
Company	Date	Date	Limit	Ops Agg.	Limit	Limit

Miscellaneous Coverages:

Ins. Company	Effective Date		Exp. Date		Coverage	Limit
National Union Fire		7/16/2009		7/16/2010	Commercial Umbrella	$	5,000,000

Audit Basts: Annual

Page 19

Workers Compensation Coverage

Policy Period:	7/16/2010 — 7/16/2011
Insurance Company:	New Hampshire Insurance Company
Schedule of Named Insureds:	An entity must be named to receive coverage under the policy.
	Signal Peak Energy LLC
	Global Rail Group LLC
Workers’ Compensation Insurance:	Statutory MT

Employers’ Liability Insurance:	Bodily Injury by Accident	$	1,000,000	Each Accident
	Bodily Injury by Disease	$	1,000,000	Each Employee
	Bodily Injury by Disease	$	1,000,000	Policy Limit
Employers’ Liability Exclusions:	Refer to policy for exclusions
Coverage Modifications:	See policy for specific information pertaining to coverage and exclusions

Description

Federal Coal Mine Health & Safety Act Coverage

Voluntary Compensation & Employers Liability Coverage

Waiver of Subrogation — under any contract prior to occurrence of loss

Notification of Change In Ownership — must report within 90 days

Montana Intentional Injury Exclusion

Montana Safety Endorsement

Audit Basis: Annual

Rating: MT
Class		Estimated		Expiring
Code	Classification	Payroll		Payroll
0158	Coal Mining — Underground -Black Lung	$	16,800,000	$	10,766,000
1016	Coal Mining — Underground	$	16,800,000	$	10,766,000
0156	Coal Mine — Surface — Black Lung		If Any		If Any
1005	Coal Mining — Surface — & Drivers		If Any		If Any
8601	Architect or Engineer — Consulting	$	986,900	$	1,225,000
8233	Coal Merchant & Local Managers, Drivers		If Any		If Any
8810	Clerical Office Employees NOC	$	368,900	$	1,819,600

Page 14

Owner/Officer Coverage Elections:

Name	Title/Relation	Included/Excluded
Darrell Roland	Vice President	Included
John Demichiei	Vice President	Included
Wayne Boich	President/Director	Excluded
Brian T. Murphy	Secretary/Treasurer	Excluded

Page 15

Commercial Directors & Officers Coverage

Policy Period:	7/16/2010 — 7/16/2011
Insurance Company:	Travelers Casualty & Surety Company of America
Schedule of Named Insureds:	An entity must be named to receive coverage under the policy

Crime Coverage

Description	Ded.		Limit
Employee Theft	$	10,000	$	1,000,000

Directors and Officers Coverage

Description	Ded.		Limit
Aggregate Limit	$	25,000	$	3,000,000
Supplemental Personal indemnification Limit of Liability for Directors and Officers			$	500,000
Investigative Expense Limit			$	100,000

Employment Practices Liability Coverage

Description	Ded.		Limit
Aggregate Limit	$	10,000	$	3,000,000
Third Party EPL Sublimit	$	10,000	$	3,000,000

Fiduciary Liability Coverage

Description	Ded.		Limit
Aggregate Limit	$	0	$	1,000,000

Page 13

PROPERTY DAMAGE
AND BUSINESS INTERRUPTION POLICY

1

SCHEDULE
ATTACHING TO AND FORMING PART OF POLICY NO: 753 / PL0901791

Insured:	Signal Peak Energy LLC
Address:	100 Portal Drive, Roundup, Montana 59072 6856
Period of Insurance:	From: 1 November 2009
	To: 31 October 2010
	Both Days Inclusive Local Standard Time at the location of the property insured
The Business:	Coal Mine
Situation:	Montana, United States of America
Premises:	1) 127 PM Coal Road Roundup, Musselshell County, Montana 59072
	2) 100 Portal Drive, Roundup, Montana 59072 6856
Limits of Liability:	USD 50,000,000 each and every occurrence Combined Single Limit Sections 1 and 2
Deductibles:	USD 1,000,000 each and every occurrence in respect of Property Damage
	60 Days in respect of Business Interruption on Actual Daily Value basis (ADV)
Premium:	USD 826,705.74 (being 35.5556% of USD 2,325,107) per annum
Indemnity Period:	As defined herein
Dated in London:	1 November 2009

2

SECTION 1 — PROPERTY DAMAGE

The Indemnity

In the event of any physical loss, destruction or damage (hereinafter in Section 1 referred to as “damage” with “damaged” having a corresponding meaning) not otherwise excluded happening at the Situation occurring during the Period of Insurance to the Property Insured described in Section 1, the Insurer(s) will, subject to the provisions of the Policy including the limitation of the Insurers’ liability, indemnify the Insured in accordance with the applicable Basis of Settlement.

Subject to the liability of the Insurer(s) not being increased beyond the Limit(s) of Liability already stated herein, the Insurer(s) will also indemnify the Insured for:

(a) architects’, surveyors’, consulting engineers’, legal and other fees and clerks’ of work salaries for estimates, plans, specifications, quantities, tenders and supervision necessarily incurred in reinstatement consequent upon damage to Property Insured but not such costs, fees and salary for preparing any claim hereunder;

(b) any fee, contribution, impost or other sum payable to any Government, Local Government or other Statutory Authority; where payment of such fee, contribution, impost or other sum payable is a condition precedent to the obtaining of consent to reinstate any building(s) insured hereunder; provided that the Insurer shall not be liable for payment of any fines and/or penalties imposed upon the Insured by any such Authorities;

(c) costs and expenses necessarily and reasonably incurred for the purpose of extinguishing fire at or in the vicinity of Property Insured or threatening to involve such property, or for the purpose of preventing or diminishing imminent damage to Property Insured by any other peril insured by this Policy, including damage to gain access, and the costs of replenishment of fire protective equipment (where such fire protective equipment is required by law to be replaced with a different type of equipment; the cost of such different type of equipment of similar capabilities as the equipment being replaced) and charges incurred for the purpose of shutting off the supply of water or other substance following accidental discharge from any fire protective equipment or otherwise escaping from intended confines;

(d) costs and expenses necessarily and reasonably incurred for the temporary protection and safety of Property Insured pending repair or replacement consequent upon damage insured hereunder;

(e) cost of replacing locks and/or keys and/or combinations where, if as a result of burglary, theft or any attempt thereat, the keys and/or combination are stolen or if there are reasonable grounds to believe the keys may have been duplicated. Also the costs of opening safes and/or strongrooms as a result of theft of keys and/or combinations;

(f) costs and expenses necessarily and reasonably incurred in respect of:

(i) the removal, storage and/or disposal of debris or the demolition, dismantling, shoring up, propping, underpinning or other temporary repairs consequent upon damage to Property Insured by this Policy and occasioned by a peril or event not otherwise excluded;

(ii) the Insured’s legal liability in respect of removal, storage and/or disposal of debris, notwithstanding in relation to premises, roadways, services, railway or waterways of others, consequent upon damage to the Property Insured by a peril hereby insured against, for such costs together with the cost of cleaning provided that such liability was not assumed by the Insured under an agreement entered into after the commencement of the Period of Insurance or any renewal thereof unless liability would have attached in the absence of such agreement.

Provided that the insurance under this section does not extend to any liability that the Insured may incur as a consequence of pollution of any kind.

3

(iii) the demolition and removal of any property belonging to the Insured which is no longer useful for the purpose it was intended, providing such demolition and removal is necessary for the purpose of the reinstatement or replacement of Property Insured under this section and is consequent upon damage to the Property Insured by a peril hereby insured against.

For the purposes of this clause debris means the residue of damaged Property Insured excluding any material which is itself a pollutant or contaminant and which is deposited beyond the boundaries of the Situation.

(g)	damage to personal property, tools and effects (including money and negotiable instruments) belonging to directors, partners, proprietors and employees of the Insured whilst such persons are engaged on the business of the Insured and damage to property of welfare, sport and social clubs associated with the Insured whilst at the Situation.
(h)	costs and expenses reasonably incurred to expedite repairs, replacement or reinstatement consequent upon damage to Property Insured including, but not limited to, express airfreight, additional overtime, night, weekend or public holiday rates of pay incurred in connection with the repair or reinstatement of Property Insured directly or indirectly arising from an event insured.
(i)	the cost of locating and repairing burst or leaking water tanks, apparatus or pipes where a claim has been substantiated for loss or damage to the Property Insured arising therefrom including the cost of restoring the premises;
(j)	costs and expenses incurred by the Insured in taking inventory (including unpacking, repacking and restocking) to identify, quantify and value any Property Insured physically lost, destroyed or damaged by any peril insured against by this Section including examination of property not belonging to but in the care, custody or control of the Insured;
(k)	reduction in value of components or parts of Property Insured if such is consequent upon physical loss destruction or damage not otherwise excluded to other components or parts of Property Insured;
(l)	cost of clearance of drains including expenses necessarily incurred in clearing and/or repairing drains, gutters, sewers and the like, at or in the vicinity of Property Insured.
	for the purpose of this clause the cost of clearance means the residue of damaged Property Insured excluding any material which is itself a pollutant or contaminant and which is deposited beyond the boundaries of the Situation.

4

Property Insured

Joy Longwall miner to include the 2009 Joy Longwall Mining System, Hydraulic supports, 1250 Foot AFC, 7LS5 Shearer, including and not limited to shields, belts, belt structures, belt drives, conveyors and all equipment that is part of the Joy long wall mining operation. This property also extends to the underground and above ground equipment to the first stacking tube only

Basis of Settlement

(a)	On buildings, machinery, plant and all other property and contents (other than those specified below); the cost of reinstatement, replacement or repair in accordance with the provisions of the Reinstatement or Replacement and Extra Cost of Reinstatement Memoranda as set out herein.
	Provided that if the Insured elects to claim the indemnity value of any damaged property, the Insurer(s) will pay to the Insured the value of such property at the time of the happening of the damage or at its option reinstate, replace or repair such property or any part thereof. In any event the Insurer(s) will pay costs incurred by the Insured in accordance with the provisions of the Extra Cost of Reinstatement Memorandum.
(b)	On raw materials, supplies and other merchandise not manufactured by the Insured; the replacement cost at the time and the place of replacement or, if such property is not replaced, the value thereof at the time and place of the damage.
(c)	On materials in process of manufacture; the replacement value of the raw materials and the value of labour and other overhead charges expended thereon or apportioned thereto at the time and the place of the damage.
(d)	On finished goods; the replacement value of raw materials and the value of labour and other overhead charges expended thereon or apportioned thereto before any allowance for profit or the cost of restocking such goods, whichever is the lesser.
(e)	On computer systems records, documents, manuscripts, securities, deeds, specifications, plans, drawings, designs, business books and other records of every description; the cost of reinstating, replacing, reproducing or restoring same, including information contained therein or thereon but not for the value to the Insured of the said information; or if such is not required, the current replacement cost of materials as blank stationery or software and the like.
(f)	On patterns; models, moulds, dies or casts; the current cost of repair or replacement (if actually replaced) otherwise the indemnity value to the Insured of such property.
(g)	On glass; the cost of repairing or replacing the broken glass including:

• temporary Shuttering and/or hiring of security service pending replacement of broken glass;

• signwriting or Ornamentation on glass;

• replacement Burglar Alarm Tapes on glass;

• removing and re-fixing of Window and Show Case Frames and Fittings;

• heat Reflecting Material or process on glass.

(h)	On directors’ and employees’ personal property, tools and effects and customers and visitors’ personal effects; the current replacement cost at the time and place of replacement
(i)	On empty premises awaiting demolition; the salvage value of the building materials and/or landlords, fixtures and fittings.
(j)	On goods sold but not delivered for which the Insured is responsible and with regard to which, under the conditions of sale, the sale contract is by reason of the damage cancelled, either wholly or to the extent of the damage; the contract price.
(k)	On mobile plant and machinery and mining equipment that is five (5) or more years old at the time of loss or damage; replacement cash value.

5

MEMORANDA TO SECTION 1 OF THE POLICY

Except to the extent that this Policy is hereby modified under the following Memoranda the terms, conditions and limitations of this Policy shall apply.

Interest of Other Parties

The insurable interest of only those lessors, financiers, trustees, mortgagees, owners and all other parties specifically noted in the records of the Insured shall be automatically included without notification or specification; the nature and extent of such interest to be disclosed in event of damage.

Where the insurance covers the interest of more than one party, any act of neglect of an individual party will not prejudice the rights of the remaining party/parties; provided the remaining party/parties shall, immediately on becoming aware of any act of neglect whereby the risk of damage has increased, give notice in writing to the lnsurer(s) and on demand pay such reasonable additional premium as the Insurer(s) may require.

Branded Goods

Any salvage of branded goods and/or merchandise, the Insured’s own or held by the Insured in trust or on commission, and/or goods sold but not delivered, shall not be disposed of by sale without the consent of the Insured. If such salvage is not disposed of by sale then the damage will be assessed at the value agreed between the Insured and the Insurer(s) after brands, labels or names have been removed by or on behalf of the Insured.

Declared Values

It is specifically understood and agreed that, with respect to the declared values of Property Insured in accordance with the Basis of Settlement, such declared values shall not include any allowance for Extra Cost of Reinstatement and any of the cost and expenses referred to under clause (b) to (k) of The Indemnity

Reinstatement or Replacement

(Applicable to buildings, machinery, plant and all other property and contents, other than those specified in Items (b) to (i) under Basis of Settlement.)

The basis upon which the amount payable is to be calculated shall be the cost of reinstatement of the property Damaged at the time of its reinstatement, subject to the following Provisions and subject also to the terms, Conditions and Limit of Liability or Sub-Limit(s) of Liability of this Policy.

For the purpose of the insurance under this Memorandum “reinstatement” shall mean:

(a)	Where property is lost or destroyed, in the case of a building, the rebuilding thereof, or in the case of property other than a building, the replacement thereof, by similar property, in either case in a condition equal to but not better or more extensive that its condition when new.
(b)	Where property is Damaged, the repair of the damage and the restoration of the Damaged portion of the property to a condition substantially the same as but not better or more extensive than its condition when new.

Provisions

(i)

The work of rebuilding, or replacing, or repairing or restoring, as the case may be (which may be carried out upon any other site(s) and in any manner suitable to the requirements of the Insured, but subject to the liability of the Insurer not being thereby increased), must be commenced and carried out with reasonable dispatch, failing which the Insurer(s) shall not be prejudiced by the said delay and shall not be liable to make any payment for additional expenses incurred by the said delay.

(ii)

When any Property Insured to which this memorandum applies is damaged in part only, the liability of the Insurer(s) shall not exceed the sum representing the cost which the Insurer(s) could have been called upon to pay for reinstatement if such property had been wholly Damaged.

6

(iii) The Insured may elect to reinstate or replace destroyed property with dissimilar property, provided it is to be used for the purpose of The Business described in the Schedule. If the Insured elects to reinstate or replace destroyed property with dissimilar property, the Insurer(s) shall pay the lesser of:

(a)	the cost of the dissimilar property, or
(b)	an amount equal to the replacement cost which would have been payable if the destroyed property had been reinstated or replaced with similar property in a condition equal to but not better or more extensive than its condition when new.

(iv)

No payment beyond the amount which would have been payable under this Policy if this memorandum had not been incorporated herein shall be made until a sum equal to the cost of reinstatement shall have been actually incurred; provided that where the Insured reinstates or replaces any lost or destroyed property at a cost which is less than the cost of reinstatement (as defined) but greater than the value of such property at the time of the happening of its loss or destruction, then the cost so incurred shall be deemed to be the cost of reinstatement.

(v)

All other insurances covering the property effected by or on behalf of the Insured shall be on a similar reinstatement basis.

Extra Cost of Reinstatement

(Applicable to buildings, machinery, plant and all other property and contents, other than those specified in Items (b) to (i) under Basis of Settlement).

This Policy extends to include the extra cost of reinstatement including demolition or dismantling of the Property Insured necessarily incurred to comply with the requirements of any Act of Parliament or Regulation made thereunder or any By-Law or Regulation or requirement of any Municipal or other Statutory Authority, subject to the following provisions.

Provisions

(i)	The work of reinstatement, (which may be carried out wholly or partially upon another site, subject to the liability of the Insurer not being thereby increased), must be commenced and carried out with reasonable dispatch, failing which the lnsurer(s) shall not be prejudiced by the said delay and shall not be liable to make any payment for additional expenses incurred by the said delay.
(ii)	The amount recoverable shall not include the additional cost incurred in complying with any such Act, Regulation, By-Law or requirement with which the Insured had been required to comply prior to the happening of the Damage.
(iii)	If the cost of reinstatement of the Damage directly caused by any of the perils insured against is less than twenty five percent (25%) of what would have been the cost of reinstatement of the Property Insured had such property been destroyed the amount recoverable hereunder shall be limited to the extra cost necessarily incurred in reinstating only that portion Damaged.

Output Replacement

If the interest insured under the Policy constitutes property which has a measurable output and which is capable of replacement with a new item or items which perform a similar function then such property shall be valued for insurance purposes as follows, and values for the settlement of any loss destruction or damage in respect thereof shall be on the same basis:

(a)	If any damaged Property Insured is to be replaced by an item or items which have the same or a lesser total output, then the insurable value thereof is the new installed cost of such replacement item or items as would give the same total output as the damaged property;
(b)	If any damaged Property Insured is to be replaced by an item or items which have a greater total output and the replacement value is no greater than the value insured of the property damaged then no deduction shall be made from any claim due to improved output;
(c)	If any damaged Property Insured is to be replaced by an item or items which have a greater total output and the replacement value is greater than the value insured of the damaged property then the insurable value thereof is that proportion of the new installed cost of the replacement item or items as the output of the damages property bears to the output of the replacement item or items. The difference between the insurable value as defined and the new installed cost of the replacement item or items shall be borne by the insured;

7

Provided that in any event where any damaged property is to be repaired the Insurer(s) shall pay the cost of restoration of such damaged property to a condition substantially the same as, but not better or more extensive than, its condition when new and provided further that the liability of the Insurer(s) shall not exceed the sum representing the cost which the Insurer(s) could have been called upon to pay if such Property Insured had been wholly destroyed.

Floor Space Ratio Index (Plot Ratio)

In the event of the buildings being Damaged so as to constitute total loss or constructive total loss and, as a result of the exercise of statutory powers and/or authority by any Government Department, Local Government or any other Statutory Authority, reinstatement of the building as before is prohibited and reinstatement is only permissible subject to a reduced Floor Space Ratio Index:

The Insurer(s) agree(s) to pay in addition to the amount payable on reinstatement of the building(s) the difference between:

(a)	the actual cost of reinstatement incurred in accordance with the reduced floor space ratio index and
(b)	the cost of reinstatement which would have been incurred had a reduced floor space ratio index not been applicable.

In arriving at the amount payable under Item (a) above any payments made by the Insurer shall include the extra cost of reinstatement including demolition or dismantling of the Property Insured necessarily incurred to comply with the requirements of any Act of Parliament or Regulation made thereunder or any By-Law or Regulation of any Municipal or other Statutory Authority.

Any payment made for under Item (a) of this clause shall be made as soon as the said difference is ascertained upon completion of the rebuilding works being certified by the architect acting on behalf of the Insured in the reinstatement of the building.

Sealing of Mine

This Policy includes but is not limited to all reasonable cost of sealing the mine or part of the mine rendered necessary for the purpose or preventing or diminishing imminent damage to property of a type not excluded by this Policy, by any peril insured against by this Policy.

Acquired Companies

This Policy extends to include:

(a)	property located anywhere in the World belonging to companies and other organisations a controlling interest in which is acquired by the Insured during the currency of this Policy; and
(b)	property located anywhere in the World for damage to which such companies or other organisations are legally responsible or for which they have assumed responsibility to insure prior to the occurrence of any damage;

subject to the Insured declaring details of such acquisitions within a reasonable period following the date of acquisition. Provided the business of the new acquisition shall be similar to The Business as stated in the Schedule.

For the purposes of this Memorandum a controlling interest shall in the case of a company, mean the acquisition of shares carrying more than fifty per cent (50%) of votes capable of being cast at a general meeting of ordinary shareholders in such company.

Undamaged Foundations (aboveground property only)

Where any Property Insured is damaged but its foundations are not destroyed and due to the requirement of any law or of any local government or statutory authority reinstatement of the Property Insured has to be carried out upon another site then the abandoned foundations will be considered as being destroyed; PROVIDED THAT if the presence of the abandoned foundations increases the resale value of the original building site then such increase in resale value shall be regarded as salvage and the amount thereof shall be paid to the Insurer(s) by the Insured upon completion of the sale of the site, or shall be deducted from the final amount of any moneys payable by the Insurer(s) under this Policy, whichever shall occur later.

8

Abandoned Undamaged Portion of a Building Deemed Destroyed

If any building is damaged and due to the exercise of statutory powers or delegated legislation or authority by any government department, local government or other statutory authority, reinstatement of such building is carried out upon another site, then the abandoned undamaged portion of such building shall be deemed to have been destroyed; provided that if the presence of such abandoned undamaged portion of the building increases the sale value of the original site, the increase in sale value shall be regarded as salvage and the amount thereof shall be payable to the lnsurer(s) by the insured upon completion of any sale of the site or shall be deducted from the total amount otherwise payable by the Insurer(s) under this Policy, whichever shall occur later.

Provided this Memorandum shall only apply if more than 25% of the building as measured by floor area, is damaged by a peril insured under this Policy.

Designation

For the purpose of ascertaining the classification under which any property is insured, the Insurer(s) agree to accept the designation applied to such property by the Insured in its records, provided that such property is not specifically excluded by this Policy.

Customers Excise and Other Duties

This Policy extends to cover the Insured’s liability for customs, excise and other duties that the Insured may become liable to pay in the event of loss, destruction or damage to Property Insured.

Hired Property

Where the Insured enters into a lease or hiring agreement for property and the terms of such lease or hiring agreement include a disclaimer clause in favour of the lessor or the owner, then the insurance provided by the Policy shall not be prejudiced by the Insured agreeing to such terms.

Customers’ Goods

This Policy extends to cover goods belonging to the Insured’s customers or customers of others indemnified herein whilst at the premises described herein.

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SUB-SECTION 1 (a) MACHINERY BREAKDOWN

Insuring Clause

In the event of Loss or Damage as defined herein to the Property Insured by this Section of the Policy directly and wholly attributable to Breakdown as defined hereunder except as hereinafter excluded, such Loss or Damage occurring during the Period of Insurance as stated in the Schedule, the Insurer agrees to indemnify the Insured for such Loss or Damage in accordance with the terms and conditions as hereinafter set forth.

Coverage

Breakdown shall mean sudden and unforeseen physical loss or physical damage immediately necessitating repair or replacement before normal working can be resumed resulting from:

(a)	defects in material, design, construction, erection or assembly;
(b)	fortuitous working accidents such as vibration, maladjustment, weakening of parts, molecular fatigue, centrifugal force, abnormal stresses, defective or accidental lack of lubrication, water hammer or local overheating (except in the case of boilers or similar plant when followed by explosion) and failure or defects in protection devices;
(c)	excessive or insufficient electrical power, failure of insulation, short circuits, open circuits or arcing or the effects of static electricity;
(d)	incompetence, lack of skill or negligent acts of employees or third parties;
(e)	falling impact, collision, collapse or similar Occurrences, obstruction or the entry of foreign bodies;
(f)	Any other cause not hereinafter excluded.

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Excluded Risks within this Sub-Section 1 (a)

The Insurers shall not be liable for:

(a)

Loss or Damage caused by fire, direct lightning, explosion, extinguishing of a fire or subsequent demolition, aircraft and other aerial devices or articles dropped therefrom, collapse of buildings, disappearance, theft or any attempt thereat. Explosion shall not mean the bursting or disruption of turbines, compressors, engine cylinders, hydraulic cylinders, flywheels or other parts subject to centrifugal force, transformer switches or oil immersed switchgear; nor shall it mean the disintegration, overpressure or rupture of pressure vessels or boiler pressure parts;

(b)

Loss or Damage caused by earthquake, tsunami, volcanic eruption or other convulsion of nature, subsidence, landslide, rockfall, avalanche, hurricane, tornado, typhoon, cyclone, or other atmospheric phenomena, flood, inundation, escape of water from water-containing apparatus or clearance of debris, demolition or dismantling arising from these causes;

(c)	(i)	wastage of material, wearing away or wearing out of any part of any machinery caused by or resulting from ordinary usage, rust, boiler scale or other deposits, erosion, corrosion, cavitation or deterioration owing to chemical or atmospheric conditions or otherwise, scratching of painted or polished surfaces;
	(ii)	slowly developing deformation such as distortion, cracks, fractures, blisters, laminations, flaws or grooving or the making good of defective tube joints or other defective joints or seams unless such defects result in damage otherwise insured under this Section 1 of the Policy;

(d)	Loss or Damage caused by the imposition of abnormal conditions directly or indirectly resulting from testing or intentional and sustained overloading. Notwithstanding the provisions of this exclusion it is understood and agreed that testing is covered during pre commissioning, start-up, and commissions of construction and/or erection projects insured under Section 1 of this Policy;
(e)	Loss or Damage to foundations and/or masonry, exchangeable or replaceable parts and attachments such as flexible drives or tools used for cutting, drilling, grinding, polishing or similar purposes or moulds, patterns, pulverising and/or crushing surfaces, screens and/or sieves, engraved cylinders, ropes, chains, belts, elevator and/or conveyor bands, refractory linings, batteries, tyres, connecting wire and/or cables, flexible pipes, jointing and/or packing material and/or all other parts not made of metal (except the insulation of electrical conductors), fuels, filter fillings, cooling media, lubricants, catalysts, chemicals and/or other operating media and/or materials used in the course of process;
(f)	loss of use of any machine or consequential loss of any nature whatsoever other than as provided for under Section 2 in respect of Business Interruption;
(g)	Loss or Damage to boilers and/or pressure vessels due to or arising from flue gas and/or chemical explosion;

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(h) Loss or Damage caused by the wilful act, wilful neglect, gross negligence or wilful misconduct of the Insured or his representatives;

(i) (i) Loss or Damage to or loss of use of Property Insured directly or indirectly caused by seepage or pollution;

(ii)	the cost of removing, nullifying or cleaning-up seeping, polluting or contaminating substances;
	other than as provided elsewhere under this Policy;

(j)	Loss or Damage for which the manufacturer or supplier of the property is responsible either by law or under contract. In the event of the said supplier or manufacturer repudiating liability or not indemnifying the Insured within 30 days of the time the claim documents are in his possession whichever occurs first the Insurers shall indemnify the Insured, subject to subrogation of their rights, to the extent that such rights exist, against the manufacturer or supplier for such loss or damage;
	This exclusion shall not apply to loss or damage caused in the course of reinstating or replacing an otherwise insured damage;
(k)	Loss or Damage due to any faults or defects known to the Insured at the time this insurance was arranged and not disclosed to the Insurer;
(l)	The deliberate withholding from the Insured by the supply authority of supplies of water, steam, gas, electricity, fuel or refrigerant as a result of a dispute between the Insured and such authority unless resulting from a cause not excluded hereby.
(m)	Testing And Commissioning Clause

It is hereby noted and agreed that this Insurance does not extend to cover destruction or damage to property in course of construction or erection, dismantling, revamp or undergoing testing or commissioning including mechanical performance testing or any consequential loss resulting therefrom.

