EXHIBIT 10.1

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$100,000,000

TERM LOAN AGREEMENT

among

PENNSYLVANIA ELECTRIC COMPANY

and

THE LENDERS REFERRED TO HEREIN

and

UNION BANK OF CALIFORNIA, N.A.,
as Administrative Agent

UNION BANK OF CALIFORNIA, N.A.,
Lead Arranger

and

NATIONAL CITY BANK,
Arranger and Syndication Agent

March 15, 2005
 

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TABLE OF CONTENTS
 
Section
 
Page
     
ARTICLE 1 DEFINITIONS AND INTERPRETATION
1
Section 1.1
Definitions
1
Section 1.2
Accounting Terms
7
Section 1.3
Interpretation
7
Section 1.4
Computation of Time Periods
8
ARTICLE 2 AMOUNTS AND TERMS OF ADVANCES
8
Section 2.1
Commitments
8
Section 2.2
Making Advances
8
Section 2.3
Repayment
9
Section 2.4
Interest
9
Section 2.5
Prepayments
9
Section 2.6
Conversion of Advances
9
Section 2.7
Payments
10
Section 2.8
Sharing of Payments, Etc
11
Section 2.9
Evidence of Debt
11
ARTICLE 3 YIELD PROTECTION
11
Section 3.1
Change in Circumstances
11
Section 3.2
Eurodollar Reserves
12
Section 3.3
Breakage Indemnity
12
Section 3.4
Taxes
12
Section 3.5
Notices
12
Section 3.6
Participants
12
Section 3.7
Basis for Claims for Compensation
12
Section 3.8
Change in Legality
13
Section 3.9
Market Rate Disruptions
13
ARTICLE 4 CONDITIONS PRECEDENT TO ADVANCES
13
Section 4.1
Conditions Precedent to Advances on Closing Date
13
Section 4.2
Reliance on Certificates
14
ARTICLE 5 REPRESENTATIONS AND WARRANTIES
14
Section 5.1
Corporate Existence and Power
14
Section 5.2
Corporate Authorization
15
Section 5.3
No Violation, Etc
15
Section 5.4
Governmental Action
15
Section 5.5
Execution and Delivery
15
Section 5.6
Other Information
15
Section 5.7
Litigation
15
Section 5.8
Fire, Etc
15
Section 5.9
Financial Statements
15
Section 5.10
ERISA
16
Section 5.11
Taxes
16
Section 5.12
Title to Properties
16
Section 5.13
Hazardous Materials
16
ARTICLE 6 AFFIRMATIVE COVENANTS
16
Section 6.1
Preservation of Existence, Etc
16
Section 6.2
Maintenance of Properties, Etc
16
Section 6.3
Compliance with Material Contractual Obligtions, Laws, Etc
17
Section 6.4
Insurance
17
Section 6.5
Visitation Rights
17
Section 6.6
Keeping of Books
17
Section 6.7
Transactions with Affiliates
17
Section 6.8
Reporting Requirements
18
Section 6.9
Use of Proceeds
18
Section 6.10
Indebtedness to Total Capitalization
18
Section 6.11
Fixed Charge Ratio
18
Section 6.12
Further Assurances
19
ARTICLE 7 NEGATIVE COVENANTS
19
Section 7.1
Liens, Etc
19
Section 7.2
Cash Collateral
19

(i)

Section 7.3
Mergers, Etc
20
Section 7.4
Sales of Assets, Etc
20
Section 7.5
Compliance with ERISA
20
Section 7.6
Constituent Documents, Etc
20
ARTICLE 8 EVENTS OF DEFAULT
20
Section 8.1
Events of Default
20
ARTICLE 9 ADMINISTRATIVE AGENT
22
Section 9.1
Appointment and Authority
22
Section 9.2
Rights as Lender
22
Section 9.3
Exculpatory Provisions
22
Section 9.4
Reliance by Administrative Agent
23
Section 9.5
Delegation of Duties
23
Section 9.6
Resignation of Administrative Agent
23
Section 9.7
Non-Reliance on Administrative Agent and Other Lenders
24
Section 9.8
No Duties, Etc
24
ARTICLE 10 MISCELLANEOUS
24
Section 10.1
Amendments and Waivers
24
Section 10.2
Notices
24
Section 10.3
No Waiver; Remedies
24
Section 10.4
Right of Setoff
25
Section 10.5
Continuing Obligation
25
Section 10.6
Costs, Expenses and Taxes
25
Section 10.7
Indemnification
25
Section 10.8
Assignments and Participations
26
Section 10.9
Severability
27
Section 10.10
Governing Law
27
Section 10.11
Execution in Counterparts
27
Section 10.12
Headings
27
Section 10.13
Patriot Act Notice
27
Section 10.14
WAIVER OF JURY TRIAL
S-1
Exhibit A
Promissory Note
 
