EXHIBIT 10.2

 
 
MASTER STANDARD SERVICE OFFER (“SSO”)
 
SUPPLY  AGREEMENT
 
FOR THE PERIOD
 
FROM JUNE 1, 2009
 
THROUGH MAY 31, 2011

 
 

--------------------------------------------------------------------------------

 

TABLE OF CONTENTS

ARTICLE 1:
DEFINITIONS
2
ARTICLE 2:
GENERAL TERMS AND CONDITIONS
11
2.1
Capacity In Which Companies Are Entering Into This Agreement
11
2.2
Parties’ Obligations
11
2.3
MISO Services
13
2.4
Communications and Data Exchange
14
2.5
Record Retention
15
2.6
Verification
15
ARTICLE 3:
REPRESENTATIONS AND WARRANTIES
16
3.1
SSO Supplier's Representations and Warranties
16
3.2
Companies’ Representations and Warranties
18
3.3
Joint Representations and Warranties
20
3.4
Survival of Obligations
21
ARTICLE 4:
COMMENCEMENT AND TERMINATION OF AGREEMENT
21
4.1
Commencement and Termination
21
4.2
Termination of Right to Supply SSO
21
4.3
Survival of Obligations
21
4.4
Mutual Termination
22
ARTICLE 5:
BREACH AND DEFAULT
23
5.1
Events of Default
23
5.2
Rights Upon Default
26
5.3
Damages Resulting From an Event of Default
26
5.4
Declaration of an Early Termination Date and Calculation of Settlement
Amount and Termination Payment
 
29
5.5
Step-up Provision
32
5.6
Setoff of Payment Obligations of the Non-Defaulting Party
33
5.7
Preservation of Rights of Non-Defaulting Party
34
ARTICLE 6:
CREDITWORTHINESS
34
6.1
Applicability
34
6.2
Creditworthiness Determination
34
6.3
Independent Credit Requirement
35
6.4
Independent Credit Threshold
35
6.5
Mark-to-Market Credit Exposure Methodology
40
6.6
Credit Limit
41
6.7
Posting Margin and Return of Surplus Margin
44
6.8
Grant of Security Interest/Remedies
46
6.9
Security Instruments
49
6.10
Maintenance of Creditworthiness
51
6.11
Calling on Security
51
6.12
Interest on Cash Held by Company
52

 
i

--------------------------------------------------------------------------------

 

6.13
Confidentiality
52
6.14
No Endorsement of SSO Supplier
53
ARTICLE 7:
PROCEDURES FOR ENERGY SCHEDULING AND DATA
TRANSMISSION
 
53
7.1
Load Obligations
53
7.2
Data Transmission
54
7.3
Energy Scheduling
54
7.4
Meter Data Management Agent
54
     
ARTICLE 8:
THE ENERGY SETTLEMENT/RECONCILIATION PROCESS
55
8.1
Energy Settlement By MISO
55
8.2
Energy Settlement by the Company
55
ARTICLE 9:
BILLING AND PAYMENT
55
9.1
The Company Payment of Obligations to the SSO Supplier
55
9.2
Billing for SSO Supplier’s Obligations to Other Parties
57
9.3
The SSO Supplier Payment of Obligations to the Companies
57
ARTICLE 10:
SYSTEM OPERATION
58
10.1
Disconnection and Curtailment by the Companies
58
10.2
Inadvertent Loss of Service to SSO Customers
59
10.3
Good Faith Efforts
59
10.4
MISO Requirements
60
10.5
Compliance with Governmental Directives
60
ARTICLE 11:
DISPUTE RESOLUTION
60
11.1
Informal Resolution of Disputes
60
11.2
Recourse to Agencies or Courts of Competent Jurisdiction
61
ARTICLE 12:
REGULATORY AUTHORIZATIONS AND JURISDICTION
61
12.1
Compliance with Applicable Legal Authorities
61
12.2
FERC Jurisdictional Matters
61
ARTICLE 13:
LIMITATION OF LIABILITY
62
13.1
Limitations on Liability
62
13.2
Risk of Loss
62
ARTICLE 14:
INDEMNIFICATION
63
14.1
Indemnification
63
14.2
Survives Agreement
64
ARTICLE 15:
MISCELLANEOUS PROVISIONS
65
15.1
Notices
65
15.2
No Prejudice of Rights
66
15.3
Assignment
66
15.4
Governing Law and Venue
68
15.5
Headings
68
15.6
Third Party Beneficiaries
68
15.7
General Miscellaneous Provisions
68
15.8
Taxes
69

 
ii

--------------------------------------------------------------------------------

 

15.9
Use of Word "Including"
70
15.10
Federal Acquisition
70
15.11
Binding Terms
71
15.12
Confidentiality
71
15.13
Amendment
74
15.14
Counterparts
74
   
APPENDIX A TO MASTER SSO SUPPLY AGREEMENT
76
APPENDIX B TO MASTER SSO SUPPLY AGREEMENT
77
APPENDIX C TO MASTER SSO SUPPLY AGREEMENT
78
APPENDIX D TO MASTER SSO SUPPLY AGREEMENT
84
APPENDIX E TO MASTER SSO SUPPLY AGREEMENT
98
APPENDIX F TO MASTER SSO SUPPLY AGREEMENT
104

 

 
iii

--------------------------------------------------------------------------------

 

MASTER SSO SUPPLY AGREEMENT

 
THIS MASTER SSO SUPPLY AGREEMENT, made and entered into this ___ day
of__________, 2009 by and between The Cleveland Electric Illuminating Company,
The Toledo Edison Company and Ohio Edison Company (collectively, the
“Companies”), each of which is a corporation organized and existing under the
laws of the State of Ohio, and each of the suppliers listed on Appendix A hereto
severally, but not jointly (each a “SSO Supplier” and, collectively, the “SSO
Suppliers”).  The Companies and each SSO Supplier are hereinafter sometimes
referred to collectively as the “Parties,” or individually as a “Party,”
 
WITNESSETH:
 
WHEREAS, each of the Companies is an Ohio public utility engaged, inter alia, in
providing SSO Service within its service territory; and
 
WHEREAS, the PUCO found that, for periods on and after June 1, 2009, it would
serve the public interest for the Companies to secure SSO Supply through a
competitive bidding process; and
 
WHEREAS, on _______, 2009 the Company conducted and completed a successful
solicitation  for SSO Supply; and,
 
WHEREAS, the SSO Supplier was one of the winning bidders in the Solicitation for
the provision of SSO Supply; and
 
WHEREAS, the PUCO has authorized the Companies to contract with winning bidders
for the provision of SSO Supply to serve SSO Load in accordance with the terms
of this Standard Service Offer Master SSO Supply Agreement (“Agreement”); and
 
 
1

--------------------------------------------------------------------------------

 
WHEREAS, the Companies and the SSO Supplier desire to enter into this Agreement
setting forth their respective obligations concerning the provision of SSO
Supply.
 
NOW, THEREFORE, in consideration of the mutual covenants and promises set forth
below, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties hereto, intending to
be legally bound, hereby covenant, promise and agree as follows:
 
ARTICLE 1:                    DEFINITIONS
 
Any capitalized or abbreviated term not elsewhere defined in this Agreement will
have the definition set forth in this Article.
 
Ancillary Services has the same meaning ascribed to the term in the applicable
MISO Rules.

Applicable Legal Authorities means generally, those federal and Ohio statutes
and administrative rules and regulations that govern the electric utility
industry in Ohio.

Asset Owner has the meaning ascribed thereto in the applicable MISO Rules.

Auction Revenue Right or ARR has the same meaning ascribed to the term in the
applicable MISO Rules.

Bankruptcy Code means those laws of the United States of America related to
bankruptcy, codified and enacted as Title 11 of the United States Code, entitled
“Bankruptcy” and found at 11 U.S.C. § 101 et seq., as such laws may be amended,
modified, replaced or superseded from time to time.

Billing Month means each calendar month during the term of this Agreement.

Business Day means any day on which the Companies’ and MISO’s corporate offices
are open for business and commercial banks are not authorized or required to
close.

Charge means any fee, charge or other amount that is billable by the Companies
to the SSO Supplier under this Agreement.

Cinergy Hub means the liquid pricing point located in MISO.
 
 
2

--------------------------------------------------------------------------------

Commercial Customer means a Customer taking service under one of the Companies’
General Service – Small Tariffs.

Commercial Pricing Node or “CP Node” has the same meaning ascribed to the term
in the applicable MISO Rules as of the Effective Date.

Competitive Electricity Supply means unbundled Energy, Resource Adequacy
Requirements, Ancillary Services and Firm Transmission Service, including all
transmission and distribution losses and congestion associated with the
provision of the foregoing services, other obligations or responsibilities
currently imposed or that may be imposed by MISO, and such other services or
products that are provided by a CRES Supplier to fulfill its obligations to
serve customer load.  The provision of Competitive Electricity Supply by CRES
Suppliers entails fulfillment of all obligations associated with service to
Customers, including the obligations of an LSE under the applicable MISO Rules.

Costs mean, with respect to the Non-Defaulting Party, any brokerage fees,
commissions and other similar transaction costs and expenses reasonably incurred
by such Party either in terminating any arrangement pursuant to which it has
hedged its obligations or entering into new arrangements which replace this
Agreement; and all reasonable attorneys’ fees and expenses incurred by the
Non-Defaulting Party in connection with the termination of this Agreement.

CRES Supplier means a person or entity that is duly certified by the Commission
to offer and to assume the contractual and legal responsibility to provide
Competitive Electricity Supply to Customers located in the state of Ohio
pursuant to retail open access programs approved by the Commission.

Customer means any person or entity who receives distribution service from the
Companies, including, without limitation, all persons eligible to receive
Competitive Electricity Supply from a CRES Supplier or SSO Service,
respectively, in accordance with the Applicable Legal Authorities.

Damages means the amount of compensation specified in Article 5 of this
Agreement  due to a Party resulting from an Event of Default or an Early
Termination of this Agreement.

Defaulting Party means a Party that causes or is subject to an Event of Default.

Delivery Period means the time period during which this Agreement is in effect.

Early Termination means termination of this Agreement prior to the end of the
term due to the occurrence of an Event of Default as specified in Section 5.2 of
this Agreement and the declaration of Early Termination.
 
 
3

--------------------------------------------------------------------------------

 
Early Termination Date means the date upon which an Early Termination becomes
effective as specified in Section 5.2 of this Agreement.

Emergency means (i) an abnormal system condition requiring manual or automatic
action to maintain system frequency, or to prevent loss of firm load, equipment
damage, or tripping of system elements that could adversely affect the
reliability of an electric system or the safety of persons or property; or (ii)
a condition that requires implementation of emergency operations procedures; or
(iii) any other condition or situation that the Companies, the FirstEnergy
Balancing Authority operator, other transmission owner, or MISO deems imminently
likely to endanger life or property or to affect or impair the Companies’
electrical system or the electrical system(s) of other(s) to which the
Companies’ electrical system is directly or indirectly connected (a "Connected
Entity").  Such a condition or situation may include, but shall not be limited
to, potential overloading of the Companies’ transmission or distribution
circuits, MISO minimum generation ("light load") conditions, or unusual
operating conditions on either the Companies’ or a Connected Entity's electrical
system, or conditions such that the Companies are unable to accept Energy from
the SSO Supplier without jeopardizing the Companies’ electrical system or a
Connected Entity's electrical system.

Energy means three-phase, 60-cycle alternating current electric energy,
expressed in units of kilowatt-hours or megawatt-hours.

Event of Default means a breach of obligations under this Agreement as set forth
in Section 5.2 hereof.

FERC means the Federal Energy Regulatory Commission, or any successor thereto.

Final FERC Order means a final order issued by FERC which is no longer subject
to rehearing or judicial review and is not the subject of proceedings at FERC on
remand from any court.

Final Monthly Energy Allocation or “FMEA” means a quantity of Energy expressed
in MWh which, for any Billing Month, is the PMEA adjusted for any billing or
metering errors found subsequent to the calculation of PMEA of which MISO is
notified prior to the last date on which MISO issues a settlement statement for
a previous operating day for the Billing Month.

Financial Transmission Rights or “FTRs” has the same meaning ascribed to the
term in the applicable MISO Rules.

Firm Transmission Service means “Network Integration Transmission Service” under
the MISO Rules.  In the event the MISO Rules are modified such that “Network
Integration Transmission Service” is no longer offered, Firm Transmission
Service means the type of transmission service offered under the MISO Rules that
is accorded the highest level of priority for scheduling and curtailment
purposes.

 
4

--------------------------------------------------------------------------------

 
FirstEnergy Balancing Authority means the geographic region represented by the
combined service territories of The Cleveland Electric Illuminating Company, The
Toledo Edison Company, Pennsylvania Power Company and Ohio Edison Company, as
may be modified from time to time, and which is recognized by the North American
Electric Reliability Council as the "FirstEnergy Balancing Authority."

FirstEnergy Load Zone means that set of electrical locations determined pursuant
to the applicable MISO tariff, rules, agreements and procedures, representing
the aggregate area of consumption for the Companies within the FirstEnergy
Balancing Authority and used for the purposes of scheduling, reporting
withdrawal volumes, and settling Energy transactions at aggregated load levels,
to facilitate Energy market transactions.  The reference commercial pricing node
will be the MISO commercial pricing node labeled “FESR”

First Mortgage Bond – has the meaning ascribed in Section 6.9(c) of this
Agreement.

Forward Market Price means forward market prices as determined by
publicly-available market quotations obtained by the Companies for the Cinergy
Hub, which is indicative of market conditions in the FirstEnergy Balancing
Authority.   

Gains means, with respect to any Party, an amount equal to the present value of
the economic benefit to it, if any (exclusive of Costs), resulting from an Early
Termination of this Agreement, determined in a commercially reasonable manner.

General Service – Small Tariffs means Rate Schedules GS, STL, TRF and POL of the
Companies’ Tariffs for Electric Service.

General Service – Large Tariffs means Rate Schedules GP, GSU and GT of the
Companies’ Tariffs for Electric Service.

Guaranty means a guaranty, hypothecation agreement, margins or security
agreement or any other document, (whether in the form attached to this Agreement
or other form approved by the Companies.)

Guarantor means any party having the authority and agreeing to guarantee a SSO
Supplier’s financial obligations under this Agreement, recognizing that such a
party will be obligated to meet the Companies’ creditworthiness requirements for
SSO Suppliers.

Independent Credit Requirement or “ICR” means an amount per Tranche required as
security under Section 6.3 hereof, to reflect the risk of Energy price movements
between the date of an Early Termination caused by an Event of Default by a SSO
Supplier and the date the final calculation of Damages owing to the Companies
under Section 5.2 is made.

Industrial Customer means a Customer taking service under one of the Companies’
General Service – Large Tariffs.
 
 
5

--------------------------------------------------------------------------------

 
Interest Index means the average Federal Funds Effective Rate, defined below,
for the period of time the funds are on deposit.  The Federal Funds Effective
Rate is published daily on the Federal Reserve website
http://www.federalreserve.gov/releases/h15/update/.

Kilowatt or “kW” means a unit of measurement of useful power equivalent to 1,000
watts.

Kilowatt-hour or “kWh” means one kilowatt of electric power used over a period
of one hour.

Load Serving Entity or “LSE” has the same meaning ascribed to the term in the
applicable MISO Rules.

Losses means, with respect to any Party, an amount equal to the present value of
the economic loss to it, if any (exclusive of Costs), resulting from an Early
Termination of this Agreement, determined in a commercially reasonable manner.
 
Margin means the amount by which the Total Exposure Amount exceeds the Credit
Limit of the SSO Supplier, or its Guarantor, as defined in Section 6.6 of this
Agreement.

Market Participant has the meaning ascribed thereto in the MISO Rules.

Mark-to-Market Exposure Amount means an amount calculated daily for each SSO
Supplier reflecting the exposure to the Companies due to fluctuations in market
prices for Energy as set forth in Section 6.5 and in Appendix C minus amounts
due pursuant to this Agreement to such SSO Supplier for the delivery of SSO
Supply.

Megawatt or “MW” means one thousand kilowatts.

Megawatt-hour or “MWh” means one megawatt of electric power used over a period
of one hour.

Merger Event means when a Party consolidates or amalgamates with, or merges into
or with, or transfers all or substantially all of its assets to another entity
and either (i) the resulting entity fails to assume all of the obligations of
such Party hereunder or (ii) the benefits of any credit support provided
pursuant to Article 6 fail to extend to the performance by such resulting,
surviving or transferee entity of the Party’s obligations hereunder, and the
resulting entity fails to meet the creditworthiness standards of this
Agreement.  Transfer of all or substantially all of the Companies’ generation
assets does not qualify as a Merger Event.

Meter Data Management Agent has the meaning ascribed thereto in the applicable
MISO Rules.
 
6

--------------------------------------------------------------------------------

 
Meter Read Date means the date on which each of the Companies is scheduled, in
accordance with its own established procedures and practices and its own
regularly-scheduled billing cycles, to read a meter for purposes of producing
Customer bills.

Meter Reading means the process whereby each of the Companies takes notice of
the information presented on a Customers’ meters.  A Meter Reading may be
obtained manually, through telemetry, or by estimation, in accordance with each
of the Companies’ established procedures and practices.

Minimum Rating means a minimum senior unsecured debt rating as defined in
Section 6.4(a)(i) of this Agreement.

MISO means the Midwest Independent Transmission System Operator, Inc. its
successors and assigns.

MISO Charges means the prevailing charges required by MISO to be paid by each
LSE operating in the MISO.

MISO EMT means the prevailing MISO Open Access Transmission and Energy Markets
Tariff on file with the FERC, which sets forth the rates, terms and conditions,
among other things, of transmission service over transmission facilities located
in the FirstEnergy Balancing Authority and the rules governing MISO’s
administration of Energy markets, Ancillary Services, Financial Transmission
Rights and Resource Adequacy Requirements, as well as any MISO Business Practice
Manuals as are in effect on the date hereof and as modified from time to time.

MISO Rules means any MISO tariff, rules or agreements, or succeeding,
superseding or amended versions of the MISO tariff, rules or agreements that may
take effect from time to time over the term of this Agreement.

Mutual Termination Agreement has the meaning ascribed to in Section 4.4 of this
Agreement.

NERC means the North American Electric Reliability Council or its successor.

PJM Western Hub means a liquid pricing point in PJM.

Preliminary Monthly Energy Allocation or “PMEA” means a quantity of Energy
expressed in MWh which, for any Billing Month, is the preliminary calculation of
the Supplier’s SSO Supplier Responsibility Share.

PMEA/FMEA Adjustment means, for any Billing Month, the monetary amount due to
the SSO Supplier or the Companies, as the case may be, in order to reconcile any
difference between the PMEA used for the purpose of calculating estimated
payments made to SSO Supplier for a given month and the FMEA used for
calculating the final payments due to the SSO Supplier for such month as more
fully described in Article 9 hereof.
 
7

--------------------------------------------------------------------------------

 
Price means the price in $/MWh set forth in Appendix A hereto, resulting from
the Companies’ Solicitation for the opportunity to provide SSO Supply.  The
Price is the basis for financial settlement of SSO Supply supplied by the SSO
Supplier for SSO Customers under this Agreement.

PUCO or “Commission” means the Public Utilities Commission of Ohio, or any
successor thereto.

Residential Customer means a Customer taking service under any of the Companies’
Residential Tariffs.

Residential Tariff means Rate Schedule RS.

Resource Adequacy Requirements means those requirements (or equivalent
requirements) set forth in the applicable MISO Rules, and as may be replaced or
superseded by other requirements in or in succeeding, superseding or amended
versions of the MISO Rules.

Seasonal Billing Factor means a numerical factor, as set forth in Appendix B
hereto, one amount applicable during the summer months of June through August,
and one amount applicable during the non-summer months of September through May,
applied to the Price in accordance with the provisions of Article 9 hereof and
thereby used to adjust the Companies’ payments to SSO Suppliers.  

Service Territory means the geographic areas of the State of Ohio in which the
Companies serve Customers.

Settlement Amount means, with respect to a Non-Defaulting Party, the net amount
of the Losses or Gains, and Costs, expressed in U.S. Dollars, which such party
incurs as a result of Early Termination, as set forth in Section 5.4(a) of this
Agreement.   For the purposes of calculating the Termination Payment, the
Settlement Amount shall be considered an amount due to the Non-Defaulting Party
under this Agreement if total of the Losses and Costs exceeds the Gains and
shall be considered an amount due to the Defaulting Party under this Agreement
if the Gains exceed the total of the Losses and Costs.