Acceptable of property hereon is subject to satisfactory completion of the following procedures and otherwise to the terms and conditions of this Policy.

i)	The plant is mechanically complete
	This requires all key items to be complete and that no temporary structures (such as pipe supports) remain awaiting permanent fixture
ii)	Plant Testing and commissioning has been completed with the design/ construction/ erection contract performance levels having been satisfactory achieved
iii)	Design performance criteria maintained by the entire plant in a stable and controlled manner for a continuous ongoing period of one hundred and sixty eight (168) hours
iv)	The Insured has accepted the plant without reservation or waiver of guarantee conditions

It is further noted and agreed that these provisions do not apply to normal routine maintenance activities and scheduled turnarounds

Cross Reference Clause

It is understood and agreed that losses excluded by this Sub-Section 1 (a) and not otherwise excluded by Section 1 shall be deemed covered by Section 1.

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Special Conditions applicable to Sub-Section 1 (a)

1.	Right of Inspection
	The Insurers’ officials shall at all reasonable times have the right of access to the Premises in which the machines are situated provided they comply with all reasonable site access requirements.
2.	Due Diligence
	It is agreed by the Insured that during the continuance of this Section 1 (a) the machine(s) shall be maintained in good working order and not wilfully operated beyond safe limits and that Government or other regulations relating to the condition, operated or inspection of machine(s) are observed. The Insured agree to forward to the Insurers copies of such inspection reports whenever required to do so by the Insurers within the Period of Insurance and any other period provided herein for the bringing of a suit against the Insurers.
3.	Valuation and Adjustment of Losses
	In case of Loss or Damage insured under this Section of the Policy, the basis of indemnity unless otherwise endorsed hereon shall be the Replacement Cost.
	“Replacement Cost” shall mean all expenses necessarily incurred to repair, rebuild or replace with new materials of like kind and quality including dismantling and re-erection charges incurred for the purpose of effecting repair. Replacement Cost shall be determined as of the date of incurring such expenditure.
	In the event that any Property Insured is not repaired, rebuilt or replaced, the basis of adjustment shall be calculated on the basis of the value of such Property Insured immediately before the Occurrence of the Los or Damage insured by this Section, with due allowance for depreciation by age, use and condition.
4.	Removal
	Such insurance as is afforded under this Section of the Policy shall also apply while the Property Insured is being removed because of imminent danger of Loss or Damage.

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SECTION 2 — BUSINESS INTERRUPTION

Interest Insured

In the event of Property Insured used by the Insured at the Premises, or Property Insured under any other Policy effected by or on behalf of the Insured, being Damaged during the Period of Insurance by any cause or event not hereinafter excluded and the Business carried on by the Insured being in consequence thereof interrupted or interfered with, the Insurer will, subject to the provisions of this Policy, pay to the Insured the amount of loss resulting from such interruption or interference in accordance with the applicable Basis of Settlement.

Provided that the Insurer will not be liable for any loss under this Section unless the Insurer, or insurers by which such property is insured, shall have paid for, or admitted liability in respect of such Damage, unless no such payment shall have been made or liability shall not have been admitted therefore solely owing to the operation of a provision in such insurance excluding liability for loss below a specific amount.

Basis of Settlement

Item 1 — Gross Earnings

The insurance under this item is limited to loss of Gross Earnings due to (a) Reduction in Turnover and (b) Increase in Cost of Working. The amount payable as indemnity hereunder shall be:

(a)	In respect of Reduction in Turnover:
	The sum produced by applying the Rate of Gross Earnings to the amount by which the Turnover during the Indemnity Period shall, in consequence of the Damage, fall short of the Standard Turnover, less any non continuing Standing Charges.
(b)	In respect of Increase in Cost of Working:
	The additional expenditure necessarily and reasonably incurred for the sole purpose of avoiding or diminishing the reduction in Turnover and/or resuming or maintaining Normal Operations which but for that expenditure would have taken place during the Indemnity Period in consequence of the Damage, but not exceeding the sum produced by applying the Rate of Gross Earnings to the amount of the reduction thereby avoided.

less any sum saved during the Indemnity Period in respect of such of the charges and expenses of the business payable out of the Gross Earnings as may cease or be reduced in consequence of the damage.

In determining Turnover during the Indemnity Period, any amounts recovered under Section 1 for finished products and/or merchandise shall be included as though completed sales.

If during the Indemnity Period products shall be sold or services shall be rendered elsewhere that at the premises of the business, either by the Insured or by others on the Insured’s behalf, the money paid or payable in respect of such sales or services shall be included in arriving at the Turnover during the Indemnity Period. The Insured agrees to use any suitable property or service owned or controlled by the insured or obtainable from other sources in order to maintain Turnover and reduce the loss under this Policy.

In adjusting any loss, account shall be taken and an equitable allowance made if any shortage in Turnover due to the Damage is postponed by reason of Turnover being maintained (temporary or otherwise) from accumulated stocks of finished products and/or merchandise.

Actual Daily Valuation is calculated at 1/365^th of the annual business interruption value of the site affected x the number of days specified

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Item 2 — Contractual Payments

The insurance under this item is in respect contractual fines and/or penalties for breach of contract and the amount payable as indemnity hereunder shall be such sum(s) as the Insured shall be legally liable to pay and shall pay in discharge fines and/or penalties incurred in consequence of the Damage for non-completion and/or late completion of orders and/or non-performance and/or late performance or services and/or the inability to meet contract specifications or resultant cancellation of orders.

Item 3 — Accounts Receivable

The Insurance under this item is limited to the loss sustained by the Insured in respect of outstanding debit balances directly due to Damage to the Insured’s books of account or other business books or records and the amount payable shall be:

1. the difference between:

(a)	the outstanding debit balances, and
(b)	the total of the amounts received or traced in respect thereof.

2.	the additional expenditure incurred in tracing and establishing customer’s debit balances including collection expenses in excess of normal collection expenses following the Damage.
3.	interest on any loan to offset impair collection pending repayment of such sums made uncollectable by such Damage.

When Damage covered by this item has occurred but the Insured cannot more accurately establish the outstanding debit balances as of the date of such Damage, such amount shall be computed as follows;

• The monthly average of outstanding debit balances represented by the Insured shall be adjusted in accordance with the percentage increase or decrease in the twelve months average of monthly sales of products and services that may have occurred in the interim.

• The monthly amount of outstanding debit balances thus established shall be further adjusted in accordance with any demonstrable variance from the average for the particular month in which the Damage occurred; due consideration also being given to the normal fluctuations in the amount of outstanding debit balances within the fiscal month involved.

• There shall be deducted from the total amount of outstanding debit balances, however established, the amount of such outstanding debit balances evidenced by records not Damaged or otherwise established or collected by the Insured, and an amount to allow for probable bad debts which would normally have been uncollectable by the Insured.

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Definitions

The following terms, wherever used, in Section 2 shall mean:

Indemnity Period: The Period of Indemnity applying to Business Interruption is as shown below:

the period:

(a)	starting from the time of physical loss or damage of the type insured against; and
(b)	ending when with due diligence and dispatch the building and equipment could be:

(i)	repaired or replaced; and
(ii)	made ready for operations,

under the same or equivalent physical and operating conditions that existed prior to the damage, irrespective of the date of expiration of this Policy.

Extended Period of Indemnity: This Policy will cover the Actual Loss Sustained by the Insured due to consequential reduction in Gross Earnings:

a.	directly resulting from the interruption of business insured under this Policy;
b.	for such additional time as would be required with due diligence and dispatch to restore the Insured’s business to the condition that would have existed had no loss occurred;
c.	beginning on the date on which liability of Insurers for loss resulting from interruption of business would end without this coverage, but
d.	in no event for more than 180 days from that date.

Standard Turnover: The turnover during that period in the twelve months immediately before the date of the damage, which corresponds with the Indemnity Period.

Standing Charges: Fixed and Continuing Expenses.

Turnover: The money (less discounts, if any allowed) paid or payable to the Insured for goods sold and/or delivered or for services rendered in the course of the Business, not to be limited by the day of expiration or cancellation of this Policy.

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MEMORANDA APPLICABLE TO SECTION 2

Accumulated Stock

In adjusting any loss, account shall be taken and equitable allowance made if any reduction in Turnover or Gross Earnings due to the Damage is postponed by reason of the Turnover being temporarily maintained from accumulated stocks of finished goods.

Books of Account

Any particulars or details contained in the Insured’s books of account or other business books or documents which may be required by the Insurer for the purpose of investigating or verifying any claim hereunder may be produced and certified by the Insured’s auditors and their certificate shall be prima-facie evidence of the particulars and details to which such certificate relates.

The words and expressions used herein shall have the meaning usually attached to them in the books and accounts of the Insured unless otherwise defined in the Policy.

Computer Installations

This Section is extended to include loss (not otherwise recoverable) resulting from interruption to or interference with the Business occasioned by Damage resulting from any of the perils hereby insured against to computer installations, including ancillary equipment and data processing media, utilised by the Insured provided that liability for such Damage would have been admitted by the Insurer had such property been insured under a property damage Policy.

Contractual Commitments

This Section is extended to include loss sustained in respect of contractual commitments and the amount payable as indemnity thereunder shall be such sums as the Insured shall be legally liable to pay and shall pay under contracts for purchases which cannot be utilised by the Insured in consequence of the Damage less any sums received or receivable by the Insured in respect of such purchases through any salvage handling operations or resale.

Departmental Clause

If the Business be conducted in departments the independent trading results of which are ascertainable the provisions of Clauses (a) and (b) of Item No. 1 — of Basis of Settlement (Section 2) — may at the option of the Insured apply separately to each department affected by the Damage. Provided that the trading results of all business units within the one Operating Group that are affected by the Damage shall be taken into account for the purpose of adjusting a claim.

Where, for the purpose of avoiding or diminishing a reduction in Turnover or Gross Earnings, goods or services are purchased from a party also insured under this Policy, the reasonable full price of such goods or services shall be taken into account for the purpose of adjusting a claim as though the goods or services were purchased from a party not also insured by this Policy.

Deterioration of Undamaged Stock

This Section is extended to cover loss directly resulting from interruption to or interference with the Business carried on by the Insured at the Premises occasioned by the deterioration of otherwise undamaged stock caused by inability to process or complete any process in consequence of Damage to property used by the Insured at the Premises.

Such loss for the purpose of this Policy being deemed to be loss resulting from Damage.

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Diminution in Value of Stock

This Section is extended to include loss sustained in respect of stocks and materials-in-trade not directly affected by the Damage which:

1.	would have been utilised by the Business or sold during the Indemnity Period had the Damage not occurred, and
2.	cannot be utilised or sold before or, so far as can reasonably be foreseen, after the expiration of the Indemnity Period; solely due to their obsolescence resulting from changes in designs. The amount payable as indemnity hereunder shall be the purchase (or manufactured) cost of such goods to the Insured less, if the goods be sold for salvage, the net amount realised from any salvage sale.

Registered Vehicles and/or Trailers

Notwithstanding Property Exclusion 5 this Section extends to include loss resulting from interruption of or interference with the Business occasioned by Damage to registered vehicles and/or trailers whilst such vehicles or trailers are at the Premises owned or occupied by the Insured; provided always that this Policy does not cover loss resulting from physical loss, destruction of or damage to such vehicles and/or trailers whilst they are being used on any public highway or thoroughfare except as allowed by the terms of Property Exclusion 5.

Royalties Receivable

This Section is extended to include loss of royalties receivable (and the amount payable as indemnity hereunder shall be the actual shortfall of royalties receivable) during the Indemnity Period in consequence of Damage to property at the premises of any company or organisation which pays such royalties to the Insured, or at the premises of any manufacturer or distributor upon which any such company or organisation is dependent.

Turnover or Gross Earnings Elsewhere After Damage

If during the Indemnity Period goods shall be sold or service shall be rendered elsewhere than at the Premises for the benefit of the Business either by the Insured or by others on the Insured’s behalf the money paid or payable in respect of such sales or services shall be brought into account in arriving at the Turnover or Gross Earnings during the Indemnity Period.

Turnover / Output Alternative

At the option of the Insured, the term Output may be substituted for the term Turnover or Gross Earnings and, for the purpose of this Section, Output shall mean the sale and/or invoice value of goods manufactured and/or processed by the Insured in course of the Business at the Premises. Provided that only one such term shall be operative in connection with any one occurrence involving Damage.

If the meaning set out above be used, the memorandum Turnover or Gross Earnings Elsewhere After Damage shall be altered to read as follows:

If during the Indemnity Period goods shall be manufactured and/or processed other than at the Premises for the benefit of the Business either by the Insured or by others on the Insured’s behalf the sale and/or invoice value of the goods so manufactured and/or processed shall be brought into account in arriving at the Output during the Indemnity Period.

The memorandum Accumulated Stocks shall be altered to read as follows:

In adjusting any loss under this Section, account shall be taken and equitable allowance made if any shortage in Output due to the Damage is postponed by reason of the Output being temporarily maintained from accumulated stocks and/or raw materials.

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EXCLUSIONS APPLICABLE TO ALL SECTIONS

Property Exclusions

This Policy does not cover physical loss, destruction of or damage to the following property or loss under Section 1 resulting therefrom:

1.	property in transit beyond the confines of any site or lease.
2.	money which shall mean coin and paper currency, cheques (including travellers cheques), negotiable instruments, letters of credit, bills of exchange, postal and money orders, stamps, credit cards, credit card sale vouchers and the contents of franking machines
3.	jewellery or furs, (other than as personal property of directors, employees or visitors) bullion, precious metals or precious stones other than as stock and/or merchandise of the Business.
4.	any locomotive or rolling stock, watercraft or aircraft;
5.	vehicles or trailers registered or licensed to travel on a public road, provided that this exclusion shall not apply to mobile plant and equipment and vehicles or trailers not otherwise insured, whilst on any premises occupied or used by the Insured;
6.	Livestock, animals, birds or fish;
7.	standing timber, growing crops and pastures;
8.	land, land values, improvements to or in land.
9.	underground workings and tunnels, underground excavations, highwalls, shafts, declines, inclines, stopes, drifts, roadways, haul roads, access roads, earthworks, open pits and any other open cut excavation, pitwalls, leach pads, leachate solution, liners forming part of leach pads, precious metals in solution,
10.	mobile plant, except for plant and equipment within open pits or underground that is not otherwise excluded for which a value has been scheduled and declared to Insurers;
11.	consumable property used in underground mines, including but not limited to roof-bolts, rock bolts, rock dust, fuel, oil, lubricants, construction material or supplies except that which has not been installed or put to its intended use;
12.	tailings dams and any structure used for containment of tailings and other property situated thereon or therein;
13.	autoclaves as a result of gradually developing flaws, deformation, distortion, cracks or partial fractures;
14.	loss or damage to refractory linings;
15.	loss or damage to underground property situated under unsupported roof or to remotely controlled plant and machinery underground whilst operating in remote mode.
16.	unmined minerals, coal deposits or ore;
17.	gold or precious metals in any form;
18.	property (other than coal and other raw materials) in the course of being or due to it being processed.
19.	empty premises undergoing demolition.
20.	offshore oil and gas drilling and/or production rigs whilst offshore.
21.	docks, wharves and piers not forming part of any building.
22.	transmission and distribution towers, poles lines components, or equipment beyond 300 metres of the Insured’s Premises.

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23.	(a) property undergoing construction, and/or erection, and/or testing and/or commissioning, provided that this exclusion shall not apply to normal mine development or maintenance. (b) empty premises undergoing demolition
24.	rehabilitation and/or restoration of mine workings
25.	property situated within the confines of, or forming part of, any open pits and any other open cut excavation.
26.	property forming part of or situated within the confines of any underground mine except that this exclusion shall not apply to longwall face equipment (as defined herein)

Perils Exclusions

The Insurer(s) shall not be liable under Section 1 and/or Section 2 in respect of:

1. physical loss, destruction of or damage to the Property Insured

(a)	directly or indirectly occasioned by or happening through or connected with war, invasion, act of foreign enemy, hostilities (whether war be declared or not), civil war, rebellion, revolution, insurrection, military or usurped power;
(b)	resulting from confiscation, nationalisation, requisition, or damage to property by or under the order of any Government or Public or Local Authority.

Notwithstanding the provisions of Perils exclusion 1(b) the lnsurer(s) shall be liable for loss, destruction of or damage to, or the cost of removal of, sound property at the Insured’s Premises for the purpose of preventing or diminishing imminent damage by, or inhibiting the spread of fire or under the order of any Government or Public or Local Authority when such fire is not a result of any of the excluded perils in the paragraph 1(a).

2. (a) physical loss, destruction of or damage to the Property Insured;

(b)	any legal liability of whatsoever nature, directly or indirectly caused by or contributed to by or arising from:
	ionising radiations or contamination by radioactivity from any nuclear waste or from the combustion of nuclear fuel;

For the purpose of this exclusion only “combustion” shall include any self-sustaining process of nuclear fission.

nuclear weapons materials.

3. physical loss, destruction or damage occasioned by or happening through:

(a) (i) loss of weight, evaporation; inherent vice; latent defect; the action of amp atmosphere; natural variations in temperature; insects, vermin, rust, oxidation or corrosion;

(ii) contamination or pollution; changes in colour, flavour, texture or finish; the action of smut or smoke from industrial operations, mildew, mould, wet and dry rot or disease; unless such events result form a cause not specifically excluded which originates beyond the premises owned, occupied or used by the Insured;

(b)	wear and tear, fading, scratching or marring, gradual deterioration or developing flaws, normal upkeep or making good
(c)	error or omission in design, plan or specification or failure of such design;
(d)	normal settling, seepage, shrinkage or expansion in buildings or foundations, walls, pavements, roads and other structural improvements, in regard to underground operations only the mining condition known as creep and heave.

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(e) faulty materials or faulty workmanship

Provided that this Exclusion 3(a) to (e) shall not apply to subsequent loss, destruction of or damage to the Property Insured occasioned by a peril (not otherwise excluded) resulting from any event or peril referred to in this exclusion.

4. physical loss, destruction or damage occasioned by or happening through;

(a) incorrect siting of buildings consequent upon

(i)	error in architectural design or specification,
(ii)	faulty workmanship,
(iii)	non compliance by the Insured (or anyone acting on behalf thereof) with the necessary permits issued by Government, Public or Local Authorities.

(b)	demolitions ordered by Government or Public or Local Authorities due to failure on the part of the Insured or their agents to obtain the necessary permits required.
(c)	error or omission in design, plan or specification or failure of design.

5. physical loss, destruction of or damage occasioned by or happening through:

(a) unexplained or inventory shortage or disappearance resulting from clerical or accounting errors, or shortage in the supply or delivery of materials to or from the Insured.

6. physical loss, destruction or damage occasioned by or happening through:

(a) (i) fraudulent or dishonest acts, fraudulent misappropriation, embezzlement, forgery, counterfeiting data corruption, unauthorised amendment of data and erasure by electronic or non-electronic means involving the Property Insured by the Insured or any employee(s) of the Insured acting or in collusion with any other person(s).

(ii) access by any person(s) other than the Insured or the Insured’s employee(s) to the Insured’s computer system via data communication media that terminate in the Insured’s computer system,

provided that this exclusion shall not apply to theft consequent upon forcible and violent entry upon premises or felonious concealment upon premises committed by an employee of the Insured or theft of money whilst in transit;

(b) (i) cessation of work whether total or partial

(ii) cessation, interruption or retarding of any process or operation as a direct result of strikes, labour disturbances or locked-out workers.

(c) kidnapping, bomb threat, hoax, extortion or any attempt thereat

Provided that this Exclusion 6(a) to(c), shall not apply to subsequent loss, destruction or damage to Property Insured occasioned by a peril (not otherwise excluded) resulting from any event or peril referred to in this exclusion.

7. any legal liability of whatsoever nature other than as herein provided.

8.	consequential loss of any kind including consequential loss due to delay, lack of performance, loss of contract or depreciation in the value of land or stock, except as herein provided in Section 2.
9.	physical loss, destruction or damage to property underground caused directly or indirectly by water and/or other liquid matter other than damage solely and exclusively caused by water entering the underground portion of a mine via man-made surface level openings.
10.	physical loss, destruction or damage caused by subsidence and/or under-mining in, adjacent to, or above any mine whether open cut or underground.

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11.	physical loss, destruction or damage to property underground directly caused by or arising out of the mining conditions known as “creep” or “heave”, but not excluding resultant physical loss or damage by a peril not otherwise excluded.
	For the purposes of the application of this exclusion:
	“Creep” shall mean gradual deformation that results from the application of stress resulting in forcing the pillars down into the floor of an underground mine.
	“Heave” shall mean gradual deformation of the floor of an underground mine.
12.	physical loss, destruction or damage to raise boring equipment whilst in “hole”
13.	physical loss destruction or damage caused by or resulting from the escape of material from hydraulically backfilled stopes.
14.	all non-damage Business Interruption, advanced Business Interruption and Contingent Business Interruption

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DEFINITIONS APPLICABLE TO ALL SECTIONS

For the purpose of this Policy, the following definitions will apply:

1. Accidental Damage

The term Accidental Damage shall mean:

Damage to the Property Insured (subject to the Exclusions Applicable to All Sections) arising out of any one original source or cause other than fire, lightning, thunderbolt, explosion, implosion or collapse, smoke and/or steam, spontaneous fermentation or heating, spontaneous combustion, earthquake, subterranean fire, volcanic eruption, subsidence, earth movement or collapse resulting therefrom or landslip, impact by any waterborne craft, land vehicles or animals, aircraft and/or other aerial devices and/or articles dropped or falling therefrom, sonic boom, burglary, theft, the acts of persons taking part in riots or civil commotions or of strikers or locked-out workers or of persons taking part in labour disturbances or of malicious persons or the acts of any lawfully constituted authority in connection with the foregoing acts or in connection with any conflagration or other catastrophe, flood, water from or action by the sea, tidal wave or high water, storm and/or tempest and/or rainwater and/or hail water and/or other liquids or substances discharged, overflowing or leaking from apparatus, appliances, pipes, sprinkler and/or any other system at the Premises or elsewhere, Machinery Breakdown or any other events or circumstances more specifically mentioned under any other Sub-Limit in the Schedule.

2. Damage

The term Damage shall mean direct physical loss, destruction or direct physical damage not specifically excluded by this Policy with the word Damaged having a corresponding meaning.

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MEMORANDA APPLICABLE TO ALL SECTIONS

Except to the extent that this Policy is hereby modified under the following Memoranda the terms, Conditions and Limitations of this Policy shall apply.

Amount of Policy not reduced by Loss

The insurance under each section and/or item of this Policy and the Indemnity Period shall be automatically reinstated in the event of any loss in consideration of the payment by the Insured of a pro-rata additional premium calculated on the amount of the loss settlement at the rate(s) agreed for the Period of Insurance.

Event

Only for the purpose of the application of any deductible: all loss destruction or damage resulting from earthquake occurring during each period of 72 consecutive hours shall be considered as one event whether such earthquake is continuous or sporadic in its sweep and/or scope and the loss, destruction or damage was due to the same seismological conditions. Each event shall be deemed to have commenced on the first happening of any such loss, destruction or damage not within the period of any previous event.

Subrogation Waiver

The Insurer(s) agree(s) to waive any rights and remedies or relief to which it/they may become entitled by subrogation against:

(a)	any corporation or organisation (including its directors, officers, employees or servants) owned or controlled by any Insured named herein or subsidiary to any Insured named herein or any co-owner of the Property Insured hereunder;
(b)	any Insured named or described by this Policy (including its directors, officers, employees or servants).

Adjustment Of Premium

1. Material Damage Section

a)	The Insured shall at the commencement of the Period of Insurance and at each subsequent Period of Insurance provide as soon as practicable to the Insurer(s) a declaration which the Insured warrants is to the best of his knowledge and belief the Replacement Cost or Indemnity Value at the time of all Insured Property according to the basis on which the respective property is insured.
b)	The value of property as declared will form the basis of the premium for Insurance under Section 1. The premium is provisional and shall be adjusted by payment to the Insurers(s) of an additional premium or by allowance to the Insured of a return premium as the case may be where during the Period of Insurance there has been an abnormal fluctuation in value of the Insured Property during the Period of Insurance.
	For the purpose of this clause an abnormal fluctuation in value shall be any fluctuation in excess of 10% of the Insured’s declaration of value of property at the commencement of the Period of Insurance as compared to the lnsured(s) declaration of value of property on expiry of the Period of Insurance.

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c) Such adjustment shall be made to the premium at the agreed rate applied to the difference between the value of the Insured Property declared at the commencement of the Period of Insurance and the value of Insured Property on the day of the expiry of the Period of Insurance.

2. Business Interruption Section

a)	The Insured shall at the commencement of the Period of Insurance and at each subsequent Period of Insurance provide to the Insurer(s) a Declaration of the estimated Gross Profit and Payroll under the terms of the Policy for that period.
b)	The estimated Annual Gross Profit and Payroll as declared will form the basis of the premium for Insurance under Section 2 and the premium produced shall be non adjustable for the Period of Insurance.

Contractual Agreements

Where in the ordinary course of Business the Insured enters into an agreement with another party and such agreement provides in substance that the Insured shall indemnify and/or hold harmless and/or release from liability such other party in respect of loss destruction or damage which may occur as a result of any peril or eventuality insured against by the Policy, this insurance shall not be prejudiced by the Insured agreeing to such provision.

Hazardous Goods

The storage of hazardous goods usual to trade and/or occupation is allowed.

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CONDITIONS APPLICABLE TO ALL SECTIONS

1. Misrepresentation And Non-Disclosure

If the Insured —

(a) failed to disclose any matter which the Insured was under a duty to disclose to the Insurer(s); or

(b) made a misrepresentation to the Insurer(s) before this Policy was entered into

and if the Insurer(s) would not have entered into this Policy for the same premium and on the same terms and Conditions expressed in this Policy but for the failure to disclose or the misrepresentation, then —

(i) the liability of the Insurer(s) in respect of any claim will be reduced to an amount to place the Insurer(s) in the same position in which the Insurer(s) would have been placed if such nondisclosure had not occurred or such misrepresentation had not been made; or

(ii) if the non-disclosure or misrepresentation was fraudulent, the lnsurer(s) may avoid this Policy.

2. Alteration

The Insurance by the Policy shall not be prejudiced by:

(a)	any act or omission unknown to or beyond the control of the Insured on the part of any tenant occupying or using the premises;
(b)	structural alterations and/or repairs, limited to buildings, machinery and plant;
(c)	any alteration of occupancy;

Provided that any such acts, omissions or alterations upon coming to the knowledge of the Insured’s officer responsible for insurance, shall as soon as practical notified to the Insurer(s) and, if agreed to by the Insurer(s) in writing, an appropriate additional premium paid if required.