Exhibit B
Notice of Borrowing
 
Exhibit C
Notice of Conversion
 
Exhibit D
Assignment and Assumption
 

 
(ii)

TERM LOAN AGREEMENT

This Agreement, dated as of March 15, 2005, is entered into by and among (1)
PENNSYLVANIA ELECTRIC COMPANY, a Pennsylvania corporation (the "Borrower"), (2)
the financial institutions listed on the signature pages hereof and each other
financial institution that becomes a party hereto pursuant to Section 10.8 (the
"Lenders") and (3) UNION BANK OF CALIFORNIA, N.A., a national banking
association ("UBOC"), as administrative agent (the "Administrative Agent") for
the Lenders.

Recital

The Borrower has requested that the Lenders make available to the Borrower a
term loan in the aggregate amount of $100,000,000, and the Lenders are willing
to do so on the terms and conditions contained in this Agreement. Accordingly,
the Borrower, the Lenders and the Administrative Agent hereby agree as set forth
below.

ARTICLE 1
DEFINITIONS AND INTERPRETATION

Section 1.1 Definitions. The terms set forth below, as used herein, have the
respective meanings set forth below (such meanings to be applicable to both the
singular and plural forms of the terms defined).

        "Advance" means a loan made by a Lender to the Borrower pursuant to this
Agreement (or a portion of such a loan thereafter Converted) and refers to a
Base Rate Advance or a Eurodollar Rate Advance, each of which shall be a "Type"
of Advance.

        "Administrative Agent" has the meaning specified in the first sentence
of this Agreement.

        "Affiliate" means, with respect to any Person, any other Person directly
or indirectly controlling (including all directors and officers of such Person),
controlled by, or under direct or indirect common control with, such Person. A
Person shall be deemed to control another entity if such Person possesses,
directly or indirectly, the power to direct or cause the direction of the
management and policies of such entity, whether through the ownership of voting
securities, by contract or otherwise.

        "Agreement" means this Term Loan Agreement, as the same may from time to
time be amended, restated or otherwise modified in accordance with its terms.

        "Applicable Law" means all applicable laws, statutes, treaties, rules,
codes, ordinances, regulations, certifications, orders, interpretations,
licenses, permits, judgments, decrees, injunctions, writs, orders, directives,
guidelines, policies and similar forms of decision of any Governmental
Authority.

        "Applicable Lending Office" means, for each Lender, (a) in the case of a
Base Rate Advance, such Lender’s Domestic Lending Office or, in the case of a
Eurodollar Rate Advance, such Lender’s Eurodollar Lending Office or (b) such
other office or Affiliate of such Lender as it may from time to time specify to
the Borrower.

        "Assignment and Assumption" means an Assignment and Assumption
substantially in the form of Exhibit D.

        "Authorized Officer" means, with respect to any action, an officer of
the Borrower authorized to take such action pursuant to resolutions of the
Borrower delivered to the Lenders from time to time.

        "Base Rate" means, for any period, a fluctuating interest rate per annum
(rounded upward to the nearest whole multiple of 1/16 of 1% per annum, if such
rate is not such a multiple) equal for each day during such period to the
greater of (a) the Reference Rate in effect for such day and (b) the sum of
0.50% per annum plus the Federal Funds Rate in effect for such day. If the
Administrative Agent determines (which determination shall be conclusive absent
manifest error) that it is unable to ascertain the Federal Funds Rate for any
reason, including the inability or failure of the Administrative Agent to obtain
sufficient quotations in accordance with the terms of this Agreement, the Base
Rate shall be determined without regard to clause (b) of the first sentence of
this definition until the circumstances giving rise to such inability no longer
exist. Any change in the Base Rate due to a change in the Reference Rate or the
Federal Funds Rate shall be effective on the effective date of such change in
the Reference Rate or the Federal Funds Rate, respectively.

        "Base Rate Advance" means an Advance that bears interest by reference to
the Base Rate.

        "Borrower" has the meaning specified in the first sentence of this
Agreement.

        "Borrowing" means Advances of the same Type made or Converted on the
same date and, in the case of Eurodollar Rate Advances, as to which a single
Interest Period is in effect.