Solicitation means the competitive bidding process by which the counterparty,
quantity, pricing and other terms of this Agreement are established.

SSO Customers means Residential, Commercial and Industrial Customers, including
special contract (SC) Customers, taking SSO Service from the Companies during
the term of this Agreement.
 
 
8

--------------------------------------------------------------------------------

 
SSO Load means the full electricity requirement including, without limitation,
Energy, Capacity, Resource Adequacy Requirements, Ancillary Services and Firm
Transmission Service of SSO Customers.  The hourly Energy requirements of SSO
Load used to determine the PMEA and FMEA will be measured and reported by the
Companies to MISO and will include distribution losses.    

SSO Load Share means the SSO Supplier’s portion of the FirstEnergy Load Zone
single coincident peak attributable to the Companies SSO Customers.

SSO Service means Standard Service Offer electric generation service that is
provided by the Companies to any Customer that is not being served by a CRES
Supplier.

SSO Supplier means an entity that has been selected through the Solicitation and
has accepted the obligations and associated rights to provide SSO Supply to the
Companies for retail customers in accordance with the Applicable Legal
Authorities and has entered into this Agreement with the Companies as a
Party.  The term “supplier” also refers generically to any entity authorized by
the PUCO to provide SSO Supply where the context makes it appropriate to do
so.  The distinction can be derived from the context, but is also generally
reflected in the use of lower case type ("supplier") to reflect the generic
usage, and an initial capital ("Supplier") to reflect a Party to this Agreement.

SSO Supplier Load Zone means the load zone created pursuant to MISO’s tariff,
rules, agreements and procedures encompassing the individual SSO Supplier’s
proportionate share of the FirstEnergy Load Zone based on that SSO Supplier’s
SSO Supplier Responsibility Share.

SSO Supplier Representative means any officer, director, employee, consultant,
contractor, or other agent or representative of the SSO Supplier in connection
with the SSO Supplier's activity solely as a SSO Supplier.  To the extent the
SSO Supplier is a division or group of a company, the term SSO Supplier
Representative does not include any person in that company who is not part of
the SSO Supplier division or group.

SSO Supplier Responsibility Share means, for each SSO Supplier, the fixed
percentage share of the Companies’ SSO Load for which the SSO Supplier is
responsible as set forth in Appendix A.  The stated percentage share is
determined by multiplying the number of Tranches won by the SSO Supplier in the
Solicitation times the Tranche size percentage share.

SSO Supply means unbundled Energy, Capacity, Resource Adequacy Requirements,
Ancillary Services and Firm Transmission Service, including all transmission and
distribution losses and congestion and imbalance costs associated with the
provision of such services, as measured and reported to MISO, and such other
services or products that a SSO Supplier may be required, by MISO or other
governmental body having jurisdiction, to provide in order to meet the SSO
Supplier Responsibility Share under this Agreement.
 
 
9

--------------------------------------------------------------------------------

 
SSO Tariffs means Schedules of Rates of The Cleveland Electric Illuminating
Company (P.U.C.O. 13), The Toledo Edison Company (P.U.C.O. 8) and Ohio Edison
Company (P.U.C.O. 11) , and as those Rate Schedules may be amended from time to
time.  Copies of the SSO Tariffs may be obtained at
http://www.firstenergycorp.com/corporate/Operating_Companies/index.html.

Standard Service Offer means a market-based standard service offer of all
competitive retail electric services necessary to maintain essential electric
service to consumers, including a firm supply of electric generation service as
required by Section 4928.141 of the Ohio Revised Code.

Statement means a monthly report prepared by the Companies for the SSO Supplier
indicating the amount due to the SSO Supplier in compensation for kWh supplied
for SSO Customers by the SSO Supplier during the current Billing Month, in
accordance with SSO Supplier’s obligations under this Agreement.

Surplus Margin has the meaning ascribed in Section 6.9(c) of this Agreement.

Tangible Net Worth or “TNW” means total assets less intangible assets and total
liabilities. Intangible assets include benefits such as goodwill, patents,
copyrights and trademarks.

Termination Payment  has the meaning set forth in Section 5.4 of this Agreement.

Total Exposure Amount means an amount calculated daily for each SSO Supplier
reflecting the total credit exposure to the Companies and consisting of the sum
of (i) the Mark-to-Market Exposure Amount arising under this Agreement; (ii) any
amount(s) designated as the “Mark-to-Market Exposure Amount” arising under any
other SSO Supply agreements providing for “SSO Supply” or similar SSO Service;
and (iii) the amount designated as the “credit exposure” under any other SSO
Supply agreements providing for SSO Supply; provided that in the event the
amount calculated for any day is a negative number, it shall be deemed to be
zero for such day.

Tranche means a fixed percentage share of the Companies’ SSO Load as determined
for the purposes of the Solicitation conducted to procure SSO Supply for the
Companies’ SSO Load.  The fixed percentage is the Tranche size for the
Companies.

Zonal Peak Load means the monthly coincident peak load of the transmission
system within the FirstEnergy Balancing Authority.
 
 
10

--------------------------------------------------------------------------------

 
ARTICLE 2:                    GENERAL TERMS AND CONDITIONS
 
 
2.1           Capacity In Which Companies Are Entering Into This Agreement
 
Each SSO Supplier agrees and acknowledges that the Companies are contracting for
the provision of SSO Supply from such SSO Supplier for Customers receiving SSO
Service on the Companies’ distribution systems pursuant to the authorizations
provided to each of the Companies.  The SSO Supplier further agrees and
acknowledges that the Companies will administer and monitor the SSO Supplier’s
performance in providing SSO Supply under this Agreement and that the Companies
will be entitled to enforce SSO Suppliers’ obligations related to the provision
of SSO Supply.  The SSO Supplier hereby permanently and irrevocably waives any
claim that Companies are not entitled to seek enforcement of this Agreement.
               The Parties acknowledge that this Agreement is a forward contract
and, accordingly, the Parties hereto are entitled to the protections of Section
556 of the Bankruptcy Code.  The Parties therefore agree that this Agreement may
be terminated by either Party upon the commencement of a proceeding by one Party
under any chapter of the Bankruptcy Code in accordance with Section 5.2 hereof.
 
2.2           Parties’ Obligations
 
(a)           Obligations of SSO Supplier
Each SSO Supplier hereby agrees severally, but not jointly, as follows:
(i)             to provide sufficient quantities of SSO Supply on an
instantaneous basis at all times to meet the SSO Supplier Responsibility Share;
(ii)            to procure those services provided by MISO and to perform such
functions as may be required by MISO that are necessary for the delivery of SSO
Supply
 
 
11

--------------------------------------------------------------------------------

 
required hereunder, and to pay all costs, fees, and charges associated with such
services, except to the extent that, as expressly set forth in this Agreement,
the Companies are acting as the Meter Data Management Agent of the SSO Suppliers
under the MISO EMT;
(iii)           to cooperate with the Companies in any regulatory compliance
efforts that may be required to maintain the ongoing legitimacy and
enforceability of the terms of this Agreement and to fulfill any regulatory
reporting requirement associated with the provision of SSO Supply or SSO
Service, before the PUCO, FERC or any other regulatory body asserting
jurisdiction;
(iv)           to become the Asset Owner, Market Participant and LSE solely with
respect to the provision of SSO Supply for the SSO Supplier Responsibility Share
and to comply with all MISO rights and obligations of an Asset Owner, Market
Participant and LSE with respect to such SSO Supplier Responsibility Share;
(v)            to become a Market Participant, including obtaining a properly
defined CP Node and provide written evidence thereof to the Companies and to
remain a Market Participant for the entire term of this Agreement;
(vii)           to pay to the Companies the PMEA/FMEA Adjustment Amount for any
month in which the PMEA exceeds the FMEA, as more fully described in Article 9
hereof ;
 (viii)        to comply in a timely manner with all obligations under this
Agreement imposed upon a SSO Supplier.
 
(b)           Obligations of the Companies
The Companies hereby agree severally, but not jointly, as follows:
 
 
12

--------------------------------------------------------------------------------

 
(i)     to pay to each SSO Supplier every Billing Month an amount equal to the
Price multiplied by the Seasonal Billing Factor multiplied by the PMEA, as
detailed in Article 9;
(ii)    to act as the Meter Data Management Agent for the SSO Suppliers;
(iii)           to pay to each SSO Supplier the PMEA/FMEA Adjustment Amount for
any month in which the FMEA exceeds the PMEA, as more fully described in Article
9 hereof;
(iv)           to transfer ARR revenues or to pay to each SSO Supplier the net
revenues from sales of its FTRs into the MISO Market, in proportion to such SSO
Supplier’s SSO Supplier Responsibility Share, for the period from June 1, 2009
through May 31, 2011;
(v)    to provide a monthly Statement to the SSO Supplier showing calculation of
amounts due pursuant to Article 9.
(vi)           to incrementally adjust the bid prices for, and payment to,
winning bidders to the extent that the MISO rate for Network Integration
Transmission Service (NITS), Seams Elimination Cost Adjustment (SECA) or other
non-market-based FERC-approved charges change, or are newly approved, and apply
to the winning bidder(s) during the period June 1, 2009 through May 31, 2011
pursuant to a FERC order.
 
2.3           MISO Services
 
Each SSO Supplier must make all necessary arrangements for the delivery of SSO
Supply through MISO.  As MDMA for settlement purposes, the Companies will advise
MISO of the magnitude of each SSO Supplier's actual SSO Supplier Responsibility
Share, as required by applicable MISO EMT, for the purpose of calculating such
SSO
 
 
13

--------------------------------------------------------------------------------

 
Supplier’s appropriate Energy obligation, Resource Adequacy Requirements
obligation, Ancillary Services obligation, Firm Transmission Service obligation,
and other requirements and obligations currently and as may be amended from time
to time by MISO, related to the provision of service under this Agreement by SSO
Suppliers arising under the applicable MISO EMT.  Each SSO Supplier will remain
responsible to MISO for the performance and cost of its Asset Owner, Market
Participant and LSE obligations associated with the provision of SSO Supply
under this Agreement until the effective date of the transfer of such Asset
Owner, Market Participant and LSE obligations.
 
2.4           Communications and Data Exchange
 
Each SSO Supplier and the Companies will supply to each other all data,
materials or other information that is specified in this Agreement, or that may
otherwise reasonably be required by SSO Suppliers or by the Companies in
connection with the provision of SSO Supply by the SSO Supplier for SSO
Customers, if required, in a thorough and timely manner.
Electronic information exchange between each SSO Supplier and the Companies
under this Agreement will employ a SSO Supplier identification number, assigned
by the Companies, which must be consistent with the SSO Supplier's Dunn &
Bradstreet Business number.  No later than three business days following the
close of the auction, each SSO Supplier must be equipped with the communications
capabilities necessary to comply with the communications and data exchange
standards that are set by and as may, from time to time, be modified by MISO,
and must bear the costs of putting in place and successfully testing all
required information technology systems that will enable it to
 
 
14

--------------------------------------------------------------------------------

 
send to and receive data from the Companies and MISO and to satisfy its
obligations under this Agreement, any applicable MISO EMT.
 
2.5           Record Retention
 
The Companies will retain for a period of two (2) years following the expiration
of the term of this Agreement, necessary records so as to permit SSO Suppliers
to confirm the validity of payments due to SSO Suppliers hereunder; provided
that, if a SSO Supplier has provided notice within two (2) years of the
expiration of the term of this Agreement that it disputes the validity of any
payments, the Companies agree that they will retain all records related to such
dispute until the dispute is finally resolved.
Each SSO Supplier will have the right, upon reasonable notice, to inspect the
books and records retained by the Companies which document the payments due and
owing, or owed and paid, to the SSO Supplier.  Such inspection must take place
during regular business hours.
 
2.6           Verification
 
        In the event of a good faith dispute regarding any invoice issued or
payment due under this Agreement, each Party will have the right to verify, at
its sole expense, the accuracy of the invoice or the calculation of the payment
due by obtaining copies of the relevant portions of the books and records of the
other Party.  The right of verification will survive the termination of this
Agreement for a period of two (2) years after such termination.  Both Parties
agree that the books and records to be inspected for performance of this
paragraph shall be deemed and treated by the Parties as Confidential
Information.  Both Parties agree to use the Confidential Information of the
other Party for the sole purpose of performance under this paragraph.  Both
Parties will take all
 
 
15

--------------------------------------------------------------------------------

 
precautions and actions to prevent sale, use or disclosure of the other Party’s
Confidential Information to any third party.
 
ARTICLE 3:                     REPRESENTATIONS AND WARRANTIES
 
 
3.1           SSO Supplier's Representations and Warranties
 
Each SSO Supplier hereby represents, warrants and covenants to the Companies as
follows:
a)    such SSO Supplier is a corporation, partnership, limited liability company
or other legal entity, as set forth in Appendix A hereto, duly organized,
validly existing and in good standing under the laws of the State of Ohio or, if
another jurisdiction, is duly registered and authorized to do business and is in
good standing in the State of Ohio;
b)    such SSO Supplier has all requisite power and authority to execute and
deliver this Agreement and to carry on the business to be conducted by it under
this Agreement and to enter into and perform its obligations hereunder,
including satisfaction of all applicable FERC and MISO requirements, including
ongoing status as a signatory to a service agreement between each of the
Companies and SSO Supplier pursuant to the applicable FERC-approved Tariffs;
c)            the execution and delivery of this Agreement and the performance
of such SSO Supplier’s obligations hereunder have been duly authorized by all
necessary action on the part of the SSO Supplier and do not and will not
conflict with, or constitute a breach of or default under, any of the terms,
conditions, or provisions of the SSO Supplier’s certificate of incorporation or
bylaws or any indenture, mortgage, other evidence of indebtedness, or other
agreement or instrument or any statute or rule, regulation, order, judgment, or
decree of any judicial or administrative body to which the
 
 
16

--------------------------------------------------------------------------------

 
SSO Supplier is a party or by which the SSO Supplier or any of its properties is
bound or subject;
d)            all necessary and appropriate action that is required on the SSO
Supplier’s part to execute this Agreement has been completed;
e)            this Agreement is the legal, valid and binding obligation of such
SSO Supplier, enforceable in accordance with its terms;
f)             there are no actions at law, suits in equity, proceedings or
claims pending or, to such SSO Supplier's knowledge, threatened against the SSO
Supplier before any federal, state, foreign or local court, tribunal or
government agency or authority that might materially delay, prevent or hinder
the SSO Supplier's performance of its obligations hereunder;
g)            it has entered into this Agreement with a full understanding of
the material terms and risks of the same, and it is capable of assuming those
risks;
h)    the SSO Supplier is in good standing as an Asset Owner, Market Participant
and LSE in MISO, is a signatory to all applicable MISO agreements, and is in
compliance, and will continue to comply with all obligations, rules, tariffs and
regulations, as established and interpreted by MISO, that are applicable to
Asset Owners Market Participants and LSEs;
i)           the SSO Supplier will be solely responsible for payment of all
charges due to MISO currently and as may be amended from time to time by MISO
associated with the SSO Supplier’s standing as an Asset Owner, as a Market
Participant and as a LSE, and the provision of SSO Supply for the SSO Supplier
Responsibility Share;
 
 
17

--------------------------------------------------------------------------------

 
j)      it has made its trading and investment decisions (including regarding
the suitability thereof) based upon its own judgment and any advice from such
advisors as it has deemed necessary and not in reliance upon any view expressed
by the Companies; and
k)            the SSO Supplier will comply with any and all information and data
transfer protocols that may be adopted by the Companies or that are set by, and
from time to time modified by, the Commission; provided that each SSO Supplier
will be entitled to challenge any such protocols in the appropriate forum.
 
3.2           Companies’ Representations and Warranties
 
Each of the Companies hereby represents, warrants and covenants to the SSO
Suppliers as follows:
a)            it is an electric utility corporation duly organized, validly
existing and in good standing under the laws of the State of Ohio;
b)            it has all requisite power and authority to carry on the business
to be conducted by it under this Agreement and to enter into and perform its
obligations hereunder;
c)            the execution and delivery of this Agreement and the performance
of its obligations hereunder have been duly authorized by all necessary action
on the part of the Company and do not and will not conflict with, constitute a
breach of or default under, any of the terms, conditions, or provisions of the
Company’s certificate of incorporation or bylaws or any indenture, mortgage,
other evidence of indebtedness, or other agreement or instrument or any statute
or rule, regulation, order, judgment, or decree of any judicial
 
 
18

--------------------------------------------------------------------------------

 
or administrative body to which the Company is a party or by which the Company
or any of its properties is bound or subject;
d)            all necessary and appropriate action that is required on the
Company’s part to execute this Agreement has been completed;
e)            this Agreement is the legal, valid and binding obligation of the
Company, enforceable in accordance with its terms, except as such enforceability
may be limited by Applicable Legal Authorities;
f)             the ability of the Company to pay any and all amounts due and
payable under this Agreement, or upon any potential breach thereof, is not
conditioned upon any governmental or administrative appropriation by the
Commission, the State of Ohio or any other governmental authority;
g)            there are no actions at law, suits in equity, proceedings or
claims pending or, to the Company’s knowledge, threatened against the Company
before any federal, state, foreign or local court, tribunal or governmental
agency or authority that might materially delay, prevent or hinder the Company’s
performance of its obligations under this Agreement;
h)            it has entered into this Agreement with a full understanding of
the material terms and risks of the same, and it is capable of assuming those
risks;
i)             the Company’s performance under this Agreement is not contingent
upon the performance of Customers or the ability of any individual Customer to
fully pay for SSO Service;
 
 
19

--------------------------------------------------------------------------------

 
j)     the Company will have full responsibility for metering, billing and
delivery with respect to Customers and SSO Suppliers will have no responsibility
with respect thereto;
k)     the Company will be responsible for distribution services and the
Supplier will not be responsible for distribution charges; and
l)     T he Company will perform MDMA functions in accordance with MISO Energy
Market Tariff and Business Practice Manuals.
 
3.3           Joint Representations and Warranties
 
Each Party hereby warrants, represents and covenants to the other that this
Agreement is for the purchase and sale of the full electricity requirement
(including, without limitation, Energy, Capacity, Resource Adequacy
Requirements, Ancillary Services and Firm Transmission Service) of the SSO Load
that will be delivered in quantities expected to be used or sold over a defined
period in the normal course of business, and it is the intention at the
inception and throughout the term of this Agreement that the fulfillment of the
SSO Supplier’s obligation under Section 2.2(a)(i) hereof will result in physical
delivery and not financial settlement, and that the quantity of SSO Supply that
each SSO Supplier must deliver and that each of the Companies must accept for
delivery will be determined by the requirements of the SSO Load for which the
SSO Supplier is responsible under the Agreement, and, as such, that this
Agreement does not provide for an option by either Party with respect to the
quantity of SSO Supply to be delivered or received during performance of the
Agreement.
 
3.4           Survival of Obligations
 
All representations and warranties contained in this Article are of a continuing
nature and must be maintained during the term of this Agreement.  If a Party
learns that any of the representations, warranties, or covenants in this
Agreement are no longer true during the term of this Agreement, the Party must
immediately notify the other Party in accordance with the notice provisions of
Section 15.1 of this Agreement.
 
ARTICLE 4:            COMMENCEMENT AND TERMINATION OF AGREEMENT
 
 
4.1           Commencement and Termination
 
The term of this Agreement will commence upon the date first written above (the
“Effective Date”); provided that the provision of SSO Supply by SSO Suppliers
will commence for any SSO Customer on or after June 1, 2009 at 12:00:01 a.m. on
such date and continue through May 31, 2011 unless this Agreement is terminated
earlier in accordance with the provisions hereof.
 
4.2           Termination of Right to Supply SSO
 
Each SSO Supplier agrees that termination of this Agreement for reason of an
Event of Default will terminate any right of such SSO Supplier to provide SSO
Supply for the SSO Customers and nullify any of the entitlements to which such
SSO Supplier became entitled as a result of being selected as a winning bidder
in the competitive bidding for SSO Supply.
 
4.3           Survival of Obligations
 
           Termination of this Agreement for any reason shall not relieve the
Companies or any SSO Supplier of any obligation accrued or accruing prior to
such termination.  
 