3. Sprinkler Installations

Applicable to owned premises or installations for which the Insured is responsible

The Insured warrants that in such of the Premises as are protected or as are required by law to be protected by an approved installation of automatic sprinklers, automatic external alarm signal and automatic alarm signal connected with a fire brigade station, in or on the Premises, due diligence shall be used so that the same shall at all times be maintained in good working order.

Notice of all alterations and additions to the automatic sprinkler installation shall be given by the Insured to the Insurer(s) as soon as reasonably practicable.

4. Other Insurance

The Insured shall give written notice as soon as practicable to the Insurer(s) of any other insurance or insurances effected covering the Property Insured.

5. Cancellation

(a) This Policy may be cancelled at any time at the request of the Insured, in which case the Insurer(s) will retain the customary pro rata for the time this Policy has been in force.

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(b) The Insurer(s) may also cancel this Policy by giving the Insured written notice to that effect where —

(i)	the Insured or any person who was at any time the Insured failed to comply with the duty of utmost good faith;
(ii)	the person who was the Insured at the time when this Policy was entered into failed to comply with the duty of disclosure;
(iii)	the person who was the Insured at the time when this Policy was entered into made a misrepresentation to the Insurer(s) during the negotiations for this Policy but before it was entered into;
(iv)	the Insured or any person who was at any time the Insured failed to comply with a provision of this Policy, including a provision with respect to the payment of the Premium;
(v)	the Insured has made a fraudulent claim under this Policy or any other Policy of insurance (whether with the Insurer(s) or some other insurer) that provided insurance cover during any part of the period during which this Policy provides insurance cover;
(vi)	the Insured failed to notify the Insurer(s) of any specific act or omission where such notification is required under the terms of this Policy; or
(vii)	the Insured acted in contravention of or omitted to act in compliance with any condition of this Policy which empowers the Insurer(s) to refuse to pay, or reduce its/their liability in respect of, a claim in the event of such contravention or omission.

(c) The Insurer(s) notice of cancellation takes effect at the earlier of the following times:

(i)	the time when another Policy of insurance between the Insured and the Insurer(s) or some other insurer, being a Policy that is intended by the Insured to replace this Policy, is entered into; or
(ii)	10 business days after the day on which notice was given to the Insured.

In the event that the lnsurer(s) cancel(s) this Policy, the Insurer(s) will repay to the Insured a rateable proportion of the Premium for the unexpired Period of Insurance from the date of cancellation.

6. Notification Of Claims

On the happening of any loss, destruction or damage giving rise to a claim under this Policy, the Insured shall forthwith give notice thereof in writing to the Insurer(s) and shall as soon as reasonably practicable deliver to the Insurer(s) a statement of claim in writing containing as particular an account as may be reasonably practicable of the items of property lost, destroyed or damaged and of the amount of loss, destruction or damage thereto, having regard to their value at the time of the loss, destruction or damage, together with details of any other insurances which may apply to the claim.

The Insured shall use due diligence and do and concur in doing all things reasonably practicable to minimise any interruption of or interference with the Business to avoid or diminish the loss and shall also deliver to the Insurer(s) a statement in writing of any claim certified by the Insured’s auditor or accountants, with all particulars and details reasonably practicable of the loss and shall produce and furnish all books of account and other business books, invoices, vouchers and all other documents, proofs, information, explanations and other evidence and facilities as may reasonably be required to enable the Insurer(s) to investigate and verify the claim together and such information or documentation shall be verified on oath as required by the Insurer(s).

No claim under this Policy shall be payable unless the Insured has complied with the terms of this condition.

7. Fraud

If the insured shall make any claim knowing the same to be false or fraudulent, as regards amount or otherwise, this contract shall become void and all claim hereunder shall be forfeited.

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8. Reinstatement

If the Insurer(s) elect(s) or become(s) bound to reinstate or replace any property, the Insured shall at the Insured’s own expense produce and deliver to the Insurer(s) all such plans, documents and information as the Insurer(s) may reasonably require. The Insurer(s) shall not be bound to reinstate exactly or completely, but only as circumstances permit and in reasonably sufficient manner and shall not in any case be bound to expend more than the applicable Limit of Liability.

9. Insurer(s) Rights

On the happening of any loss, destruction or damage in respect of which a claim is or may be made under this Policy the Insurer(s) and every person authorised by the Insurer(s) may, without thereby incurring any liability, and without diminishing the right of the Insurer(s) to rely upon any Conditions of this Policy, enter, take or keep possession of any building or premises where the loss, destruction or damage has happened and may take possession of or require to be delivered to the Insurer(s) any of the property hereby insured and may keep possession of and deal with such property for all reasonable purposes and in any reasonable manner.

This condition shall be evidence of the leave and licence of the Insured to the Insurer(s) so to do. The Insured shall do all necessary within the Insured’s control to ensure that the Insurer(s)’ requirements are met and that the Insurer(s) is (are) not hindered or obstructed in undertaking anything authorised by any provision of the Policy.

The Insured shall not be entitled to abandon any property to the Insurer(s) whether taken possession of by the Insurer(s) or not.

10. Subrogation

Any person claiming under this Policy shall at the request and at the expense of the Insurer(s) do and concur in doing and permit to be done all such acts and things as may be necessary or reasonably required by the Insurer(s) for the purpose of enforcing any rights and remedies, or of obtaining relief or indemnity from other parties to which the Insurer(s) shall be or would become entitled or subrogated upon the Insurer(s) paying for or making good any destruction or damage under this Policy.

If the Insurer(s) make(s) any recovery as a result of such action, the Insured may only recover from the Insurer(s) any amount by which the amount recovered by the Insurer(s) exceeded the amount paid to the Insured by the Insurer(s) in relation to the loss.

11. Precautions To Prevent Loss

The Insured shall take all reasonable precautions to prevent loss, destruction or damage to the Property Insured by this Policy.

12. Termination Of Cover Under Section 2

Notwithstanding anything contained herein to the contrary, if during any period in respect of which this Policy is in force:

a)	the Insured ceases to carry on the Business or any part of the Business is disposed of, permanently discontinued or the Insured’s interest in the Business or such part thereof ceases otherwise than by death; or
b)	the Insured (being a corporation) is placed in liquidation (or provisional liquidation), is placed under Official Management, enters into a Scheme of Arrangement, has Receivers and/or Managers appointed over its assets or undertaking(s); or
c)	the Insured (being a natural person) becomes a bankrupt or enters into a scheme of arrangement or compromise or composition with creditors;

then the insurance cover provided under Section 2 of this Policy in respect of such Business or Insured shall automatically and forthwith cease.

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In the event of the Indemnity Period having begun to run in respect of any claim relating to such Business or part thereof, the Indemnity Period shall thereupon be at an end, unless its continuance be admitted by memorandum signed for or on behalf of the Insurer(s).

13. Observance Of Terms And Conditions

The due observance and fulfilment of these Conditions and the other terms of this Policy by the Insured, insofar as the same are capable of being construed as such, are conditions precedent to any liability of the Insurer(s) to make any payment under this Policy.

14. Progress Payments

Provided that liability has been admitted progress payments on account of any claim may be made to the Insured at such intervals and for such amounts as may be agreed upon production of a report by the Loss Adjuster (if appointed) provided such payment(s) shall be deducted from the amount finally determined upon adjustment of the claim.

15. Headings

Headings have been included for ease of reference and it is understood and agreed that the terms and Conditions of this Policy are not to be construed or interpreted by reference to such headings.

16. Jurisdiction

This insurance shall be governed by the law of Montana, United States of America. Each party agrees to submit to the jurisdiction of competent jurisdiction within Montana, United States of America and to comply with all requirements necessary to give such court jurisdiction. All matters arising hereunder shall be determined in accordance with the law and the practice of such court.

17. Reasonable Despatch

If, following physical loss or destruction of or damage to Property Insured, the Insured considers that resumption of its business activity and/or the work of reinstating or replacing or repairing the Property Insured poses a threat to human life or safety or is otherwise contrary to the law of England and Wales, and as a result the Insured delays commencement of all or part of the resumption and/or all or part of the work of reinstatement or replacement or repairing, then Insurer(s) agree that any such delay is beyond the control of the Insured and that the Insured is acting with reasonable despatch and due diligence.

18. Inspection

Insurer(s), at all reasonable times during the Period of Insurance, shall be permitted but not obligated to inspect the Property Insured by this Policy. Neither Insurer(s) right to make inspections nor the making thereof nor any report thereon shall constitute any undertaking, on behalf of or for the benefit of the named Insured or others, to determine or warrant that such property is safe or healthful.

19. Collection From Others

No loss or part of a loss shall be paid or made good hereunder to the extent the Insured has collected such loss from others. However, such collection shall not constitute a condition precedent to the right of the Insured to make any claim or to receive any payment by Insurer(s) under and in accordance with this Policy.

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20. Interest Of Other Parties

In addition to the indemnity provided to the Insured this Policy extends to indemnify any other party having an interest in the Property Insured by virtue of and in accordance with the terms of a mortgage, leasing, hiring, financial, equity or renting agreement or any other form of agreement and it is agreed that the receipts of any such parties for any claims settlements under this Policy in relation to their respective interests shall be a full and sufficient discharge to Insurer(s).

For the purpose of the indemnity by this extension, it is agreed that Insurer(s) will waive all rights of subrogation which they may have or acquire against any of the said parties in respect of such property and that any agreement that the insured may have between any or all such parties will not affect the validity of this extension.

21. Permission

Permission is given to cease operations and for any premises to be vacant or unoccupied.

22. Service of Suit Clause (U.S.A.)

It is agreed that in the event of the failure of the Insurers hereon to pay any amount claimed to be due hereunder, the Insurers hereon, at the request of the Insured (or Reinsured), will submit to the jurisdiction of a Court of competent jurisdiction within the United States. Nothing in this Clause constitutes or should be understood to constitute a waiver of Insurers’ rights to commence an action in any Court of competent jurisdiction in the United States, to remove an action to a United States District Court, or to seek a transfer of a case to another Court as permitted by the laws of the United States or of any State in the United States. It is further agreed that service of process in such suit may be made upon Mendes and Mount, 750 Seventh Avenue, New York, NY 10019-6829, and that in any suit instituted against any one of them upon this contact, Insurers will abide by the final decision of such Court or of any Appellate Court in the event of an appeal.

The above-named are authorized and directed to accept service of process on behalf of Insurers in any such suit and/or upon the request of the Insured (or Reinsured) to give a written undertaking to the Insured (or Reinsured) that they will enter a general appearance upon Insurers’ behalf in the event such a suit shall be instituted.

Further, pursuant to any statute of any state, territory or district of the United States which makes provision therefor, Insurers hereon hereby designate the Superintendent, Commissioner or Director of Insurance or other officer specified for that purpose in the statute, or his successor or successors in office, as their true and lawful attorney upon whom may be served any lawful process in any action, suit or proceeding instituted by or on behalf of the Insured (or Reinsured) or any beneficiary hereunder arising out of this contract of insurance (or reinsurance), and hereby designate the above-named as the person to whom the said officer is authorized to mail such process or a true copy thereof.

NMA 1998

(24/4/86)

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ENDORSEMENT NUMBER:	One (1)
INSURED:	Signal Peak Energy LLC
POLICY NUMBER:	753 / PL0901791
EFFECTIVE DATE:	1 November 2009

TERRORISM EXCLUSION ENDORSEMENT

Notwithstanding any provision to the contrary within this insurance or any endorsement thereto it is agreed that this insurance excludes loss, damage, cost or expense of whatsoever nature directly or indirectly caused by, resulting from or in connection with any act of terrorism regardless of any other cause or event contributing concurrently or in any other sequence to the loss.

For the purpose of this endorsement an act of terrorism means an act, including but not limited to the use of force or violence and/or the threat thereof, of any person or group(s) of persons, whether acting alone or on behalf of or in connection with any organisation(s) or government(s), committed for political, religious, ideological or similar purposes including the intention to influence any government and/or to put the public or any section of the public, in fear.

This endorsement also excludes loss, damage, cost or expense of whatsoever nature directly or indirectly caused by, resulting from or in connection with any action taken in controlling, preventing, suppressing or in any way relating to any act of terrorism.

If the Insurers allege that by reason of this exclusion, any loss, damage, cost or expense is not covered by this insurance the burden of proving the contrary shall be upon the Insured.

In the event any portion of this endorsement is found to be invalid or unenforceable, the remainder shall remain in full force and effect.

NMA2920

08/10/2001

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ENDORSEMENT NUMBER:	Two (2)
INSURED:	Signal Peak Energy LLC
POLICY NUMBER:	753 / PL0901791
EFFECTIVE DATE:	1 November 2009

ELECTRONIC DATA ENDORSEMENT B

1.	Electronic Data Exclusion
	Notwithstanding any provision to the contrary within the Policy or any endorsement thereto, it is understood and agreed as follows:-

a) This Policy does not insure, loss, damage, destruction, distortion, erasure, corruption or alteration of ELECTRONIC DATA from any cause whatsoever (including but not limited to COMPUTER VIRUS) or loss of use, reduction in functionality, cost, expense of whatsoever nature resulting therefrom, regardless of any other cause or event contributing concurrently or in any other sequence to the loss.

ELECTRONIC DATA means facts, concepts and information converted to a form useable for communications, interpretation or processing by electronic and electromechanical data processing or electronically controlled equipment and includes programmes, software, and other coded instructions for the processing and manipulation of data or the direction and manipulation of such equipment.

COMPUTER VIRUS means a set of corrupting, harmful or otherwise unauthorised instructions or code including a set of maliciously introduced unauthorised instructions or code, programmatic or otherwise, that propagate themselves through a computer system or network of whatsoever nature. COMPUTER VIRUS includes but is not limited to ‘Trojan Horses’, ‘worms’ and ‘time or logic bombs’.

b) However, in the event that a peril listed below results from any of the matters described in paragraph a) above, this Policy, subject to all its terms, conditions and exclusions will cover physical damage occurring during the Policy period to Property Insured by this Policy directly caused by such listed peril.

Listed Perils
Fire
Explosion

2. Electronic Data Processing Media Valuation

Notwithstanding any provision to the contrary within the Policy or any endorsement thereto, it is understood and agreed as follows:-

Should electronic data processing media insured by this Policy suffer physical loss or damage insured by this Policy, then the basis of valuation shall be the cost of the blank media plus the costs of copying the ELECTRONIC DATA from back-up or from originals of a previous generation. These costs will not include research and engineering nor any costs of recreating, gathering or assembling such ELECTRONIC DATA. If the media is not repaired, replaced or restored the basis of valuation shall be the cost of the blank media. However this Policy does not insure any amount pertaining to the value of such ELECTRONIC DATA to the Insured or any other party, even if such ELECTRONIC DATA cannot be recreated, gathered or assembled.

NMA 2915
25/01/2001

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ENDORSEMENT NUMBER:	Three (3)
INSURED:	Signal Peak Energy LLC
POLICY NUMBER:	753 / PL0901791
EFFECTIVE DATE:	1 November 2009

Notwithstanding any provision to the contrary within this insurance or any endorsement thereto:

MICRO-ORGANISM EXCLUSION (MAP)

This Policy does not insure any loss, damage, claim, cost, expense or other sum directly or indirectly arising out of or relating to:

mold, mildew, fungus, spores or other micro-organism of any type, nature, or description, including but not limited to any substance whose presence poses an actual or potential threat to human health.

This exclusion applies regardless whether there is:

(i)	any physical loss or damage to insured property;
(ii)	any insured peril or cause, whether or not contributing concurrently or in any sequence;
(iii)	any loss of use, occupancy, or functionality; or
(iv)	any action required, including but not limited to repair, replacement, removal, cleanup, abatement, disposal, relocation, or steps taken to address medical or legal concerns.

This exclusion replaces and supersedes any provision in the Policy that provides insurance, in whole or in part, for these matters.

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ENDORSEMENT NUMBER:	Four (4)
INSURED:	Signal Peak Energy LLC
POLICY NUMBER:	753 / PL0901791
EFFECTIVE DATE:	1 November 2009

ASBESTOS ENDORSEMENT (WEH)

A. This Policy only insures asbestos physically incorporated in an insured building or structure, and then only that part of the asbestos which has been physically damaged during the Period of Insurance by one of these Listed Perils:

Fire; Explosion; Lightning; Windstorm; Hail; Direct impact of vehicle, aircraft or vessel; Riot or civil commotion; Vandalism or malicious mischief; or accidental discharge of fire protective equipment.

This coverage is subject to all limitations in the Policy to which this endorsement is attached and, in addition, to each of the following specific limitations:

1.	The said building or structure must be insured under this Policy for damage by that Listed Peril.
2.	The Listed Peril must be the immediate, sole cause of the damage to the asbestos.
3.	The Insured must report to Insurers the existence and cost of the damage as soon as practicable after the Listed Peril first damaged the asbestos. However this Policy does not insure any such damage first reported to Insurers more than 12 (twelve) months after the expiration, or termination, of the Period of Insurance.
4.	Insurance under this Policy in respect of asbestos shall not include any sum relating to:

(i)	any faults in the design, manufacture or installation of the asbestos.
(ii)	asbestos not physically damaged by the Listed Peril including any governmental or regulatory authority direction or request of whatsoever nature relating to undamaged asbestos.

B. Except as forth in the foregoing Section A, this Policy does not insure asbestos or any sum relating thereto.

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ENDORSEMENT NUMBER:	Five (5)
INSURED:	Signal Peak Energy LLC
POLICY NUMBER:	753 / PL0901791
EFFECTIVE DATE:	1 November 2009

BIOLOGICAL OR CHEMICAL MATERIALS EXCLUSION

It is agreed that this Policy excludes loss, damage, cost or expense of whatsoever nature directly or indirectly caused by, resulting from or in connection with the actual or threatened malicious use of pathogenic or poisonous biological or chemical materials regardless of any other cause or event contributing concurrently or in any other sequence thereto.

NMA2962

06/02/03

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ENDORSEMENT NUMBER:	Six (6)
INSURED:	Signal Peak Energy LLC
POLICY NUMBER:	753 / PL0901791
EFFECTIVE DATE:	1 November 2009

PRESERVATION OF PROPERTY (WEL)

In case of actual or imminent physical loss, destruction or damage of the type insured against by this Policy, the expenses incurred by the Insured in taking reasonable and necessary actions for the temporary protection and preservation of Property Insured hereunder shall be added to the total physical loss, destruction or damage otherwise recoverable under the Policy and be subject to the applicable deductible without increase in the limit provisions contained in this Policy.

The expenses so incurred shall be borne by the Insured and the Insurer(s) proportionately to the extent of their respective interests. The Insurer(s) portion of such expense shall be limited to the extent that such expenses reduce loss which would otherwise be payable under this Policy and are subject to a Sub-Limit of USD 5,000,000 subject to the deductible stated in the Schedule.

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ENDORSEMENT NUMBER:	Seven (7)
INSURED:	Signal Peak Energy LLC
POLICY NUMBER:	753 / PL0901791
EFFECTIVE DATE:	1 November 2009

ADDITIONAL LIMITATIONS AND CONDITIONS ENDORSEMENT (STANDARD)

THIS ENDORSEMENT CONTAINS PROVISIONS IN CLAUSES II, V AND VI THAT MAY LIMIT OR PREVENT RECOVERY UNDER THIS POLICY FOR DEBRIS REMOVAL (AS PROVIDED IN CLAUSE II) AND/OR RESULTING LOSS (AS PROVIDED IN CLAUSE V).

I. LAND, WATER AND AIR EXCLUSION CLAUSE

Notwithstanding any provision to the contrary within the Policy of which this Endorsement forms part (or within any other Endorsement which forms part of this Policy), this Policy does not insure land (including but not limited to land on which the insured property is located), water or air, howsoever and wherever occurring, or any interest or right therein. The foregoing exclusion shall not apply to water which is contained in plumbing or firefighting installations in the Insured’s buildings at the time of any damage insured by this Policy.

II. DEBRIS REMOVAL CLAUSE

Nothing contained in this Clause shall override any seepage and/or pollution and/or contamination exclusion or any radioactive contamination exclusion or any other exclusion applicable to this Policy. The inclusion of this Clause shall in no event increase the Limit of Liability of Insurers under this Policy or any other endorsement applicable to this Policy.

Any provision within this Policy (or within any other Endorsement which forms part of this Policy) which insures debris removal is cancelled and replaced by the following:

1. In the event of direct physical damage to property, for which Insurers agree to pay hereunder, or which but for the application of a deductible or underlying amount they would agree to pay (hereinafter in this Clause referred to as “Damage”), this Policy also insures, subject to the limitations below and method of calculation in Clause VI of this Endorsement and to all the other terms and conditions of the Policy, expense:

(a) which is reasonably and necessarily incurred by the Insured in the removal, from the premises of the Insured at which the Damage occurred, of debris which results from the Damage; and

(b) of which the Insured becomes aware and advises the amount to Insurers hereon within one year of the commencement of the Damage;

provided however, that nothing in this Clause shall insure any expense provided under Clause V of this Endorsement.

2. The maximum amount of expense for removal of debris (subject to the limitations of paragraph 1 above) that can be included in the method of calculation in Clause VI of this Endorsement, shall be the greater of USD 500,000 (five hundred thousand Dollars) or 10% (ten per cent) of the amount of the Damage from which expense results.

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III. SEEPAGE AND/OR POLLUTION AND/OR CONTAMINATION EXCLUSION CLAUSE

Notwithstanding any provision to the contrary within the Policy of which this Endorsement forms part (or within any other Endorsement which forms part of this Policy), this Policy does not insure:

1. any loss, damage, cost or expense; or

2. any increase in insured loss, damage, cost or expense; or

3. any loss, damage, cost, expense, fine, penalty or other sum which is incurred, sustained or imposed by, or by the threat of, any judgement, order, direction, instruction or request of, or any agreement with, any court, government agency, any public, civil or military authority or any other person (and whether or not as a result of public or private litigation);

which arises from any kind of seepage or any kind of pollution and/or contamination, or threat thereof, whether or not caused by or resulting from a peril insured, or from steps or measures taken in connection with the avoidance, prevention, abatement, mitigation, remediation, clean-up or removal of such seepage or pollution and/or contamination, or threat thereof.

The term “any kind of seepage or any kind of pollution and/or contamination” as used in this Endorsement includes (but is not limited to):

1. seepage of, or pollution and/or contamination by anything, including but not limited to, any material designated as a “hazardous substance” by the United States Environmental Protection Agency or as a “hazardous material” by the United States Department of Transportation, or defined as a “toxic substance” by the Canadian Environmental Protection Act for the purposes of part II of that Act, or any substance designated or defined as toxic, dangerous, hazardous or deleterious to persons or the environment under any other law, ordinance or regulation; and

2. the presence, existence, or release of anything which endangers or threatens to endanger the health, safety or welfare of persons or the environment.

IV. LISTED PERILS RESULTING FROM SEEPAGE AND/OR POLLUTION AND/OR CONTAMINATION CLAUSE

This Policy is amended as set forth below. All other terms and conditions of this Policy remain unchanged and continue to apply with full force and effect. Nothing contained in this Clause shall override any radioactive contamination exclusion applicable to this Policy. If any of the perils listed below results from seepage and/or pollution and/or contamination, then such resultant perils shall not be excluded solely by the foregoing Seepage and/or Pollution and/or Contamination Exclusion Clause.

Listed Perils
Fire,
Explosion.

Nothing in this Clause, however, shall extend this Policy to insure:

1.	loss, damage, cost, expense, fine or penalty, or other sum arising from any kind of seepage or any kind of pollution and/or contamination that causes or results from a listed peril; or
2.	loss or damage at any premises other than the premises where the listed peril took place; or
3.	property and/or interests other than those insured by this Policy against the listed perils.

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V. LIMITED SEEPAGE AND/OR POLLUTION AND/OR CONTAMINATION RESULTING FROM PHYSICAL DAMAGE CAUSED BY LISTED PERILS CLAUSE

THIS CLAUSE IS VOID AND OF NO FORCE OR EFFECT UNLESS AN AMOUNT IS SPECIFIED IN PARAGRAPH 2) BELOW.

This Policy is amended as set forth below. All other terms and conditions of this Policy remain unchanged and continue to apply with full force and effect. Nothing contained in this Clause shall override any radioactive contamination exclusion or, except as set forth herein, the foregoing Seepage and/or Pollution and/or Contamination Exclusion Clause. The inclusion of this Clause shall in no event increase the Limit of Liability of Insurers under this Policy or any other endorsement applicable to this Policy.

1. If.

(a) any of the perils listed below is the sole, immediate and direct cause of physical damage to Property Insured by this Policy against such listed peril (hereinafter in this Clause referred to as “Original Damage”); and

(b) the Original Damage is the sole, immediate and direct cause of seepage onto, and/or pollution and/or contamination of property which is:

(i)	at the same premises as the Original Damage; and
(ii)	insured by this Policy against the listed peril causing the Original Damage; and

(c) said property is damaged thereby (hereinafter in this Clause referred to as “Resulting Damage”);

then this Policy, subject to the following additional terms and limitations and the method of calculation in Clause VI of this Endorsement, also insures:

(d) the Resulting Damage; and

(e) the reasonable and necessary expense incurred by the Insured for debris removal and/or clean up which is:

(i)	limited to the same premises as the Original Damage; and
(ii)	made necessary solely by the Resulting Damage;
	but which shall in no event include any expense of clean up or removal of land, water or air,

(which Resulting Damage and expense of debris removal and/or clean up, hereinafter in this Clause are referred to as “Resulting Loss”);

provided, however, that this Policy only insures the Resulting Loss where:

(f) Insurers have agreed to pay for the Original Damage or, but for the operation of a deductible or underlying amount, would have agreed to pay for the Original Damage; and

(g) within one year of the commencement of the listed peril which caused the Original Damage, the Insured became aware and advised Insurers of the amount of:

(i) the Resulting Loss; and

(ii) any other interest to be claimed under this Policy as a result of the Resulting Damage, whether physical damage, business interruption, extra expense or otherwise.

Listed Perils
Fire,
Lightning,
Explosion.

39

Nothing in this Clause, however, shall extend this Policy to cover any condition that existed prior to the Original Damage nor to insure any loss, damage, cost, expense, fine, penalty, or other sum which is incurred, sustained or imposed by, or by the threat of, any judgement, order, direction, instruction or request of, or any agreement with, any court, government agency, any public, civil or military authority or any other person (and whether or not as a result of public or private litigation) in connection with any kind of seepage or any kind of pollution and/or contamination from any cause.

2. The maximum amount for any Resulting Loss and any other interest claimed under this Policy as a result of the Resulting Damage, whether physical damage, business interruption, extra expense or otherwise, that can be included in the method of calculation in Clause VI of this Endorsement is USD 500,000 (or the equivalent in local currency).