        "Business Day" means a day of the year on which banks are not required
or authorized to close in Akron, Ohio or Los Angeles, California and, if the
applicable Business Day relates to a Eurodollar Rate Advance, on which dealings
in Dollar deposits are carried on in the London interbank market.

        "Calculation Period" means, for purposes of calculating any financial
measure with respect to the Borrower and its Subsidiaries, any period of four
successive fiscal quarters of the Borrower ending on the last day of a fiscal
quarter of the Borrower.

        "Capital Leases" means leases of the type described in clause (d) of the
definition of åIndebtednessæ in this Section 1.1.

        "Cash and Cash Equivalents" means (a) cash on hand, (b) demand deposits
maintained in the United States or any other country with any commercial bank,
trust company, savings and loan association, savings bank or other financial
institution, (c) time deposits maintained in the United States or any other
country with, or certificates of deposit having a maturity of one year or less
issued by, any commercial bank, securities dealer, trust company, savings and
loan association, savings bank or other financial institution, (d) direct
obligations of, or obligations unconditionally guaranteed by, the United States
or any agency thereof and having a maturity of one year or less and
(e) commercial paper rated (on the date of acquisition thereof) A-1 or P-1 or
better by S&P or Moody’s, respectively (or an equivalent rating by another
nationally recognized credit-rating agency of similar standing if neither S&P
nor Moody’s is then in the business of rating commercial paper) and having a
maturity of one year or less.

        "Change in Control" means the occurrence of either of the following: (a)
any entity, person (within the meaning of Section 14(d) of the Securities
Exchange Act of 1934 (the "Exchange Act")) or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Exchange Act) that theretofore was a
beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of less than
20% of the Borrower’s then outstanding common stock either (i) acquires shares
of common stock of the Borrower in a transaction or series of transactions that
results in such entity, person or group directly or indirectly owning
beneficially 20% or more of the outstanding common stock of the Borrower or (ii)
acquires, by proxy or otherwise, the right to vote for the election of
directors, for any merger, combination or consolidation of the Borrower or any
of its direct or indirect Subsidiaries, or for any other matter or question,
more than 20% of the then outstanding voting securities of the Borrower; or (b)
the election or appointment, at any time prior to the Maturity Date when
FirstEnergy Corp., an Ohio corporation, is not the sole legal and beneficial
owner of the outstanding capital stock of the Borrower, of persons to the
Borrower’s board of directors (i) who were not directors of the Borrower on the
date hereof and (ii) whose election or appointment was not approved by a
majority of those persons who were directors on the date hereof, where such
newly elected or appointed directors constitute 20% or more of the directors of
the board of directors of the Borrower.

        "Closing Date" means the day, not later than March 31, 2005, on which
each of the conditions precedent specified in Section 4.1 is fulfilled to the
satisfaction of, or waived with the consent of, the Lenders and the initial
Advances are made hereunder.

        "Code" means the Internal Revenue Code of 1986 and the regulations
promulgated and rulings issued thereunder.

- 2-

        "Commitment" means, for each Lender, $50,000,000.

        "Consolidated Debt" means, with respect to the Borrower at any date of
determination, the aggregate Indebtedness of the Borrower and its Consolidated
Subsidiaries determined on a consolidated basis in accordance with generally
accepted accounting principles but shall not include (a) Nonrecourse
Indebtedness of the Borrower or any of its Consolidated Subsidiaries and (b)
obligations under leases that have been or should be, in accordance with
generally accepted accounting principles, recorded as operating leases in
respect of which the Borrower or any of its Consolidated Subsidiaries is liable
as a lessee.

        "Consolidated Subsidiary" means, as to any Person, any Subsidiary of
such Person the accounts of which are or are required to be consolidated with
the accounts of such Person in accordance with generally accepted accounting
principles.

        "Controlled Group" means all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control that, together with the Borrower, are treated as a single
employer under Section 414(b) or 414(c) of the Code.

        "Conversion," "Convert" and "Converted" each refer to a conversion of
Advances of one Type into Advances of the other Type pursuant to Section 2.6,
3.8 or 3.9 or the selection of a new, or the renewal of the same, Interest
Period for Eurodollar Rate Advances pursuant to Section 2.6(a).

        "Default" means any Event of Default or any event or condition that,
with the giving of notice or the lapse of time, or both, would constitute an
Event of Default.

        "Dollars" and "$" each mean lawful money of the United States of
America.