 
20

--------------------------------------------------------------------------------

 
Applicable provisions of this Agreement will continue in effect after
termination to the extent necessary to provide for final billings and
adjustments.
 
           4.4               Mutual Termination
 
The Companies and the SSO Supplier may agree at any time during the term of this
Agreement to terminate their respective rights and obligations hereunder on such
terms and under such conditions that they mutually deem to be appropriate as set
forth in a mutual termination agreement acceptable in form and substance to the
Companies and the SSO Supplier (“Mutual Termination Agreement”); provided that
Companies agree that they will enter into a such Mutual Termination Agreement,
which will discharge the terminating SSO Supplier (the “Terminating SSO
Supplier”) with respect to liabilities arising after the effective date of the
Mutual Termination Agreement if the following conditions precedent are met:  (i)
the Terminating SSO Supplier identifies a replacement supplier willing to assume
all obligations of the Terminating SSO Supplier hereunder for the remaining term
of this Agreement (the “Replacement SSO Supplier”); (ii) the Replacement SSO
Supplier demonstrates its compliance with Article 6 hereof, “Creditworthiness”,
as of the effective date of the Mutual Termination Agreement; (iii) the
Replacement SSO Supplier executes a counterpart signature page to this Agreement
and thereby becomes a Party under this Agreement, effective immediately
following the effective date of the Mutual Termination Agreement; and (iv) the
Terminating SSO Supplier is not, to the belief or knowledge of the Companies,
subject to an Event of Default as of the effective date of the Mutual
Termination Agreement or, if the Companies believe that the Terminating SSO
Supplier may be subject to an Event of Default, either (a) the Companies have
determined that, as of the effective date of the
 
 
21

--------------------------------------------------------------------------------

 
Mutual Termination Agreement, they have not incurred any Damages as a result of
the Event of Default or (b) if the Companies have determined, as of the
effective date of the Mutual Termination Agreement, that they may have incurred
Damages as a result of the Event of Default, that the Replacement SSO Supplier
has agreed in writing to be responsible for the payment of such Damages or to
otherwise cure the Event of Default, in either case to the satisfaction of the
Companies.
 
ARTICLE 5:                    BREACH AND DEFAULT
 
 
5.1           Events of Default
 
An Event of Default under this Agreement will occur if a Party (the "Defaulting
Party"):
(i)     is the subject of a voluntary bankruptcy, insolvency or similar
proceeding;
(ii)            makes an assignment for the benefit of its creditors;
(iii)           applies for, seeks consent to, or acquiesces in the appointment
of a receiver, custodian, trustee, liquidator or similar official to manage all
or a substantial portion of its assets;
(iv)           is dissolved (other than pursuant to a consolidation,
amalgamation or merger) or is the subject of a Merger Event;
(v)            has a secured party take possession of all or substantially all
of its assets or has a distress, execution, attachment, sequestration or other
legal process levied, enforced or sued on or against all or substantially all of
its assets;
(vi)           has a resolution passed for its winding-up, official management
or liquidation (other than pursuant to a consolidation, amalgamation or merger);
 
 
22

--------------------------------------------------------------------------------

 
(vii)           in the case of an SSO Supplier, fails to become an LSE or fails
to remain an LSE for the entire term hereof as required under Section 2.2(a) of
this Agreement;
(viii)          in the case of an SSO Supplier, fails to become a Market
Participant or fails to show proof of having established a proper CP Node and
provide written evidence thereof to the Company or fails to remain a Market
Participant for the entire term hereof as required under Section 2.2(a) of this
Agreement;  
(ix)           in the case of an SSO Supplier, MISO terminates the SSO
Supplier’s ability to make purchases from the MISO markets or MISO holds any of
the Companies responsible for the provision of Energy, Resource Adequacy
Requirements, Ancillary Services or Firm Transmission Services to meet the
Supplier’s SSO Supplier Responsibility Share under this Agreement;
(x)            fails to comply with the Creditworthiness standards as set forth
in Article 6 below, including, without limitation, compliance with the
Creditworthiness requirements to cover the Margin calculated under Section 6.7
or post any Margin due under Section 6.7, within the time frames set forth in
the Agreement;
(xi)           fails to pay the other Party within one (1) Business Day after
notice is given by the other Party of nonpayment when payment is due;
(xii)          violates any federal, state or local code, regulation or statute
applicable to the supply of Energy in a manner that materially, and adversely,
affects the Party’s performance under this Agreement, including by way of
failure to continually satisfy all applicable FERC requirements, or, in the case
of a SSO Supplier, by way of failure to maintain any other governmental
approvals required for participation in the Ohio retail
 
 
23

--------------------------------------------------------------------------------

 
Energy market as a SSO Supplier, default on any obligation or other failure to
comply with MISO requirements under the applicable MISO tariff, rules or
agreements;
(xiii)          is the subject of an involuntary bankruptcy or similar
proceeding;
(xiv)          subject to Section 5.3(b) hereof, in the case of the Companies,
fails to accept SSO Supply properly tendered by SSO Supplier under this
Agreement;
(xv)           fails to satisfy any other material obligation under this
Agreement not listed above;
(xvi)          makes a materially incorrect or misleading representation or
warranty under this Agreement; or
(xvii)         commits an act or makes an omission that constitutes an “Event of
Default” under any other agreement(s) for the provision of SSO Service between
the Company and the SSO Supplier; and fails to remedy such condition, event or
delinquency herein above described such that the other Party (the
“Non-Defaulting Party”) is completely made whole with respect to such condition,
event or delinquency, within three (3) Business Days of receipt of written
notice thereof from such Non-Defaulting Party; provided, however, that an Event
of Default will be deemed to have occurred immediately, without any need for the
provision of notice thereof by the Non-Defaulting Party and without any right of
cure on the part of the Defaulting Party, in the event of the occurrence of a
condition, event or delinquency described in subsections “i”, “ii”, “iii”, “iv”,
“v”, “vi”, “vii”, “viii”,  “ix”, “x” or “xi” above.  Termination of this
Agreement by the PUCO, other regulatory authority, or court of law does not
constitute an Event of Default under this Agreement.
 
 
24

--------------------------------------------------------------------------------

 
5.2           Rights Upon Default
 
Upon and during the continuation of an Event of Default, the Non-Defaulting
Party will be entitled to:
(i)            pursue any and all available legal and equitable remedies;
(ii)           declare an Early Termination Date of this Agreement with respect
to the obligations of the Defaulting Party without any liability or
responsibility whatsoever except for obligations arising prior to the date of
termination, by providing written notice to the Defaulting Party; provided,
however, that this Agreement will immediately terminate automatically and
without notice in the case of any Event of Default in which a Supplier is the
Defaulting Party occurring under Section 5.1(i), (ii), (iii), (iv), (v), (vi),
(vii), (viii), (ix), (x), or (xi) hereof and such date of automatic termination
will be deemed the Early Termination Date of this Agreement with respect to such
Supplier; and
(iii)           receive Damages in accordance with Section 5.3 of this
Agreement.
The Non-Defaulting Party will be entitled to elect or pursue one or more of the
above remedies simultaneously or sequentially, as appropriate.
 
 
25

--------------------------------------------------------------------------------

 
           5.3               Damages Resulting From an Event of Default
 
(a)           SSO Suppliers’ Failure to Supply SSO Supply or Declaration of
Early Termination By the Companies:  Damages resulting from (i) a SSO Supplier’s
failure to (A) provide SSO Supply in conformance with Section 2.2 hereof or (B)
pay MISO for purchases of any products or services from MISO, or other failure
to comply with the applicable MISO requirements, such that MISO holds any of the
Companies responsible for the provision of Energy, Resource Adequacy
Requirements, Ancillary Services or Firm Transmission Services to meet the SSO
Supplier Responsibility Share
 
 
26

--------------------------------------------------------------------------------

 
under this Agreement or (ii) the occurrence of any Event of Default attributable
to a SSO Supplier resulting in Early Termination, will include all costs
incurred by any of the Companies, acting in a commercially reasonable manner
consistent with any statutory or regulatory requirements imposed by the
Applicable Legal Authorities, in obtaining replacement services or in obtaining
a replacement supplier, which costs exceed the amounts that would have been
payable to the defaulting SSO Supplier under this Agreement.  Costs incurred by
the Companies for the purpose of calculating Damages hereunder will consist of
the following:
(i)           the cost of Energy, Capacity, Resource Adequacy Requirements,
Ancillary Services and Firm Transmission Service (including transmission and
distribution losses, congestion, administrative charges or other elements of SSO
Supply) currently and as may be amended from time to time by MISO allocated to
the Company by MISO due to the failure of a SSO Supplier to meet obligations
owing to MISO in connection with its obligations under this Agreement;
(ii)          the cost of Energy, Capacity, Resource Adequacy Requirements,
Ancillary Services and Firm Transmission Service (including transmission and
distribution losses, congestion, administrative charges or other elements of SSO
Supply) currently and as may be amended from time to time by MISO purchased by
the Company to replace SSO Supply that a SSO Supplier was obligated to supply
under this Agreement during the term hereof;
(iii)        administrative and legal costs associated with procuring
replacement SSO Supply; and
 
 
27

--------------------------------------------------------------------------------

 
(iv)         financial hedging costs incurred by any of the Companies as a
result of having to procure SSO Supply not provided by a SSO Supplier.
Without limitation of the foregoing, Damages calculated hereunder will
constitute the ultimate liability of a SSO Supplier in the event of an Early
Termination caused by an Event of Default attributable to such SSO Supplier
regardless of the reason or basis for such Early Termination.  The Parties
recognize, however, the final calculation of Damages hereunder may not be known
for some time since the level of such Damages may be dependant upon the
arrangements made by the Company to obtain replacement services or a replacement
supplier.  The Companies and each SSO Supplier agree that, until the calculation
of Damages under this provision is completed, the amount and payment to the
Companies of the Settlement Amount in the event of an Early Termination as set
forth in Section 5.4 hereof will be immediately due and owing as an estimate of
all Damages ultimately determined to be due and owing.   After Damages have been
finally determined under this Section 5.3, the amounts of Damages due and owing
will be reconciled with payments already made by SSO Supplier under Section 5.4
hereof.
(b)           Failure By the Companies To Accept SSO Supply Tendered By SSO
Supplier: Damages resulting from the failure of the Companies to accept SSO
Supply tendered by the SSO Supplier necessary to meet the SSO Supplier
Responsibility Share of SSO Load under this Agreement will consist of the
positive difference (if any) between the amounts that would have been payable to
the SSO Supplier hereunder had the Companies accepted the SSO Supply tendered by
the SSO Supplier necessary to the SSO Supplier Responsibility Share of SSO Load
under this Agreement minus the amount
 
 
28

--------------------------------------------------------------------------------

 
realized by the SSO Supplier in disposing, in a reasonable commercial manner, of
the SSO Supply not accepted by the Companies; provided however, that the
Companies will not be required to accept quantities of unbundled Energy,
Capacity, Ancillary Services, Firm Transmission Service or other component of
SSO Supply utilized by Customers on an instantaneous basis as a function of
electrical load, in excess of such Customer’s instantaneous consumption of such
component of SSO Supply; and further provided that the Companies are not liable
for any Damages if this Agreement is terminated by the PUCO, other regulatory
authority or a court of law.
(c)           Damages Resulting From Early Termination Due To An Event of
Default Attributable To the Companies:  Damages resulting from Early Termination
due to an Event of Default attributable to the Companies will be as set forth in
Section 5.4 below.  Damages calculated in accordance with Section 5.4, and
reflected in the Termination Payment, shall be the exclusive remedy available to
the SSO Supplier in the event of Early Termination resulting from an Event of
Default attributable to the Companies.  The Companies shall not be liable for
any Damages if this Agreement is terminated by the PUCO, other regulatory
authority or a court of law.
(d)           Other Damages:  Damages for Events of Default not specified above
shall consist of the direct damages incurred by the Non-Defaulting Party.
 
                5.4          Declaration of an Early Termination Date and
Calculation of Settlement Amount and Termination Payment
 
(a)           Settlement Amount.  If an Event of Default with respect to a
Defaulting Party has occurred and is continuing, the Non-Defaulting Party (in
the case of an Event of Default by the Companies, each SSO Supplier shall be
considered a “Non-Defaulting Party”) shall have the right (i) to designate a
day, no earlier than the day such
 
 
29

--------------------------------------------------------------------------------

 
 
notice is effective and no later than twenty (20) days after such notice is
effective, as a date for Early Termination (“Early Termination Date”) to
accelerate all amounts owing between the Parties and to liquidate and terminate
the undertakings set forth in this Agreement (ii) withhold any payments due to
the Defaulting Party under this Agreement and (iii) suspend performance;
provided however, that an Early Termination Date shall be deemed to occur
automatically and concurrently with the Event of Default, without any
requirement for the provision of notice by the Non-Defaulting Party,  with
respect to an Event of Default under subparagraphs “i”, “ii”, “iii”, “iv”, “v”,
“vi”, “vii”, “viii”, “ix”, “x” and “xi” of Section 5.1.  The Non-Defaulting
Party will calculate, in a commercially reasonable manner, a Settlement Amount
with respect to the obligations under this Agreement.  For the purposes of such
determination, the quantity amounts of Energy (including all charges for
transmission and distribution losses and congestion) and other services provided
for under this Agreement for the period following the Early Termination Date
through the remainder of the term of this Agreement will be deemed to be those
quantity amounts that would have been delivered on an hourly basis, had this
Agreement been in effect during the previous calendar year adjusted for such SSO
Load changes as may have occurred since the previous calendar year.
(b)           Net Out of Settlement Amounts.  The Non-Defaulting Party will
calculate Termination Payment by aggregating all Settlement Amounts due under
this Agreement or any other agreement(s) between the Companies and the SSO
Supplier for the provision of SSO Supply into a single amount by netting out (a)
all Settlement Amounts that are due or will become due to the Defaulting Party,
plus at the option of the Non-Defaulting Party, any cash or other form of
security then available to the Non-
 
 
30

--------------------------------------------------------------------------------

 
 
Defaulting Party and actually received, liquidated and retained by the
Non-Defaulting Party, plus any or all other amounts due to the Defaulting Party
under this Agreement or any other agreement(s) between the Companies and the SSO
Supplier for the provision of SSO Supply against (b) all Settlement Amounts that
are due or will become due to the Non-Defaulting Party, plus any or all other
amounts due to the Non-Defaulting party under this Agreement or any other
agreement(s) between the Companies and the SSO Supplier for the provision of SSO
Supply, so that all such amounts will be netted out to a single liquidated
amount; provided however, that if the SSO Supplier is the Defaulting Party and
the Termination Payment is due to the SSO Supplier, the Company will be entitled
to retain a commercially reasonable portion of the Termination Payment, which
may be equal to the entire amount of the Termination Payment, as security for
additional amounts that may be determined to be due and owing by the SSO
Supplier as Damages and further provided that any previously attached security
interest of the Companies in such retained amounts will continue.  The
Termination Payment will be due to or due from the Non-Defaulting Party as
appropriate.  If the Termination Payment has been retained by the Companies as
security for additional amounts that may be determined to be due and owing by
the SSO Supplier, and if, upon making a final determination of Damages, the
Termination Payment, or any portion thereof, is to be made to the SSO Supplier,
the Companies will pay simple interest on the Termination Payment amount being
made to the SSO Supplier.  Simple interest will be calculated at the lower of
the Interest Index or six (6) percent per annum.
(c)           Notice of Termination Payment.  As soon as practicable after
calculation of a Termination Payment, notice must be given by the Non-Defaulting
Party
 
 
31

--------------------------------------------------------------------------------

 
 
to the Defaulting Party of the amount of the Termination Payment and whether the
Termination Payment is due to or due from the Non-Defaulting Party.  The notice
will include a written statement explaining in reasonable detail the calculation
of such amount.  Subject to Section 5.4(b), the Termination Payment must be made
by the Party that owes it within three (3) Business Days after such notice is
received by the Defaulting Party.
(d)           Disputes With Respect to Termination Payment.  If the Defaulting
Party disputes the Non-Defaulting Party’s calculation of the Termination
Payment, in whole or in part, the Defaulting Party must, within three (3)
Business Days of receipt of Non-Defaulting Party’s calculation of the
Termination Payment, provide to the Non-Defaulting Party a detailed written
explanation of the basis for such dispute; provided, however, that if the
Termination Payment is due from the Defaulting Party, the Defaulting Party must
first provide commercially reasonable financial assurances to the Non-Defaulting
Party in an amount equal to the Termination Payment.
 
5.5           Step-up Provision
 
If any one or more SSO Suppliers defaults in its obligations hereunder resulting
in the exercise of the right of Early Termination by the Companies with respect
to such SSO Supplier(s), then the Companies, subject to Applicable Legal
Authorities, may offer some or all Non-Defaulting Supplier(s) the optional right
to assume under this Agreement additional Tranches of SSO Load, and subject to
further compliance with the creditworthiness provisions of Article 6 of this
Agreement.  The provision of any such offer by the Companies to Non-Defaulting
Suppliers will indicate the duration of the offer and the manner of acceptance
thereof.  Following the assumption by SSO
 
 
32

--------------------------------------------------------------------------------

 
Supplier(s) of additional Tranches hereunder, the Companies will prepare a
modified Appendix A which will set forth the revised SSO Supplier Responsibility
Shares of the SSO Load of the participating Non-Defaulting SSO Supplier(s)
following such assumption.  This modified Appendix A must be initialed (as a
single document or in counterparts) by the Companies and any affected SSO
Supplier(s) and shall thereafter be deemed a part of this Agreement, as to such
affected SSO Supplier(s), from its effective date.  A SSO Supplier will not
suffer any prejudice under this Agreement or otherwise if it declines an offer
to assume additional Tranches upon the default by another SSO Supplier.
 
5.6           Setoff of Payment Obligations of the Non-Defaulting Party
 
Any payment obligations of the Non-Defaulting Party to the Defaulting Party
pursuant to this Agreement or any other agreement(s) between the Companies and
the SSO Supplier for the provision of SSO Supply will be set off  (i) first, to
satisfy any payment obligations of the Defaulting Party to the Non-Defaulting
Party pursuant to this Agreement or any other agreement(s) between the Companies
and the SSO Supplier for the provision of SSO Supply that are unsecured and not
subject to any Guaranty; (ii) second, to satisfy any payment obligations of the
Defaulting Party to the Non-Defaulting Party pursuant to this Agreement or any
other agreement(s) between the Companies and the SSO Supplier for the provision
of SSO Supply that are unsecured, but which are subject to a Guaranty; and (iii)
third, to satisfy any remaining payment obligations of the Defaulting Party to
the Non-Defaulting Party pursuant to this Agreement or any other agreement(s)
between the Companies and the SSO Supplier for the provision of SSO Supply.  
 
 
33

--------------------------------------------------------------------------------

 
5.7           Preservation of Rights of Non-Defaulting Party
 
               The rights of the Non-Defaulting Party under this Agreement,
including without limitation Sections 5.4 and 5.6, will be supplemental to, and
not in lieu of, any right of recoupment, lien, or set-off afforded by applicable
law, and all such rights are expressly preserved for the benefit of the
Non-Defaulting Party.
 
 
ARTICLE 6:                    CREDITWORTHINESS
 
 
6.1           Applicability
 
Each SSO Supplier agrees that it will meet the Creditworthiness standards of
this Article 6 at all times during the term of this Agreements and will inform
the Companies immediately of any changes in its credit rating or financial
condition. Without limitation of the foregoing, each SSO Supplier shall, upon
written request, affirmatively demonstrate to the Companies, its compliance with
the Creditworthiness standards set forth hereunder.  The Companies may, upon
reasonable advance notice, establish less restrictive Creditworthiness standards
under this Article 6 in a non-discriminatory manner,
6.2           Creditworthiness Determination
The SSO Supplier may submit and maintain a security deposit in accordance with
Section 6.3 and 6.6 below in lieu of submitting to or being qualified under a
creditworthiness evaluation.  The SSO Supplier may petition the Companies to
re-evaluate its creditworthiness whenever an event occurs that the SSO Supplier
believes would improve the determination made by the Companies of its
creditworthiness.  The Companies’ credit re-evaluation must be completed as soon
as possible,  but in no event,  longer than thirty (30) days after receiving a
fully documented request.  The Companies
 
 
34

--------------------------------------------------------------------------------

 
shall provide the rationale for their determination of the credit limit and any
resulting security requirement.  The Companies shall perform their credit
re-evaluation and associated security calculation in a non-discriminatory
manner.  SSO Suppliers shall provide unrestricted access to audited financial
statements; however, if audited financial statements are not available, the
Companies may specify other types of financial statements that will be accepted.
 