VI. METHOD OF CALCULATION

In calculating the amount, if any, payable under this Policy for a claim including expense of debris removal (as provided for and limited in Clause II of this Endorsement) and/or Resulting Loss (as provided for and limited in Clause V of this Endorsement), the amount of such expense of debris removal and/or such Resulting Loss shall be added to:

(a) the amount of the Damage (as defined in Clause II) or the amount of the Original Damage (as defined in Clause V); and

(b) all other amounts, if any, insured under this Policy as a result of the same occurrence that Insurers hereon agree to pay or, but for the application of a deductible or underlying amount, they would agree to pay;

then the resulting sum shall be the amount of which first all deductibles and then any underlying amounts to which this Policy is subject shall be applied and then balance, if any, shall be the amount payable, subject to all other provisions of this Policy and to the applicable limit(s), Sub-Limit(s) and aggregate limit(s).

21/2/91

NMA2415

40

ENDORSEMENT NUMBER:	Eight (8)
INSURED:	Signal Peak Energy LLC
POLICY NUMBER:	753/PL0901791
EFFECTIVE DATE:	1 November 2009

ELECTRONIC DATE RECOGNITION EXCLUSION (LISTED PERILS)

1. This Policy does not cover any loss, damage, cost, claim or expense, whether preventative, remedial or otherwise, directly or indirectly arising out of or relating to:

(a) the calculation, comparison, differentiation, sequencing or processing of data involving the date change to the year 2000, or any other date change, including leap year calculations, by any computer system, hardware, programme or software and/or any microchip, integrated circuit or similar device in computer equipment or non-computer equipment, whether the property of the insured or not; or

(b) any change, alteration, or modification involving the date change to the year 2000, or any other date change, including leap year calculations, to any such computer system, hardware, programme or software and/or any microchip, integrated circuit or similar device in computer equipment or non-computer equipment, whether the property of the insured or not.

This clause applies regardless of any other cause or event that contributes concurrently or in any sequence to the loss, damage, cost, claim or expense.

2. However, in the event that a peril listed below results from 1.(a) or 1.(b) above, this Policy, subject to all its other terms, conditions and exclusions, will cover physical damage occurring during the policy period to Property Insured by this Policy directly caused by such listed peril.

Listed Perils

Fire
Explosion

3. Notwithstanding Section 2 above, this Policy does not cover any costs and expenses, whether preventative, remedial or otherwise, arising out of or relating to change, alteration or modification of any computer system, hardware, programme or software and/or any microchip, integrated circuit or similar device in computer equipment or non-computer equipment, whether the property of the insured or not.

16/7/98

NMA2808

41

ENDORSEMENT NUMBER:	Nine (9)
INSURED:	Signal Peak Energy LLC
POLICY NUMBER:	753 / PL0901791
EFFECTIVE DATE:	1 November 2009

ZURICH TESTING AND COMMISSIONING CLAUSE

It is hereby noted and agreed that this Insurance does not extend to cover destruction or damage to property in course of construction or erection, dismantling, revamp or undergoing testing or commissioning including mechanical performance testing or any consequential loss resulting therefrom.

Acceptance of Property hereon is subject to satisfactory completion of the following procedures and otherwise subject to the terms and conditions of this Policy.

v)	The plant is mechanically complete
	This requires all key items to be complete and that no temporary structures (such as pipe supports) remain awaiting permanent fixture

vi) Plant Testing and commissioning has been completed with the design/ construction/ erection contract performance levels having been satisfactory achieved

vii) Design performance criteria maintained by the entire plant in a stable and controlled manner for a continuous ongoing period of one hundred and sixty eight (168) hours

viii) The Insured has accepted the plant without reservation or waiver of guarantee conditions

It is further noted and agreed that these provisions do not apply to normal routine maintenance activities and scheduled turnarounds

42

ENDORSEMENT NUMBER:	Ten (10)
INSURED:	Signal Peak Energy LLC
POLICY NUMBER:	753 / PL0901791
EFFECTIVE DATE:	1 November 2009

U.S. TERRORISM RISK INSURANCE ACT OF 2002 AS AMENDED
NOT PURCHASED CLAUSE

This Clause is issued in accordance with the terms and conditions of the “U.S. Terrorism Risk Insurance Act of 2002” as amended as summarized in the disclosure notice.

It is hereby noted that the Insurer(s) have made available coverage for “insured losses” directly resulting from an “act of terrorism” as defined in the “U.S. Terrorism Risk Insurance Act of 2002”, as amended (“TRIA”) and the Insured has declined or not confirmed to purchase this coverage.

This Insurance therefore affords no coverage for losses directly resulting from any “act of terrorism” as defined in TRIA except to the extent, if any, otherwise provided by this Policy.

All other terms, conditions, insured coverage and exclusions of this Insurance including applicable limits and deductibles remain unchanged and apply in full force and effect to the coverage provided by this Insurance.

21/12/2007

LMA5092

Form approved by Lloyd’s Market Association

43

SEVERAL LIABILITY NOTICE

The subscribing insurers’ obligations under contracts of insurance to which they subscribe are several and not joint and are limited solely to the extent of their individual subscriptions. The subscribing insurers are not responsible for the subscription of any co-subscribing insurer who for any reason does not satisfy all or part of its obligations.

08/94

LSW1001 (Insurance)

LINES CLAUSE

This Insurance, being signed for 35.5556% of 100% insures only that proportion of any loss, whether total or partial, including but not limited to that proportion of associated expenses, if any, to the extent and in the manner provided in this Insurance.

The percentages signed in the Table are percentages of 100% of the amount(s) of Insurance stated herein.

NMA2419

44

		753
	B0753PL0901791000	LPL
		Page 2 of 18

RISK DETAILS

TYPE:	All Risks of Direct Physical Loss or Damage including Machinery Breakdown and Business Interruption Resulting Therefrom Insurance
INSURED:	Signal Peak Energy LLC
MAILING ADDRESS:	490 North 31st Street, Suite 308, Billings, Montana 59101
PERIOD:	From: 1 November 2009
	To: 31 October 2010
	Both Days inclusive Local Standard Time at the location of the property insured
INTEREST:	Section 1 — Property Damage
	Joy Longwall miner to include the 2009 Joy Longwall Mining System, Hydraulic supports, 1250 Foot AFC, 7LS5 Shearer, including and not limited to shields, belts, belt structures, belt drives, conveyors and all equipment that is part of the Joy long wall mining operation. This property also extends to the underground and above ground equipment to the first stacking tube only
	Section 2 — Business Interruption
	Item 1 — Gross Earnings:
	(a) Reduction in Turnover
	(b) Increase in Cost of Working
	Item 2 — Contractual Payments
	Item 3 — Accounts Receivable
LIMITS OF LIABILITY:	USD 50,000,000 each and every occurrence Combined Single Limit Sections 1 and 2
	In excess of Policy Deductibles

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		753
	B0753PL0901791000	LPL
		Page 3 of 18

SUB-LIMITS:
DEDUCTIBLES:	USD 1,000,000 each and every occurrence in respect of Property Damage
	60 Days in respect of Business Interruption Actual Daily Value basis (ADV)
MAXIMUM INDEMNITY PERIOD:	12 Months
EXCLUSIONS:	a)    Land, land values, improvements to or in land,
	b)    Property situated within the confines of, or forming part of, any open pits and any other open cut excavation.
	c)    Property forming part of or situated within the confines of any underground mine except that this exclusion shall not apply to longwall face equipment (as defined herein)
	d)    Consumable property used in underground mines, including but not limited to roof-bolts, rock bolts, rock dust, fuel, oil, lubricants, construction materials or supplies except that which has not been installed or put to its intended use
	e)    Tailings dams and any structure used for containment of tailings and other property situated thereon or therein.
	f)    Autoclaves as a result of gradually developing flaws, deformation, distortion, cracks or partial fractures, unless resultant damage is caused by an event, occurrence or peril covered by this policy
	g)    Loss or damage to refractory linings other than damage directly caused by the sudden and unforeseen operation of an insured peril external to the furnace
	h)    Loss or damage to underground property situated under unsupported roof or to remotely controlled plant and machinery underground whilst operating in remote mode.
	i)    Unmined minerals, coal or ore
	j)    Gold in any form
	k)    Property in the course of construction &/or testing &/or commissioning (Zurich Testing & Commissioning Clause to apply)

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		753
	B0753PL0901791000	LPL
		Page 4 of 18

	Amended Peril Exclusions
	a)    Excluding damage to underground property caused directly or directly by water &/or other liquid matter other than damage solely caused by water entering underground portion of mine via man-made surface level openings
	b)    Excluding loss or damage caused by escape of material from hydraulically backfilled stopes.
	c)    Excluding creep and/or heave
	d)    Excluding loss or damage caused by subsidence and/or undermining in, adjacent to, or above any mine whether open cut or underground.
	e)    Excluding loss or damage to raise boring equipment whilst in “hole
	And as per Policy attached
SITUATION:	Montana, United States of America
CONDITIONS:	As per attached Property Damage and Business Interruption Policy LMA5062 Fraudulent Claim Clause to apply NMA 1998 Service of Suit Clause Testing and Commissioning Clause as attached NMA 2915 Electronic Data Endorsement B NMA 2920 Terrorism Exclusion Endorsement NMA 2808 Electronic Date Recognition Exclusion (listed perils) War & Civil War Exclusion as per policy wording WEL Preservation of Property Clause Limited to USD 5m Transmission & Distribution Lines Exclusion (300 metres) MAP Micro-organism Exclusion WEH Asbestos Exclusion NMA 2962 Biological or Chemical Materials Exclusion Property limited to Longwall Face Equipment Only and BI in respect of loss or damage to such property
	Excluding Rehabilitation and/or restoration of mine workings Excluding all non-damage Business Interruption and advanced Business interruption
	Contingent Business Interruption excluded
	LSW 1001 to apply to policies
SUBJECTIVITIES:	None

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		753
	B0753PL0901791000	LPL
		Page 5 of 18

CHOICE OF LAW AND JURISDICTION:	This insurance shall be governed by and construed in accordance with the law of Montana, United States of America and each party agrees to submit to the exclusive jurisdiction of the Courts of Montana, United States of America.
PREMIUM:	USD                     (100%) per annum
PREMIUM PAYMENT TERMS:	It is a condition of this contract of insurance that the premium due at inception must be paid to and received by Insurers on or before 23:59 hours Greenwich Mean Time on the 15 December 2009. If this condition is not complied with, then this contract of insurance shall terminate on the above date with the Insured hereby agreeing to pay premium calculated at not less than pro rata temporis
	Where the premium is to be paid through a London Market Bureau, payment to Insurers will be deemed to occur on the day of delivery of a premium advice note to the Bureau or the date premium is released to Insurers via the de-linking system. Where settlement is be to made to non bureau companies payment will be deemed to be the date Lloyd & Partners Limited instruct their bankers to make the appropriate settlement
FEES PAYABLE RESULTANT FROM CONDITIONS / WARRANTIES/ SUBJECTIVITIES:	None
TAX(ES) PAYABLE BY THE INSURED AND ADMINISTERED BY INSURER(S):	None
RECORDING, TRANSMITTING & STORING INFORMATION:	Where Lloyd & Partners Limited maintains risk and claim data / information / documents Lloyd & Partners Limited may hold data / information / documents electronically.

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		753
	B0753PL0901791000	LPL
		Page 6 of 18

INSURER CONTRACT DOCUMENTATION:	XIS to sign Lloyd’s policy. Treat as fully claused wording. XIS to sign Company policy. Treat as fully claused wording. Each Company which does not subscribe to XIS to sign a follow Policy for their own participation, following the terms and condition of the lead wording.
	Lloyd & Partners Limited will prepare/submit formal policies (and subsequent policy endorsements, if any) to be signed (a) by Xchanging Ins-Sure Services on behalf of Lloyd’s Insurers and Company Insurers for whom Xchanging Ins-Sure Services are so authorised and (b) by each other subscribing Company Insurer where required. Agree Sign As Seen-no Technical check required.
	Policy Preparation Service to be utilized wherever such service is available or mandated.
	Xchanging Ins-Sure Services are authorised to sign direct and reinsurance policy documents prior to premium payment in accordance with the Xchanging Ins-Sure Services Early Document Scheme.
	All non-Xchanging Ins-Sure Services companies hereon hereby authorise the first non-Xchanging Ins-Sure Services company to issue on their behalf, a collective policy and all endorsements as may be required, without the requirement to issue any authorisation.
FORM:	LMA3044A in respect of Lloyd’s. IS3 in respect of XIS Companies Single Company Policy in respect of each non-XIS Company.
	Lloyd’s Insurers agree if required by Lloyd & Partners Limited to issue Co-Insurance Policy NMA2074 (no further Insurer agreement required).
	NMA2419 Lines Clause if applicable

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		753
	B0753PL0901791000	LPL
		Page 7 of 18

INFORMATION

Information made available to and seen by all subscribing Insurers hereon includes the following:

The Insured’s business includes a coal mine.

Premises:

1) 127 PM Coal Road Roundup, Musselshell County, Montana 59072

2) 490 North 31^st Street, Suite 308, Billings, Yellowstone County, Montana 59101

Values:
Joy Miner:	USD	72,000,000
Business Interruption:	USD	113,000,000

Lloyd & Partners Limited Presentation dated June 2009 seen, noted and agreed by Insurers. Contents:

01. Acord Commercial Insurance Application	16 pages
02. Signal Peak Energy Property & Equipment List	3 pages
03. International Mining Industry Underwriters Risk Assessment Report Signal Peak Energy Bull Mountain #1 Mine Date of Survey: May 7th to 8th 2009	39 pages

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Schedule 3.20

Hedging Agreements

None.

Schedule 6.02

Existing Liens

1. As part of the claims made by Scion in the matter referenced in more detail on Schedule 3.06 hereto, Scion has asserted that, as security for certain amounts alleged to be owed to Scion, it has a security interest in certain of defendants’ (including Signal Peak’s) rights in respect of the mineral reserves and related assets under that certain mineral deed of Bull Mountain Land Company LLC originally recorded on June 6, 2001, in Book 375, Page 122, under Document No. 204135 in the Records of the Clerk and Recorder of Mussellshell County, Montana and Yellowstone County, Montana, and in coal and other minerals extracted from that reserve, and mining equipment and royalty interests, and the proceeds of the foregoing. The Borrowers and other defendants in these cases dispute the existence, validity and enforceability of such purported security interests and amounts alleged to be secured thereby. The reserves are currently owned by Eastern Montana Minerals, Inc. which leases the mineral rights afforded thereby to Signal Peak.

2. Ames Construction, Inc. (“Ames”) filed two liens against portions of the property now owned by Bull Mountain Coal Mining, Inc. (n/k/a Signal Peak) and Global Rail. The first Ames lien is a mortgage filed on December 1, 2003, in both Yellowstone County (Inst. # 3266086) and Musselshell County (Inst. # 259112) securing the payment of an indebtedness of $1.172 million. The mortgage relates to a $1.172 million letter of credit provided by Ames to the Montana Department of Environmental Quality on behalf of a prior owner, BMP Investment, Inc., as financial assurance for the issuance of a mining permit for the mine. The Ames letter of credit has been replaced and different bonding is now provided as financial assurance for the mining permit. The second Ames lien is a construction lien filed in Musselshell County (Inst. #265441) in the amount of $1.8 million in May 2007 regarding construction services performed by Ames for prior owners. Neither of the two Ames liens were identified by First American Title Insurance Company as affecting the title to the coal estate leased by Signal Peak from Eastern Montana Minerals, Inc. Global Rail, Ames and Airlie Group entities have entered into agreements providing a mechanism for, among other things, the release of the two outstanding Ames liens which have not yet been completed.

EXHIBIT A
to the Credit Agreement

FORM OF
ASSIGNMENT AND ASSUMPTION AGREEMENT

dated as of [                     __], 20[__]

between

[NAME OF ASSIGNOR],
as Assignor

and

[NAME OF ASSIGNEE],
as Assignee

with respect to the

SIGNAL PEAK ENERGY, LLC, and
GLOBAL RAIL GROUP, LLC
CREDIT AGREEMENT,
dated as of October 22, 2010

A-1

This ASSIGNMENT AND ASSUMPTION AGREEMENT (this “Assignment and Assumption”) is dated as of the Effective Date set forth below and is entered into by and between [NAME OF ASSIGNOR] (the “Assignor”) and [NAME OF ASSIGNEE] (the “Assignee”). Capitalized terms used but not defined herein shall have the meanings given to them in the Credit Agreement identified below (as amended, amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), receipt of a copy of which is hereby acknowledged by the Assignee. The Standard Terms and Conditions set forth in Annex 1 attached hereto (the “Standard Terms and Conditions”) are hereby agreed to and incorporated herein by reference and made a part of this Assignment and Assumption as if set forth herein in full.

For an agreed consideration, the Assignor hereby irrevocably sells and assigns to the Assignee, and the Assignee hereby irrevocably purchases and assumes from the Assignor, subject to and in accordance with the Standard Terms and Conditions and the Credit Agreement, as of the Effective Date set forth below, (i) all of the Assignor’s rights and obligations in its capacity as a Lender under the Credit Agreement and any other documents or instruments delivered pursuant thereto to the extent related to the amount(s) identified below of all of such outstanding rights and obligations of the Assignor under the Credit Agreement and (ii) to the extent permitted to be assigned under applicable law, all claims, suits, causes of action and any other rights of the Assignor (in its capacity as a Lender) against any Person, whether known or unknown, arising under or in connection with the Credit Agreement, any other documents or instruments delivered pursuant thereto or the loan transactions governed thereby or in any way based on or related to any of the foregoing, including, but not limited to, contract claims, tort claims, malpractice claims, statutory claims and all other claims at law or in equity related to the rights and obligations sold and assigned pursuant to clause (i) above (the rights and obligations sold and assigned by the Assignor to the Assignee pursuant to clauses (i) and (ii) above being referred to herein, collectively, as the “Assigned Interest”). Such sale and assignment is without recourse to the Assignor and, except as expressly provided in this Assignment and Assumption, without representation or warranty by the Assignor.

1. Assignor:	[Name of Assignor]
2. Assignee:	[Name of Assignee]
3. Borrowers:	Signal Peak Energy, LLC and Global Rail Group, LLC
4. Administrative Agent:	Union Bank, N.A., as the Administrative Agent under the Credit Agreement
5. Collateral Agent:	Union Bank, N.A., as the Collateral Agent under the Credit Agreement

A-2

6. Credit Agreement:	Credit Agreement, dated as of October 22, 2010, among Signal Peak Energy, LLC, Global Rail Group, LLC, the Lenders named therein and from time to time party thereto, and Union Bank, N.A., in its capacities as the Administrative Agent and as the Collateral Agent.
7. Assigned Interest: 1

	Amount of
Amount of Commitment Assigned	Loans Assigned
$	$

8. Effective Date: [                      _____], 20[_]

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

¹ Assignments must be made in the minimum amounts required by Section 9.04(b) of the Credit Agreement.

A-3

The terms set forth in this Assignment and Assumption are hereby agreed to:

ASSIGNOR [NAME OF ASSIGNOR]
By:
	Name:
	Title:

A-4

ASSIGNEE
[NAME OF ASSIGNEE]
By:
	Name:
	Title:
Address for Notices:
Attention:
Telephone No.:
Facsimile No.:

A-5

[Consented to and Accepted by:
UNION BANK, N.A., as Administrative Agent
By:
	Name:
	Title:
Consented to:
SIGNAL PEAK ENERGY, LLC
By:
	Name:
	Title:
GLOBAL RAIL GROUP, LLC
By:
	Name:
	Title:]2

² Insert if the consent of the Administrative Agent or the Borrowers is required by Section 9.04(b) of the Credit Agreement.

A-6

ANNEX 1

Credit Agreement, dated as of October 22, 2010, among Signal Peak Energy, LLC, Global Rail Group, LLC, the Lenders named therein and from time to time party thereto, and Union Bank, N.A., as the Administrative Agent and as the Collateral Agent

STANDARD TERMS AND CONDITIONS FOR
ASSIGNMENT AND ASSUMPTION

1. Representations and Warranties.

1.1 Assignor. The Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of the Assigned Interest, (ii) the Assigned Interest is free and clear of any lien, encumbrance or other adverse claim and (iii) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby; and (b) assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with the Credit Agreement or any other Loan Document, (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Documents or any collateral thereunder, (iii) the financial condition of the Borrowers, the Pledgors, any other Loan Parties, any of their respective Affiliates or any other Person obligated in respect of any Loan Document or (iv) the performance or observance by the Borrowers, the Pledgors, any other Loan Parties, any of their respective Affiliates or any other Person of any of their respective obligations under any Loan Document.

1.2. Assignee. The Assignee (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement, (ii) it meets all the requirements to be an assignee under Section 9.04(b) of the Credit Agreement (subject to such consents, if any, as may be required under Section 9.04(b) of the Credit Agreement), (iii) from and after the Effective Date, it shall be bound by the provisions of the Credit Agreement as a Lender thereunder and, to the extent of the Assigned Interest, shall have the obligations of a Lender thereunder, (iv) it is sophisticated with respect to decisions to acquire assets of the type represented by the Assigned Interest and either it, or the person exercising discretion in making its decision to acquire the Assigned Interest, is experienced in acquiring assets of such type, (v) it has received a copies of the Credit Agreement and the other Loan Documents, and has received or has been accorded the opportunity to receive copies of the most recent financial statements delivered pursuant to Sections 5.01(a) and (b) of the Credit Agreement, as applicable, and such other documents and information as it deems appropriate to make its own credit analysis and decision to enter into this Assignment and Assumption and to purchase the Assigned Interest, (vi) it has, independently and without reliance upon the Administrative Agent, the Collateral Agent or any Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Assignment and Assumption and to purchase the Assigned Interest, and (vii) if it is not incorporated in under the laws of the

A-7

United States of America or a state thereof, attached to the Assignment and Assumption is any documentation required to be delivered by it pursuant Section 2.14 of the Credit Agreement, in each case, duly completed and executed by the Assignee; (b) appoints and authorizes each of the Administrative Agent and the Collateral Agent to take such action as agent on its behalf and to exercise such powers under the Loan Documents as are delegated to the Administrative Agent and the Collateral Agent by the terms thereof, together with such powers as are reasonably incidental thereto; and (c) agrees that (i) it will, independently and without reliance on the Administrative Agent, the Collateral Agent or any Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents, and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender.

2. Payments. From and after the Effective Date, the Administrative Agent and the Collateral Agent shall make all payments in respect of the Assigned Interest (including payments of principal, interest, fees and other amounts) to the Assignor for amounts which have accrued to but excluding the Effective Date and to the Assignee for amounts which have accrued from and after the Effective Date.

3. General Provisions. This Assignment and Assumption shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns. This Assignment and Assumption may be executed in any number of counterparts, which together shall constitute one instrument. Delivery of an executed counterpart of a signature page of this Assignment and Assumption by telecopy or other electronic communication shall be effective as delivery of a manually executed counterpart of this Assignment and Assumption. This Assignment and Assumption shall be governed by, and construed in accordance with, the law of the State of New York.

A-8

EXHIBIT B
to the Credit Agreement

FORM OF
PLEDGE AND SECURITY AGREEMENT

This PLEDGE AND SECURITY AGREEMENT, dated as of October 22, 2010 (as amended, supplemented, restated or otherwise modified from time to time, this “Agreement”), made by (a) FIRSTENERGY VENTURES CORP., an Ohio corporation (“FirstEnergy Ventures”), (b) GLOBAL MINING GROUP, LLC, a Delaware limited liability company (“Global Mining Group”), and (c) WMB LOAN VENTURES II, LLC, a Delaware limited liability company (“WMB II”) (all such companies are herein collectively referred to as the “Pledgors” and individually as a “Pledgor”), in favor of UNION BANK, N.A., as collateral agent (in such capacity, together with its successors and assigns in such capacity, the “Collateral Agent”) for the Secured Parties (as hereinafter defined).

W I T N E S S E T H:

WHEREAS, pursuant to the Credit Agreement, dated as of October 22, 2010, among Signal Peak Energy, LLC, a Delaware limited liability company (“SPE”), Global Rail Group, LLC, a Delaware limited liability company (“RailCo”, and together with SPE being referred to herein, collectively, as the “Borrowers” and, individually, as a “Borrower”), the Lenders named therein and from time to time party thereto, Union Bank, N.A., as Administrative Agent, and the Collateral Agent (as amended, amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), the Lenders have extended commitments to make Loans to the Borrowers subject to the terms and conditions set forth in the Credit Agreement;

WHEREAS, in order to induce the Lenders to make the Loans to the Borrowers pursuant to the Credit Agreement, the Pledgors agreed to execute and deliver this Agreement;

WHEREAS, each Pledgor has duly authorized the execution, delivery and performance of this Agreement and will receive direct and indirect benefits by reason of the availability of the Commitments and the making of the Loans to the Borrowers by the Lenders.

NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and in order to induce the Lenders to make the Loans pursuant to and in accordance with the Credit Agreement, each Pledgor hereby agrees with the Collateral Agent, for the benefit of the Secured Parties, as follows:

ARTICLE I
DEFINITIONS

SECTION 1.1. Certain Terms. The following terms when used in this Agreement, including its preamble and recitals, shall have the following meanings (such definitions to be equally applicable to the singular and plural forms thereof):

“Agreement” has the meaning assigned to that term in the preamble hereto.

“Applicable UCC” has the meaning assigned to that term in Section 3.1.9(b).

B-1

“Borrowers” has the meaning assigned to that term in the first recital hereto.

“Collateral” has the meaning assigned to that term in Section 2.1.

“Collateral Agent” has the meaning assigned to that term in the preamble hereto.

“Credit Agreement” has the meaning assigned to that term in the first recital hereto.

“Distributions” means all dividends (including, without limitation, cash dividends, dividends in the form of Equity Interests, other non-cash dividends and liquidating dividends), limited liability company distributions and all other distributions (whether similar or dissimilar to the foregoing) on or with respect to any Pledged Interests or other Equity Interests constituting Collateral.

“Equity Interests” means the limited liability company membership interests or other equity ownership interests in an Issuing Company, and any warrants, options or other rights entitling the holder thereof to purchase or acquire any such equity interests.

“Equity Interest Holder” means any Person that may from time to time possess an Equity Interest.

“Financing Statements” has the meaning assigned to that term in Section 3.1.9(b).

“Issuing Companies” means (a) with respect to Global Mining Group, SPE, and (b) with respect to FirstEnergy Ventures and WMB II, RailCo.

“LLC Agreements” means, (a) with respect to SPE, the Limited Liability Company Agreement, dated as of July 16, 2008, by Global Mining Group (on its own behalf and as assignee of Bull Mountain Coal Properties, Inc.), and (b) with respect to RailCo, the Limited Liability Company Agreement, dated as of July 16, 2008, by and among WMB II (as assignee of WMB Rail Ventures, LLC) and FirstEnergy Ventures, in each case as amended, amended and restated, supplemented or otherwise modified from time to time in accordance with the terms hereof and thereof.