        "Domestic Lending Office" means, for each Lender, the office of such
Lender specified as such on the signature pages hereof or such other office of
such Lender as it may from time to time specify to the Borrower.

        "ERISA" means the Employee Retirement Income Security Act of 1974 and
the regulations promulgated and rulings issued thereunder.

        "ERISA Affiliate" means any Person that for purposes of Title IV of
ERISA is a member of the Borrower’s controlled group, or under common control
with the Borrower, within the meaning of Section 414 of the Code and the
regulations promulgated and rulings issued thereunder.

        "ERISA Event" means (a) the occurrence of a reportable event, within the
meaning of Section 4043 of ERISA, unless the 30-day notice requirement with
respect thereto has been waived by the PBGC, (b) the provision by the
administrator of any Plan of a notice of intent to terminate such Plan, pursuant
to Section 4041(a)(2) of ERISA (including any such notice with respect to a plan
amendment referred to in Section 4041(e) of ERISA), (c) the cessation of
operations at a facility in the circumstances described in Section 4062(e) of
ERISA, (d) the withdrawal by the Borrower or an ERISA Affiliate from a Multiple
Employer Plan during a plan year for which it was a åsubstantial employeræ as
defined in Section 4001(a)(2) of ERISA, (e) the failure by the Borrower or any
ERISA Affiliate to make a payment to a Plan required under Section 302 of ERISA,
which results in a Lien pursuant to Section 302(f) of ERISA, (f) the adoption of
an amendment to a Plan requiring the provision of security to such Plan,
pursuant to Section 307 of ERISA, or (g) the institution by the PBGC of
proceedings to terminate a Plan, pursuant to Section 4042 of ERISA, or the
occurrence of any event or condition that might reasonably constitute grounds
under Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, a Plan.

        "Eurocurrency Liabilities" has the meaning specified in Regulation D of
the Board of Governors of the Federal Reserve System.

        "Eurodollar Lending Office" means, for each Lender, the office of such
Lender specified as such on the signature pages hereof (or, if no such office is
specified, such Lender’s Domestic Lending Office) or such other office of such
Lender as it may from time to time specify to the Borrower.

        "Eurodollar Rate" means, for each Interest Period for each Eurodollar
Rate Advance that is part of the same Borrowing, the interest rate per annum
(rounded upward to the nearest whole multiple of 1/16 of 1% per annum, if such
average is not such a multiple) at which deposits in Dollars would be offered to
the Administrative Agent in the London interbank market two Business Days before
the first day of such Interest Period in an amount substantially equal to such
Eurodollar Rate Advance and for a period equal to such Interest Period.

- 3-

        "Eurodollar Rate Advance" means an Advance that bears interest by
reference to the Eurodollar Rate.

        "Eurodollar Reserve Percentage" means, for each Interest Period for each
Eurodollar Rate Advance made by each Lender, the reserve percentage applicable
to such Lender during such Interest Period (or, if more than one such percentage
is so applicable, the daily average of such percentages for those days in such
Interest Period during which any such percentage is so applicable) under
Regulation D or other regulations issued from time to time by the Board of
Governors of the Federal Reserve System for determining the maximum reserve
requirement (including any emergency, supplemental or other marginal reserve
requirement) then applicable to such Lender with respect to liabilities or
assets consisting of or including Eurocurrency Liabilities having a term equal
to such Interest Period.

        "Event of Default" has the meaning specified in Section 8.1.

        "Federal Funds Rate" means, for any period, a fluctuating interest rate
per annum equal for each day during such period to (a) the weighted average
(rounded upward to the nearest whole multiple of 1/16 of 1% per annum, if such
average is not such a multiple) of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers, as published for such day (or, if such day is not a Business Day,
for the next preceding Business Day) by the Federal Reserve Bank of New York or
(b) if such average is not so published for any day that is a Business Day, the
average (rounded upward to the nearest whole multiple of 1/16 of 1% per annum,
if such average is not such a multiple) of the quotations for such day for such
transactions received by the Administrative Agent from three Federal funds
brokers of recognized standing selected by it.

        "First Mortgage Bonds" means the bonds issued pursuant to the Mortgage
and Deed of Trust dated as of January 1, 1942 between the Borrower and The Bank
of New York, as successor trustee, as heretofore and from time to time hereafter
amended and supplemented.