6.3           Independent Credit Requirement
 
The Independent Credit Requirement (“ICR”) per tranche (“ICRT”) that will be
required of SSO Suppliers under this Agreement will initially be $1.5 million
per Tranche and will decline in accordance with the schedule included as part of
Appendix C throughout the term hereof.  The ICR under this Agreement is the ICRT
times the number of Tranches shown in Appendix A hereto.
 
6.4           Independent Credit Threshold
 
SSO Suppliers that qualify under the following criteria will be granted an
Independent Credit Threshold (“ICT”).  The ICT will be used by the SSO Suppliers
solely to partially or fully cover the aggregate ICR amounts under this
Agreement and any other SSO agreement(s) between it and the Companies.  In all
instances, the most current senior unsecured debt rating (or, if unavailable,
the most current corporate issuer debt rating) will be used.
(a)  The following requirements shall apply to SSO Suppliers or Guarantors of
SSO Suppliers that have been incorporated or otherwise formed under the laws of
the United States in order to be granted an ICT.  For SSO Suppliers who cannot
meet the following requirements, the posting of cash or letter of credit in an
acceptable
 
 
35

--------------------------------------------------------------------------------

 
 
form as defined in Section 6.9(b) below (see standard format in Appendix D) for
the entire aggregate ICR amounts under this Agreement and any other SSO
agreement(s) between it and the Companies will be required at the time of or
prior to the execution of this Agreement.
(i)           The SSO Supplier must (1) be rated by at least one of the
following rating agencies:  Standard & Poor's Rating Services (“S&P”), Moody's
Investors Service, Inc. (“Moody’s”) or Fitch, Inc. (“Fitch”), and (2) have a
minimum senior unsecured debt rating (or, if unavailable, corporate issuer
rating) of at least “BBB-” from S&P, “Baa3” from Moody’s, or “BBB-” from Fitch
(a "Minimum Rating").  If the SSO Supplier is rated by only two rating agencies,
and the ratings are split, the highest rating will be used.  If the SSO Supplier
is rated by three rating agencies, and the ratings are split, the lower of the
two highest ratings will be used; provided that, in the event that the two
highest ratings are common, such common rating will be used.  The maximum level
of the ICT will be determined based on the following table:
 
Credit Rating of the SSO Supplier
Max.
Independent
Credit
Threshold
 
S&P
Moody’s
Fitch
 
BBB+               and
above
 
Baa1                and
above
BBB+               and
above
16% of TNW
BBB
 
Baa2
BBB
10% of TNW
BBB-
 
Baa3
BBB-
8% of TNW
Below BBB-
Below Baa3
Below BBB-
0% of TNW
 

 
 
36

--------------------------------------------------------------------------------

 

 
The SSO Supplier will be required to post cash or a letter of credit in an
acceptable form as defined in Section 6.9 (b) below (see standard format in
Appendix D)  for the aggregate ICR amounts under this Agreement and any other
SSO agreement(s) between it and the Companies, to the extent  that the aggregate
ICR exceeds the ICT; or
(ii)          For SSO Suppliers having a Guarantor, the Guarantor must (1) be
rated by at least one of the following rating agencies:  S&P, Moody's, or Fitch,
and (2) have a minimum senior unsecured debt rating (or, if unavailable,
corporate issuer rating) equal to the Minimum Rating.  If the SSO Supplier is
rated by only two rating agencies, and the ratings are split, the highest rating
will be used.  If the SSO Supplier is rated by three rating agencies, and the
ratings are split, the lower of the two highest ratings will be used; provided
that, in the event that the two highest ratings are common, such common rating
will be used.  The maximum level of the ICT that could be provided through the
Guaranty (see standard format in Appendix E) will be determined based on the
following table:

Credit Rating of the Guarantor
Max.
Independent
Credit Threshold
S&P
Moody’s
Fitch
 
BBB+                and
above
 
Baa1                 and
above
BBB+                and
above
16% of TNW
BBB
Baa2
BBB
10% of TNW
 
BBB-
Baa3
BBB-
8% of TNW
 
Below BBB-
Below Baa3
Below BBB-
0% of TNW
 

 
 
 
37

--------------------------------------------------------------------------------

 
The SSO Supplier will be granted an ICT of up to the amount of the Guaranty,
provided that the amount of the Guaranty is below the maximum ICT shown in the
table above.  If a Guaranty is provided for an unlimited amount, the SSO
Supplier will be granted an ICT of up to the maximum ICT shown in the table
above.  The Guaranty tendered by the SSO Supplier to satisfy the ITC requirement
arising under this Section 6.4 shall be a separate document from the Guaranty,
if any, tendered by the SSO Supplier to satisfy any requirement for a credit
limit to cover the Total Exposure Amount arising under Section 6.6 below;
provided, however, that a single Guaranty may be provided if such Guaranty is
for an unlimited amount.  The SSO Supplier will be required to post cash or
letter of credit in an acceptable form as defined in Section 6.9 (b) below (see
standard format in Appendix D) for the aggregate ICR amounts under this
Agreement and any other SSO agreement(s) between it and the Companies, to the
extent that the aggregate ICR exceeds the ICT at the time of or prior to the
execution of this Agreement.
(b)           The following standards will apply to SSO Suppliers or Guarantors
of SSO Suppliers that have not been incorporated or otherwise formed under the
laws of the United States.  For SSO Suppliers who cannot meet the following
requirements, the posting of cash or letter of credit in an acceptable form as
defined in Section 6.9(b) below (see standard format in Appendix D) for the
entire aggregate ICR amounts under this Agreement and any other SSO agreement(s)
between it and the Companies will be required at the time of or prior to the
execution of this Agreement.
(i)           The SSO Supplier must supply such evidence of creditworthiness so
as to provide the Companies with comparable assurances of creditworthiness as is
applicable above for SSO Suppliers that have been incorporated or
 
 
38

--------------------------------------------------------------------------------

 
otherwise formed under the laws of the United States.  The Companies will have
full discretion, without liability or recourse to the SSO Supplier, to evaluate
the evidence of creditworthiness submitted by such SSO Supplier; or
(ii)          The Guarantor of a SSO Supplier must supply such evidence of
creditworthiness so as to provide the Companies with comparable assurances of
creditworthiness as is applicable above for Guarantors of SSO Suppliers that
have been incorporated or otherwise formed under the laws of the United
States.  The Companies will have full discretion, without liability or recourse
to the Guarantor or the SSO Supplier, to evaluate the evidence of
creditworthiness submitted by such Guarantor.
(c)            All SSO Suppliers or Guarantors of SSO Suppliers that have not
been incorporated or otherwise formed under the laws of the United States must,
in addition to all documentation required elsewhere in this Section 6.4, supply
the following as a condition of being granted an ICT:
(i)           For SSO Supplier: (1) a legal opinion of counsel qualified to
practice in the foreign jurisdiction in the which SSO Supplier is incorporated
or otherwise formed that this Agreement is, or upon the completion of execution
formalities will become, the binding obligation of the SSO Supplier in the
jurisdiction in which it has been incorporated or otherwise formed; (2) the
sworn certificate of the corporate secretary (or similar officer) of such SSO
Supplier that the person executing the Agreement on behalf of the SSO Supplier
has the authority to execute the Agreement and that the governing board of such
SSO Supplier has approved the execution of the Agreement and (3) the sworn
certificate of the corporate secretary (or similar officer) of such SSO Supplier
that the SSO Supplier has been authorized by its governing board  to
 
 
39

--------------------------------------------------------------------------------

 
enter into agreements of the same type as this Agreement.  The Companies will
have full discretion, without liability or recourse to the SSO Supplier, to
evaluate the sufficiency of the documents submitted by the SSO Supplier.
(ii)          For the Guarantor of a SSO Supplier: (1) a legal opinion of
counsel qualified to practice in the foreign jurisdiction in which the Guarantor
is incorporated or otherwise formed that this Guaranty is, or upon the
completion of execution formalities will become, the binding obligation of the
Guarantor in the jurisdiction in which it has been incorporated or otherwise
formed; (2) the sworn certificate of the corporate secretary (or similar
officer) of such Guarantor that the person executing the Guaranty on behalf of
the Guarantor has the authority to execute the Guaranty and that the governing
board of such Guarantor has approved the execution of the Guaranty and (3) the
sworn certificate of the corporate secretary (or similar officer) of such
Guarantor  that the Guarantor has been authorized by its governing board to
enter into agreements of the same type as this Guaranty.  The Companies will
have full discretion, without liability or recourse to the Guarantor or the SSO
Supplier, to evaluate the sufficiency of the documents submitted by such
Guarantor.
 
6.5           Mark-to-Market Credit Exposure Methodology
 
To calculate the daily exposure for each SSO Supplier the Mark-to-Market (“MtM”)
credit exposure methodology will be used.  The “mark” for each Billing Month
will be determined at the time the competitive bidding process is completed
based on the available Forward Market Prices and, if Forward Market Prices are
not available, using a proprietary method that reflects forward market
conditions.  At the time the competitive bidding process is completed, the MtM
credit exposure for each SSO Supplier shall be
 
 
40

--------------------------------------------------------------------------------

 
equal to zero.  Subsequently, the differences between the available Forward
Market Prices on the valuation date and the “mark” prices for the corresponding
Billing Months will be used to calculate the daily exposures for each SSO
Supplier.  The total MtM credit exposure will be equal to the sum of the MtM
credit exposures for each Billing Month.  The methodology for calculation of the
MtM credit exposure is illustrated in the example (using hypothetical numbers)
set forth in Appendix C hereto.
 
6.6           Credit Limit
 
The following criteria constitute the Companies’ creditworthiness requirements
for the SSO Suppliers to cover the Total Exposure Amount.  In all instances, the
most current senior unsecured debt rating (or, if unavailable, corporate issuer
rating) will be used.
(i)            For SSO Suppliers to be granted an unsecured line of credit, the
SSO Supplier must (1) be rated by at least one of the following rating agencies:
S&P, Moody’s, or Fitch, and (2) have a minimum senior unsecured debt rating (or,
if unavailable, corporate issuer rating) equal to the Minimum Rating.  If the
SSO Supplier is rated by only two rating agencies, and the ratings are split,
the highest rating will be used.  If the SSO Supplier is rated by three rating
agencies, and the ratings are split, the lower of the two highest ratings will
be used; provided that, in the event that the two highest ratings are common,
such common rating will be used.  The maximum level of the credit limit to cover
the Total Exposure Amount will be determined based on the following table:
 
 
41

--------------------------------------------------------------------------------

 

Credit Rating of the SSO Supplier
Max. Credit Limit to
be calculated as the lesser of the % of TNW and credit limit cap below
S&P
Moody’s
Fitch
%
Credit Limit Cap
 
BBB+                and
above
Baa1                and
above
BBB+               and
above
16% of TNW
$75,000,000
BBB
 
Baa2
BBB
10% of TNW
$50,000,000
BBB-
 
Baa3
BBB-
8% of TNW
$25,000,000
Below
BBB-
Below
Baa3
Below
BBB-
0% of TNW
0

The SSO Supplier will be required to post cash, letter of credit in an
acceptable form as defined in Section 6.9 (b) below (see standard format in
Appendix D), or First Mortgage Bonds delivered or pledged as provided for in
Section 6.9(c) below for the Margin due the Company as set forth in Section 6.7
of this Agreement; or
(ii)           For SSO Suppliers having a Guarantor, the Guarantor must (1) be
rated by at least one of the following rating agencies: S&P, Moody's, or Fitch,
and (2) have a minimum senior unsecured debt rating (or, if unavailable,
corporate issuer rating) equal to the Minimum Rating.  If SSO Supplier is rated
by only two rating agencies, and the ratings are split, the highest rating will
be used.  If the SSO Supplier is rated by three rating agencies, and the ratings
are split, the lower of the two highest ratings will be used; provided that, in
the event that the two highest ratings are common, such common rating will be
used. The maximum level of the credit limit to cover the Total Exposure Amount
that could be provided through the financial guaranty (see standard format in
Appendix E) will be determined based on the following table:
 
 
42

--------------------------------------------------------------------------------

 
 
Credit Rating of the Guarantor
Max. Credit Limit
to be calculated as the lesser of the %
of TNW and credit limit cap below
S&P
Moody’s
Fitch
%
Credit Limit Cap
 
BBB+                and
above
Baa1                and
above
BBB+              and
above
16% of TNW
$75,000,000
BBB
 
Baa2
BBB
10% of TNW
$50,000,000
BBB-
 
Baa3
BBB-
8% of TNW
$25,000,000
Below
BBB-
Below
Baa3
Below
BBB-
0% of TNW
0

The SSO Supplier will be granted a credit limit equal to the lesser of (i) the
amount of the Guaranty as provided to the Companies at the time this Agreement
is executed as such amount may be modified in any amended or substitute Guaranty
provided to the Companies during the term of this Agreement or (ii) the
Supplier’s Maximum Credit Limit.  The SSO Supplier, however, may not increase or
substitute its Guaranty for the purpose of increasing its applicable credit
limit during the time period after the Companies have made a Margin call but
before the SSO Supplier has posted the required Margin.  Notwithstanding
anything herein to contrary, the SSO Supplier may increase the limit of its
Guaranty after satisfying a Margin call from the Companies and upon the
Companies’ receipt of an amended or substitute Guaranty increasing the limit of
the Guaranty, the SSO Supplier may request a return of Margin in accordance with
Section 6.7 hereof.  The SSO Suppliers will be required to post cash, letter of
credit in an acceptable form as defined in Section 6.9 (b) below (see standard
format in Appendix D), or First Mortgage Bonds delivered or pledged as provided
for in Section 6.9(c) below for the Margin due the Companies as set forth in
Section 6.7 of this Agreement; or
 
 
43

--------------------------------------------------------------------------------

 
(iii)   The posting of cash or letter of credit as defined in Section 6.9
(b)  below for the entire Total Exposure Amount.
 
6.7           Posting Margin and Return of Surplus Margin
 
(a)    If at any time and from time to time during the term of this Agreement,
the Total Exposure Amount exceeds the SSO Supplier’s or Guarantor’s credit
limit, then the Companies on any Business Day, may request that SSO Supplier
provide cash, letter of credit in an acceptable form as defined in Section 6.9
(b) below (see standard format in Appendix D),  or First Mortgage Bonds
delivered or pledged as provided for in Section 6.9(c) below,  in an amount
equal to the Margin (less any Margin posted by the SSO Supplier and held by the
Companies pursuant to this Agreement or any other agreement(s) between the
Companies and the SSO Supplier for the provision of SSO Supply).
If the SSO Supplier receives written notice for Margin from the Companies by
1:00 p.m. prevailing Eastern Time on a Business Day, then the SSO Supplier shall
post Margin the next following Business Day if posting cash and the second
Business Day if posting a letter of credit or, with respect to Surplus Margin
only, delivering or pledging First Mortgage Bonds (as defined in Section 6.9(c)
below), unless in each case the Companies agree in writing to extend the period
to provide Margin.  If the SSO Supplier receives notice for Margin from the
Companies after 1:00 p.m. prevailing Eastern Time on a Business Day, whether
posting cash, letter of credit, or First Mortgage Bond delivered or pledged as
provided for in Section 6.9(c) below  then the SSO Supplier must post Margin the
second Business Day following the date of notice unless the Companies agree in
writing to extend the period to provide Margin.  The Companies will not
 
 
44

--------------------------------------------------------------------------------

 
unreasonably deny a request for a one-day extension of such period.  In the
event that the SSO Supplier fails to provide Margin when due, then an Event of
Default under Article 5 will be deemed to have occurred and the Companies will
be entitled to the remedies set forth in Article 5 of this Agreement.  If the
SSO Supplier is otherwise entitled to deliver or pledge its or its Guarantor’s
First Mortgage Bonds to cover Surplus Margin, but cannot do so within the second
Business Day time period or any extension thereof, the SSO Supplier may
initially post cash or a letter of credit to satisfy such obligation, which cash
or letter of credit shall be returned by the Companies upon the subsequent
delivery or pledge of its or its Guarantor’s First Mortgage Bonds in accordance
with the provisions of Section 6.9(c) hereof.
(b)    Remaining Margin being held by the Companies not needed to satisfy the
Total Exposure Amount, as determined above, will be returned to the SSO Supplier
upon receipt of a written request by the SSO Supplier.  The returned amount to
the SSO Supplier shall be the lesser of the remaining Margin then held by the
Companies or the Total Exposure Amount less the Credit Limit.   If the SSO
Supplier posted cash and notice is received by 1:00 p.m. prevailing Eastern Time
on a Business Day , the remaining Margin will be returned by the next following
Business Day and if the SSO Supplier posted cash and notice is received by the
Companies after 1:00 p.m. prevailing Eastern Time on a Business Day, the
remaining Margin will be returned by the second Business Day following the date
of notice.  If the SSO Supplier posted a letter of credit, the Surplus Margin
shall be returned on the next Business Day following the Business Day on which
the amendment to the letter of credit is received from the issuing bank.  In the
event that the Company fails to return the remaining Margin when due in
accordance
 
 
45

--------------------------------------------------------------------------------

 
with this Article, then an Event of Default under Article 5 will be deemed to
have occurred and the SSO Suppliers will be entitled to the remedies set forth
in Article 5 of this Agreement unless SSO Supplier agrees in writing to extend
such period for providing the remaining Margin.  The SSO Supplier will not
unreasonably deny a request for a one-day extension of the period for returning
the remaining Margin.  If after the SSO Supplier or its Guarantor has delivered
or pledged First Mortgage Bonds to cover Surplus Margin (as defined in Section
6.9(c) below), there exists no Surplus Margin, then upon the written request of
the SSO Supplier, the Companies shall return such First Mortgage Bonds to the
SSO Supplier for cancellation as promptly as reasonably practicable; provided,
however, that no return of any First Mortgage Bonds pursuant to the foregoing
shall relieve the SSO Supplier of its obligation under this Agreement to post
collateral in respect of Margin, including Surplus Margin, which obligation
shall continue in full force and effect at all times during the term of this
Agreement.
 
6.8           Grant of Security Interest/Remedies
 
To secure its obligations under this Agreement and to the extent that the SSO
Supplier delivered Margin/collateral hereunder, the SSO Supplier hereby grants
to the Companies a present and continuing security interest in, and lien on (and
right of setoff against), and assignment of all property, cash collateral and
cash equivalent collateral and any and all proceeds resulting therefrom or the
liquidation thereof, whether now or hereafter held by, on behalf of, or for the
benefit of, the Companies, and SSO Supplier and the Companies agree to take such
action as reasonably required to perfect the secured Party’s first priority
security interest in, and lien on (and right of setoff against), such collateral
and any and all proceeds resulting therefrom or from the liquidation thereof.  
 
 
46

--------------------------------------------------------------------------------

 
Upon or any time after the occurrence or deemed occurrence and during the
continuation of an Event of Default or an Early Termination Date, the Companies
may do any one or more of the following in any order: (i) exercise any of the
rights and remedies of the Companies with respect to all collateral, including
any such rights and remedies under law then effect; (ii) exercise their rights
of setoff against any and all property of the SSO Supplier in the possession of
the Companies whether held in connection with this Agreement or any other
agreement(s) between the Companies and the SSO Supplier for the provision of SSO
Supply; (iii) draw on any outstanding letter of credit issued for their benefit;
(iv) exercise any and all rights remedies available to it under and against any
First Mortgage Bonds delivered or pledged in accordance with Section 6.9(c); and
(v) liquidate all security held by or for the benefit of the Companies free from
any claim or right of any nature whatsoever of the SSO Supplier, including any
equity or right of right of purchase or redemption by the SSO Supplier.  The
Companies will apply the proceeds of the collateral realized upon the exercise
of such rights or remedies to reduce the SSO Supplier’s obligation under this
Agreement or any other agreement(s) between the Companies and the SSO Supplier
for the provision of SSO Supply (the SSO Supplier remaining liable for any
amounts owing to the Companies after such application), subject to the
Companies’ obligation to the return of any surplus proceeds remaining after such
obligations are satisfied in full.
All notices, demands or requests regarding credit requirements and credit
related security or deposit transfers shall be in writing and shall be
personally delivered or sent by overnight express mail, courier service or
facsimile transmission (with the original transmitted by any of the other
aforementioned delivery methods) addressed as follows:
 
 
47

--------------------------------------------------------------------------------

 
 
If to a SSO Supplier:
 
Notification information for each SSO Supplier is set forth on Appendix A
hereto.