“Pledged Interests” means the Equity Interests of each Pledgor, including but not limited to, the Equity Interests described on Attachment 1 hereto.

“Pledged Property” means the Pledged Interests and all other pledged Equity Interests, all other securities, all assignments of any amounts due or to become due with respect thereto and all other instruments received, receivable or otherwise distributed in respect of or in exchange for the Pledged Interests or any other pledged Equity Interests that are now being delivered by each Pledgor to the Collateral Agent or may from time to time hereafter be delivered by each Pledgor to the Collateral Agent for the purpose of being pledged under this Agreement, and all proceeds of any of the foregoing.

“Pledgor” and “Pledgors” have the meaning assigned to those terms in the preamble hereto.

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“Secured Obligations” has the meaning assigned to that term in Section 2.2.

“Secured Parties” means, collectively, (i) the Agents, (ii) the Lenders and (iii) any Qualified Counterparty under a Specified Hedge Agreement.

“Securities Act” has the meaning assigned to that term in Section 6.2.

“Security Documents” means this Agreement and each of the other security agreements, pledges, mortgages, assignments (collateral or otherwise) and consents, if any, and each other security agreement or other instrument or document executed and delivered pursuant to any of the foregoing documents, in each case to secure any of the Secured Obligations.

“U.C.C.” means the Uniform Commercial Code as from time to time in effect in the State of New York or, with respect to any Collateral located in any state other than the State of New York, the Uniform Commercial Code as from time to time in effect in such state.

SECTION 1.2. Credit Agreement Definitions. Unless otherwise defined herein or the context otherwise requires, terms used in this Agreement, including its preamble and recitals, have the meanings provided in the Credit Agreement.

SECTION 1.3. U.C.C. Definitions. Unless otherwise defined herein or the context otherwise requires, terms for which meanings are provided in the U.C.C. are used in this Agreement, including its preamble and recitals, with such meanings.

ARTICLE II
PLEDGE

SECTION 2.1. Grant of Security Interest. Each Pledgor hereby pledges, hypothecates, assigns, charges, mortgages, delivers and transfers to the Collateral Agent for its benefit and the ratable benefit of each of the other Secured Parties, and hereby grants to the Collateral Agent for its benefit and the ratable benefit of each of the other Secured Parties a continuing security interest in, all of such Pledgor’s right, title and interest in and to the following property, whether now or hereafter existing or acquired (collectively, the “Collateral”):

(a) the LLC Agreement of each Issuing Company to which such Pledgor is a party and all Equity Interests of such Pledgor in such Issuing Company, including, without limitation, (i) the Pledged Property, (ii) all rights of such Pledgor as an Equity Interest Holder and all rights to receive Distributions, cash, instruments and other property from time to time received, receivable or otherwise distributed under or pursuant to each such LLC Agreement, (iii) all rights of such Pledgor to receive proceeds of any insurance, indemnity, warranty or guaranty with respect to each such LLC Agreement, (iv) all claims of such Pledgor for damages arising out of or for breach of or default under each such LLC Agreement, (v) the right of such Pledgor to terminate each such LLC Agreement, to perform and exercise consensual or voting rights thereunder and to compel performance and otherwise exercise all remedies thereunder, (vi) all rights of such Pledgor, as an Equity Interest Holder, to all property and assets of each Issuing Company (whether real property, inventory, equipment, contract rights, accounts, receivables, general intangibles, securities, instruments, chattel paper, documents, choses in action or otherwise), and (vii) certificates or instruments evidencing an ownership or Equity Interest in each Issuing Company or its assets;

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(b) all other securities, all assignments of any amounts due or to become due with respect thereto, and all other instruments from time to time received, receivable or otherwise distributed in respect of or in exchange for any or all of the items listed in clause (a) above;

(c) to the extent not included in the foregoing, all Distributions, interest, and other payments and rights with respect to any of the items listed in clauses (a) and (b) above; and

(d) to the extent not included in the foregoing, all proceeds of any and all of the foregoing Collateral (including, without limitation, proceeds that constitute property of the types described above).

SECTION 2.2. Security for Obligations. This Agreement secures the payment of all Obligations and all other obligations of the Pledgors and the other Loan Parties to each Secured Party now or hereafter existing under the Credit Agreement and each other Loan Document (including, without limitation, this Agreement), whether for principal, interest, fees, costs, expenses, indemnities or otherwise (the Obligations and all such other obligations being referred to herein, collectively, as the “Secured Obligations”). Without limiting the generality of the foregoing, this Agreement secures the payment of all amounts that constitute part of the Secured Obligations and would be owed by any Pledgor or any other Loan Party under the Loan Documents but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving such Pledgor or any other Loan Party.

SECTION 2.3. Pledgors Remain Liable. Anything herein to the contrary notwithstanding:

(a) each Pledgor shall remain liable under the contracts and agreements included in the Collateral (including, without limitation, each LLC Agreement to which such Pledgor is a party) to the extent set forth therein, and this Agreement shall not relieve any Pledgor of any duties or obligations under such contracts and agreements, which duties and obligations shall continue to the same extent as if this Agreement had not been executed;

(b) each Pledgor shall pay when due all taxes, fees and assessments imposed on or with respect to the Collateral, except to the extent the validity thereof is being contested in good faith by appropriate proceedings for which adequate reserves in accordance with GAAP have been set aside by such Pledgor and the failure to make payment pending such contest could not reasonably be expected to result in a Material Adverse Effect;

(c) the exercise by the Collateral Agent of any of its rights hereunder shall not release any Pledgor from any of its duties or obligations under any such contracts or agreements included in the Collateral; and

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(d) neither the Collateral Agent nor any other Secured Party shall have any obligation or liability under any such contracts or agreements included in the Collateral by reason of this Agreement, nor shall the Collateral Agent or any other Secured Party be obligated to perform any of the obligations or duties of any Pledgor thereunder or to take any action to collect or enforce any claim for payment assigned hereunder.

SECTION 2.4. Delivery of Pledged Property. All certificates or instruments, if any, representing or evidencing any Collateral at any time shall be delivered to and held by or on behalf of the Collateral Agent pursuant hereto, shall be in suitable form for transfer by delivery, and shall be accompanied by all necessary instruments of transfer or assignment, duly executed in blank and in form and substance reasonably satisfactory to the Collateral Agent. The Collateral Agent shall have the right, at any time upon the occurrence and during the continuance of an Event of Default, in its discretion and without notice to any Pledgor, to transfer to or to register in the name of the Collateral Agent or any of its nominees any or all of the Collateral, subject only to the revocable rights specified in Section 4.4. In addition, the Collateral Agent shall have the right at any time to exchange certificates or instruments representing or evidencing Collateral for certificates or instruments of smaller or larger denominations.

SECTION 2.5. Continuing Security Interest; Assignments, Etc. This Agreement shall create a continuing security interest in the Collateral and shall:

(a) remain in full force and effect until the payment in full in cash of all Secured Obligations, the termination of all Commitments and the termination or expiration of all Specified Hedge Agreements;

(b) be binding upon each Pledgor and its successors, transferees and assigns; and

(c) inure, together with the rights and remedies of the Collateral Agent hereunder, to the benefit of the Collateral Agent and each other Secured Party.

Without limiting the generality of the foregoing clause (c), any Secured Party may assign or otherwise transfer all or any portion of its Commitment, any Loan held by it and/or its other rights and obligations under the Loan Documents to any other Person, and such other Person shall thereupon become vested with all rights and benefits in respect thereof granted to such Secured Party under any Loan Document (including, without limitation, this Agreement) or otherwise, subject, however, to the provisions of Section 9.04 of the Credit Agreement. No Pledgor may transfer or assign all or any portion of its rights or obligations under this Agreement without the prior written consent of all of the Secured Parties. Upon the payment in full in cash of all Secured Obligations, the termination of all Commitments and the termination or expiration of all Specified Hedge Agreements, the security interest granted herein shall terminate and all rights to the Collateral shall revert to the Pledgors. Upon any such termination pursuant to the preceding sentence, the Collateral Agent will, at each Pledgor’s sole expense, deliver to such Pledgor, without any representations, warranties or recourse of any kind whatsoever, all certificates and instruments representing or evidencing the Pledged Interests being released, and execute and deliver to such Pledgor such documents as such Pledgor shall reasonably request to evidence such termination.

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SECTION 2.6. Security Interest Absolute. All rights of the Collateral Agent and the security interests granted to the Collateral Agent hereunder, and all obligations of each Pledgor hereunder, shall be absolute and unconditional, irrespective of:

(a) any lack of validity, legality or enforceability of the Credit Agreement, any other Loan Document or any other agreement or instrument relating to any thereof;

(b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Secured Obligations, or any compromise, renewal, extension, acceleration or release with respect thereto, or any other amendment or waiver of or any consent to departure from the Credit Agreement or any other Loan Document, including, without limitation, any increase in the Secured Obligations resulting from the extension of additional credit to any of the Borrowers or otherwise;

(c) any taking, addition, exchange, release, surrender, impairment or non-perfection of any collateral, or any taking, release or amendment or waiver of or consent to departure from any guaranty, for all or any of the Secured Obligations;

(d) the failure of any Secured Party:

(i) to assert any claim or demand or to enforce any right or remedy against the Borrowers, any other Loan Party or any other Person (including, without limitation, any other guarantor) under the provisions of the Credit Agreement, any other Loan Document or otherwise, or

(ii) to exercise any right or remedy against any other guarantor of, or collateral securing, any of the Secured Obligations;

(e) any amendment to, rescission, waiver, or other modification of, or any consent to departure from, any of the terms of the Credit Agreement or any other Loan Document;

(f) any defense, claim, set-off, counterclaim or other right which may at any time be available to or be asserted by any Borrower, any Pledgor or any other Loan Party against any Secured Party or any other Person, whether in connection with this Agreement, the transactions contemplated in any of the other Loan Documents, or any unrelated transaction;

(g) any reduction, limitation, impairment or termination of the Secured Obligations for any reason, including, without limitation, any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to (and each Pledgor hereby waives any right to or claim of) any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality, nongenuineness, irregularity, compromise or unenforceability of, or any other event or occurrence affecting, the Secured Obligations or otherwise;

(h) any manner of application of collateral, or proceeds thereof, to all or any of the Secured Obligations, or any manner of sale or other disposition of any collateral for all or any of the Secured Obligations or any other assets of any of the Pledgors, the other Loan Parties or any of their respective Subsidiaries;

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(i) any change, restructuring or termination of the corporate structure or existence of any Borrower, any Pledgor, any other Loan Party or any of their respective Subsidiaries; or

(j) any other circumstance that might otherwise constitute a defense available to, or a legal or equitable discharge of, any Pledgor or any other Loan Party.

SECTION 2.7. Subrogation. Each Pledgor hereby unconditionally and irrevocably agrees not to exercise any claim or other rights which it may now or hereafter acquire against any other Loan Party that arise from the existence, payment, performance or enforcement of such Pledgor’s obligations under this Agreement or any other Loan Document, including, without limitation, any right of subrogation, reimbursement, assignment, exoneration, implied contract or indemnification, any right to participate in any claim or remedy of any Secured Party against any other Loan Party or any collateral that any Secured Party now has or hereafter acquires, whether or not such claim, remedy or right arises in equity, or under contract, statute or common law, including, without limitation, the right to take or receive from any other Loan Party, directly or indirectly, in cash or other property or by set-off or in any manner, payment or security on account of such claim or other rights, until such time as the Secured Obligations shall have been indefeasibly paid in full in cash, the Commitments shall have been irrevocably terminated and all Specified Hedge Agreements shall have terminated or expired. If any amount shall be paid to any Pledgor in violation of the preceding sentence, such amount shall be deemed to have been paid to such Pledgor for the benefit of, and held in trust for, the Secured Parties, shall be segregated from other funds of such Pledgor, and shall forthwith be paid to the Collateral Agent on behalf of the Secured Parties to be credited and applied against the Secured Obligations, whether matured or unmatured, in such order as the Collateral Agent may determine. Each Pledgor acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated by the Credit Agreement and that the waiver set forth in this Section is knowingly made in contemplation of such benefits.

ARTICLE III
REPRESENTATIONS AND WARRANTIES

SECTION 3.1. Representations and Warranties, Etc. Each Pledgor represents and warrants unto each Secured Party, as at the date of each pledge and delivery hereunder (including, without limitation, each pledge and delivery of Pledged Interests) by such Pledgor to the Collateral Agent of any Collateral, as set forth in this Article:

SECTION 3.1.1. Organization. Such Pledgor is a corporation or limited liability company, as applicable, duly organized, validly existing and in good standing under the laws of the state of its organization and is duly qualified to do business in, and is in good standing in, all other jurisdictions where the nature of its business or the nature of property owned or used by it makes such qualification necessary (except where the failure to so qualify would not have a Material Adverse Effect).

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SECTION 3.1.2. Due Authorization; Noncontravention; Etc. The execution, delivery and performance by such Pledgor of this Agreement (a) are within such Pledgor’s corporate or limited liability company powers, as applicable, (b) have been duly authorized by all necessary action (corporate, limited liability company or otherwise) and relate to its ordinary course of business, and (c) do not and will not (i) except to the extent received prior to the date hereof, require any consent or approval of the shareholders or members (as the case may be) of such Pledgor, (ii) violate any provision of the organizational documents of such Pledgor or of law, (iii) violate any legal restriction binding on or affecting such Pledgor, (iv) result in a breach of, or constitute a default under, any indenture or loan or credit agreement or any other agreement, lease or instrument to which such Pledgor is a party or by which it or its properties may be bound or affected, or (v) result in or require the creation of any Lien (other than pursuant to, or as permitted under, this Agreement and the other Loan Documents) upon or with respect to any of the Collateral. This Agreement has been duly executed and delivered by such Pledgor.

SECTION 3.1.3. Authorization, Approval, Etc. Except for the filing of the Financing Statements and continuation statements to be filed in connection therewith, and except for such consents, approvals or other action, or notices that have been obtained or made and are in full force and effect, no consent of any other Person and no authorization, approval, or other action by, and no notice to or filing with, any Governmental Authority is required (a) for the pledge and assignment by such Pledgor of the Collateral purported to be pledged and assigned by it pursuant to this Agreement or for the execution, delivery, or performance of this Agreement by such Pledgor, (b) for the perfection or maintenance of the security interest created hereby (including, without limitation, the first priority nature of such security interest), or (c) for the exercise by the Collateral Agent of the voting or other rights provided for in this Agreement or the remedies in respect of such Collateral pursuant to this Agreement (except as may be required in connection with any disposition of any portion of the Collateral by laws affecting the offering and sale of securities generally).

SECTION 3.1.4. Validity, Etc. This Agreement constitutes the legal, valid and binding obligation of such Pledgor, enforceable against such Pledgor in accordance with its terms, subject to the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar law affecting creditors’ rights generally, and subject to the effect of general principles of equity (regardless of whether considered in a proceeding in equity or at law).

SECTION 3.1.5. No Proceedings. There is no pending or threatened action, suit, investigation, litigation or proceeding against such Pledgor or any of its properties before any court, governmental agency or arbitrator, that (a) could reasonably be expected to have a Material Adverse Effect or (b) purports to affect the legality, validity or enforceability of this Agreement or any other Loan Document or the consummation of the transactions contemplated hereby.

SECTION 3.1.6. Ownership, No Liens, Etc. Such Pledgor is the legal and beneficial owner of, and has good and marketable title to (and has full right and authority to pledge and assign), the Collateral purported to be pledged and assigned by it hereunder, free and clear of any Lien, except for the security interest created by this Agreement and any restrictions on transfer imposed by any LLC Agreement to which it is a party. No effective financing statement or other instrument similar in effect covering all or any part of the Collateral is on file in any recording office, except as may have been filed in favor of the Collateral Agent relating to this Agreement. Such Pledgor has no trade name.

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SECTION 3.1.7. LLC Agreements. Each LLC Agreement to which such Pledgor is a party, true and complete copies of which has been furnished to the Collateral Agent, has been duly authorized, executed and delivered by such Pledgor, has not been amended or otherwise modified (except (i) for any such amendments or modifications prior to the date hereof or (ii) to the extent otherwise permitted hereunder), is in full force and effect and is the legal, valid and binding obligation of, and enforceable against, such Pledgor in accordance with its terms, subject to the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar law affecting creditors’ rights generally, and subject to the effect of general principles of equity (regardless of whether considered in a proceeding in equity or at law). There exists no default under any such LLC Agreement by such Pledgor.

SECTION 3.1.8. Valid Security Interest. This Agreement creates a valid security interest in the Collateral purported to be pledged and assigned by such Pledgor hereunder securing the payment of the Secured Obligations.

SECTION 3.1.9. Perfection of Security Interest. (a) When the certificates or instruments (if any) representing or evidencing Collateral shall be delivered hereunder, and for so long as such certificates or instruments shall remain in the possession of the Collateral Agent in the State of California, the security interest in such Collateral created hereby shall be perfected under the Uniform Commercial Code as in effect in the State of California, and such security interest, as so perfected, will be first priority.

(b) Upon the filing of appropriate financing statements (the “Financing Statements”) in each filing office listed in Attachment 1 hereto under the Uniform Commercial Code as in effect in the state in which such filing office is located (the “Applicable UCC”), the security interest in the Collateral purported to be pledged and assigned by such Pledgor hereunder shall be perfected under the Applicable UCC, and no further filings or other actions are necessary to perfect such security interest. When such Financing Statements are duly filed pursuant to the Applicable UCC, such security interest, as so perfected, will be first priority.

(c) To the extent that any of the Pledged Interests purported to be pledged and assigned by such Pledgor hereunder constitutes “uncertificated securities” (as defined in the U.C.C.), such Pledgor has delivered to the Collateral Agent a written agreement duly executed by the Issuing Company of such Pledged Interests pursuant to which such Issuing Company has agreed to comply with instructions originated by the Collateral Agent with respect to such Pledged Interests without further consent by such Pledgor, as contemplated by Section 8-106(c)(2) of the Uniform Commercial Code as in effect in such Issuing Company’s jurisdiction (as determined pursuant to Section 8-110(d) of the U.C.C.). Neither such Pledgor nor such Issuing Company has, directly or indirectly, granted “control” (as defined in said Section 8-106(c)(2)) of any such Pledged Interests to any Person other than the Collateral Agent.

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SECTION 3.1.10. Regulatory Status. Such Pledgor is not, and after the consummation of the transactions contemplated by this Agreement and the other Loan Documents will not be, an “investment company”, or an “affiliated person” of, or “promoter” or “principal underwriter” for, an “investment company” (within the meaning of the Investment Company Act of 1940, as amended). Such Pledgor is not (i) subject to regulation under the Federal Power Act, as amended, or (ii) subject to regulation under the applicable laws of any state relating to public utilities and/or public service corporations (other than any state law relating solely to taxation of such Pledgor).

SECTION 3.1.11. Principal Place of Business. The principal place of business and chief executive office of such Pledgor and the office where such Pledgor keeps its records concerning the Collateral is set forth under the name of such Pledgor on the signature pages hereof.

SECTION 3.1.12. Solvency. Such Pledgor is, and upon the consummation of the transactions contemplated under this Agreement and the other Loan Documents will be, Solvent.

SECTION 3.1.13. Conditions to Effectiveness. There are no conditions precedent to the effectiveness of this Agreement that have not been satisfied or waived.

SECTION 3.1.14. Independent Decision. Such Pledgor has, independently and without reliance upon the Agents or any other Secured Party and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement.

ARTICLE IV
COVENANTS

SECTION 4.1. Protect Collateral; Further Assurances, Etc. (a) No Pledgor will sell, assign, transfer, pledge, or encumber in any manner the Collateral (except in favor of the Collateral Agent). Each Pledgor will warrant and defend the right and title herein granted unto the Collateral Agent in and to the Collateral (and all right, title, and interest represented by the Collateral) against the claims and demands of all Persons whomsoever. No Pledgor will permit any Issuing Company to issue any Equity Interests (including, without limitation, any non-voting Equity Interests or any Class B Units (as defined in any LLC Agreement)) (i) to such Pledgor or any other Pledgor unless the same is immediately delivered in pledge to the Collateral Agent hereunder or (ii) to any other Person (other than a Pledgor).

(b) Each Pledgor agrees that from time to time, at the expense of such Pledgor, it will promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or desirable, or that the Collateral Agent may reasonably request, in order to perfect, protect, and preserve the pledge, assignment, and security interest granted or purported to be granted hereby or to enable the Collateral Agent to exercise and enforce its rights and remedies hereunder with respect to any Collateral. Without limiting the generality of the foregoing, each Pledgor will (i) execute and file, with a copy thereof to the Collateral Agent, such financing or continuation statements, or amendments thereto, and such other instruments or notices, as may be necessary or desirable, or as the Collateral Agent may reasonably request, in order to perfect and preserve the assignment and security interest granted or purported to be granted hereby; and (ii) mark conspicuously, at the request of the Collateral Agent, each of its records pertaining to the Collateral with a legend, in form and substance satisfactory to the Collateral Agent, indicating that all of its right, title, and interest in and to (A) each LLC Agreement to which it is a party, and (B) all Pledged Interests purported to be pledged and assigned by such Pledgor hereunder, have been assigned and are subject to the security interest pursuant hereto.

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(c) Each Pledgor hereby further authorizes the Collateral Agent to file one or more financing or continuation statements, and amendments thereto, relating to all or any part of the Collateral without the signature of such Pledgor where permitted by law. A photocopy or other reproduction of this Agreement or any security agreement or financing statement covering the Collateral or any part thereof shall be sufficient as a financing statement where permitted by law.

(d) Each Pledgor will furnish to the Collateral Agent from time to time such statements and schedules further identifying and describing the Collateral as and such other reports in connection with the Collateral as the Collateral Agent may reasonably request, all in reasonable detail.

SECTION 4.2. Certificated Securities, etc. Each Pledgor agrees that all certificated securities constituting Collateral delivered by such Pledgor pursuant to this Agreement will be accompanied by duly executed undated blank stock powers or other equivalent instruments of transfer reasonably acceptable to the Collateral Agent. Each Pledgor will, from time to time upon the request of the Collateral Agent, promptly deliver to the Collateral Agent such stock powers, instruments and similar documents, reasonably satisfactory in form and substance to the Collateral Agent, with respect to the Collateral as the Collateral Agent may reasonably request and will, from time to time upon the request of the Collateral Agent after the occurrence and during the continuance of any Event of Default, promptly transfer any Pledged Interests (including, without limitation, any certificated securities constituting Collateral) into the name of any nominee designated by the Collateral Agent.

SECTION 4.3. Continuous Pledge. Subject to Section 2.5, each Pledgor will, at all times, keep pledged to the Collateral Agent pursuant hereto all Pledged Interests and all other Equity Interests constituting Collateral, all Distributions with respect thereto, and all other Collateral and other securities, instruments, proceeds, and rights from time to time received by or distributable to such Pledgor in respect of any Collateral.

SECTION 4.4. Voting Rights; Distributions, Etc. Each Pledgor agrees:

(a) after any Event of Default shall have occurred and be continuing and the Collateral Agent has notified such Pledgor that all Distributions with respect to the Pledged Interests otherwise payable to such Pledgor shall be paid to the Collateral Agent for the benefit of the Secured Parties, promptly upon receipt thereof by such Pledgor and without any further request therefor by the Collateral Agent, to deliver (properly endorsed where required hereby or requested by the Collateral Agent) to the Collateral Agent all Distributions, interest, principal, other cash payments, and proceeds of the Collateral, all of which shall be held by the Collateral Agent as additional Collateral for use in accordance with Section 6.4; and

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(b) after any Event of Default shall have occurred and be continuing and the Collateral Agent has notified such Pledgor of the Collateral Agent’s intention to exercise its voting power under this Section 4.4(b):

(i) the Collateral Agent may exercise (to the exclusion of such Pledgor) the voting power and all other incidental rights of ownership with respect to any Pledged Interests or other Equity Interests constituting Collateral and such Pledgor hereby grants the Collateral Agent an irrevocable proxy, exercisable under such circumstances, to vote the Pledged Interests and such other Collateral; and

(ii) such Pledgor shall promptly deliver to the Collateral Agent such additional proxies and other documents as may be necessary to allow the Collateral Agent to exercise such voting power.

All Distributions, interest, principal, cash payments, and proceeds which may at any time and from time to time be held by any Pledgor but which such Pledgor is then obligated to deliver to the Collateral Agent shall, until delivery to the Collateral Agent, be held by each Pledgor separate and apart from its other property in trust for the Collateral Agent. The Collateral Agent agrees that unless an Event of Default shall have occurred and be continuing and the Collateral Agent shall have given the notice referred to in Section 4.4(b), each Pledgor shall have the exclusive voting power with respect to any Pledged Interests pledged by such Pledgor hereunder and the Collateral Agent shall, upon the written request of any Pledgor, promptly deliver such proxies and other documents, if any, as shall be reasonably requested by such Pledgor which are necessary to allow such Pledgor to exercise voting power with respect to any such Pledged Interests; provided, however, that no vote shall be cast, or consent, waiver, or ratification given, or action taken by any Pledgor that would impair any Collateral or violate any provision of the Credit Agreement or any other Loan Document (including, without limitation, this Agreement).

(c) Each Pledgor’s right to receive and retain any and all Distributions in respect of the Collateral purported to be pledged and assigned by it hereunder shall be further limited as follows:

(i) Distributions paid or payable other than in cash in respect of, and instruments and other property received, receivable, or otherwise distributed in respect of, or in exchange for, any such Collateral,

(ii) Distributions paid or payable in cash in respect of any such Collateral in connection with a partial or total liquidation or dissolution, and distributions paid or payable in violation of law or any LLC Agreement, and

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(iii) cash paid, payable, or otherwise distributed in redemption of, or in exchange for, any Collateral,

shall be, and shall be forthwith delivered to the Collateral Agent to hold as, Collateral and shall, if received by such Pledgor, be received in trust for the benefit of the Collateral Agent, be segregated from the other property or funds of such Pledgor, and be forthwith delivered to the Collateral Agent as Collateral in the same form as so received (with any necessary indorsement or assignment).

(d) Upon the occurrence and during the continuance of any Event of Default and notice from the Collateral Agent to such Pledgor of the Collateral Agent’s intention to exercise its rights under any provision of this Section 4.4:

(i) All rights of such Pledgor (A) to receive the Distributions which it would otherwise be authorized to receive and retain and (B) to exercise or refrain from exercising the voting and other consensual rights that it would otherwise be entitled to exercise, in each case pursuant to this Section 4.4, shall cease, and all such rights shall thereupon become vested in the Collateral Agent who shall thereupon have the sole right to receive and hold on behalf of the Secured Parties as Collateral such Distributions and to exercise or refrain from exercising such voting and other consensual rights; and

(ii) all Distributions that are received by such Pledgor contrary to the provisions of clause (i) above shall be received in trust for the benefit of the Collateral Agent on behalf of the Secured Parties, shall be segregated from other funds of such Pledgor, and shall be forthwith paid over to the Collateral Agent as Collateral in the same form as so received (with any necessary indorsement or assignment).