If to the Companies to:
 
Thomas R. Sims
Senior Business Analyst
FirstEnergy Corp.
76 South Main Street, 17th Floor
Akron, OH  44308
Telephone: 330-384-3808
Facsimile: 330-255-1662
simst@firstenergycorp.com

 
                    Copy to:
 
David M. Blank
Vice President, Rates & Regulatory Affairs
FirstEnergy Corp.
76 South Main Street, 8th Floor
Akron, OH  44308
Telephone: 330-384-5451
Facsimile: 330-761-4281
dmblank@firstenergycorp.com

Copy to:
 
Dean W. Stathis
Director, Regulated Commodity Sourcing
2800 Pottsville Pike
Reading PA 19612-6001
Telephone: 610-921-6766
Facsimile: 610-939-8542
dstathis@firstenergycorp.com

And:

Mark A. Hayden, Esq.
FirstEnergy Corp.
76 South Main Street
Akron, OH  44308
Telephone: 330-761-7735
Facsimile: 330-384-3875
haydenm@firstenergycorp.com
 
 
48

--------------------------------------------------------------------------------

 
or to such other person at such other address as a Party may designate by like
notice to the other Party.  Notice received after the close of the Business Day
will be deemed received on the next Business Day; provided that notice by
facsimile transmission will be deemed to have been received by the recipient if
the recipient confirms receipt telephonically or in writing.
 
6.9           Security Instruments
 
At each SSO Supplier’s choice, the following are deemed to be acceptable methods
for posting security, if required:
(a)           cash; or
(b)   a standby irrevocable letter of credit acceptable to the Company issued by
a bank or other financial institution with a minimum “A” senior unsecured debt
rating (or, if unavailable, corporate issuer rating) from S&P or Moody’s (see
standard format in Appendix D).  The letter of credit shall state that it will
renew automatically for successive one-year or shorter periods, until terminated
upon at least ninety (90) days prior written notice from the issuing financial
institution.  If the Companies receive notice from the issuing financial
institution that letter of credit is being cancelled, the SSO Supplier will be
required to provide a substitute letter of credit from an alternative bank
satisfying the minimum requirements.  The receipt of the substitute letter of
credit must be effective as of the cancellation date and delivered to the
Companies thirty (30) days before the cancellation date of the original letter
of credit.  If the SSO Supplier fails to supply a substitute letter of credit as
required, then the Companies will have the right to draw on the existing letter
of credit and to hold the amount as Margin.
 
 
49

--------------------------------------------------------------------------------

 
If the credit rating of a bank or other financial institution from which a SSO
Supplier has obtained a letter of credit falls below levels specified in this
Article 6, the SSO Supplier will have two (2) Business Days following written
notice by the Companies to obtain a suitable letter of credit from another bank
or other financial institution that meets those standards unless such period is
extended in writing by Companies; or
(c)    with respect to Surplus Margin only the delivery or pledge of First
Mortgage Bonds of the SSO Supplier or its Guarantor, which First Mortgage Bonds
shall conform to the requirements set forth in Appendix F and otherwise be in
form, amount and substance satisfactory to the Companies in their sole
discretion. For purposes of this subsection (c), (i) “Surplus Margin” means
Margin in excess of $400 million that has been secured by cash or letter of
credit as defined in section (a) and (b) above and “First Mortgage Bonds” means
obligations of such SSO Supplier or Guarantor, as the case may be, evidenced by
a first mortgage bond or other similar instrument and secured by a first
priority lien on all or substantially all of the property, plant and equipment
and related assets of such SSO Supplier or Guarantor.
(d)           Notwithstanding anything in the Agreement to the contrary, the
Companies may exercise any rights or claims to any collateral posted, delivered
or pledged to it under Section 6.7 hereof, before, after, concurrently with, or
to the exclusion of, any other collateral posted, delivered or pledged, and in
particular are not required to exercise any remedies whatsoever against any
First Mortgage Bonds prior to applying any cash collateral against, or making a
drawing under any letter of credit in respect of,
 
50

--------------------------------------------------------------------------------

 
 
any liabilities of the SSO Supplier hereunder or its Guarantor under the
Guaranty to the Companies or any of them
 
6.10         Maintenance of Creditworthiness
 
(a)           Reporting of Changes.
Each SSO Supplier must promptly notify the Companies of any change in its credit
rating or financial condition or that of its Guarantor.  The SSO Supplier or
Guarantor must also furnish evidence of an acceptable credit rating or financial
condition upon the request of the Companies.
(b)           Change in Credit Standing.
The Companies will re-evaluate the creditworthiness of a SSO Supplier whenever
it becomes aware of an adverse change, through the provision of notice by such
SSO Supplier or otherwise, in the SSO Supplier’s or Guarantor’s credit
standing.  If the lowest credit rating (whether corporate issuer rating or
unsecured senior debt rating) used to determine the SSO Supplier’s ICT or its
credit limit adversely changes, the Companies will require additional security
from a SSO Supplier in accordance with Sections 6.4 and 6.6.  The additional
security must be in a form acceptable to the Companies, as specified in Section
6.9 of this Agreement.
 
6.11         Calling on Security
 
The Companies may call upon the security posted by the SSO Supplier if the SSO
Supplier fails to pay amounts due to the Companies pursuant to this Agreement or
any other agreement(s) between the Companies and the SSO Supplier for the
provision of SSO Supply after all of the following events occur:
(a)           written Notice of Default is provided to the SSO Supplier; and
 
 
51

--------------------------------------------------------------------------------

 
(b)           any applicable cure period ends.
The foregoing notwithstanding, the security posted by the SSO Supplier will
become due automatically without prior notice or right of cure in the case of
any Event of Default arising under Section 5.1 (i), (ii), (iii), (iv), (v),
(vi), (vii), (viii), (ix), (x) and (xi) hereof.
 
6.12         Interest on Cash Held by Company
 
           The Companies will pay simple interest calculated at the lower of the
Interest Index or six (6) percent per annum on all cash held by Companies
pursuant to this Agreement. Each Billing Month the SSO Supplier will prepare a
statement of interest amounts due from the Companies.  The statement will be
sent to the Companies within three (3) Business Days after the end of the
Billing Month via overnight mail or other expeditious means.  The Companies will
make interest payments on the first Business Day after the 5th day of each
calendar month.
 
6.13         Confidentiality
 
Information supplied by a SSO Supplier in connection with the creditworthiness
process shall be deemed confidential and not subject to public disclosure,
unless Applicable Legal Authorities require disclosure of the information.  If
information must be disclosed, then the confidentiality of the information will
be maintained consistent with the Applicable Legal Authority’s rules and
regulations pertaining to confidentiality.  The SSO Supplier will be given
prompt notice of any request by a third party to obtain confidential information
related to the SSO Supplier’s creditworthiness.
 
 
52

--------------------------------------------------------------------------------

 
6.14         No Endorsement of SSO Supplier
 
The Companies’ determination that a SSO Supplier is creditworthy pursuant to the
process set forth above, will not be deemed to constitute an express or implied
warranty or guarantee of any kind with respect to the financial or operational
qualifications of the SSO Supplier.  The Companies will treat all SSO Suppliers
in a non-discriminatory manner and shall provide no preference to any SSO
Supplier.
 
ARTICLE 7:            PROCEDURES FOR ENERGY SCHEDULING AND DATA TRANSMISSION
 
The Parties must adhere to any applicable operational requirements of MISO
necessary to protect the integrity of the transmission system within the
FirstEnergy Balancing Authority and the transmission systems of interconnected
balancing authorities, and must satisfy any and all MISO and NERC criteria, when
applicable. The SSO Supplier also must adhere to any applicable operational
requirements of the Companies necessary to protect the integrity of each of the
Companies’ local distribution systems.   
 
7.1           Load Obligations
 
The Companies and the SSO Supplier acknowledge that the SSO Customers are within
the Companies’ service territories and that the SSO Load must be divided into
SSO Supplier obligations by applying the SSO Supplier Responsibility Share for
each SSO Supplier.
 
 
 
53

--------------------------------------------------------------------------------

 
 
7.2           Data Transmission
 
(a)           Energy
The procedures for transmitting load obligation data for the SSO Supplier’s
hourly Energy obligations will be as set forth by MISO.
(b)           Resource Adequacy
The procedures for transmitting load obligation data for the SSO Supplier’s
Resource Adequacy Requirements will be as set forth by MISO.
(c)           Transmission
The SSO Load Share will be determined by the Companies.  The procedures for
transmitting the SSO Load Share and the SSO Supplier Responsibility Share data
based upon which the SSO Supplier will meet its Firm Transmission Service
obligations will be  as set forth by MISO.
(d)           Ancillary Services
The procedures for transmitting data regarding the SSO Supplier’s Ancillary
Services obligations will be as set forth by  MISO.
 
7.3           Energy Scheduling
 
The Companies will not provide load-forecasting services.  The SSO Supplier must
schedule Energy resources to meet its obligations with MISO as provided for in
the applicable MISO tariff, rules, agreements, procedures, and manuals.
 
7.4           Meter Data Management Agent
 
The Companies will act as the SSO Supplier’s Meter Data Management Agent by
providing MISO with the actual data regarding the SSO Supplier Responsibility
Share of the SSO Load for the purposes of settlement.  The SSO Supplier will
access the Meter
 
 
54

--------------------------------------------------------------------------------

 
 
Data Management Agent submitted data directly from the Suppliers’ own MISO
portal. The Energy obligations for each SSO Supplier will be determined based on
its SSO Supplier Responsibility Share.  
 
ARTICLE 8:                    THE ENERGY SETTLEMENT/RECONCILIATION PROCESS
 
 
8.1           Energy Settlement By MISO
 
The settlement process occurs at MISO, pursuant to MISO tariffs, rules,
agreements, and procedures, to reflect the SSO Supplier’s actual Energy
obligations in a supply/usage reconciliation process.  For purposes of the
settlement process, the delivery point will be deemed to be the SSO Supplier
Load Zone.
 
8.2           Energy Settlement by the Company
 
Energy Settlement shall be conducted by the MISO.  In the event that MISO
imposes penalties against any of the Companies as a result of the SSO Supplier’s
transactions or failure to meet the MISO requirements, the Companies will bill
such penalties directly to the SSO Supplier.
 
ARTICLE 9:                     BILLING AND PAYMENT
 
 
9.1           The Company Payment of Obligations to the SSO Supplier
 
The Companies will pay all amounts due to the SSO Supplier hereunder in
accordance with the following provisions:
(a)           Each Billing Month, the Company will prepare and provide a
Statement to each SSO Supplier.  Line items on the Statement will show amounts
due equal to the Price multiplied by the applicable Seasonal Billing Factor
multiplied by PMEA times the Price in accordance with Section 2.2.
 
 
55

--------------------------------------------------------------------------------

 
(b)           The Statement will be sent to SSO Supplier within six (6) Business
Days after the end of the Billing Month via overnight mail or other expeditious
means.
(c)           The Companies will make payment on the first Business Day after
the 19th day of each calendar month.
(d)           To the extent that the FMEA differs from the PMEA, the Companies
will pay or charge to the SSO Supplier (the “FMEA/PMEA Adjustment”)
(e)           If each Party owes an amount to the other Party pursuant to this
Agreement, including any related interest, and payments or credits, the Parties
may satisfy their respective obligations to each other by netting the aggregate
amounts due to one Party against the aggregate amounts due to the other Party,
with the Party, if any, owing the greater aggregate amount paying the other
Party the difference between the amounts owed.
(f)           All payments shall be subject to adjustment for any arithmetic
errors, computation errors, or other errors, provided that the errors become
known within one (1) year of the termination of this Agreement.  
(g)           The Companies shall make payments of funds payable to the SSO
Supplier by electronic transfer to a bank designated by the SSO Supplier.
(h)           If a good faith dispute arises between the Companies and the SSO
Supplier regarding a Statement, the disputing Party shall be obligated to pay
only the undisputed portion of the Statement, if any, and shall present the
dispute in writing and submit supporting documentation to the non-disputing
Party within one-hundred twenty (120) calendar days from the date of the
Statement in dispute.  Statement disputes must be addressed promptly, and in
accordance with the dispute resolution procedures set forth
 
 
56

--------------------------------------------------------------------------------

 
in this Agreement.  Upon resolution of a Statement dispute, any payments made to
either Party will include simple interest on the payment at the lower of the
Interest Index or six (6) percent per annum payable from the date that notice of
a Statement dispute was received by the non-disputing Party.
(i)           If payment is made to the SSO Supplier after the due date shown on
the Statement, a late fee will be added to the unpaid balance until the entire
Statement is paid.  This late fee will be calculated at the prime rate
commercial J.P. Morgan Chase charges borrowers.
 
9.2           Billing for SSO Supplier’s Obligations to Other Parties
 
The Companies shall have no responsibility for billing between the following
entities: the SSO Supplier and MISO; the SSO Supplier and any Energy source; or
the SSO Supplier and any other third party.  The Companies shall be solely
responsible for billing SSO Customers for SSO Service.
 
9.3           The SSO Supplier Payment of Obligations to the Companies
 
The SSO Supplier must pay all Charges it incurs hereunder in accordance with the
following provisions:
(a)           Each Billing Month, the Companies will submit an invoice to the
SSO Supplier for all Charges provided under this Agreement.  The SSO Supplier
must make payment for Charges incurred on or before the due date shown on the
invoice.  The due date will be on the first Business Day after the 19th day of
each calendar month. The invoice will be sent to SSO Supplier within six (6)
Business Days after the end of the Billing Month via overnight mail or other
expeditious means.
 
 
57

--------------------------------------------------------------------------------

 
(b)           Invoices shall be subject to adjustment for any arithmetic errors,
computation errors, or other errors, provided that the errors become known
within one year of the termination of this Agreement.  
(c)           The SSO Supplier must make payments of funds payable to the
Company by electronic transfer to a bank designated by the Company.
(d)           If a good faith dispute arises between the Companies and the SSO
Supplier regarding an invoice, the disputing Party shall pay only the undisputed
portion of the invoice, if any, and must present the dispute in writing and
submit supporting documentation to the non-disputing Party within one-hundred
twenty (120) calendar days from the due date of the invoice in question.  All
disputes shall be addressed promptly, and in accordance with the dispute
resolution procedures set forth in Article 11.  Upon resolution of a dispute,
any payments made to either Party shall include simple interest on the payment
at the lower of the Interest Index or six (6) percent per annum payable from the
date that notice of a dispute was received by the non-disputing Party.
(e)           If payment is made to the Companies after the due date shown on
the invoice, a late fee will be added to the unpaid balance until the entire
invoice is paid.  This late fee shall be calculated at the prime rate commercial
J.P. Morgan Chase charges borrowers.
 
ARTICLE 10:                  SYSTEM OPERATION
 
 
10.1         Disconnection and Curtailment by the Companies
 
Each of the Companies shall have the right, without incurring any liability to
SSO Suppliers, to disconnect (or otherwise curtail, interrupt or reduce
deliveries from) the SSO Suppliers or to disconnect (or otherwise curtail,
interrupt or reduce deliveries to) any
 
 
58

--------------------------------------------------------------------------------

 
Customer whenever one of the Companies determines in the exercise of its good
faith discretion, or when the Companies are directed by MISO, that such a
disconnection, curtailment, interruption or reduction is necessary to facilitate
construction, installation, maintenance, repair, replacement or inspection of
any of the Companies’ facilities; or due to any other reason affecting the safe
and reliable operation of the Companies’ or a Customer’s facilities, including
Emergencies, forced outages or potential overloading of the Companies’
transmission or distribution circuits, potential damage to any Customer’s
facilities or any risk of injury to persons.   The Companies shall not show any
preference for any entity affiliated with it in connection with any such
disconnection or curtailment.
 
10.2         Inadvertent Loss of Service to SSO Customers
 
                The Parties agree and acknowledge that service to SSO Customers
may be inadvertently lost due to storms, weather, accidents, breakage of
equipment or other events beyond the reasonable control of the Companies
affecting the transmission and distribution facilities of the
Companies.  Neither Party will have any liability to the other Party for the
occurrence of such events except for the Companies’ obligation to pursue steps
for the resumption of the disrupted service as set forth in Section 10.3
below.  In no event will an inadvertent loss of service affect a Party’s
obligation to make any payments then due or becoming due with respect to
performance rendered prior to such inadvertent loss of service.
 
           10.3              Good Faith Efforts
 
The Companies will use good faith efforts to (a) minimize any curtailment,
interruption or reduction to the extent practicable under the circumstances; (b)
provide
 
 
59

--------------------------------------------------------------------------------

 
 
the SSO Supplier with prior notification of any curtailment, interruption or
reduction, to the extent practicable; and (c) resume service as promptly as
practicable.
 
           10.4              MISO Requirements
 
The Parties acknowledge and agree that, as members of MISO, each of them is
bound by all of the MISO EMT, operating instructions, policies and procedures
set forth by MISO.  The SSO Supplier acknowledges and agrees that it will
cooperate with the Companies, MISO and the applicable balancing authority and
reliability coordinator so that the Companies will be in compliance with all
MISO emergency operations procedures, which include, but are not limited to,
those procedures pertaining to minimum and maximum generation Emergencies, and
measures requiring involuntary Customer participation, such as supply voltage
reduction or full interruption of Customer load by either manual or automatic
means.
 
           10.5              Compliance with Governmental Directives
 
The SSO Supplier also acknowledges and agrees that the Companies may need to act
in response to governmental or civil authority directives that may affect SSO
Customer load.  The SSO Supplier agrees to cooperate with the Companies in order
to comply with said directives.
 
ARTICLE 11:                  DISPUTE RESOLUTION
 
 
11.1         Informal Resolution of Disputes
 
The Companies and the SSO Supplier will use good faith and reasonable commercial
efforts to informally resolve all disputes arising out of the implementation of
this Agreement.  The SSO Supplier's point of contact for all information,
operations, and questions will be as provided for in Article 15.  Any dispute
between the Companies and
 
 
60

--------------------------------------------------------------------------------

 
 
the SSO Supplier under this Agreement may be referred to a designated senior
representative of each of the Parties for resolution on an informal basis as
promptly as practicable.
 
11.2         Recourse to Agencies or Courts of Competent Jurisdiction
 
Nothing in this Agreement shall restrict the rights of either Party to file a
complaint with the FERC under relevant provisions of the Federal Power Act
(“FPA”), with the PUCO under relevant provisions of the Applicable Legal
Authorities, with a Ohio State court of competent jurisdiction, or with a
federal court of competent jurisdiction situated in the State of Ohio.  The
Parties’ agreement hereunder is without prejudice to any Parties’ right to
contest the jurisdiction of the agency or court to which a complaint is brought.
 
ARTICLE 12:                  REGULATORY AUTHORIZATIONS AND JURISDICTION
 
 
12.1         Compliance with Applicable Legal Authorities
 
The Companies and the SSO Supplier are subject to, and will comply with, all
existing or future applicable federal, State and local laws, all existing or
future duly-promulgated orders or other duly-authorized actions of MISO or of
Applicable Legal Authorities.
 
12.2         FERC Jurisdictional Matters
 
The inclusion herein of any descriptions of procedures or processes utilized by
MISO or otherwise subject to the jurisdiction of FERC is intended solely for
informational purposes.  If anything stated herein is found by the FERC in a
final rule, regulation, determination, or order to conflict with or be
inconsistent with any provision of the FPA, or any final rule, regulation, order
or determination of the FERC under the
 
 
61

--------------------------------------------------------------------------------

 
 
FPA or if any existing procedures or processes utilized by MISO are duly
modified, the applicable FERC rule, regulation, order, determination or
modification will control.  To the extent required under any provision of the
FPA, or any rule, regulation, order or determination of the FERC under the FPA,
the Companies, and SSO Supplier, if applicable, will use reasonable commercial
efforts to secure, from time to time, all appropriate orders, approvals and
determinations from the FERC necessary to support this Agreement.
 