SECTION 4.5. Place of Perfection; Records. Each Pledgor shall keep its place of business and chief executive office and the office where it keeps its records concerning the Collateral, and the original copies of each LLC Agreement to which it is a party and of all other documents that evidence the Collateral (other than any Pledged Interests delivered to the Collateral Agent pursuant to the terms of this Agreement) at the address for such Pledgor specified on the signature pages hereof or, upon 30 days’ prior written notice to the Collateral Agent, at such other location in a jurisdiction where all action required by Section 4.1 to protect, preserve and maintain the lien and security interest created hereby and the priority thereof shall have been taken with respect to the Collateral. In addition, each Pledgor agrees that it shall not, at any time after the date hereof, change its jurisdiction of organization except, upon not less than 30 days’ prior written notice to the Collateral Agent, to such other jurisdiction in the United States of America where all action required by Section 4.1 to protect, preserve and maintain the lien and security interest created hereby and the priority thereof shall have been taken with respect to the Collateral. Each Pledgor will hold and preserve such records and will permit representatives of the Collateral Agent and the other Secured Parties at any time during normal business hours to inspect, copy and/or make abstracts from such records.

SECTION 4.6. As to the LLC Agreements. (a) Each Pledgor shall at its expense perform and observe in all material respects all the terms and provisions to be performed or observed by it under each LLC Agreement to which it is a party, maintain each such LLC Agreement in full force and effect, enforce each such LLC Agreement in accordance with its terms, and take all such action to such end as may from time to time be reasonably requested by the Collateral Agent.

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(b) Each Pledgor shall not:

(i) sell, assign (by operation of law or otherwise) or otherwise dispose of, or grant any option with respect to, any of the Collateral, or create or suffer to exist any Lien upon or with respect to any of the Collateral, except (A) for the pledge, assignment, and security interest created by this Agreement and (B) for any restrictions on transfer imposed by any LLC Agreement to which it is a party;

(ii) cancel or terminate any LLC Agreement to which it is a party or consent to or accept any cancellation or termination thereof;

(iii) amend, modify or otherwise change any LLC Agreement to which it is a party or give any consent, waiver or approval thereunder, except for such amendments, modifications, changes, consents, waivers and approvals that, individually and in the aggregate, could not reasonably be expected to result in a Material Adverse Effect and provided that a copy of any such amendment, modification, change, consent, waiver or approval shall be provided to the Collateral Agent at least ten (10) days prior to its execution;

(iv) upon the occurrence and during the continuance of an Event of Default, amend, modify or otherwise change any LLC Agreement to which it is a party, or give any consent, waiver or approval thereunder, except with the prior written consent of the Required Lenders (such consent not to be unreasonably withheld);

(v) waive any material default under or material breach of any LLC Agreement to which it is a party, except with the prior written consent of the Required Lenders (such consent not to be unreasonably withheld); or

(vi) take any other action in connection with any LLC Agreement to which it is a party that would impair the value of the interest or rights of such Pledgor thereunder or that would impair the interest or rights of the Collateral Agent or the other Secured Parties.

SECTION 4.7. Affiliate Transactions. No Pledgor will sell, lease or otherwise transfer any Property to, or purchase, lease or otherwise acquire any Property from, or otherwise engage in any other transactions with, any other Pledgor, any Loan Party, or any of their respective Affiliates, except (a) at prices and on terms and conditions no less favorable than could be obtained on an arm’s length basis from unrelated third parties, (b) any Restricted Payment permitted by Section 6.08 of the Credit Agreement, and (c) shared corporate or administrative services and staffing with Affiliates, including accounting, legal, human resources and treasury operations, provided on customary terms for similarly situated companies; provided, that the foregoing shall not restrict or limit or otherwise apply to any such transactions between or among FirstEnergy Ventures, FirstEnergy and/or any Subsidiary of FirstEnergy (other than, for the avoidance of doubt, any Borrower).

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ARTICLE V
THE COLLATERAL AGENT

SECTION 5.1. Duties of the Collateral Agent. (a) The Collateral Agent shall not have any duties or obligations except those expressly set forth in this Agreement or the other Loan Documents. Without limiting the generality of the foregoing, (a) the Collateral Agent shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing, (b) the Collateral Agent shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated by this Agreement or the other Loan Documents that the Collateral Agent is required to exercise in writing as directed by the Required Lenders, and (c) except as expressly set forth in this Agreement or the other Loan Documents, the Collateral Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrowers that is communicated to or obtained by the bank serving as the Collateral Agent or any of its Affiliates in any capacity. The Collateral Agent shall not be liable for any action taken or not taken by it with the consent or at the request of the Required Lenders or in the absence of its own gross negligence or willful misconduct as determined by the final, non-appealable judgment of a court of competent jurisdiction. The Collateral Agent shall be deemed not to have knowledge of any Default unless and until written notice thereof is given to the Collateral Agent by a Borrower or a Lender, and the Collateral Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with any Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or in connection with any Loan Document, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth in any Loan Document, (iv) the validity, enforceability, effectiveness or genuineness of any Loan Document or any other agreement, instrument or document, or (v) the satisfaction of any condition set forth in Article IV of the Credit Agreement or elsewhere in any Loan Document, other than to confirm receipt of items expressly required to be delivered to the Collateral Agent. The powers conferred on the Collateral Agent hereunder are solely to protect its interest (on behalf of the Secured Parties) in the Collateral and shall not impose any duty on it to exercise any such powers.

(b) The Collateral Agent’s sole duty with respect to the custody, safekeeping and physical preservation of the Collateral in its possession, under Section 9-207 of the U.C.C. or otherwise, shall be to deal with it in the same manner as the Collateral Agent deals with similar property for its own account. Neither the Collateral Agent nor any of its Related Parties shall be liable for failure to demand, collect or realize upon any of the Collateral or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Collateral upon the request of any Pledgor or any other Person or to take any other action whatsoever with regard to the Collateral or any part thereof (including (i) ascertaining or taking action with respect to calls, conversions, exchanges, maturities, tenders or other matters relative to any Pledged Property, whether or not the Collateral Agent has or is deemed to have knowledge of such matters, and (ii) the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral). The Collateral Agent shall be accountable only for amounts that it actually receives as a result of the exercise of such powers, and neither the Collateral Agent nor any of its Related Parties shall be responsible to any Pledgor for any act or failure to act hereunder, except to the extent that any such act or failure to act is determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of the Collateral Agent or any such Related Parties.

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SECTION 5.2. Replacement of the Collateral Agent. The Required Lenders may at any time, with the consent of the Borrowers (which consent shall not be unreasonably withheld or delayed, and shall not be required if an Event of Default shall have occurred and be continuing), replace the Collateral Agent (it being understood that any such replacement Collateral Agent shall be a Person that serves as agent for other credit facilities of a comparable size), provided, that the Required Lenders may not replace the Collateral Agent unless, after giving effect to such replacement and each contemporaneous assignment the Required Lenders or the Borrowers shall have arranged in connection with such replacement, (i) neither the Collateral Agent nor any of its Affiliates shall have outstanding any Loan or Commitment or other obligation of any kind under the Credit Agreement or any other Loan Document, and (ii) each of the Collateral Agent and its Affiliates shall have received payment in full of all amounts owing to it under or in respect of the Credit Agreement and each other Loan Document.

SECTION 5.3. Resignation of the Collateral Agent. Subject to the appointment and acceptance of a successor Collateral Agent as provided in this paragraph, the Collateral Agent may resign at any time by notifying the Required Lenders and the Borrowers. Upon any such resignation, the Required Lenders shall have the right, subject to the approval of the Borrowers (such approval not to be unreasonably withheld or delayed, and not to be required during the continuance of an Event of Default), to appoint a successor. If no successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Collateral Agent gives notice of its resignation, then the retiring Collateral Agent may, on behalf of the Lenders and subject to the approval of the Borrowers (such approval not to be unreasonably withheld or delayed, and not to be required during the continuance of an Event of Default), appoint a successor Collateral Agent, which shall be any commercial bank organized under the laws of the United States of America or any State thereof having a combined capital and surplus and undivided profits of not less than $500,000,000. Upon the acceptance of its appointment as the Collateral Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Collateral Agent, and the retiring Collateral Agent shall be discharged from its duties and obligations hereunder and under each other Loan Document. The fees payable by the Borrowers to a successor Collateral Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrowers and such successor. After the Collateral Agent’s resignation hereunder, the provisions of this Article V, Article VIII of the Credit Agreement and Section 9.03 of the Credit Agreement shall continue in effect for the benefit of such retiring Collateral Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while it was acting as the Collateral Agent.

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SECTION 5.4. Collateral Agent Appointed Attorney-in-Fact. Each Pledgor hereby irrevocably constitutes and appoints the Collateral Agent and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of such Pledgor and in the name of such Pledgor or in its own name, for the purpose of carrying out the terms of this Agreement, to take, upon the occurrence and during the continuance of any Event of Default, any and all appropriate action and to execute any and all documents and instruments that may be necessary or desirable to accomplish the purposes of this Agreement, and, without limiting the generality of the foregoing, each Pledgor hereby gives the Collateral Agent the power and right, on behalf of such Pledgor, upon the occurrence and during the continuance of an Event of Default, without notice to or assent by such Pledgor, to do any or all of the following:

(a) in the name of such Pledgor or its own name, or otherwise, take possession of and endorse and collect any checks, drafts, notes, acceptances or other instruments for the payment of moneys due under or in respect of any Collateral and file any claim or take any other action or proceeding in any court of law or equity or otherwise deemed appropriate by the Collateral Agent for the purpose of collecting any and all such moneys due under or in respect of any Collateral whenever payable; and

(b) (i) direct any Person liable for any payment under any of the Collateral to make payment of any and all moneys due or to become due thereunder directly to the Collateral Agent or as the Collateral Agent shall direct; (ii) ask or demand for, collect, and receive payment of and give receipt for, any and all moneys, claims and other amounts due or to become due at any time in respect of or arising out of any Collateral; (iii) receive, collect, sign and endorse any drafts or other instruments, documents and chattel paper in connection with any of the Collateral; (iv) commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect the Collateral or any portion thereof and to enforce any other right in respect of any Collateral; (v) defend any suit, action or proceeding brought against such Pledgor with respect to any Collateral; (vi) settle, compromise or adjust any such suit, action or proceeding and, in connection therewith, give such discharges or releases as the Collateral Agent may deem appropriate; and (vii) generally, sell, transfer, pledge and make any agreement with respect to or otherwise deal with any of the Collateral as fully and completely as though the Collateral Agent were the absolute owner thereof for all purposes, and do, at the Collateral Agent’s option and such Pledgor’s expense, at any time, or from time to time, all acts and things that the Collateral Agent deems necessary to protect, preserve or realize upon the Collateral and the Secured Parties’ security interests therein and to effect the intent of this Agreement, all as fully and effectively as such Pledgor might do.

Each Pledgor hereby acknowledges, consents and agrees that the power of attorney granted pursuant to this Section is irrevocable and coupled with an interest.

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ARTICLE VI
REMEDIES

SECTION 6.1. Certain Remedies. If any Event of Default shall have occurred and be continuing:

(a) The Collateral Agent may exercise in respect of the Collateral, in addition to other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party on default under the U.C.C. (whether or not the U.C.C. applies to the affected Collateral) and also may, without demand of performance or other demand, presentment, protest, advertisement or notice of any kind (except any notice required by law referred to below) to or upon any Pledgor or any other Person (all and each of which demands, defenses, advertisements and notices are hereby waived), sell, assign, give option or options to purchase, or otherwise dispose of and deliver the Collateral or any part thereof (or contract to do any of the foregoing) in one or more parcels at public or private sale, at any of the Collateral Agent’s offices or elsewhere, for cash, on credit or for future delivery, and upon such other terms as the Collateral Agent may deem commercially reasonable. The Collateral Agent shall give at least ten (10) days’ prior notice to each Pledgor of the time and place of any public sale or the time after which any private sale is to be made, and each Pledgor agrees that such notice shall constitute reasonable notification. The Collateral Agent shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. The Collateral Agent may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned.

(b) The Collateral Agent may:

(i) transfer all or any part of the Collateral into the name of the Collateral Agent or its nominee, with or without disclosing that such Collateral is subject to the lien and security interest hereunder,

(ii) notify the parties obligated on any of the Collateral to make payment to the Collateral Agent of any amount due or to become due thereunder,

(iii) enforce collection of any of the Collateral by suit or otherwise, and surrender, release or exchange all or any part thereof, or compromise or extend or renew for any period (whether or not longer than the original period) any obligations of any nature of any Person with respect thereto,

(iv) endorse any checks, drafts, or other writings in each Pledgor’s name to allow collection of the Collateral,

(v) take control of any proceeds of the Collateral, and

(vi) execute (in the name, place and stead of each Pledgor) endorsements, assignments, stock powers and other instruments of conveyance or transfer with respect to all or any of the Collateral.

Each such purchaser of the Collateral shall hold the property sold absolutely free from any claim or right on the part of any Pledgor, and to the extent permitted by applicable law, the Pledgors hereby waive all rights of redemption, stay, valuation and appraisal any Pledgor now has or may at any time in the future have under any rule of law or statute now existing or hereafter enacted.

SECTION 6.2. Securities Laws. If the Collateral Agent shall determine to exercise its right to sell all or any of the Collateral pursuant to Section 6.1, each Pledgor agrees that, upon request of the Collateral Agent, such Pledgor will, at its own expense:

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(a) execute and deliver, and cause each of the Issuing Companies and their respective directors, officers and Equity Interest Holders to execute and deliver, all such instruments and documents, and do or cause to be done all such other acts and things, as may be necessary or, in the opinion of the Collateral Agent, advisable to register such Collateral under the provisions of the Securities Act of 1933, as from time to time amended (the “Securities Act”), and to cause the registration statement relating thereto to become effective and to remain effective for such period as prospectuses are required by law to be furnished, and to make all amendments and supplements thereto and to the related prospectus which, in the opinion of the Collateral Agent, are necessary or advisable, all in conformity with the requirements of the Securities Act and the rules and regulations of the Securities and Exchange Commission applicable thereto;

(b) use its best efforts to qualify the Collateral under the state securities or “Blue Sky” laws and to obtain all necessary governmental approvals for the sale of the Collateral, as requested by the Collateral Agent;

(c) cause each Issuing Company to make available to its security holders, as soon as practicable, an earnings statement that will satisfy the provisions of Section 11(a) of the Securities Act; and

(d) do or cause to be done all such other acts and things as may be necessary to make such sale of the Collateral or any part thereof valid and binding and in compliance with applicable law.

Each Pledgor further acknowledges the impossibility of ascertaining the amount of damages that would be suffered by the Collateral Agent or the Secured Parties by reason of the failure by such Pledgor to perform any of the covenants contained in this Section and, consequently, to the extent permitted under applicable law, agrees that, if such Pledgor shall fail to perform any of such covenants, it shall pay, as liquidated damages and not as a penalty, an amount equal to the value (as determined by the Collateral Agent) of the Collateral on the date the Collateral Agent shall demand compliance with this Section.

SECTION 6.3. Compliance with Restrictions. Each Pledgor agrees that in any sale of any of the Collateral whenever an Event of Default shall have occurred and be continuing, the Collateral Agent is hereby authorized to comply with any limitation or restriction in connection with such sale as it may be advised by counsel is necessary in order to avoid any violation of applicable law (including, without limitation, compliance with such procedures as may restrict the number of prospective bidders and purchasers, require that such prospective bidders and purchasers have certain qualifications, and restrict such prospective bidders and purchasers to Persons who will represent and agree that they are purchasing for their own account for investment and not with a view to the distribution or resale of such Collateral), or in order to obtain any required approval of the sale or of the purchaser by any governmental regulatory authority or official, and each Pledgor further agrees that such compliance shall not result in such sale being considered or deemed not to have been made in a commercially reasonable manner, nor shall the Collateral Agent be liable or accountable to any Pledgor for any discount allowed by reason of the fact that such Collateral is sold in compliance with any such limitation or restriction.

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SECTION 6.4. Application of Proceeds. (a) Subject to Section 6.4(b) below, all cash proceeds received by the Collateral Agent in respect of any sale of, collection from, or other realization upon all or any part of the Collateral shall be applied (after payment of any amounts payable to the Collateral Agent pursuant to Section 9.03 of the Credit Agreement and Section 6.5 below) in whole or in part by the Collateral Agent for the ratable benefit of the Secured Parties against all or any part of the Secured Obligations in such manner as the Collateral Agent determines in its sole discretion. Any surplus of such cash or cash proceeds held by the Collateral Agent and remaining after payment in full of all the Secured Obligations, the termination of all Commitments and the termination or expiration of all Specified Hedge Agreements, shall be paid over to the Pledgors or to whomsoever may be lawfully entitled to receive such surplus

(b) All payments received and amounts realized by the Collateral Agent under this Agreement or any other Loan Document while an Event of Default with respect to the payment of any amount due under any Loan Document, or any other Event of Default which results in the acceleration of the Secured Obligations, shall have occurred and be continuing, as well as all payments or amounts then held or thereafter received by the Collateral Agent as part of the Collateral during the continuation of such Event of Default, shall be applied by the Collateral Agent in the following order of priority:

First, so much of such amounts as shall be required to reimburse the Collateral Agent for the costs and expenses of retaking, holding and preparing the Collateral for sale and the selling of the Collateral (including, without limitation, advertising, selling and legal expenses and attorneys’ fees) and the discharge of all assessments or Liens, if any, on the Collateral prior to the Lien created by the Security Documents (except any taxes, assessments or Liens subject to which such sale shall have been made), and to reimburse the Agents for any fees, expenses or other losses incurred by the Agents in connection with their duties and rights (to the extent not previously reimbursed) under the Loan Documents, shall be distributed to the Agents ratably, without priority, in accordance with the amount of such costs, expenses and losses to the Agents;

Second, so much of such amounts as shall be required to reimburse the Secured Parties for amounts advanced by them or their predecessors in interest for purposes of curing any such Event of Default or enforcing rights under any Loan Document (to the extent not previously reimbursed) shall be distributed to the Secured Parties ratably, without priority of one over the other, in accordance with the total amount of such reimbursements then being made;

Third, so much of such amounts as shall be required to pay in full all fees due to the Secured Parties pursuant to the Loan Documents (including, without limitation, any Specified Hedge Agreements and the Fee Letter) shall be distributed to the applicable Secured Parties without priority of one over the other;

Fourth, so much of such amounts as shall be required to pay in full all accrued interest payable to the Secured Parties in respect of the Loans, shall be distributed ratably to each of the Secured Parties entitled to receive such interest without order of priority;

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Fifth, so much of such amounts as shall be required (i) to pay or prepay in full, ratably without priority of one over the other, the outstanding principal amount of the Loans until the Loans are paid in full, and (ii) to pay or prepay in full all payments due under any Specified Hedge Agreement to which a Secured Party is a party, shall be distributed to the Secured Parties entitled to the same; and in case such amounts shall be insufficient to pay in full all of the foregoing amounts described in clauses (i) and (ii) above, then to the payment thereof to each of the Secured Parties, ratably in proportion to its percentage of the sum of all such foregoing amounts;

Sixth, so much of such amounts as shall be required to pay any Secured Obligations not covered in clause First, Second, Third, Fourth, or Fifth above shall be distributed to the Secured Parties entitled to the same, ratably, without priority of one over the other; and,

Seventh, the balance, if any, of such amounts remaining thereafter shall be paid to the Person lawfully entitled to receive the same or shall be paid to whomsoever a court of competent jurisdiction may direct.

SECTION 6.5. Indemnity and Expenses. The Pledgors hereby agree, jointly and severally, to indemnify and hold harmless the Collateral Agent, the other Secured Parties and their respective Related Parties (each, an “Indemnified Party”) from and against any and all claims, losses and liabilities arising out of or resulting from this Agreement (including, without limitation, enforcement of this Agreement), except to the extent that such claims, losses or liabilities are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnified Party. To the extent not paid by the Borrowers pursuant to Section 9.03 of the Credit Agreement, upon demand, each Pledgor will pay to the Collateral Agent the amount of any and all reasonable expenses, including the reasonable fees and disbursements of its counsel and of any experts and agents, which the Collateral Agent may incur in connection with:

(a) the administration of this Agreement, the Credit Agreement and each other Loan Document;

(b) the custody, preservation, use, or operation of, or the sale of, collection from, or other realization upon, any of the Collateral;

(c) the exercise or enforcement of any of the rights of the Collateral Agent hereunder; or

(d) the failure by such Pledgor to perform or observe any of the provisions hereof.

To the extent that any of the Pledgors fails to pay any amount required to be paid by it to the Collateral Agent hereunder, each Lender severally agrees to pay to the Administrative Agent such Lender’s Applicable Percentage (determined as of the time that the applicable unreimbursed expense or indemnity payment is sought) of such unpaid amount; provided that the unreimbursed expense or indemnified loss, claim, damage, liability or related expense, as the case may be, was incurred by or asserted against the Collateral Agent in its capacity as such.

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ARTICLE VII
MISCELLANEOUS PROVISIONS

SECTION 7.1. Loan Document. This Agreement is a Loan Document executed pursuant to the Credit Agreement and shall (unless otherwise expressly indicated herein) be construed, administered and applied in accordance with the terms and provisions thereof.

SECTION 7.2. Amendments, etc.; Successors and Assigns.

(a) No amendment to or waiver of any provision of this Agreement nor consent to any departure by any Pledgor herefrom shall in any event be effective unless the same shall be in writing and signed by the Collateral Agent (acting upon the instructions of the Required Lenders) and, in the case of any such amendment, each Pledgor, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which it is given.

(b) In addition to, and not in limitation of, Section 2.6, this Agreement shall be binding upon each Pledgor and its successors, permitted transferees and permitted assigns, and shall inure to the benefit of and be enforceable by the Collateral Agent and each other Secured Party and their respective successors, transferees and assigns.

SECTION 7.3. Protection of Collateral. The Collateral Agent may from time to time, at its option and at the expense of the Pledgors, perform or cause the performance of any act which any Pledgor agrees hereunder to perform and which such Pledgor shall fail to perform after being requested in writing so to perform (it being understood that no such request need be given after the occurrence and during the continuance of any Event of Default), and the Collateral Agent may from time to time take any other action that the Collateral Agent deems necessary or appropriate for the maintenance, preservation or protection of any of the Collateral or of its security interest therein.

SECTION 7.4. Addresses for Notices. All notices and other communications provided for hereunder shall be in writing (including telegraphic, facsimile, telex or cable communication) and mailed, telegraphed, telecopied, telexed, cabled or delivered, if to any Pledgor, at its address designated as corresponding to it on the signature pages hereof, and if to the Collateral Agent, at its address specified in the Credit Agreement; or, as to each party, at such other address as shall be designated by such party in a written notice to the other parties. All such notices and communications shall, when mailed, telegraphed, telecopied, telexed or cabled, be effective five days after being deposited in the mails, or when delivered to the telegraph company, telecopied, confirmed by telex answerback or delivered to the cable company, respectively, except that notices and communications to the Collateral Agent shall not be effective until received by the Collateral Agent.

SECTION 7.5. No Waiver; Remedies. No failure on the part of the Collateral Agent or any other Secured Party to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The Collateral Agent and each other Secured Party shall have all remedies available at law or equity, including, without limitation, the remedy of specific performance for any breach of any provision hereof. The remedies herein provided are cumulative and not exclusive of any remedies provided by law or equity.

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SECTION 7.6. Severability. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Agreement or affecting the validity or enforceability of such provisions in any other jurisdiction.

SECTION 7.7. Waiver of Jury Trial. EACH OF THE PLEDGORS AND THE COLLATERAL AGENT HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH OF THE PLEDGORS AND THE COLLATERAL AGENT (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY TO ANY LOAN DOCUMENT HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES TO THE LOAN DOCUMENTS HAVE BEEN INDUCED TO ENTER INTO THE LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

SECTION 7.8. Captions. Article and section captions used in this Agreement are for convenience of reference only, and shall not affect the construction of this Agreement.

SECTION 7.9. Counterparts. This Agreement may be executed by the parties hereto in several counterparts, each of which shall be deemed to be an original and all of which shall constitute together but one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by telecopier or other electronic transmission shall be effective as delivery of an original executed counterpart of this Guaranty.

SECTION 7.10. Governing Law, Entire Agreement, etc. This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of New York, except to the extent that the validity or perfection of the security interest hereunder, or remedies hereunder, in respect of any particular Collateral are governed by the laws of a jurisdiction other than the State of New York. This Agreement and the other Loan Documents constitute the entire understanding among the parties hereto with respect to the subject matter hereof and supersede any prior agreements, written or oral, with respect thereto.

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SECTION 7.11. Submission to Jurisdiction.

(a) Each Pledgor hereby irrevocably and unconditionally submits, for itself and its Property, to the nonexclusive jurisdiction of the Supreme Court of the State of New York sitting in New York County and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement or any of the other Loan Documents to which it is or is to be a party, or for recognition or enforcement of any judgment, and each Pledgor hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State court or, to the extent permitted by law, in such Federal court. Each Pledgor agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement or any other Loan Document shall affect any right that the Collateral Agent or any other Secured Party may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against one or more of the Pledgors or their respective Properties in the courts of any other jurisdiction.

(b) Each Pledgor hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or any other Loan Document to which it is or is to be a party in any court referred to in paragraph (a) of this Section. Each Pledgor hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such suit, action or proceeding in any such court. Each Pledgor also irrevocably consents, to the fullest extent permitted by law, to the service of any and all process in any such suit, action or proceeding in the manner provided for notices in Section 7.4. Nothing in this Agreement or any other Loan Document will affect the right of the Collateral Agent or any other Secured Party to serve process in any other manner permitted by law.

SECTION 7.12. Reinstatement. This Agreement and the obligations of the Pledgors hereunder shall automatically be reinstated if and to the extent that for any reason any payment made pursuant to this Agreement or any other Loan Document is rescinded or must otherwise be restored or returned, whether as a result of any proceedings in bankruptcy or reorganization or otherwise with respect to any Pledgor or any other Person or as a result of any settlement or compromise with any Person (including any Pledgor) in respect of such payment.

SECTION 7.13. Consent and Acknowledgement. Each of the Pledgors hereby acknowledges receiving copies of the Credit Agreement and the other Loan Documents and consents to the terms and provisions thereof. In addition, each of the Pledgors hereby consents to the extent required by any LLC Agreement or any other organizational documents of the Issuing Companies to the pledge by each Pledgor, pursuant to the terms hereof, of the Pledged Property and the other Collateral and, upon the occurrence and during the continuance of an Event of Default, to the transfer of such Pledged Property and other Collateral to the Collateral Agent or its nominee and to the substitution of the Collateral Agent or its nominee as the substituted Equity Interest Holder in any Issuing Company with all rights, powers and duties of a member or other Equity Interest Holder of such Issuing Company.

[Next page is the signature page]

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

FIRSTENERGY VENTURES CORP.
By:
	Name:	James F. Pearson
	Title:	Vice President and Treasurer
Address: 76 South Main Street Akron, Ohio 44308 Attention: Treasurer Telephone No.: 330-384-5855 Facsimile No.: 330-384-3772
WMB LOAN VENTURES II, LLC
By:
	Name:	Wayne M. Boich
	Title:	President
Address: 41 South High Street, Suite 3750 — South Columbus, Ohio 43215 Attention: Brian T. Murphy Telephone No.: 614-221-0101 Facsimile No.: 614-221-0117

[Pledge and Security Agreement Signature Page]

B-25

GLOBAL MINING GROUP, LLC
By:
	Name:	Wayne M. Boich
	Title:	President
Address: 41 South High Street, Suite 3750 — South Columbus, Ohio 43215 Attention: Brian T. Murphy Telephone No.: 614-221-0101 Facsimile No.: 614-221-0117

[Pledge and Security Agreement Signature Page]

B-26

Acknowledged and Accepted:

UNION BANK, N.A., as Collateral Agent

By:	Name:
	Title:

[Pledge and Security Agreement Signature Page]

B-27

ATTACHMENT 1
to
Pledge and Security Agreement

Pledged Limited Liability Company Interests

				Type and
			Names of Other	Percentage of
		Title and Date of	Equity Interest	Equity Interests	Certificate No.
Pledgor	Issuing Company	LLC Agreement	Holders	Pledged	(if any)
FirstEnergy Ventures Corp.	Global Rail Group, LLC	Limited Liability Company Agreement, dated as of July 16, 2008, by and among WMB Loan Ventures II, LLC (as assignee of WMB Rail Ventures, LLC) and FirstEnergy Ventures Corp.	WMB Loan Ventures II, LLC	50% of the Equity Interests, represented by Class A Units	N/A
WMB Loan Ventures II, LLC	Global Rail Group, LLC	Limited Liability Company Agreement, dated as of July 16, 2008, by and among WMB Loan Ventures II, LLC (as assignee of WMB Rail Ventures, LLC) and FirstEnergy Ventures Corp.	FirstEnergy Ventures Corp.	50% of the Equity Interests, represented by Class A Units	N/A

[Attachment 1 to Pledge and Security Agreement]

B-28

				Type and
			Names of Other	Percentage of
		Title and Date of	Equity Interest	Equity Interests	Certificate No.
Pledgor	Issuing Company	LLC Agreement	Holders	Pledged	(if any)
Global Mining Group, LLC	Signal Peak Energy, LLC	Limited Liability Company Agreement, dated as of July 16, 2008, by Global Mining Group, LLC	None	100% of the Equity Interests, represented by Units	N/A

[Attachment 1 to Pledge and Security Agreement]

B-29

ATTACHMENT 2
to
Common Pledge and Security Agreement

Filing Offices for UCC Financing Statements

Pledgor	Filing Offices
FirstEnergy Ventures Corp.	Ohio Secretary of State
WMB Loan Ventures II, LLC	Delaware Secretary of State
Global Mining Group, LLC	Delaware Secretary of State

[Attachment 2 to Pledge and Security Agreement]

B-30

EXHIBIT C
to the Credit Agreement

FORM OF PROMISSORY NOTE

$[_______]	New York, New York
	[____ __], 20[_____]

FOR VALUE RECEIVED, the undersigned, SIGNAL PEAK ENERGY, LLC, a Delaware limited liability company, and GLOBAL RAIL GROUP, LLC, a Delaware limited liability company (together, the “Borrowers”), HEREBY JOINTLY AND SEVERALLY UNCONDITIONALLY PROMISE TO PAY to the order of [NAME OF LENDER] (the “Lender”) or its registered assigns, without offset or counterclaim, in lawful money of the United States of America and in immediately available funds, the principal amount of [_____] DOLLARS ($[_____]), or, if less, the aggregate outstanding principal amount of all Loans made by the Lender to the Borrowers pursuant to the Credit Agreement (as defined below). The principal amount hereof shall be paid in the amounts and on the dates specified in the Credit Agreement. The Borrowers further agree, jointly and severally, to pay interest in like money on the unpaid principal amount hereof from time to time outstanding at the rates and on the dates specified in the Credit Agreement. Capitalized terms used herein and not otherwise defined herein shall have the respective meanings assigned to such terms in the Credit Agreement.

Both principal and interest are payable to Union Bank, N.A., as Administrative Agent, at its offices at 445 South Figueroa Street, Los Angeles, California 90071, in immediately available funds. Each Loan made by the Lender to a Borrower pursuant to the Credit Agreement, and all payments made on account of the principal amount thereof, shall be recorded by the Lender and, prior to any transfer hereof, endorsed on the grid attached hereto which is part of this Note, provided that the failure to so record any such Loan or any payment on account thereof shall not affect the payment obligations of the Borrowers hereunder or under the Credit Agreement.

This Note (a) is one of the Notes referred to in the Credit Agreement, dated as of October 22, 2010 (as amended, amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among the Borrowers, the Lender and the other Lenders named therein and from time to time party thereto, and Union Bank, N.A., as Administrative Agent and as Collateral Agent, (b) is subject to the provisions of the Credit Agreement, and (c) is subject to optional and mandatory prepayment in whole or in part as provided in the Credit Agreement. This Note is secured as provided in the Security Documents and is entitled to the benefits of the Guaranty and the other Loan Documents. Reference is hereby made to the Security Documents for a description of the assets in which a security interest has been granted, the nature and extent of the security, the terms and conditions upon which the security interest was granted and the rights of the holder of this Note in respect thereof.

C-1

Upon the occurrence of any one or more Events of Default, all principal and all accrued interest then remaining unpaid on this Note shall become, or may be declared to be, immediately due and payable, as provided in the Credit Agreement.

All parties now and hereafter liable with respect to this Note, whether maker, principal, surety, guarantor, endorser, or otherwise, hereby waive presentment, demand, protest, and all other notices of any kind. No failure to exercise, and no delay in exercising, any rights hereunder on the part of the holder hereof shall operate as a waiver of such rights.

This Note may not be transferred except pursuant to and in accordance with the terms and conditions of the Credit Agreement.

THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

SIGNAL PEAK ENERGY, LLC
By:
	Name:
	Title:
GLOBAL RAIL GROUP, LLC
By:
	Name:
	Title:

C-2

LOANS, MATURITIES AND PAYMENTS OF PRINCIPAL

	Amount of	Maturity of	Principal Paid	Amount of Unpaid	Notation
Date	Loan	Loan	or Prepaid	Principal Balance	Made By

C-3

EXHIBIT D
to the Credit Agreement

FORM OF
GUARANTY AGREEMENT

This GUARANTY AGREEMENT, dated as of October 22, 2010 (this “Guaranty”), is made by each of FIRSTENERGY CORP., an Ohio corporation (“FirstEnergy”), GLOBAL MINING GROUP, LLC, a Delaware limited liability company (“Global Mining”), WMB LOAN VENTURES, LLC, a Delaware limited liability company (“WMB”), and WMB LOAN VENTURES II, LLC, a Delaware limited liability company (“WMB II”, and together with FirstEnergy, Global Mining and WMB being referred to herein, collectively, as the “Guarantors” and, individually, as a “Guarantor”), in favor of the Lenders (as defined in the Credit Agreement referred to below) and UNION BANK, N.A., as Administrative Agent (in such capacity, together with its successors and assigns in such capacity, the “Administrative Agent”) and as Collateral Agent (in such capacity, together with its successors and assigns in such capacity, the “Collateral Agent”) for the Lenders (the Lenders, the Administrative Agent and the Collateral Agent being referred to herein, collectively, as the “Beneficiaries” and, individually, as a “Beneficiary”).

PRELIMINARY STATEMENTS

1. Signal Peak Energy, LLC, a Delaware limited liability company (“SPE”), and Global Rail Group, LLC, a Delaware limited liability company (“RailCo”, and together with SPE being referred to herein, collectively, as the “Borrowers” and, individually, as a “Borrower”), are parties to a Credit Agreement, dated as of October 22, 2010 (as amended, amended and restated, supplemented or otherwise modified from time to time, the “Credit Agreement”; the capitalized terms defined therein and not otherwise defined herein being used herein as therein defined), with the Beneficiaries. Pursuant to the Credit Agreement, the Lenders have agreed to make certain Loans available to the Borrowers on the terms and conditions set forth therein.

2. The obligation of the Lenders to make Loans to the Borrowers pursuant to the Credit Agreement is conditioned upon, among other things, the execution and delivery of this Guaranty by each Guarantor.

3. Each of the Guarantors will derive substantial direct and indirect benefits from the transactions contemplated by the Credit Agreement. Each Guarantor is willing to guarantee the Obligations of the Borrowers under the Credit Agreement and the other Loan Documents as hereinafter provided to obtain such benefits.

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NOW, THEREFORE, in consideration of the premises and in order to induce the Lenders to make Loans under the Credit Agreement and to induce the Beneficiaries to otherwise satisfy their obligations under the Credit Agreement, each Guarantor hereby agrees as follows:

SECTION 1. Guaranty; Limitation of Liability.

(a) The Guarantors, jointly and severally, hereby absolutely, unconditionally and irrevocably guarantee the punctual payment when due, whether at scheduled maturity or on any date of a required prepayment or by acceleration, demand or otherwise, of all Obligations of the Borrowers now or hereafter existing under or in respect of the Credit Agreement and the other Loan Documents (including, without limitation, any extensions, modifications, substitutions, amendments or renewals of any or all of the foregoing Obligations), whether direct or indirect, absolute or contingent, and whether for principal, interest, reimbursement obligations, premiums, fees, indemnities, contract causes of action, costs, expenses or otherwise, including, without limitation, the obligation of the Borrowers to pay principal, interest, charges, expenses, fees, attorneys’ fees and disbursements, indemnities and other amounts payable by the Borrowers under any Loan Document (such Obligations, the “Guaranteed Obligations”), and agrees to pay any and all expenses (including, without limitation, fees and expenses of counsel) incurred by any Beneficiary in enforcing any rights under this Guaranty. Without limiting the generality of the foregoing, the Guarantors’ liability shall extend to all amounts that constitute part of the Guaranteed Obligations and would be owed by the Borrowers to any Beneficiary under or in respect of the Loan Documents but for the fact that they are unenforceable or not allowable due to the existence of a bankruptcy, reorganization or similar proceeding involving either Borrower.

(b) Each Guarantor and, by its acceptance of this Guaranty, each Beneficiary hereby confirms that it is the intention of all such Persons that this Guaranty and the Guaranteed Obligations of each Guarantor hereunder shall not constitute a fraudulent transfer or fraudulent conveyance for purposes of the Federal Bankruptcy Code, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any other federal, state or foreign bankruptcy, insolvency, receivership or similar law to the extent applicable to this Guaranty and the Guaranteed Obligations. To effectuate the foregoing intention, the Beneficiaries and each Guarantor hereby irrevocably agree that the Guaranteed Obligations at any time as to each Guarantor shall be limited to the maximum amount as will result in the Guaranteed Obligations not constituting a fraudulent transfer or fraudulent conveyance as to such Guarantor.

SECTION 2. Guaranty Absolute.

The Guarantors, jointly and severally, guarantee that the Guaranteed Obligations will be paid strictly in accordance with the terms of the Loan Documents, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of any Beneficiary with respect thereto. The obligations of the Guarantors under or in respect of this Guaranty are independent of the Guaranteed Obligations or any other obligations of the Borrowers under or in respect of the Loan Documents, and a separate action or actions may be brought and prosecuted against each Guarantor to enforce this Guaranty, irrespective of whether any action is brought against either Borrower or any other Guarantor or whether either Borrower or any other Guarantor is joined in any such action or actions. The liability of the Guarantors under this Guaranty shall be irrevocable, absolute and unconditional irrespective of, and each Guarantor hereby irrevocably waives any defenses it may now have or hereafter acquire in any way relating to, any or all of the following:

(a) any lack of validity or enforceability of any Loan Document or any agreement or instrument relating thereto;

D-2

(b) any change in the time, manner or place of payment of, or in any other term of, all or any of the Guaranteed Obligations or any other obligations of the Borrowers under or in respect of the Loan Documents, or any other amendment or waiver of or any consent to departure from any Loan Document, including, without limitation, any increase in the Guaranteed Obligations resulting from the extension of additional credit to the Borrowers or otherwise;

(c) any taking, exchange, release or non-perfection of any collateral, or any taking, release or amendment or waiver of, or consent to departure from, any other guaranty, for all or any of the Guaranteed Obligations;

(d) any manner of application of any collateral, or proceeds thereof, to all or any of the Guaranteed Obligations, or any manner of sale or other disposition of any collateral for all or any of the Guaranteed Obligations or any other assets of either Borrower or any of its Affiliates;

(e) any change, restructuring or termination of the corporate structure or existence of either Borrower or any of its Affiliates;

(f) any failure of any Beneficiary to disclose to the Guarantors any information relating to the business, condition (financial or otherwise), operations, performance, properties or prospects of either Borrower now or hereafter known to such Beneficiary (each Guarantor waiving any duty on the part of Beneficiaries to disclose such information);

(g) the failure of any other Person to execute or deliver this Guaranty or any other guaranty or agreement or the release or reduction of liability of a Guarantor or any other guarantor or surety with respect to the Guaranteed Obligations; or

(h) any other circumstance (including, without limitation, any statute of limitations) or any existence of or reliance on any representation by any Beneficiary that might otherwise constitute a defense available to, or a discharge of, a Guarantor or any other guarantor or surety.

This Guaranty shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Guaranteed Obligations is rescinded or must otherwise be returned by any Beneficiary or any other Person upon the insolvency, bankruptcy or reorganization of a Guarantor, either Borrower or otherwise, all as though such payment had not been made.

SECTION 3. Waivers and Acknowledgments.

(a) Each Guarantor hereby unconditionally and irrevocably waives promptness, diligence, notice of acceptance, presentment, demand for performance, notice of nonperformance, default, acceleration, protest or dishonor and any other notice with respect to any of the Guaranteed Obligations and this Guaranty and any requirement that any Beneficiary protect, secure, perfect or insure any Lien or any property subject thereto or exhaust any right or take any action against the Borrowers, any other Guarantor or any other Person or any collateral.

D-3

(b) Each Guarantor hereby unconditionally and irrevocably waives any right to revoke this Guaranty and acknowledges that this Guaranty is continuing in nature and applies to all Guaranteed Obligations, whether existing now or in the future.

(c) Each Guarantor hereby unconditionally and irrevocably waives (i) any defense arising by reason of any claim or defense based upon an election of remedies by any Beneficiary that in any manner impairs, reduces, releases or otherwise adversely affects the subrogation, reimbursement, exoneration, contribution or indemnification rights of such Guarantor or other rights of such Guarantor to proceed against either Borrower, any other Guarantor or any other Person or any collateral and (ii) any defense based on any right of set-off or counterclaim against or in respect of the Guaranteed Obligations.

(d) Each Guarantor hereby unconditionally and irrevocably waives any duty on the part of any Beneficiary to disclose to such Guarantor any matter, fact or thing relating to the business, condition (financial or otherwise), operations, performance, properties or prospects of either Borrower or any of its Affiliates now or hereafter known by such Beneficiary.

(e) Each Guarantor acknowledges that it will receive substantial direct and indirect benefits from the financing arrangements contemplated by the Loan Documents and that the waivers set forth in Section 2 and this Section 3 are knowingly made in contemplation of such benefits.

SECTION 4. Subrogation.

Each Guarantor hereby unconditionally and irrevocably agrees not to exercise any rights that it may now have or hereafter acquire against either Borrower or any other Guarantor that arise from the existence, payment, performance or enforcement of the Guaranteed Obligations under or in respect of this Guaranty, including, without limitation, any right of subrogation, reimbursement, exoneration, contribution or indemnification and any right to participate in any claim or remedy of any Beneficiary against either Borrower or any other Guarantor, whether or not such claim, remedy or right arises in equity or under contract, statute or common law, including, without limitation, the right to take or receive from either Borrower or any other Guarantor, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim, remedy or right, unless and until all of the Guaranteed Obligations and all other amounts payable under this Guaranty shall have been paid in full in cash. If any amount shall be paid to a Guarantor in violation of the immediately preceding sentence at any time prior to the later of (a) the payment in full in cash of the Guaranteed Obligations and all other amounts payable under this Guaranty, and (b) the termination of all Commitments in accordance with the Credit Agreement, such amount shall be received and held in trust for the benefit of the Beneficiaries, shall be segregated from other property and funds of such Guarantor and shall forthwith be paid or delivered to the Administrative Agent in the same form as so received (with any necessary endorsement or assignment) to be credited and applied to

D-4

the Guaranteed Obligations and all other amounts payable under this Guaranty, whether matured or unmatured, in accordance with the terms of the Loan Documents, or to be held as collateral for any Guaranteed Obligations or other amounts payable under this Guaranty thereafter arising. If (i) a Guarantor shall make payment to any Beneficiary of all or any part of the Guaranteed Obligations, (ii) all of the Guaranteed Obligations and all other amounts payable under this Guaranty shall have been paid in full in cash, and (iii) the termination of all Commitments in accordance with the Credit Agreement shall have occurred, the Beneficiaries will, at such Guarantor’s request and expense, execute and deliver to such Guarantor appropriate documents, without recourse and without representation or warranty, necessary to evidence the transfer by subrogation to such Guarantor of an interest in the Guaranteed Obligations resulting from such payment made by such Guarantor pursuant to this Guaranty.

SECTION 5. Payments Free and Clear of Taxes, Etc.

(a) Section 2.14 of the Credit Agreement is incorporated herein by reference as if set forth at length in this Guaranty, mutatis mutandis, provided that each reference to the term “Borrower” or “Borrowers” shall be deemed to be a reference to the Guarantors; and each reference to the term “Administrative Agent” shall be deemed to be a reference to the Agents, and provided further that the obligations of the Guarantors to make payments in accordance with Section 2.14 as incorporated by reference herein shall be joint and several.

(b) Without prejudice to the survival of any other agreement of a Guarantor hereunder, the agreements and obligations of the Guarantors contained in this Section 5 shall survive the payment in full or termination of the Guaranteed Obligations.

SECTION 6. Representations and Warranties.

(a) FirstEnergy hereby makes for the benefit of the Beneficiaries all of the representations and warranties of FirstEnergy contained in Section 4.01 (other than subsections (j) and (k) thereof) of that certain Credit Agreement, dated as of August 24, 2006, as amended by the Consent and Amendment, dated as of November 2, 2007 (as so amended and as further amended, amended and restated, supplemented or otherwise modified from time to time, the “FirstEnergy Credit Agreement”), among FirstEnergy, FirstEnergy Solutions Corp., an Ohio corporation, American Transmission Systems, Incorporated, an Ohio corporation, Ohio Edison Company, an Ohio corporation, Pennsylvania Power Company, a Pennsylvania corporation, The Cleveland Electric Illuminating Company, an Ohio corporation, The Toledo Edison Company, an Ohio corporation, Jersey Central Power & Light Company, a New Jersey corporation, Metropolitan Edison Company, a Pennsylvania corporation, and Pennsylvania Electric Company, a Pennsylvania corporation, as borrowers, the banks and other financial institutions named therein, Citibank, N.A., as administrative agent, the fronting banks party thereto from time to time and the swing line lenders party thereto from time to time (in the form of such representations and warranties (and all defined terms used therein) as they exist on the date of this Guaranty and as they may hereafter be amended from time to time, but only to the extent that the incorporation of any such amendments into this Guaranty has been consented to in accordance with Section 10 hereof), which representations and warranties (and all defined terms used therein) are incorporated herein by reference as if set forth at length in this Guaranty, mutatis mutandis; provided that each reference to the term “this Agreement” shall be deemed to be a reference to this Guaranty; each reference to the term “Loan Documents” shall be deemed to be a reference to this Guaranty and each other Loan Document to which FirstEnergy is a party, if any; each reference to the term “Borrower” shall be deemed to be a reference to FirstEnergy; and each reference to the term “Administrative Agent”, “Bank”, “Fronting Bank” or “Lender” shall be deemed to be a reference to the Beneficiaries.

D-5

(b) Each Guarantor (other than FirstEnergy) hereby makes for the benefit of the Beneficiaries all of the representations and warranties contained in Article III of the Credit Agreement (other than Sections 3.04(a), 3.08, 3.12, 3.17, 3.19, 3.20, 3.21 and 3.22 thereof), which representations and warranties are incorporated herein by reference as if set forth at length in this Guaranty, mutatis mutandis; provided that each reference to the term “Borrower” or “Borrowers” shall be deemed to be a reference to such Guarantor; and each reference to the term “this Agreement” shall be deemed to be a reference to this Guaranty.

(c) Each Guarantor hereby makes for the benefit of the Beneficiaries each of the following additional representations and warranties:

(i) There are no conditions precedent to the effectiveness of this Guaranty that have not been satisfied or waived.

(ii) Such Guarantor has, independently and without reliance upon any Beneficiary and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Guaranty and each other Loan Document to which it is or is to be a party, and such Guarantor has established adequate means of obtaining from the Borrowers on a continuing basis information pertaining to, and is now and on a continuing basis will be completely familiar with, the business, condition (financial or otherwise), operations, performance, properties and prospects of the Borrowers.

SECTION 7. FirstEnergy Covenants.

(a) FirstEnergy Credit Agreement. So long as any Commitment is in effect or any portion of the Guaranteed Obligations shall remain unpaid, FirstEnergy shall observe and perform all of the covenants of FirstEnergy contained in Article V (other than Sections 5.01(h) and 5.02 thereof) of the FirstEnergy Credit Agreement (in the form of such covenants (and all defined terms used therein) as they exist as of the date of this Guaranty and as they may hereafter be amended from time to time, but only to the extent that the incorporation of any such amendments into this Guaranty has been consented to in accordance with Section 10), and all such covenants (and all defined terms used therein) are hereby incorporated and made applicable by reference as if set forth at length in this Guaranty, mutatis mutandis; provided that each reference to the term “Loan Documents” shall be deemed to be a reference to this Guaranty and each other Loan Document to which FirstEnergy is a party, if any; each reference to the term “Borrower” shall be deemed to be a reference to FirstEnergy; each reference to the term “Majority Lenders” shall be deemed to be a reference to the Required Lenders; and each reference to the term “Administrative Agent”, “Bank”, “Fronting Bank” or “Lender” shall be deemed to be a reference to the Beneficiaries.

D-6

(b) Debt to Capitalization Ratio. So long as any Commitment is in effect or any portion of the Guaranteed Obligations shall remain unpaid, FirstEnergy shall maintain a Debt to Capitalization Ratio of no more than 0.65 to 1.00 (determined as of the last day of each fiscal quarter). As used in this subsection (b), the term “Debt to Capitalization Ratio” shall have the meaning assigned to such term in the FirstEnergy Credit Agreement (as such term, and all related defined terms, exist as of the date of this Guaranty and as they may hereafter be amended from time to time, but only to the extent that the incorporation of any such amendments into this Guaranty has been consented to in accordance with Section 10), and such term (and all related defined terms) are hereby incorporated and made applicable by reference as if set forth at length in this Guaranty, mutatis mutandis; provided that each reference to the term “Borrower” shall be deemed to be a reference to FirstEnergy.

SECTION 8. Call Option.

In the event that the Administrative Agent provides an Acceleration Notice pursuant to Section 9(a) hereof or otherwise requests payment from the Guarantors of the outstanding amount of the Guaranteed Obligations due and payable at such time, FirstEnergy shall either (in its sole discretion) (a) pay to the Administrative Agent (for the benefit of the Beneficiaries), pursuant to Section 9(b) hereof, all of the Guaranteed Obligations (to the extent due and payable at such time and not paid by the Borrowers or the other Guarantors), in immediately available funds, or (b) within five (5) Business Days after its receipt of such Acceleration Notice or such request (as the case may be), (i) purchase by assignment from the Lenders, in accordance with Section 9.04(b) of the Credit Agreement, the outstanding principal amount of all Loans and all other Guaranteed Obligations due and payable at such time (the “Call Option”) and (ii) assume (pursuant to a resignation, assignment and assumption agreement reasonably satisfactory to the Agents and FirstEnergy) all rights and obligations of the Agents under the Loan Documents. If FirstEnergy exercises the Call Option, the Lenders shall assign all of their rights and obligations under the Credit Agreement to FirstEnergy in accordance with Section 9.04(b) thereof (provided, that the Lenders shall have received payment from FirstEnergy, in immediately available funds, of an amount equal to the outstanding amount of the Guaranteed Obligations due and payable at such time).

SECTION 9. Notice of Defaults.

(a) The Administrative Agent hereby agrees to (i) provide written notice to FirstEnergy and Boich promptly after the Administrative Agent obtains knowledge of the occurrence of any Default, and (ii) provide written notice to the Guarantors (an “Acceleration Notice”) promptly after the acceleration of the outstanding principal amount of the Loans pursuant to Article VII of the Credit Agreement.

(b) The Guarantors hereby agree, jointly and severally, within five (5) Business Days after their receipt of an Acceleration Notice, to pay to the Administrative Agent (for the benefit of the Beneficiaries) the outstanding amount of the Guaranteed Obligations due and payable at such time and all other amounts due and payable by the Guarantors under this Guaranty (except to the extent that FirstEnergy exercises the Call Option and complies with its obligations in connection therewith pursuant to Section 8).

D-7

SECTION 10. Amendments, Etc.

No amendment or waiver of any provision of this Guaranty and no consent to any departure by any Guarantor therefrom shall in any event be effective unless the same shall be in writing and signed by the Required Lenders, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no amendment, waiver or consent shall, unless in writing and signed by all of the Beneficiaries, (a) reduce or limit the obligations of any Guarantor hereunder, release any Guarantor hereunder or otherwise limit any Guarantor’s liability with respect to the Obligations owing to the Beneficiaries under or in respect of the Loan Documents, (b) postpone any date fixed for payment hereunder or (c) change the number of Beneficiaries or the percentage of (x) the Commitments, or (y) the aggregate unpaid principal amount of the Loans that, in each case, shall be required for the Beneficiaries or any of them to take any action hereunder; and provided, further, that no amendment, waiver or consent shall, unless in writing and signed by the Administrative Agent in addition to the Lenders required above to take such action, affect the rights or duties of the Administrative Agent under this Guaranty.

SECTION 11. Notices, Etc.