ARTICLE 13:                  LIMITATION OF LIABILITY
 
 
13.1         Limitations on Liability
 
Except to the extent expressly set forth in this Agreement, each Party will be
liable to other Parties for direct damages incurred as a result of such Party’s
failure to comply with this Agreement and no Party will have any liability to
the other Party for consequential, indirect, special or punitive damages,
including lost profits or lost revenues, arising out of such Party’s failure to
comply with its obligations under this Agreement.  Notwithstanding anything to
the contrary in this Agreement, nothing herein shall impose any  obligations or
liability from one SSO Supplier to any other SSO Supplier(s).
 
13.2         Risk of Loss
 
           Solely for purposes of determining risk of loss and for determining
the indemnity obligations under Article 14 hereof, the Companies will be deemed
to have custody and control of the electric Energy delivered by a SSO Supplier
upon receipt thereof into the Companies’ distribution system and until delivery
thereof at the retail electric meter of the Customer; and each SSO Supplier will
be deemed to have custody and control of the
 
 
62

--------------------------------------------------------------------------------

 
electric Energy at all times prior to receipt thereof by the Companies.  Each
SSO Supplier will at all times be deemed to hold title to electric Energy until
delivery at the retail electric meter of the Customer at which time title shall
be deemed to pass to such Customer.  It is acknowledged and agreed that the
Companies shall at no time take title to any electric Energy under this
Agreement. The Party deemed to have custody and control of electric Energy will,
among the Parties to this Agreement, be responsible for all loss or damage to
property or injury or death to persons arising in connection with such electric
Energy while in its custody and control and will indemnify the other Parties
with respect to same as set forth in Article 14 of this Agreement.
 
ARTICLE 14:                   INDEMNIFICATION
 
 
14.1         Indemnification
 
(a)           Should any of the Companies become the defendant in, or obligor
for, any third party’s claims or liabilities for losses, penalties, expenses,
damage to property, injury to or death of any person including a Party’s
employees or any third parties, that were caused by or occur in connection with
an act or omission of a SSO Supplier with respect to an obligation arising under
or in connection with this Agreement, or for which such SSO Supplier has
otherwise assumed liability under the terms of this Agreement, such SSO Supplier
must defend (at the Companies’ option), indemnify and hold harmless the
Companies, their shareholders, board  members, directors, officers and
employees, agents and attorneys from and against any and all such third party
claims and liabilities, except to the extent that a court of competent
jurisdiction determines that the losses, penalties, expenses or damages were
caused wholly or in part by the gross
 
 
63

--------------------------------------------------------------------------------

 
negligence or willful misconduct of the Companies.  The Companies may, at their
own expense, retain counsel and participate in the defense of any such suit or
action.
(b)           Should a SSO Supplier (the “Indemnified Supplier”) become the
defendant in, or obligor for, any third party’s claims or liabilities for
losses, penalties, expenses, damage to property, injury to or death of any
person including a Party’s employees or any third parties, that were caused by
or occur in connection with an act or omission of the Companies or another SSO
Supplier with respect to an obligation arising under or in connection with this
Agreement, or for which the Companies or such other SSO Supplier has otherwise
assumed liability under the terms of this Agreement, the Companies or such SSO
Supplier must defend (at the option of the Indemnified Supplier), indemnify and
hold harmless the Indemnified Supplier, its shareholders, board members,
directors, officers, employees, agents and attorneys from and against any and
all such third party claims and/or liabilities, except to the extent that a
court of competent jurisdiction determines that the losses, penalties, expenses
or damages were caused wholly or in part by the gross negligence or willful
misconduct of the Indemnified Supplier.  The Indemnified Supplier may, at its
own expense, retain counsel and participate in the defense of any such suit or
action.
 
14.2         Survives Agreement
 
The obligation of a Party to defend, indemnify, and hold harmless another Party
under this Article will survive termination of this Agreement, and will not be
limited in any way by any limitation on the amount or type of damages,
compensation, or benefits payable by or for either Party under any statutory
scheme, including any Worker’s Compensation Acts, Disability Benefit Acts or
other Employee Benefit Acts.
 
 
64

--------------------------------------------------------------------------------

 
ARTICLE 15:                  MISCELLANEOUS PROVISIONS
 
 
15.1         Notices
 
Unless otherwise stated herein, all notices, demands or requests required or
permitted under this Agreement must be in writing and must be personally
delivered or sent by overnight express mail, courier service or facsimile
transmission (with the original transmitted by any of the other aforementioned
delivery methods) addressed as follows:
 
If to a SSO Supplier:
 
                        Notification information for each SSO Supplier is set
forth on Appendix A hereto.

If to the Company to:
 
David M. Blank
Vice President, Rates & Regulatory Affairs
FirstEnergy Corp.
76 South Main Street, 8th Floor
Akron, OH  44308
Telephone: 330-384-5451
Facsimile: 330-761-4281
dmblank@firstenergycorp.com

                                Copy to:
 
Mark A. Hayden, Esq.
FirstEnergy Corp.
76 South Main Street
Akron, OH  44308
Telephone: 330-761-7735
Facsimile: 330-384-3875
haydenm@firstenergycorp.com

or to such other person at such other address as a Party may designate by like
notice to the other Party.  Notice received after the close of the Business Day
will be deemed received on the next Business Day; provided that notice by
facsimile transmission will be
 
 
65

--------------------------------------------------------------------------------

 
deemed to have been received by the recipient if the recipient confirms receipt
telephonically or in writing.
 
15.2         No Prejudice of Rights
 
The failure of a Party to insist on any one or more instances upon strict
performance of any provisions of this Agreement, or to take advantage of any of
its rights hereunder, may not be construed as a waiver of any such provisions or
the relinquishment of any such right or any other right hereunder, which will
remain in full force and effect.  No term or condition of this Agreement will be
deemed to have been waived and no breach excused unless such waiver or consent
to excuse is in writing and signed by the Party claimed to have waived or
consented to excuse.
 
15.3         Assignment
 
Parties may not assign any of their rights or obligations under this Agreement
without obtaining (a) any necessary regulatory approval(s) and (b) the prior
written consent of the non-assigning Party, which consent will not be
unreasonably withheld; provided that the Companies agree that they will grant
their consent to a proposed assignment by a SSO Supplier if the proposed
assignee meets all of the Companies’ creditworthiness requirements then in
effect under Article 6 of this Agreement; and further provided that a SSO
Supplier wishing to assign its interests hereunder will not be obligated to
obtain the consent of any other SSO Supplier.  No assignment of this Agreement
will relieve the assigning Party of any of its obligations under this Agreement
until such obligations have been assumed by the assignee and all necessary
consents have been obtained.  Any assignment in violation of this Section 15.3
will be void; provided, however, any of the Companies may assign any or all of
its rights and obligations under
 
 
66

--------------------------------------------------------------------------------

 
this Agreement, without the SSO Supplier’s consent, to any entity succeeding to
all or substantially all of the assets of the Company, if such assignee agrees,
in writing, to be bound by all of the terms and conditions hereof and all
necessary regulatory approvals are obtained.  SSO Supplier may, with prior
written notice to the Companies but without obtaining the approval of the
Companies, assign the accounts, revenues or proceeds under this Agreement to a
third party.  The Companies agree that following receipt of such notice of the
assignment of accounts, revenues or proceeds and such other documentation that
the assigning SSO Supplier may reasonably request that the Companies will pay
amounts becoming due to the assigning SSO Supplier under this Agreement directly
to the designated assignee; provided however, that nothing herein shall enlarge
or expand the rights of such designated assignee beyond the rights granted to
the SSO Supplier and the right of such designated assignee to receive payments
shall be subject to all defenses, offsets and claims of the Companies arising
under this Agreement.  The Companies further agrees that, in the event necessary
regulatory approvals to effectuate an assignment have been sought in good faith
but that action by the regulatory body is pending, the Companies will accept the
performance of the proposed assignee as a Party to this Agreement, as co-obligor
with the Party proposing to assign its interest, until such approvals are
obtained; provided that, in the event the regulatory body declines to grant its
approval (or, in the discretion of the Companies, in the event the application
seeking approval is still pending without action by the regulatory  body after
ninety (90) days), the request for approval of the assignment will be deemed to
have been rejected.
 
 
67

--------------------------------------------------------------------------------

 
15.4         Governing Law and Venue
 
To the extent not subject to the jurisdiction of the FERC, questions including
those concerning the formation, validity, interpretation, execution, amendment,
termination and construction of this Agreement will be governed by the laws of
the State of Ohio, without regard to principles of conflicts of law.  Any
lawsuit arising in connection with this Agreement must be brought in the State
or Federal courts of Ohio.
 
15.5         Headings
 
The headings and subheadings contained in this Agreement are used solely for
convenience and do not constitute a part of the Agreement between the Parties
hereunto, nor should they be used to aid in any manner in the construction of
this Agreement.
 
15.6         Third Party Beneficiaries
 
This Agreement is intended solely for the benefit of the Parties hereto
including Customers for whom the Companies are executing this Agreement as
agent.  Nothing in this Agreement may be construed to create any duty, or
standard of care with reference to, or any liability to, any person not a Party
to this Agreement.
 
15.7         General Miscellaneous Provisions
 
(a)    This Agreement may not be interpreted or construed to create an
association, joint venture, or partnership between the Parties (or any of them),
or to impose any partnership obligation or liability upon any Party.  The
obligations of the SSO Suppliers are expressly agreed to be several and not
joint.  No Party will have any right, power, or authority to enter into any
agreement or undertaking for, or on behalf of, or to act as or be an agent or
representative of, or to otherwise bind, the any other Party.
 
 
68

--------------------------------------------------------------------------------

 
(b)    Cancellation, expiration or Early Termination of this Agreement will not
relieve the Parties of obligations that by their nature survive such
cancellation, expiration or termination, including warranties, remedies,
promises of indemnity and confidentiality.
(c)    Should any provision of this Agreement be held invalid or unenforceable,
such provision will be invalid or unenforceable only to the extent of such
invalidity or unenforceability without invalidating or rendering unenforceable
any other provision hereof, unless it materially changes the agreement of the
Parties.
(d)    Each of the Parties acknowledges that it has read this Agreement,
understands it, and agrees to be bound by its terms.  This Agreement is intended
by the Parties as a final expression of their agreement.  The Parties further
agree that this Agreement is the complete and exclusive statement of agreement
and supersedes all proposals (oral or written), understandings, representations,
conditions, warranties, covenants and all other communications between the
Parties relating thereto.
 
15.8         Taxes
 
All present and future federal, state, municipal or other taxes imposed by any
taxing authority by reason of the provision of SSO Supply by a SSO Supplier
under this Agreement will be the liability of the SSO Supplier, except for Ohio
Sales and Use Taxes, which will be the Companies’ responsibility.   Should a SSO
Supplier be required to remit any Ohio  Sales and Use Taxes directly to the
applicable taxing authority, other than taxes previously collected by the SSO
Supplier on behalf of the Companies, the Companies will defend and indemnify the
SSO Supplier for such Sales and Use Taxes and will pay to the SSO Supplier all
such tax amounts upon demand.  Each SSO Supplier
 
 
69

--------------------------------------------------------------------------------

 
shall pay all such taxes to the applicable taxing authority to the extent
required or permitted by law.  If any transaction is exempt from the payment of
any such taxes, the affected SSO Supplier will, if requested, provide the
Companies with valid tax exemption certificates.  Should the Companies be
required to remit any such taxes directly to any applicable taxing authority,
other than taxes previously collected by the Companies directly from an SSO
Supplier, the SSO Supplier will defend and indemnify the Companies and will pay
to the Companies all such tax amounts upon demand.
If new Federal or Ohio taxes or Federal or Ohio government-mandated fees are
imposed on wholesale transactions covering Energy, Resource Adequacy
Requirements, Firm Transmission Service or Ancillary Services after the
effective date, the Companies will reimburse suppliers for such new taxes or
fees provided the Companies recover the cost of such new taxes or fees from the
Companies’ customers.
 
15.9         Use of the Word "Including"
 
The word "including", when following any general statement or term, is not to be
construed as limiting the general statement or term to the specific items or
matters set forth or to similar items or matters, but rather as permitting the
general statement or term to refer to all other items or matters that could
reasonably fall within its broadest possible scope.
 
15.10       Federal Acquisition Regulation
 
If any of the following clauses prescribed by the Federal Acquisition Regulation
(“FAR”), 48 Code of Federal Regulations Chapter 1 should be deemed to apply to
this Agreement, the SSO Supplier shall comply with the requirements of such
clause(s), and
 
 
70

--------------------------------------------------------------------------------

 
shall include the terms or substance of such clause(s) in its subcontracts, as
and to the extent required by the FAR:
(i)            Clean Air and Water:  §52.223-2;
 
(ii)
Contract Work Hours and Safety Standards Act-Overtime Compensation:  §52.222-4

(iii)          Equal Opportunity:  §52.222-26;
 
(iv)
Affirmative Action for and Employment Reports on Special Disabled and Vietnam
Era Veterans:  §52.222-35 and §52.222-37;

(v)           Affirmative Action for Handicapped Workers:  §52.222-36; and
 
(vi)
Utilization of Small Business Concerns and Small Disadvantaged Business Concerns
and Small Business and Small Disadvantaged Business Subcontracting
Plan:  §52.219-8 and §52-219-9.

In case of a conflict between the provisions of the FAR and the balance of this
Agreement, the requirements of the FAR will prevail.
 
15.11       Binding Terms
 
               This Agreement and the rates, terms and conditions herein will
remain in effect for the entire term hereof and each Party agrees not to seek
any change to such rates, terms and conditions pursuant to the Federal Power
Act, if the Federal Power Act is deemed to have jurisdiction to this Agreement,
including on the grounds that they are not just and reasonable.
 
15.12      Confidentiality
 
(a)           Each Party shall hold in confidence and not release or disclose
any document or information furnished by the other Party in connection with this
Agreement,
 
 
71

--------------------------------------------------------------------------------

 
unless: (i) compelled to disclose such document or information by judicial,
regulatory or administrative process or other provisions of law; (ii) such
document or information is generally available to the public; (iii) such
document or information was available to the receiving Party on a
non-confidential basis; or (iv) such document or information was available to
the receiving Party on a non-confidential basis from a third-party, provided
that the receiving Party does not know, and, by reasonable effort, could not
know that such third-party is prohibited from transmitting the document or
information to the receiving Party by a contractual, legal or fiduciary
obligation.
(b)           Notwithstanding any other provision of this Section 15.13, a Party
may disclose to its employees, representatives and agents all documents and
information furnished by the other Party in connection with this Agreement,
provided that such employees, representatives and agents have been advised of
the confidentiality provisions of this Section 15.13, and further provided that
in no event shall a document or information be disclosed in violation of the
standard of conduct requirements established by FERC.
(c)            Absolute protection from public disclosure of the bidders’ data
and information filed in this auction process cannot be provided.  By
participating in this auction process, each bidder acknowledges and agrees to
the confidentiality provisions set forth herein, as well as any limitations
thereto.  In addition, the bidder agrees the bidder's data and information
submitted in this auction process will be disclosed if required by any federal,
state or local agency (including, without limitation, the PUCO) or by a court of
competent jurisdiction.  However, the FirstEnergy Ohio Utilities will endeavor
to notify the bidder in advance of such disclosure.  In any event, neither the
 
 
72

--------------------------------------------------------------------------------

 
FirstEnergy Ohio Utilities nor the Auction Manager, nor any of their employees
or agents, will be responsible to the bidders or any other party, or liable for
any disclosure of such designated materials before, during or subsequent to this
auction.  Notwithstanding the above, the FirstEnergy Ohio Utilities and the
Auction Manager reserve the right to use and communicate publicly and/or to
third parties any and all information/data submitted as part of this auction
process in any proceedings before FERC, the PUCO, and any other regulatory body
and the courts, if necessary, without the prior consent/approval of, or notice
to, any such bidder.
(d)           A Party receiving notice or otherwise concluding that any
confidential document or information furnished by the other Party in connection
with this Agreement is being sought under any provision of law, to the extent it
is permitted to do so under any applicable law, shall: (i) promptly notify the
other Party; and (ii) use reasonable efforts in cooperation with the other Party
to seek confidential treatment of such confidential information.
(e)           The Parties agree that monetary damages may be inadequate to
compensate a Party for the other Party’s breach of its obligations under this
Section 15.13. Each Party accordingly agrees that the other Party shall be
entitled to equitable relief, by way of injunction or otherwise, if the Party
breaches or threatens to breach its obligations under this Section 15.13, which
equitable relief shall be granted without bond or proof of damages, and the
receiving Party shall not plead in defense that there would be an adequate
remedy at law.
 
 
73

--------------------------------------------------------------------------------

 
 
15.13       Amendment
 
This Agreement, including the appendices hereto, cannot be amended without the
written agreement of all Parties and the approval of the Commission prior to
such amendment becoming effective.
 
15.14       Counterparts
 
                This Agreement may be executed in counterparts, each of which
will be considered an original, but all of which will constitute one instrument.
 
[Remainder of this page intentionally left blank.]
 

 
74

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed
by their duly authorized representatives as of the date first set forth above.
 
ATTEST:
                   
By:
 
Rhonda S. Ferguson
   
Steven E. Strah
Vice President, Corporate Secretary
Chief Ethics Officer FirstEnergy Service Co.
   
Regional President, Ohio Edison
         
By:
       
Trent A. Smith
     
Regional President, The Toledo
     
Edison Company
               
By:
       
Dennis M. Chack
     
Regional President, The Cleveland
     
Electric Illuminating Company
                 
ATTEST:
                   
By:
       
Name:
     
Title:

[SUPPLIER SIGNATURES APPEAR ON SUCCEEDING PAGES]

 
75

--------------------------------------------------------------------------------

 

APPENDIX A TO MASTER SSO SUPPLY AGREEMENT
DATED _________, 2009,
BY AND BETWEEN  THE CLEVELAND ELECTRIC ILLUMINATING COMPANY,
THE TOLEDO EDISON COMPANY AND OHIO EDISON COMPANY
 AND THE SSO SUPPLIERS

 
                                                    Notice
 

SSO
Supplier                                                                                   Price                                             
SSO Supplier
                                                                          Responsibility
Share

___________________________________                                                                          ______/MWh                                      
      _____________

Address for Notice

The address for any notice to _______________ provided pursuant to Sections 6.8
and 15.1 of the SSO Master SSO Supply Agreement shall be the following:

For Credit Related Issues, Section 6.8:

 
Name
Address
Telephone
Fax
e-mail

For Notices, Section 15.1:

Name
Address
Telephone
Fax
e-mail

 
76

--------------------------------------------------------------------------------

 

APPENDIX B TO MASTER SSO SUPPLY AGREEMENT
DATED __________ , 2009
BY AND BETWEEN THE CLEVELAND ELECTRIC ILLUMINATING COMPANY,
THE TOLEDO EDISON COMPANY AND OHIO EDISON COMPANY
AND THE SSO SUPPLIERS

 

 
Seasonal Billing Factor
 

The Seasonal Billing Factors are as follows:
 

June 1 through August 31
 
1.1180
September 1 through December 31  and
January 1 through May 31
 
0.9581

 
77

--------------------------------------------------------------------------------

 

APPENDIX C TO MASTER SSO SUPPLY AGREEMENT
DATED __________ , 2009
BY AND BETWEEN THE CLEVELAND ELECTRIC ILLUMINATING COMPANY,
THE TOLEDO EDISON COMPANY AND OHIO EDISON COMPANY
AND THE SSO SUPPLIERS

 
Schedule for ICRT
 
Column (A) will be used to correspond to the term time period specified in
Article 4.1 of the Master SSO Supply Agreement.

 
(A)
MONTH
 ($/tranche)
June 2009
1,500,000
July 2009
1,500,000
August 2009
1,500,000
September 2009
1,500,000
October 2009
1,200,000
November 2009
1,200,000
December 2009
1,200,000
January 2010
1,200,000
February 2010
800,000
March 2010
800,000
April 2010
800,000
May, 2010
800,000
June, 2010
600,000
July, 2010
600,000
August, 2010
600,000
September, 2010
600,000
October, 2010
400,000
November 2010
400,000
December, 2010
400,000
January, 2011
400,000
February 2011
200,000
March 2011
200,000
April 2011
200,000
May, 2011
200,000

 
78

--------------------------------------------------------------------------------

 

 
APPENDIX C TO MASTER SSO SUPPLY AGREEMENT
DATED__________ , 2009
BY AND BETWEEN THE CLEVELAND ELECTRIC ILLUMINATING COMPANY,
THE TOLEDO EDISON COMPANY AND OHIO EDISON COMPANY
AND THE SSO SUPPLIERS

MtM Exposure Amount Calculation Information
 
Table 1  contains the illustrative marks for a twelve month period of the
Agreement.  Monthly marks (example only, to be updated in May 2009) are provided
for June 2009 through May 2010. For each month, two-month blocks or quarterly
blocks where a publicly-available market quotes are available, a market quote
will be used for those months. For any month that a market quote is not
available, the Companies will use a proprietary method that reflects forward
market conditions.
The mark for each Billing Month is the mark that is calculated on the date that
the Solicitation closes and will not change over the life of the contract. After
the close of the competitive bidding process Forward Market Prices will
change.  In addition, the on-peak and off-peak loads used to calculate the MtM
Exposure Amount will be adjusted monthly to reflect the most current changes.
 
 
79

--------------------------------------------------------------------------------

 
Forward Market Prices for the months, two-month blocks or quarterly blocks where
a market quote is available will be equal to the market quote. In case a quote
for a component of a block and for the block is both available, the Companies
reserve the right not to use both the component of a block and the block if they
are inconsistent with each other.  However, when this inconsistency occurs, the
Companies must use either the market quote for the component or the market quote
for the block. Forward Market Prices for each month, two-month blocks, or
quarterly blocks where a market quote is unavailable will be equal to the last
available market quote for that time period or in case they have not been quoted
since the Solicitation closed, they will be equal to the marks set at the close
of the Solicitation.

MtM Calculation Example

Parameters

On the closing day of the Solicitation, the following parameters are set

1.  
The expected On-Peak Load per tranche.

2.  
The expected Off-Peak Load per tranche.

3.  
A table of monthly on-peak forward prices (to be used as the “mark” or inception
price for each month of the supply period).

4.  
A table of monthly on-and off-peak energy prices to determine the ratio of
off-peak price to on-peak prices.

Indicative on-peak and off-peak loads per tranche will be made available 14 days
prior to the Solicitation.

 
80

--------------------------------------------------------------------------------

 

 

 
MARK-TO-MARKET EXAMPLE
 
All Energy prices are based on Cinergy Hub
 
 

Table 1 - Initial Market Price Data
Market Quotes Prior to Solicitation Closing Day

Month
Jun-09
Jul-09
Aug-09
Sep-09
Oct-09
Nov-09
On-Peak
$46.39
$56.39
$56.39
$44.56
$40.90
$44.03

Month
Dec-09
Jan-10
Feb-10
Mar-10
Apr-10
May-10
On-Peak
$43.11
$53.11
$51.69
$50.40
$50.40
$48.43

Table 2 - Off-peak Price Factors
Pre-determined Ratio of Off-Peak to On-Peak Price

Month
Ratio of Off-Peak to On-Peak Price
January
0.66
February
0.66
March
0.66
April
0.59
May
0.45
June
0.46
July
0.45
August
0.49
September
0.55
October
0.65
November
0.59
December
0.66

 

 

 
81

--------------------------------------------------------------------------------

 

Table 3 – Closing Day Marks
Marks Set on the Closing Day of the Solicitation
Energy (MWh/tranche)

Prices for June 2009 through May 2011  so as to correspond to the Delivery
Period

 
On-Peak Volume
Off-Peak Volume
On-Peak Price
Off-Peak Price
Jun-09
25,735
23,155
 $ 46.39
$21.34
Jul-09
31,768
22,281
 $ 56.39
$25.38
Aug-09
23,577
26,691
 $ 56.39
$27.63
Sep-09
24,723
20,579
 $ 44.56
$24.51
Oct-09
23,968
19,890
 $ 40.90
$26.59
Nov-09
20,637
22,806
 $44.03
$25.98
Dec-09
27,935
21,333
 $ 43.11
$28.45
Jan-10
25,510
25,737
 $ 53.11
$35.05
Feb-10
25,971
23,056
 $ 51.69
$34.12
Mar-10
24,097
24,880
 $ 50.40
$33.26
Apr-10
25,576
18,448
 $ 50.40
$29.74
May-10
19,875
23,210
 $ 48.43
$21.79
Jun-10
25,735
23,155
 $ 54.11
$24.89
Jul-10
31,768
22,281
 $ 65.11
$29.30
Aug-10
23,577
26,691
 $ 65.11
$31.90
Sep-10
24,723
20,579
 $ 51.40
$28.27
Oct-10
23,968
19,890
 $ 45.40
$29.51
Nov-10
20,637
22,806
 $ 44.43
$26.21
Dec-10
27,935
21,333
 $ 44.43
$29.32
Jan-11
25,510
25,737
 $ 64.13
$42.33
Feb-11
25,971
23,056
 $ 64.13
$42.33
Mar-11
24,097
24,880
 $ 52.57
$34.70
Apr-11
25,576
18,448
 $ 52.57
$31.02
May-11
19,875
23,210
 $ 51.65
$23.24

Table 4 – Market Prices on Day 1 of the Delivery Period
Market Quotes on Day 1 of the Delivery Period

Month
Jun-09
Jul-09
Aug-09
Sep-09
Oct-09
Nov-09
On-Peak
$46.39
$57.39
$56.39
$46.56
$40.90
$45.03

Month
Dec-09
Jan-10
Feb-10
Mar-10
Apr-10
May-10
On-Peak
$44.11
$53.11
$51.69
$50.40
$50.40
$48.43

 
82

--------------------------------------------------------------------------------

 

Table 5 – MtM on Day 1
 
Mark-to-Market set on Day 1 of the Delivery Period
Energy (MWh/tranche)
 
Data for June 2009 through May 2011 so as to correspond to the Delivery Period

 
On-Peak
Load per Tranche (MWh)
Off-Peak
Load per Tranche (MWh)
Mark for
On-Peak
Prices
Current
Day 1 On-
Peak
Prices
Change in
On-Peak
Price
Change in
Off-Peak
Price
MtM
Jun-09
25,735
23,155
 $ 46.39
$46.39
$-
$-
$-
Jul-09
31,768
22,281
 $ 56.39
$57.39
$1.00
$0.45
$41,794
Aug-09
23,577
26,691
 $ 56.39
$56.39
$-
$-
 
Sep-09
24,723
20,579
 $ 44.56
$46.56
$2.00
$1.10
$ 72,081
Oct-09
23,968
19,890
 $ 40.90
$40.90
$-
$-
 
Nov-09
20,637
22,806
 $44.03
$45.03
$1.00
$0.59
$ 34,093
Dec-09
27,935
21,333
 $ 43.11
$44.11
$-
$-
 
Jan-10
25,510
25,737
 $ 53.11
$53.11
$-
$-
 
Feb-10
25,971
23,056
 $ 51.69
$51.69
$-
$-
 
Mar-10
24,097
24,880
 $ 50.40
$50.40
$-
$-
 
Apr-10
25,576
18,448
 $ 50.40
$50.40
$-
$-
 
May-10
19,875
23,210
 $ 48.43
$48.43
$-
$-
 
Jun-10
25,735
23,155
 $ 54.11
$54.11
$-
$-
 
Jul-10
31,768
22,281
 $ 65.11
$65.11
$-
$-
 
Aug-10
23,577
26,691
 $ 65.11
$65.11
$-
$-
 
Sep-10
24,723
20,579
 $ 51.40
$51.40
$-
$-
 
Oct-10
23,968
19,890
 $ 45.40
$45.40
$-
$-
 
Nov-10
20,637
22,806
 $ 44.43
$44.43
$-
$-
 
Dec-10
27,935
21,333
 $ 44.43
$44.43
$-
$-
 
Jan-11
25,510
25,737
 $ 64.13
$64.13
$-
$-
 
Feb-11
25,971
23,056
 $ 64.13
$64.13
$-
$-
 
Mar-11
24,097
24,880
 $ 52.57
$52.57
$-
$-
 
Apr-11
25,576
18,448
 $ 52.57
$52.57
$-
$-
 
May-11
19,875
23,210
 $ 51.65
$51.65
$-
$-
             
Total
$ 147,968

 
83

--------------------------------------------------------------------------------

 

APPENDIX D TO MASTER SSO SUPPLY AGREEMENT
DATED __________, 2009
BY AND BETWEEN THE CLEVELAND ELECTRIC ILLUMINATING COMPANY,
THE TOLEDO EDISON COMPANY AND OHIO EDISON COMPANY
AND THE SSO SUPPLIERS

 
Sample SSO Letter of Credit
 

___________________________ (Date)

Letter of Credit No. _______________

To:
The Cleveland Electric Illuminating Company, The Toledo Edison Company and Ohio
Edison Company (“Beneficiaries”)

1.      We hereby establish in your favor this irrevocable transferable Letter
of Credit (this “ Letter of Credit ”) for the account of
_______________________(the “Applicant”), in the aggregate amount of
$________________, effective immediately and available to you at sight upon
demand at our counters at _____________ and expiring 364 days from date of
issuance or any extension thereof (in the form of Annex 5), unless terminated
earlier or automatically extended, in accordance with the provisions hereof or
otherwise extended.
 
2.      This Letter of Credit is issued at the request of the Applicant, and we
hereby irrevocably authorize you to draw on us, in accordance with the terms and
conditions hereof, up to the maximum amount of this Letter of Credit, subject to
reduction as provided in paragraph 12 hereof.  This Letter of Credit may be
drawn upon an Event of Default under the SSO Master Supply Wholesale 
Agreement(s) between the Applicant and you, dated _________ .
 

 
84

--------------------------------------------------------------------------------

 
3.  A partial or full drawing hereunder may be made by you on any Business Day
on or prior to the expiration of this Letter of Credit by delivering, by no
later than 11:00 A.M. (New York, NY time1) on such Business Day to
                                                    (Bank),
                                                                      
 (address), (i) a notice executed by you in the form of Annex 1 hereto,
appropriately completed and duly signed by an Authorized Officer of each of the
Beneficiaries and (ii) your draft in the form of Annex 2 hereto, appropriately
completed and duly signed by an Authorized Officer of each of the Beneficiaries.
Authorized Officer shall mean President, Treasurer, any Vice President or any
Assistant Treasurer. 
 
4.      We may, but shall not be obligated to, accept any request to issue a
substitute Letter of Credit.  Such request shall be in an Availability
Certificate in the form of Annex 3 hereto by you to us for exchange for a new
Letter of Credit in the amount set forth in an Availability Certificate, which
amount shall not exceed the present value of this letter of credit.  Upon
acceptance by us of any such request to issue a substitute Letter of Credit for
exchange, the new Letter of Credit shall be issued in the amount as set forth in
the Availability Certificate.
 
5.      We hereby agree to honor a drawing hereunder made in compliance with the
terms and provisions of this Letter of Credit by transferring in immediately
available funds the amount specified in the draft delivered to us in connection
with such drawing to such account at such bank in the United States as you may
specify in your draft delivered to us pursuant to Paragraph 3 hereof, by 3:00
P.M. (New York, NY time) on the date of such drawing, if delivery of this
requisite document is made prior to
 
 

--------------------------------------------------------------------------------

1 If the issuer of the Letter of Credit is located in an area that is not in the
Eastern time zone, this time and all other times in this Letter of Credit, and
the definition of a business day should be adjusted accordingly
 
 
 
85

--------------------------------------------------------------------------------

 
 
     11:00 AM (New York, NY time) on a business day pursuant to Paragraph 3
herein above, but at the opening of business on the first Business Day next
succeeding the date of such drawing if delivery of the requisite document is
made on or after 11:00 AM (New York, NY time) on any Business Day pursuant to
Paragraph 3 herein above.
 
6.      If a demand for payment made by you hereunder does not, in any instance,
conform to the terms and conditions of this Letter of Credit, we shall give you
prompt notice (not exceeding three (3) Business Days following the date of
receipt of the documents) that the demand for payment was not effected in
accordance with the terms and conditions of this Letter of Credit, stating the
reasons therefore and that we will upon your instructions hold any documents at
your disposal or return the same to you.  Upon being notified that the demand
for payment was not effected in conformity with this Letter of Credit, you may
attempt to correct any such non-conforming demand for payment to the extent that
you are entitled to do so, provided, however, in such event a conforming demand
for payment must be timely made in accordance with the terms of this Letter of
Credit.
 
7.      This Letter of Credit will automatically terminate and be delivered to
us for cancellation on the earliest of (i) the making by you of the drawings in
an amount equal to the maximum amount available to be made hereunder, (ii) the
date we issue a new letter of credit in exchange for this Letter of Credit in
accordance with paragraph 4 herein above, (iii) the date we receive from you a
Certificate of Expiration in the form of Annex 4 hereto, or (iv) will be
automatically extended without written amendment for successive additional one
(1) year periods from the current or any
 
 
 
 
 
86

--------------------------------------------------------------------------------

       future extended expiry date, unless at least ninety (90) days prior to
such date of expiration, we give written notice to Beneficiaries by registered
or certified mail, return receipt requested, or by overnight courier, at the
address set forth above, or at such other address of which prior written notice
has been provided to us, that we elect not to renew this irrevocable standby
Letter of Credit for such additional one (1) year period.
 
8.      As used herein:
 
      " Availability Certificate ” shall mean a certificate substantially in the
form of Annex 3 hereto, appropriately completed and duly signed by your
      authorized officer.
 
“ Business Day ” shall mean any day on which commercial banks are not authorized
or required to close in New York, New York and any day on which payments can be
effected on the Fed wire system.
 
9.      This Letter of Credit is assignable and transferable, in accordance with
Annex 6, to an entity who you certify to us in the form of Annex 6, and we
hereby consent to such assignment or transfer, provided that this Letter of
Credit may not otherwise be amended or modified without consent from us, you and
the Applicant, and except as otherwise expressly stated herein, is subject to
the Uniform Customs and Practice for Documentary Credits – 2007 Revision, ICC
Publication No. 600, or any successor publication thereto (the “ UCP ”).  Any
and all transfer fees, expenses and costs shall be borne by the Applicant.  This
Letter of Credit shall, as to matters not governed by the UCP, be governed and
construed in accordance with New York law, without regard to principles of
conflicts of law.  Transfers fees shall be borne by the Applicant.
 
 
 
87

--------------------------------------------------------------------------------

 
10.  This Letter of Credit sets forth in full our undertaking, and such
undertaking shall not in any way be modified, amended, changed, amplified or
limited by reference to any document, instrument or agreement referred to
herein, except for Annexes 1 through 6 hereto and the notices referred to
herein; and any such reference shall not be deemed to incorporate herein by
reference any document, instrument or agreement except as set forth above.
 
11.  We certify that as of ___________________________(date) we ______________
(“Bank”) satisfy the senior unsecured debt rating of “A” from Standard & Poor’s
Rating Service.
 
12.  The amount which may be drawn by you under this Letter of Credit shall be
automatically reduced by the amount of any drawings paid through us referencing
this Letter of Credit No. _____.    Partial drawings are permitted hereunder.
 
13.  Faxed document(s) are acceptable. Presentation by fax must be made to fax
number ____________________ confirmed by telephone to _______________.
 
14.  In the event of act of God, riot, civil commotion, insurrection, war,
terrorism or by any strikes or lock outs, or any cause beyond our control, that
interrupts our business, and causes the place for presentation of this letter of
credit to be closed for business on the last day of presentation, the expiration
date of this letter of credit shall be automatically extended without amendment
to a date thirty (30) calendar days after the place for presentation reopens for
business.
 
15.  This original letter of credit has been sent to the Company located at
________________ above (as per Applicant’s instructions).  The aggregate amount
paid to the Company during the validity of this Letter of Credit will not exceed
the
 
 
 
88

--------------------------------------------------------------------------------

 
 
      amount of this Letter of Credit.  Any demands or communications in the
form of the attached Annexes (except for Annex 5) or other communications
directed to us under this Letter of Credit must be signed by an Authorized
Officer of the EDC.  Acceptance or rejection of any amendments to this Letter of
Credit or any extensions pursuant to Annex 5 must be signed by an Authorized
Officer of each of the Beneficiaries.
 
 
 
                                                                                            Very
truly yours,
                                                                                             (Bank)
                                                                                             __________________________________
                                                                                            By:_______________________________
                                                                                                 Name:
                                                                                                Title:

                                                                                            By:_______________________________
                                                                                                Name:
                                                                                            Title:

--------------------------------------------------------------------------------

 
1 If the issuer of the Letter of Credit is located in an area that is not in the
Eastern time zone, this time and all other times in this Letter of Credit, and
the definition of a business day should be adjusted accordingly

 
89

--------------------------------------------------------------------------------

 

 
Annex 1 to Letter of Credit
 
DRAWING UNDER LETTER OF CREDIT NO. ________

_______________, 20__

To:        (Bank)
              (Address)

              Attention:  Standby Letter of Credit Unit

Ladies and Gentlemen:

      The undersigned is making a drawing under the above-referenced Letter of
Credit in the amount specified below and hereby certifies to you as follows:

1.           Capitalized terms used herein that are defined herein shall have
the meanings ascribed thereto in the Letter of Credit.

2.           "Pursuant to Paragraph 2 of the Letter of Credit No._____________,
dated____________, 20__, the undersigned is entitled to make a drawing under the
Letter of Credit in the aggregate amount of $__________, inasmuch as there is an
Event of Default under any SSO Master Supply Wholesale  Agreement between the
Applicant and us.

3.           The amount to be received by The Cleveland Electric Illuminating
Company is $___________, the amount to be received by The Toledo Edison Company
is $________ and the amount to be received by The Ohio Edison Company is
$____________ , for total equal to the aggregate amount in the previous
paragraph.

4.           We acknowledge that, upon your honoring the drawing herein
requested, the amount of the Letter of Credit available for drawing shall be
automatically decreased by an amount equal to this drawing.
                                                                Very truly
yours,

The Cleveland Electric Illuminating
Company                                                                                                  
The Toledo Edison Company
By:
__________________________________                                                                                                By:__________________________
Name:                                                                                                                 Name:
Title:                                                                                                                
Title:
Date:                                                                                                                            Date:

Ohio Edison Company
By: ________________________________
Name:
Title:
Date:

 
90

--------------------------------------------------------------------------------

 

 
Annex 2 to Letter of Credit
 
DRAWING UNDER LETTER OF CREDIT NO. ________

______________, 20__

ON [Business Day immediately succeeding
           date of presentation]

PAY TO:                           The Cleveland Electric Illuminating Company

$ _________________________________

For credit to the account of _________________________.

PAY TO:                           The Toledo Edison Company

$ _________________________________

For credit to the account of _________________________.

PAY TO:                           Ohio Edison Company

$ _________________________________

For credit to the account of _________________________.

FOR VALUE RECEIVED AND CHARGE TO ACCOUNT OF LETTER OF CREDIT NO. ____________ OF

(Bank)
(Address)

The Cleveland Electric Illuminating
Company                                                                                                  
The Toledo Edison Company
By:
__________________________________                                                                                                By:__________________________
Name:                                                                                                                 Name:
Title:                                                                                                               
Title:
Date:                                                                                                                          
Date:

Ohio Edison Company
By: _______________________________
Name:
Title:
Date:

 
91

--------------------------------------------------------------------------------

 

 
Annex 3 to Letter of Credit
 
AVAILABILITY CERTIFICATE
UNDER LETTER OF CREDIT NO. ________

_______________, 20__
To:           (Bank)
                 (Address)

                Attention:  Standby Letter of Credit Unit

Ladies and Gentlemen:

      Each of the undersigned hereby requests that, in exchange for the
above-referenced Letter of Credit, a new Letter of Credit be issued in the
aggregate amount of $_________ (the “New Amount”) and to expire on
__________________(date), but otherwise in the form of this Letter of Credit.

      Please acknowledge your intention to issue such new Letter of Credit in
the New Amount upon the surrender of the above-referenced Letter of Credit by
signing the attached acknowledgment copy hereof and forwarding it to:

Beneficiaries
                                        Addresses

                                                                Very truly
yours,

The Cleveland Electric Illuminating
Company                                                                                                 
 The Toledo Edison Company
By:
__________________________________                                                                                                By:__________________________
Name:                                                                                                                 Name:
Title:                                                                                                                        
   Title:
Date:                                                                                                                                  
 Date:

Ohio Edison Company
By: _____________________________
Name:
Title:
Date:

                                                                                     APPLICANT
NAME

                                                                                   
 By:                                                               
                                             Name:
                                                                                    
Title:
                                                                                   
 Date:
 
 
92

--------------------------------------------------------------------------------

 
 
Agreed and Accepted:
(Bank)

By ______________________
Name:
Title:
Date:

 
93

--------------------------------------------------------------------------------

 

 
Annex 4 to Letter of Credit
 
CERTIFICATE OF EXPIRATION
OF LETTER OF CREDIT NO. ________

_______________, 20__

To:     (Bank)
           (Address)

           Attention:  Standby Letter of Credit Unit

Ladies and Gentlemen:

      The undersigned hereby certifies to you that the above referenced Letter
of Credit may be cancelled without payment.  Attached hereto is said Letter of
Credit, marked cancelled.