All notices and other communications provided for hereunder shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows: (i) if to a Guarantor, addressed to it at the addresses listed below such Guarantor’s name on the signature pages hereto; (ii) if to the Administrative Agent or any other Beneficiary, at its address specified in Section 9.01 of the Credit Agreement; or (iii) as to each party, at such other address as shall be designated by such party in a written notice to each other party. All such notices and other communications sent by hand or overnight courier service, or mailed by certified or registered mail, shall be deemed to have been given when received; notices sent by telecopier shall be deemed to have been given when sent (except that, if not given during normal business hours for the recipient, shall be deemed to have been given at the opening of business on the next business day for the recipient). Delivery by telecopier or other electronic transmission of an executed counterpart of a signature page to any amendment or waiver of any provision of this Guaranty shall be effective as delivery of an original executed counterpart thereof.

SECTION 12. No Waiver, Remedies.

No failure on the part of any Beneficiary to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law.

D-8

SECTION 13. Right of Set-off.

Upon the occurrence and during the continuance of any Event of Default, each Beneficiary is hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final, excluding, however, any payroll accounts maintained by a Guarantor with such Beneficiary if and to the extent that such Beneficiary shall have expressly waived its set-off rights in writing in respect of such payroll account) at any time held and other indebtedness at any time owing by such Beneficiary to or for the credit or the account of such Guarantor against any and all of the obligations of such Guarantor now or hereafter existing under this Guaranty, irrespective of whether such Beneficiary shall have made any demand under this Guaranty or any other Loan Document and although such obligations may be unmatured. Each Beneficiary agrees promptly to notify such Guarantor after any such set-off and application; provided, however, that the failure to give such notice shall not affect the validity of such set-off and application. The rights of each Beneficiary under this Section are in addition to other rights and remedies (including, without limitation, other rights of set-off) that such Beneficiary may have.

SECTION 14. Indemnification.

(a) Without limitation of any other Guaranteed Obligations of a Guarantor or remedies of the Beneficiaries under this Guaranty, the Guarantors shall, jointly and severally, to the fullest extent permitted by law, indemnify, defend and save and hold harmless each Beneficiary and each of its Affiliates and their respective officers, directors, employees, agents and advisors (each, an “Indemnified Party”) from and against, and shall pay on demand, any and all claims, damages, losses, liabilities and expenses (including, without limitation, reasonable fees and expenses of counsel) that may be incurred by or asserted or awarded against any Indemnified Party in connection with or as a result of any failure of any Guaranteed Obligations to be the legal, valid and binding obligations of either Borrower enforceable against such Borrower in accordance with their terms.

(b) EACH GUARANTOR HEREBY ALSO AGREES THAT NONE OF THE INDEMNIFIED PARTIES SHALL HAVE ANY LIABILITY (WHETHER DIRECT OR INDIRECT, IN CONTRACT, TORT OR OTHERWISE) TO SUCH GUARANTOR OR ANY OF ITS RESPECTIVE AFFILIATES OR ANY OF THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND ADVISORS, AND SUCH GUARANTOR HEREBY AGREES NOT TO ASSERT ANY CLAIM AGAINST ANY INDEMNIFIED PARTY ON ANY THEORY OF LIABILITY, FOR SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES IN CONNECTION WITH, ARISING OUT OF, OR OTHERWISE RELATING TO THIS GUARANTY, ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN OR THE ACTUAL OR PROPOSED USE OF THE PROCEEDS OF THE LOANS CONSTITUTING GUARANTEED OBLIGATIONS.

(c) Without prejudice to the survival of any of the other agreements of any Guarantor under this Guaranty or any of the other Loan Documents, the agreements and obligations of such Guarantor contained in Section 1(a) (with respect to enforcement expenses), the last sentence of Section 2, Section 5 and this Section 14 shall survive the payment in full of the Guaranteed Obligations and all of the other amounts payable under this Guaranty.

D-9

SECTION 15. Subordination.

If any Default shall have occurred and be continuing, each Guarantor agrees to subordinate any and all debts, liabilities and other obligations owed to such Guarantor by either Borrower or any other Guarantor (the “Subordinated Obligations”) to the Guaranteed Obligations to the extent and in the manner hereinafter set forth in this Section 15:

(a) Prohibited Payments, Etc. Except during the continuance of a Default (including the commencement and continuation of any proceeding under any Debtor Relief Law (as hereinafter defined) relating to either Borrower or any other Guarantor), each Guarantor may receive payments permitted under Section 6.08 of the Credit Agreement from the Borrowers and regularly scheduled payments from each other Guarantor on account of the Subordinated Obligations. After the occurrence and during the continuance of any Default (including the commencement and continuation of any proceeding under any Debtor Relief Law relating to either Borrower or any other Guarantor), however, unless the Administrative Agent otherwise agrees, no Guarantor shall demand, accept or take any action to collect any payment on account of the Subordinated Obligations.

(b) Prior Payment of Guaranteed Obligations. In any proceeding under any Debtor Relief Law relating to either Borrower or any other Guarantor, each Guarantor agrees that the Beneficiaries shall be entitled to receive payment in full in cash of all Guaranteed Obligations (including all interest and expenses accruing after the commencement of a proceeding under any Debtor Relief Law, whether or not constituting an allowed claim in such proceeding (“Post Petition Interest”)) before such Guarantor receives payment of any Subordinated Obligations.

(c) Turn-Over. After the occurrence and during the continuance of any Default (including the commencement and continuation of any proceeding under any Debtor Relief Law relating to either Borrower or any other Guarantor), each Guarantor shall, if the Administrative Agent so requests, collect, enforce and receive payments on account of the Subordinated Obligations as trustee for the Beneficiaries and deliver such payments to the Administrative Agent on account of the Guaranteed Obligations (including all Post Petition Interest), together with any necessary endorsements or other instruments of transfer, but without reducing or affecting in any manner the liability of such Guarantor under the other provisions of this Guaranty.

(d) Administrative Agent Authorization. After the occurrence and during the continuance of any Default (including the commencement and continuation of any proceeding under any Debtor Relief Law relating to either Borrower or any Guarantor), the Administrative Agent is authorized and empowered (but without any obligation to so do), in its discretion, (i) in the name of any Guarantor, to collect and enforce, and to submit claims in respect of, Subordinated Obligations and to apply any amounts received thereon to the Guaranteed Obligations (including any and all Post Petition Interest), and (ii) to require each Guarantor (A) to collect and enforce, and to submit claims in respect of, Subordinated Obligations and (B) to pay any amounts received on such obligations to the Administrative Agent for application to the Guaranteed Obligations (including any and all Post Petition Interest).

(e) Debtor Relief Laws. As used in this Section 15, the term “Debtor Relief Laws” shall mean the Federal Bankruptcy Code and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief laws of the United States or other applicable jurisdictions from time to time in effect and affecting the rights of creditors generally.

D-10

SECTION 16. Continuing Guaranty; Assignments under the Credit Agreement.

This Guaranty is a continuing guaranty and shall (a) remain in full force and effect until the later of (i) the payment in full in cash of the Guaranteed Obligations and all other amounts payable under this Guaranty, and (ii) the date of the termination of all Commitments in accordance with the Credit Agreement, (b) be binding upon each Guarantor, its successors and assigns and (c) inure to the benefit of and be enforceable by the Beneficiaries and their successors, transferees and assigns. Without limiting the generality of clause (c) of the immediately preceding sentence, any Lender may assign or otherwise transfer all or any portion of its rights and obligations under the Credit Agreement (including, without limitation, all or any portion of its Commitment, the Loans owing to it and the Note or Notes held by it) to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to such Lender herein or otherwise, in each case as and to the extent provided in Section 9.04 of the Credit Agreement. No Guarantor shall have the right to assign or otherwise transfer its rights or obligations hereunder or any interest herein without the prior written consent of the Beneficiaries (and any attempted assignment or transfer by any Guarantor without such consent shall be null and void).

SECTION 17. Execution in Counterparts.

This Guaranty and each amendment, waiver and consent with respect hereto may be executed in any number of counterparts and by different parties thereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Guaranty by telecopier or other electronic transmission shall be effective as delivery of an original executed counterpart of this Guaranty.

SECTION 18. Governing Law; Jurisdiction; Waiver of Jury Trial, Etc.

(a) THIS GUARANTY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

(b) Each Guarantor hereby irrevocably and unconditionally submits, for itself and its Property, to the nonexclusive jurisdiction of the Supreme Court of the State of New York sitting in New York County and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Guaranty or any of the other Loan Documents to which it is or is to be a party, or for recognition or enforcement of any judgment, and each Guarantor hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State court or, to the extent permitted by law, in such Federal court. Each Guarantor agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Guaranty or any other Loan Document shall affect any right that any Beneficiary may otherwise have to bring any action or proceeding relating to this Guaranty or any other Loan Document against one or more of the Guarantors or their respective Properties in the courts of any other jurisdiction.

D-11

(c) Each Guarantor hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Guaranty or any other Loan Document to which it is or is to be a party in any court referred to in paragraph (b) of this Section. Each Guarantor hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such suit, action or proceeding in any such court. Each Guarantor also irrevocably consents, to the fullest extent permitted by law, to the service of any and all process in any such suit, action or proceeding in the manner provided for notices in Section 11. Nothing in this Guaranty or any other Loan Document will affect the right of any Beneficiary to serve process in any other manner permitted by law.

(d) EACH GUARANTOR AND EACH BENEFICIARY HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS GUARANTY, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH GUARANTOR AND EACH BENEFICIARY (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY TO ANY LOAN DOCUMENT HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES TO THE LOAN DOCUMENTS HAVE BEEN INDUCED TO ENTER INTO THE LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

D-12

IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be duly executed and delivered by its officer thereunto duly authorized as of the date first above written.

GUARANTORS FIRSTENERGY CORP.
By:
	Name:	James F. Pearson
	Title:	Vice President and Treasurer

Address:	76 South Main Street
	Akron, Ohio 44308
Telecopy No.	330-384-3772
Attention:	James F. Pearson

GLOBAL MINING GROUP, LLC
By:
	Name:	Wayne M. Boich
	Title:	President

Address:	41 South High Street
	Suite 3750-South
	Columbus, Ohio 43215
Telecopy No.	614-221-0117
Attention:	Brian T. Murphy

Signature Page to Guaranty

D-13

WMB LOAN VENTURES, LLC
By:
	Name:
	Title:

Address:	41 South High Street
	Suite 3750-South
	Columbus, Ohio 43215
Telecopy No.	614-221-0117
Attention:	Brian T. Murphy

WMB LOAN VENTURES II, LLC
By:
	Name:
	Title:

Address:	41 South High Street
	Suite 3750-South
	Columbus, Ohio 43215
Telecopy No.	614-221-0117
Attention:	Brian T. Murphy

Signature Page to Guaranty

D-14

AGREED AND ACCEPTED:

UNION BANK, N.A., as Administrative Agent and
as Collateral Agent

By:	Name:
	Title:

Signature Page to Guaranty

D-15

EXHIBIT E
to the Credit Agreement

FORM OF BORROWING REQUEST

[Date]

Union Bank, N.A., as Administrative

Agent for the Lenders party to the
Credit Agreement referred to below

Attention:                                        

Ladies and Gentlemen:

The undersigned, Signal Peak Energy, LLC, a Delaware limited liability company, and Global Rail Group, LLC, a Delaware limited liability company (together, the “Borrowers”), refer to the Credit Agreement, dated as of October 22, 2010 (the “Credit Agreement”, the terms defined therein and not otherwise defined herein being used herein as therein defined), among the Borrowers, the Lenders party thereto, and Union Bank, N.A., as Administrative Agent and as Collateral Agent, and hereby give you notice, irrevocably, pursuant to Section 2.03 of the Credit Agreement that the undersigned hereby request a Borrowing under the Credit Agreement, and in that connection sets forth below the information relating to such Borrowing (the “Proposed Borrowing”) as required by Section 2.03 of the Credit Agreement:

(i) The aggregate principal amount of the Proposed Borrowing is [$ 325,000,000].

(ii) The Business Day of the Proposed Borrowing is October [_____], 2010.

(iii) The Type of Loans comprising the Proposed Borrowing is [ABR Loans] [Eurodollar Loans].

(iv) [The initial Interest Period for each Loan made as part of the Proposed Borrowing is [one/two/three week(s)/one/two/three/six month(s).]¹

(v) The proceeds of the Loans comprising the Proposed Borrowing should be disbursed pursuant to the wire instructions set forth in Schedule 1 attached hereto.

¹ To be included for a Proposed Borrowing comprised of Eurodollar Loans only.

E-1

Very truly yours, SIGNAL PEAK ENERGY, LLC
By:
	Name:
	Title:
GLOBAL RAIL GROUP, LLC
By:
	Name:
	Title:

E-2

SCHEDULE 1

Wire Instructions

E-3

EX-12

EXHIBIT 12

FIRSTENERGY CORP.

CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES

	Nine Months Ended
	September 30
	2010		2009
	(Dollars in millions)
EARNINGS AS DEFINED IN REGULATION S-K:
Income before extraordinary items	$	580	$	754
Interest and other charges, before reduction for amounts capitalized and deferred		629		759
Provision for income taxes		364		430
Interest element of rentals charged to income (a)		114		122
Earnings as defined	$	1,687	$	2,065
FIXED CHARGES AS DEFINED IN REGULATION S-K:
Interest before reduction for amounts capitalized and deferred	$	629	$	759
Interest element of rentals charged to income (a)		114		122
Fixed charges as defined	$	743	$	881
CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES		2.27		2.34

(a) Includes the interest element of rentals where determinable plus 1/3 of rental expense where no readily defined interest element can be determined.

EXHIBIT 12

FIRSTENERGY SOLUTIONS CORP.

CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES

	Nine Months Ended
	September 30
	2010		2009
	(Dollars in thousands)
EARNINGS AS DEFINED IN REGULATION S-K:
Income before extraordinary items	$	177,125	$	667,766
Interest and other charges, before reduction for amounts capitalized and deferred		157,922		99,488
Provision for income taxes		107,833		372,175
Interest element of rentals charged to income (a)		68,562		71,641
Earnings as defined	$	511,442	$	1,211,070
FIXED CHARGES AS DEFINED IN REGULATION S-K:
Interest before reduction for amounts capitalized and deferred	$	157,922	$	99,488
Interest element of rentals charged to income (a)		68,562		71,641
Fixed charges as defined	$	226,484	$	171,129
CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES		2.26		7.08

(a) Includes the interest element of rentals where determinable plus 1/3 of rental expense where no readily defined interest element can be determined.

EXHIBIT 12

OHIO EDISON COMPANY

CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES

	Nine Months Ended
	September 30
	2010		2009
	(Dollars in thousands)
EARNINGS AS DEFINED IN REGULATION S-K:
Income before extraordinary items	$	119,737	$	80,011
Interest and other charges, before reduction for amounts capitalized and deferred		66,440		67,717
Provision for income taxes		60,797		36,742
Interest element of rentals charged to income (a)		47,972		52,756
Earnings as defined	$	294,946	$	237,226
FIXED CHARGES AS DEFINED IN REGULATION S-K:
Interest before reduction for amounts capitalized and deferred	$	66,440	$	67,717
Interest element of rentals charged to income (a)		47,972		52,756
Fixed charges as defined	$	114,412	$	120,473
CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES		2.58		1.97

(a) Includes the interest element of rentals where determinable plus 1/3 of rental expense where no readily defined interest element can be determined.

EXHIBIT 12

THE CLEVELAND ELECTRIC ILLUMINATING COMPANY

CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES

	Nine Months Ended
	September 30
	2010		2009
	(Dollars in thousands)
EARNINGS AS DEFINED IN REGULATION S-K:
Income before extraordinary items	$	60,866	$	(32,290	)
Interest and other charges, before reduction for amounts capitalized and deferred		100,267		100,819
Provision for income taxes		33,107		(25,290	)
Interest element of rentals charged to income (a)		1,338		1,912
Earnings as defined	$	195,578	$	45,151
FIXED CHARGES AS DEFINED IN REGULATION S-K:
Interest before reduction for amounts capitalized and deferred	$	100,267	$	100,819
Interest element of rentals charged to income (a)		1,338		1,912
Fixed charges as defined	$	101,605	$	102,731
CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES		1.92		(b	)

(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)	The earnings as defined in 2009 would need to increase $57,580,000 for the fixed charge ratio to be 1.0.

EXHIBIT 12

THE TOLEDO EDISON COMPANY

CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES

	Nine Months Ended
	September 30
	2010		2009
	(Dollars in thousands)
EARNINGS AS DEFINED IN REGULATION S-K:
Income before extraordinary items	$	27,821	$	14,497
Interest and other charges, before reduction for amounts capitalized and deferred		31,421		25,649
Provision for income taxes		13,241		3,123
Interest element of rentals charged to income (a)		23,924		26,159
Earnings as defined	$	96,407	$	69,428
FIXED CHARGES AS DEFINED IN REGULATION S-K:
Interest before reduction for amounts capitalized and deferred	$	31,421	$	25,649
Interest element of rentals charged to income (a)		23,924		26,159
Fixed charges as defined	$	55,345	$	51,808
CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES		1.74		1.34

(a) Includes the interest element of rentals where determinable plus 1/3 of rental expense where no readily defined interest element can be determined.

EXHIBIT 12

JERSEY CENTRAL POWER & LIGHT COMPANY

CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES

	Nine Months Ended
	September 30
	2010		2009
	(Dollars in thousands)
EARNINGS AS DEFINED IN REGULATION S-K:
Income before extraordinary items	$	161,971	$	127,782
Interest and other charges, before reduction for amounts capitalized and deferred		90,508		90,659
Provision for income taxes		121,491		95,834
Interest element of rentals charged to income (a)		4,822		5,467
Earnings as defined	$	378,792	$	319,742
FIXED CHARGES AS DEFINED IN REGULATION S-K:
Interest before reduction for amounts capitalized and deferred	$	90,508	$	90,659
Interest element of rentals charged to income (a)		4,822		5,467
Fixed charges as defined	$	95,330	$	96,126
CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES		3.97		3.33

(a) Includes the interest element of rentals where determinable plus 1/3 of rental expense where no readily defined interest element can be determined.

EXHIBIT 12

METROPOLITAN EDISON COMPANY

CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES

	Nine Months Ended
	September 30
	2010		2009
	(Dollars in thousands)
EARNINGS AS DEFINED IN REGULATION S-K:
Income before extraordinary items	$	43,664	$	37,370
Interest and other charges, before reduction for amounts capitalized and deferred		39,812		42,502
Provision for income taxes		30,968		21,027
Interest element of rentals charged to income (a)		1,642		1,647
Earnings as defined	$	116,086	$	102,546
FIXED CHARGES AS DEFINED IN REGULATION S-K:
Interest before reduction for amounts capitalized and deferred	$	39,812	$	42,502
Interest element of rentals charged to income (a)		1,642		1,647
Fixed charges as defined	$	41,454	$	44,149
CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES		2.80		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.

EXHIBIT 12

PENNSYLVANIA ELECTRIC COMPANY

CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES

	Nine Months Ended
	September 30
	2010		2009
	(Dollars in thousands)
EARNINGS AS DEFINED IN REGULATION S-K:
Income before extraordinary items	$	50,089	$	49,307
Interest and other charges, before reduction for amounts capitalized and deferred		52,501		36,690
Provision for income taxes		28,280		29,393
Interest element of rentals charged to income (a)		2,538		2,324
Earnings as defined	$	133,408	$	117,714
FIXED CHARGES AS DEFINED IN REGULATION S-K:
Interest before reduction for amounts capitalized and deferred	$	52,501	$	36,690
Interest element of rentals charged to income (a)		2,538		2,324
Fixed charges as defined	$	55,039	$	39,014
CONSOLIDATED RATIO OF EARNINGS TO FIXED CHARGES		2.42		3.02

(a) Includes the interest element of rentals where determinable plus 1/3 of rental expense where no readily defined interest element can be determined.

EX-31.1

Exhibit 31.1

Certification

I, Anthony J. Alexander, certify that:

1.	I have reviewed this report on Form 10-Q of FirstEnergy Corp.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: October 26, 2010

/s/ Anthony J. Alexander  

Anthony J. Alexander 

Chief Executive Officer 

Exhibit 31.1

Certification

I, Donald R. Schneider, certify that:

1.	I have reviewed this report on Form 10-Q of FirstEnergy Solutions Corp.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: October 26, 2010

/s/ Donald R. Schneider  

Donald R. Schneider 

Chief Executive Officer 

Exhibit 31.1

Certification

I, Charles E. Jones, certify that:

1.	I have reviewed this report on Form 10-Q of Ohio Edison Company;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: October 26, 2010

/s/ Charles E. Jones  

Charles E. Jones 

Chief Executive Officer 

Exhibit 31.1

Certification

I, Charles E. Jones, certify that:

1.	I have reviewed this report on Form 10-Q of The Cleveland Electric Illuminating Company;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: October 26, 2010

/s/ Charles E. Jones  

Charles E. Jones 

Chief Executive Officer 

Exhibit 31.1

Certification

I, Charles E. Jones, certify that:

1.	I have reviewed this report on Form 10-Q of The Toledo Edison Company;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: October 26, 2010

/s/ Charles E. Jones  

Charles E. Jones 

Chief Executive Officer 

Exhibit 31.1

Certification

I, Donald M. Lynch, certify that:

1.	I have reviewed this report on Form 10-Q of Jersey Central Power & Light Company;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: October 26, 2010

/s/ Donald M. Lynch  

Donald M. Lynch 

Chief Executive Officer 

Exhibit 31.1

Certification

I, Charles E. Jones, certify that:

1.	I have reviewed this report on Form 10-Q of Metropolitan Edison Company;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: October 26, 2010

/s/ Charles E. Jones  

Charles E. Jones 

Chief Executive Officer 

Exhibit 31.1

Certification

I, Charles E. Jones, certify that:

1.	I have reviewed this report on Form 10-Q of Pennsylvania Electric Company;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: October 26, 2010

/s/ Charles E. Jones  

Charles E. Jones 

Chief Executive Officer 

EX-31.2

Exhibit 31.2

Certification

I, Mark T. Clark, certify that:

1.	I have reviewed this report on Form 10-Q of FirstEnergy Corp.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: October 26, 2010

/s/ Mark T. Clark  

Mark T. Clark 

Chief Financial Officer 

Exhibit 31.2

Certification

I, Mark T. Clark, certify that:

1.	I have reviewed this report on Form 10-Q of FirstEnergy Solutions Corp.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: October 26, 2010

/s/ Mark T. Clark  

Mark T. Clark 

Chief Financial Officer 

Exhibit 31.2

Certification

I, Mark T. Clark, certify that:

1.	I have reviewed this report on Form 10-Q of Ohio Edison Company;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: October 26, 2010

/s/ Mark T. Clark  

Mark T. Clark 

Chief Financial Officer 

Exhibit 31.2

Certification

I, Mark T. Clark, certify that:

1.	I have reviewed this report on Form 10-Q of The Cleveland Electric Illuminating Company;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: October 26, 2010

/s/ Mark T. Clark  

Mark T. Clark 

Chief Financial Officer 

Exhibit 31.2

Certification

I, Mark T. Clark, certify that:

1.	I have reviewed this report on Form 10-Q of The Toledo Edison Company;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: October 26, 2010

/s/ Mark T. Clark  

Mark T. Clark 

Chief Financial Officer 

Exhibit 31.2

Certification

I, K. Jon Taylor, certify that:

1.	I have reviewed this report on Form 10-Q of Jersey Central Power & Light Company;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: October 26, 2010

/s/ K. Jon Taylor  

K. Jon Taylor 

Chief Financial Officer 

Exhibit 31.2

Certification

I, Mark T. Clark, certify that:

1.	I have reviewed this report on Form 10-Q of Metropolitan Edison Company;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: October 26, 2010

/s/ Mark T. Clark  

Mark T. Clark 

Chief Financial Officer 

Exhibit 31.2

Certification

I, Mark T. Clark, certify that:

1.	I have reviewed this report on Form 10-Q of Pennsylvania Electric Company;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: October 26, 2010

/s/ Mark T. Clark  

Mark T. Clark 

Chief Financial Officer 

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350

In connection with the Report of FirstEnergy Corp. (“Company”) on Form 10-Q for the period ending September 30, 2010 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each undersigned officer of the Company does hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Anthony J. Alexander  

Anthony J. Alexander 

Chief Executive Officer 

/s/ Mark T. Clark  

Mark T. Clark 

Chief Financial Officer 

Date: October 26, 2010

Exhibit 32

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350

In connection with the Report of FirstEnergy Solutions Corp. (“Company”) on Form 10-Q for the period ending September 30, 2010 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each undersigned officer of the Company does hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Donald R. Schneider  

Donald R. Schneider 

President
(Chief Executive Officer) 

/s/ Mark T. Clark  

Mark T. Clark 

Chief Financial Officer 

Date: October 26, 2010

Exhibit 32

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350

In connection with the Report of Ohio Edison Company (“Company”) on Form 10-Q for the period ending September 30, 2010 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each undersigned officer of the Company does hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Charles E. Jones  

Charles E. Jones 

President
(Chief Executive Officer) 

/s/ Mark T. Clark  

Mark T. Clark 

Chief Financial Officer 

Date: October 26, 2010

Exhibit 32

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350

In connection with the Report of The Cleveland Electric Illuminating Company (“Company”) on Form 10-Q for the period ending September 30, 2010 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each undersigned officer of the Company does hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Charles E. Jones  

Charles E. Jones 

President
(Chief Executive Officer) 

/s/ Mark T. Clark  

Mark T. Clark 

Chief Financial Officer 

Date: October 26, 2010

Exhibit 32

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350

In connection with the Report of The Toledo Edison Company (“Company”) on Form 10-Q for the period ending September 30, 2010 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each undersigned officer of the Company does hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Charles E. Jones  

Charles E. Jones 

President
(Chief Executive Officer) 

/s/ Mark T. Clark  

Mark T. Clark 

Chief Financial Officer 

Date: October 26, 2010

Exhibit 32

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350

In connection with the Report of Jersey Central Power & Light Company (“Company”) on Form 10-Q for the period ending September 30, 2010 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each undersigned officer of the Company does hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to the best of his or her knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Donald M. Lynch  

Donald M. Lynch 

President
(Chief Executive Officer) 

/s/ K. Jon Taylor  

K. Jon Taylor 

Controller
(Chief Financial Officer) 

Date: October 26, 2010

Exhibit 32

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350

In connection with the Report of Metropolitan Edison Company (“Company”) on Form 10-Q for the period ending September 30, 2010 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each undersigned officer of the Company does hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Charles E. Jones  

Charles E. Jones 

President
(Chief Executive Officer) 

/s/ Mark T. Clark  

Mark T. Clark 

Chief Financial Officer 

Date: October 26, 2010

Exhibit 32

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350

In connection with the Report of Pennsylvania Electric Company (“Company”) on Form 10-Q for the period ending September 30, 2010 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each undersigned officer of the Company does hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to the best of his knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Charles E. Jones  

Charles E. Jones 

President
(Chief Executive Officer) 

/s/ Mark T. Clark  

Mark T. Clark 

Chief Financial Officer 

Date: October 26, 2010