The Cleveland Electric Illuminating
Company                                                                                              
  The Toledo Edison Company
By:
_________________________________                                                                                                By:__________________________
Name:                                                                                                                      
Name:
Title:                                                                                                                         
Title:
Date:                                                                                                                                 Date:

Ohio Edison Company
By: _____________________________
Name:
Title:
Date:

cc:         ___________________________ (Applicant Name)

 
94

--------------------------------------------------------------------------------

 

 
Annex 5 to Letter of Credit
 
NOTICE OF EXTENSION
OF LETTER OF CREDIT NO._________________

____________, 20__

To          The Cleveland Electric Illuminating Company, The Toledo Edison
Company and Ohio Edison Company:

Re: Our Letter of Credit no. ______________________ presently in the aggregate
amount of USD________________ issued for the account of _______________________
and expiring on ____________________.

On the expiration date of the Letter of Credit no. _______________, we will
issue a new Letter of Credit No. ____________ to expire on
__________________(date). This new Letter of Credit No. _________________will,
aside from the expiration date be in the amount and form of our Letter of Credit
No. __________________.

Very truly yours,

       BANK_______________________________

                                                                        By  _______________________________
                                                                                    Name:
                                                                        Title:
                                                                        Date:

cc:         ___________________________ (Applicant Name)

 
95

--------------------------------------------------------------------------------

 

 
Annex 6 to Letter of Credit
 
NOTICE OF TRANSFER
OF LETTER OF CREDIT NO._________________

____________, 20__
To:
Bank
Bank Address

To Whom It May Concern:
Re: Credit_______________________
Issued by _______________________
Advice No_______________________

For the value received, the undersigned beneficiary hereby irrevocably transfers
to:

________________________________
(Name of Transferee)

_______________________________
(Address)

all rights of the undersigned beneficiary to draw under the above Letter of
Credit in its entirety.

By this transfer, all rights of the undersigned beneficiary in such Letter of
Credit are transferred to the transferee and the transferee shall have the sole
rights as beneficiary thereof, including sole rights relating to any amendments
whether increases or extensions or other amendments and whether now existing or
hereafter made.  All amendments are to be advised direct to the transferee
without necessity of any consent of or notice to the undersigned beneficiary.

The advice of such Letter of Credit is returned herewith, and we ask you to
endorse the transfer on the reverse thereof, and forward it direct to the
transferee with your customary notice of transfer.

Enclosed is a certified check in the amount of $_______ in payment of your
transfer commission and in addition we agree to pay to you on demand any
expenses that may be incurred by you in conjunction with this transfer.

Very Truly Yours

_____________________________________
(signature of the Company)

 
 
96

--------------------------------------------------------------------------------

 
The above signature with title as stated conforms to that on file with us and is
authorized for the execution of said instruments.

(Name of authenticating party)

_____________________________________
(Authorized signature of authenticating party)
Name
Title

 
97

--------------------------------------------------------------------------------

 

APPENDIX E TO MASTER SSO SUPPLY AGREEMENT
DATED ____________, 2009
BY AND BETWEEN THE CLEVELAND ELECTRIC ILLUMINATING COMPANY,
THE TOLEDO EDISON COMPANY AND OHIO EDISON COMPANY
AND THE SSO SUPPLIERS

 
Guaranty
 

GUARANTY (this “Guaranty”), dated as of ____________________, made by
_________________ (the “Guarantor”), a corporation organized and existing under
the laws of _________________ in favor of The Cleveland Electric Illuminating
Company, The Toledo Edison Company and Ohio Edison Company (the “Guaranteed
Parties”), corporations organized and existing under the laws of the State of
Ohio.

Terms not defined herein take on the meaning given to them in the SSO Master
Supply Wholesale  Agreement(s) dated ______.  Guarantor enters into this
Guaranty in consideration of, and as an inducement for Guaranteed Parties having
entered into or entering into the “Agreements” with
_______________________[Name], a ___________________ [State] corporation (the
“SSO Supplier”), which may involve the extension of credit by the Guaranteed
Parties.  Guarantor, subject to the terms and conditions hereof, hereby
unconditionally and absolutely guarantees to the Guaranteed Parties the full and
prompt payment when due, subject to an applicable grace period and upon demand
in writing from the Guaranteed Parties to the Guarantor’s attention at the
address for Guarantor set forth in Article 11 hereof of any and all amounts
payable by the SSO Supplier to the Guaranteed Parties arising out of the
Agreement(s), and,

1.      The Guarantor, as primary obligor and not merely as surety, hereby
irrevocably and unconditionally guarantees the full and prompt payment when due
(whether by acceleration or otherwise) of the principal and interest on any sums
due and payable by the SSO Supplier as a result of an Event of Default under the
Agreement(s) (including, without limitation, indemnities, damages, fees and
interest thereon, pursuant to the terms of the Agreement(s)).  Notwithstanding
anything to the contrary herein, the maximum aggregate liability of the
Guarantor under this Guaranty shall Option 1 [in no event exceed
_________________.]  Option 2 [in no event exceed the lesser of [the credit
limit amount] or the sum of the Total Exposures Amounts under the
Agreement(s).]  All such principal, interest, obligations and liabilities,
collectively, are the “Guaranteed Obligations”.  This Guaranty is a guarantee of
payment and not of collection.
 
 
 
2.      The Guarantor hereby waives diligence, acceleration, notice of
acceptance of this Guaranty and notice of any liability to which it may apply,
and waives presentment and all demands whatsoever except as noted herein, notice
of protest, notice of dishonor or nonpayment of any such liability, suit or
taking of other action by any
 
 
 
98

--------------------------------------------------------------------------------

 
 
 
 
      Guaranteed Parties against, and any other notice to, any party liable
thereon (including the Guarantor or any other guarantor), filing of claims with
a court in the event of the insolvency or bankruptcy of the SSO Supplier, and
any right to require a proceeding first against the SSO Supplier.
 
 
3.      The Guaranteed Parties may, at any time and from time to time, without
notice to or consent of the Guarantor, without incurring responsibility to the
Guarantor and without impairing or releasing the obligations of the Guarantor
hereunder, upon or without any terms or conditions: (i) take or refrain from
taking any and all actions with respect to the Guaranteed Obligations, any
Document or any person (including the SSO Supplier) that the Guaranteed Parties
determine in their sole discretion to be necessary or appropriate; (ii) take or
refrain from taking any action of any kind in respect of any security for any
Guaranteed Obligation(s) or liability of the SSO Supplier to the Guaranteed
Parties ; or (iii) compromise or subordinate any Guaranteed Obligation(s) or
liability of the SSO Supplier to the Guaranteed Parties including any security
therefore.
 
 
 
4.      Subject to the terms and conditions hereof, the obligations of the
Guarantor under this Guaranty are absolute and unconditional and, without
limiting the generality of the foregoing, shall not be released, discharged or
otherwise affected by: (i) any extension, renewal, settlement, compromise,
waiver, consent, discharge or release by the SSO Supplier concerning any
provision of the Agreement(s) in respect of any Guaranteed Obligations of the
SSO Supplier; (ii) the rendering of any judgment against the SSO Supplier or any
action to enforce the same; (iii) the existence, or extent of, any release,
exchange, surrender, non-perfection or invalidity of any direct or indirect
security for any of the Guaranteed Obligations; (iv) any modification,
amendment, waiver, extension of or supplement to any of the Agreement(s) or the
Guaranteed Obligations agreed to from time to time by the SSO Supplier and the
Guaranteed Parties ; (v) any change in the corporate existence (including its
constitution, laws, rules, regulations or powers), structure or ownership of the
SSO Supplier or the Guarantor, or any insolvency, bankruptcy, reorganization or
other similar proceedings affecting the SSO Supplier or its assets, the
Guarantor or any other guarantor of any of the Guaranteed Obligations; (vi) the
existence of any claim, set-off or other rights which the Guarantor may have at
any time against the SSO Supplier, the Guaranteed Parties or any other
corporation or person, whether in connection herewith or in connection with any
unrelated transaction; provided that nothing herein shall prevent the assertion
of any such claim by separate suit or compulsory counterclaim; (vii) the
invalidity, irregularity or unenforceability in whole or in part of the
Agreement(s) or any Guaranteed Obligations or any instrument evidencing any
Guaranteed Obligations or the absence of any action to enforce the same, or any
provision of applicable law or regulation purporting to prohibit payment by the
SSO Supplier of amounts to be paid by it under the Agreement(s) or any of the
Guaranteed Obligations; and (viii) except for a failure to comply with any
applicable statute of limitations, any other act or omission to act or delay of
any kind of the SSO Supplier, any other guarantor, the Guaranteed Parties or any
other corporation or person or any other event, occurrence or circumstance
 
 
 
99

--------------------------------------------------------------------------------

 
 
 
 
      whatsoever which might, but for the provisions of this paragraph,
constitute a legal or equitable discharge of the Guarantor’s obligations
hereunder.
 
 
 
5.      The Guarantor hereby irrevocably waives (a) any right of reimbursement
or contribution, and (b) any right of salvage against the SSO Supplier or any
collateral security or guaranty or right of offset held by the Guaranteed
Parties therefor.
 
 
 
6.      The Guarantor will not exercise any rights, which it may acquire by way
of subrogation until all Guaranteed Obligations to the Guaranteed Parties
pursuant to the Agreement(s) have been paid in full.
 
 
 
7.      Subject to the terms and conditions hereof, this Guaranty is a
continuing one and all liabilities to which it applies or may apply under the
terms here of shall be conclusively presumed to have been created in reliance
hereon.  Except for a failure to comply with any applicable statute of
limitations, no failure or delay on the part of the Guaranteed Parties in
exercising any right, power or privilege hereunder, and no course of dealing
between the Guarantor and the Guaranteed Parties , shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights, powers and remedies
herein expressly provided are cumulative and not exclusive of any rights, powers
or remedies, which the Guaranteed Parties would otherwise have. No notice to or
demand on the Guarantor in any case shall entitle the Guarantor to any other or
further notice of demand in similar or other circumstances or constitute a
waiver of the rights of the Guaranteed Parties to any other or further action in
any circumstances without notice or demand.
 
 
 
8.      This Guaranty shall be binding upon the Guarantor and upon its
successors and assigns and shall inure to the benefit of and be enforceable by
the Guaranteed Parties and its successors and assigns; provided, however, that
the Guarantor may not assign or transfer any of its rights or obligations
hereunder without the prior written consent of the Guaranteed Parties . The
assignment rights of the Guaranteed Parties will be in accordance with the terms
of the underlying Agreement(s).
 
 
 
9.      Neither this Guaranty nor any provision hereof may be changed, waived,
discharged or terminated except upon written agreement of the Guaranteed Parties
and the Guarantor.
 
 
 
10.  The Guarantor agrees that its liability as guarantor shall continue and
remain in full force and effect in the event that all or any part of any payment
made hereunder or any obligation or liability guaranteed hereunder is recovered
(as a fraudulent conveyance, preference or otherwise) rescinded or must
otherwise be reinstated or returned due to bankruptcy or insolvency laws or
otherwise.
 
 
 
11.  All notices and other communications hereunder shall be made at the
addresses by hand delivery, by the next day delivery service effective upon
receipt or by certified
 
 
 
 
 
100

--------------------------------------------------------------------------------

 
 
      mail return receipt requested (effective upon scheduled weekday delivery
day) or telefacsimile (effective upon receipt of evidence, including
telefacsimile evidence, that telefacsimile was received)
 

                 If to the Guarantor:
[To be completed]

                If to the Guaranteed Parties:
                Thomas R. Sims
                Senior Business Analyst
FirstEnergy Corp.
76 South Main Street, 17th Floor
Akron, OH  44308
Telephone: 330-384-3808
Facsimile: 330-255-1662
simst@firstenergycorp.com

12.  
If claim is ever made upon the Guaranteed Parties for repayment or recovery of
any amount or amounts received in payment or on account of any of the Guaranteed
Obligations and th Guaranteed Parties repays all or part of such amount by
reason of (a) any judgment, decree or order of any court or administrative body
having jurisdiction over such payee or any of its property, or (b) any
settlement or compromise of any such claim effected by such payee with any such
claimant (including the Guarantor), then and in such event the Guarantor agrees
that any such judgment, decree, order, settlement or  compromise shall be
binding upon it, notwithstanding any revocation hereof or the cancellation of
the Agreement(s) or other instrument evidencing any liability of the Guarantor,
and the Guarantor shall be and remain liable to the Guaranteed Parties hereunder
for the amount so repaid or recovered to the same extent as if such amount had
never originally been received by any such payee.

13.  
The Guarantor hereby certifies that it satisfies the Minimum Rating as defined
in the Agreement(s).

14.  
This Guaranty shall remain in full force and effect until all Guaranteed
Obligations have been fully and finally performed, at which point it will
expire. The Guarantor may terminate this Guaranty upon thirty (30) days prior
written notice to the Guaranteed Parties which termination shall be effective
only upon receipt by the Guaranteed Parties of alternative means of security or
credit support, as specified in the Agreement(s) and in a form reasonably
acceptable to the Guaranteed Parties. Upon the effectiveness of any such
expiration or termination, the Guarantor shall have no further liability under
this Guaranty, except with respect to the Guaranteed Obligations entered into
prior to the time the expiration or termination is effective,

 
 
101

--------------------------------------------------------------------------------

 
         which Guaranteed Obligations shall remain guaranteed pursuant to the
terms of this Guaranty until finally and fully performed.
 
15.  
The Guarantor represents and warrants that: (i) it is duly organized and validly
existing under the laws of the jurisdiction in which it was organized and has
the power and authority to execute, deliver, and perform this Guaranty; (ii) no
authorization, approval, consent or order of, or registration or filing with,
any court or other governmental body having jurisdiction over the Guarantor is
required on the part of the Guarantor for the execution, delivery and
performance of this Guaranty except for those already made or obtained; (iii)
this Guaranty constitutes a valid and legally binding agreement of the
Guarantor, and is enforceable against the Guarantor, except as the
enforceability of this Guaranty may be limited by the effect of any applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditor’s rights generally and by general principles of equity; and (iv) the
execution, delivery and performance of this Guaranty by the Guarantor have been
and remain duly authorized by all necessary corporate or comparable action and
do not contravene any provision of its ___________________ [insert appropriate
corporate organizational document, such as Declaration of Trust, Limited
Liability Agreement, Articles of Incorporation or by-laws] or any law,
regulation or contractual restriction binding on it or its assets.

16.  
This Guaranty and the rights and obligations of the SSO Supplier and the
Guarantor hereunder shall be construed in accordance with and governed by the
laws of the State of Ohio. The Guarantor and Guaranteed Parties jointly and
severally agree to the exclusive jurisdiction of State and federal courts
located in the State of Ohio over any disputes arising or relating to this
Guaranty and waive any objections to venue or inconvenient forum.  The Guarantor
and Guaranteed Parties each hereby irrevocably waive any and all rights to trial
by jury with respect to any legal proceeding arising out of or relating to this
Guaranty.

17.  
This writing is the complete and exclusive statement of the terms of this
Guaranty and supersedes all prior oral or written representations,
understandings, and agreements between the Guaranteed Parties and the Guarantor
with respect to subject matter hereof.  The Guaranteed Parties and the Guarantor
agree that there are no conditions to the full effectiveness of this Guaranty.

18.  
 Every provision of this Guaranty is intended to be severable. If any term or
provision hereof is declared to be illegal or invalid for any reason whatsoever
by a court of competent jurisdiction, such illegality or invalidity shall not
affect the balance of the terms and provisions hereof, which terms and
provisions shall remain binding and enforceable. This Guaranty may be executed
in any number of counterparts, each of which shall be an original, but all of
which together shall constitute one instrument.

 
19.  
No Trustee or shareholder of Guarantor shall be held to any liability whatsoever
for any obligation under this Guaranty, and such Guaranty shall not be
enforceable against any such Trustee in their or his or her individual
capacities or capacity.  This Guaranty shall be enforceable against the Trustees
of Guarantor only as such, and

102

--------------------------------------------------------------------------------

 

 
every person, firm, association, trust or corporation having any claim or demand
arising under this Guaranty and relating to Guarantor, its shareholders or
Trustee shall look solely to the trust estate of Guarantor for the payment or
satisfaction thereof.
 
 
 
 
 
 
 

IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be executed and
delivered as of the date first above written to be effective as of the earliest
effective date of any of the Agreement(s).

[GUARANTOR]

By:_____________________________
           Title:

Accepted and Agreed to:

The Cleveland Electric Illuminating Company,
The Toledo Edison Company
and Ohio Edison Company
By:__________________________
           Title:

 

 
103

--------------------------------------------------------------------------------

 
APPENDIX F TO MASTER SSO SUPPLY AGREEMENT

Any First Mortgage Bonds delivered or pledged in satisfaction of the Surplus
Margin requirements of Section 6.9(c) of the Agreement by the SSO Supplier or
its Guarantor (each, an “Issuer”) shall be in a maximum principal amount of not
less than $250 million; provided that First Mortgage Bonds delivered or pledged
to cover the first $500 million of Surplus Margin shall be in a maximum
principal amount of not less than $500 million; provided further that the
provisions of such First Mortgage Bonds may provide that the aggregate liability
of the Issuer thereunder at any given time will be the lesser of the aggregate
maximum principal amount of all such First Mortgage Bonds then delivered or
pledged and the actual amount of Surplus Margin then due under the
Agreement.  Such First Mortgage Bonds shall also satisfy the following
conditions:
 
1)  
the Issuer’s First Mortgage Bonds or other senior secured debt securities that
are pari passu with such First Mortgage Bonds shall at the date of delivery or
pledge be rated at least BBB-, Baa3 or BBB- by any of S&P, Moody’s or Fitch;

2)  
all required State and Federal regulatory approvals for the delivery or pledge
of such First Mortgage Bonds shall have been obtained and be in full force and
effect;

3)  
any mortgage, indenture, deed of trust or other security agreement (the
“Indenture”) providing for the issuance and delivery of the First Mortgage Bonds
shall be a first priority lien on the property covered thereby subject only to
customary permitted encumbrances, and shall contain customary provisions
including with respect to:

a)  
the coverage of the lien thereof to appropriate asset classes (i.e. all assets
used or useful in the generating electricity) and the maintenance and protection
of the effectiveness and priority of such lien and the collateral covered
thereby;

b)  
the limitation in amount of any First Mortgage Bond or other ratable obligations
issuable thereunder to not more than 75% of the lower of cost or fair value of
collateral covered thereby;

c)  
the exercise of remedies against the Issuer and such collateral in the event of,
among other things, any default in payment, compliance with covenants or
occurrence of bankruptcy, insolvency or similar proceedings;

4)  
the Issuer shall provide the Companies with customary legal opinions of outside
counsel as to such matters as the Companies may request, including, but not
limited to:

a)  
the authorization, execution, delivery and enforceability of the First Mortgage
Bonds and the Indenture,

b)  
the due recordation of the Indenture and creation and priority of the lien
thereof,

c)  
the Issuer’s valid and marketable title to the property covered by the lien of
the Indenture, and

 
 
104

--------------------------------------------------------------------------------

 
   d)
  the receipt and full force and effect of all required State and Federal
approvals; and

 
       5)
the structure of the delivery or pledge of the First Mortgage Bonds shall be
acceptable to the Ohio Utilities (i.e. pledge, guaranty, escrow, etc.).

 
 
Notwithstanding the foregoing, any First Mortgage Bonds delivered or pledged in
satisfaction of the requirements of Section 6.9(c) of the Agreement shall be in
form, amount and substance satisfactory to the Companies in their sole
discretion and the Companies hereby reserve the right to waive or modify any of
the above conditions in their sole discretion.
 

 
105

--------------------------------------------------------------------------------