        "Fixed Charge Ratio" means, with respect to the Borrower for any fiscal
quarter thereof, the ratio of (a) the sum of (i) consolidated net income, before
extraordinary items, of the Borrower and its Subsidiaries for the twelve-month
period ended on the last day of such fiscal quarter, plus (ii) depreciation,
amortization, Federal income taxes deducted in determining such net income,
interest expense, and preferred stock dividends of its Subsidiaries, plus (iii)
the interest element of rental payments deducted in determining such net income
under operating-lease obligations of the Borrower and its Subsidiaries during
such twelve-month period, plus (iv) all other noncash charges constituting
operating expenses deducted in determining such net income to (b) the sum of (i)
all interest expense (excluding the amount of any allowance for funds used
during construction) in respect of Indebtedness of the Borrower and its
Subsidiaries during such twelve-month period, plus (ii) the interest element of
rental payments deducted in determining net income under operating-lease
obligations of the Borrower and its Subsidiaries during such twelve-month
period.

        "Governmental Action" means any authorization, consent, approval,
waiver, exception, variance, order, license, exemption, publication, filing,
notice, declaration or other requirement of any Governmental Authority (other
than routine reporting requirements the failure to comply with which will not
affect the validity or enforceability of any Loan Document or have a material
and adverse effect on the transactions contemplated by any Loan Document or any
material right, power or remedy of any Person thereunder).

        "Governmental Authority" means, whether domestic or foreign, any
national, federal, state or local government, any political subdivision thereof,
or any governmental, quasi-governmental, judicial, public or statutory
instrumentality, authority, body or entity, including any central bank or
comparable authority and any referee or arbitrator.

        "Hazardous Materials" means any petrochemical or petroleum products, any
flammable materials, explosives, radioactive materials, hazardous materials,
hazardous wastes, hazardous or toxic substances or related or similar materials,
asbestos or any material containing asbestos, or any other substance or material
as so defined and regulated by any Applicable Law, including the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980 (42 U.S.C.
Sections 9601, et seq.), the Hazardous Materials Transportation Act (49 U.S.C.
Sections 1801, et seq.) and the Resource Conservation and Recovery Act (42
U.S.C. Sections 6901, et seq.), and the regulations adopted and publications
promulgated pursuant thereto.

- 4-

        "Indebtedness" means, for any Person, all obligations of such Person
that in accordance with generally accepted accounting principles should be
classified on a balance sheet of such Person as liabilities of such Person, and
in any event shall include, without duplication, all (a) indebtedness for
borrowed money, (b) obligations evidenced by bonds, debentures, notes or other
similar instruments, (c) obligations to pay the deferred purchase price of
property or services, (d) obligations as lessee under leases that have been or
should be, in accordance with generally accepted accounting principles, recorded
as capital leases, (e) reimbursement obligations (contingent or otherwise) in
respect of outstanding letters of credit, (f) indebtedness of the type referred
to in clauses (a) through (e) above that is secured by (or for which the holder
of such indebtedness has an existing right, contingent or otherwise, to be
secured by) any Lien on property (including accounts and contract rights) owned
by such Person, even though such Person has not assumed or become liable for the
payment of such indebtedness, and (g) obligations under direct or indirect
guaranties in respect of, and obligations (contingent or otherwise) to purchase
or otherwise acquire, or otherwise to assure a creditor against loss in respect
of, indebtedness or obligations of others of the kinds referred to in clauses
(a) through (e) above.

        "Interest Period" means, for each Eurodollar Rate Advance that is part
of the same Borrowing, the period commencing on the date of such Advance or the
date of the Conversion of any Advance into such an Advance and ending on the
last day of the period selected by the Borrower pursuant to the provisions below
and, thereafter, each subsequent period commencing on the last day of the
immediately preceding Interest Period and ending on the last day of the period
selected by the Borrower pursuant to the provisions below. The duration of each
such Interest Period shall be 1, 2 or 3 weeks or 1, 2, 3 or 6 months, as the
Borrower may select upon notice (by means of the Notice of Borrowing or a Notice
of Conversion) received by the Administrative Agent not later than 11:00 a.m.,
California time, on the third Business Day before the first day of such Interest
Period; provided, however, that

(a) Interest Periods commencing on the same date for Advances composing the same
Borrowing shall be of the same duration;

(b) the Borrower may not select any Interest Period that ends after the Maturity
Date;

(c) not more than 5 different Interest Periods may be in effect at any one time
under this Agreement;

(d) for any Interest Period of a duration of less than one month, the Eurodollar
Rate applicable to such Interest Period shall be equal to the higher of the
Eurodollar Rate then applicable to an Interest Period of such duration and the
Eurodollar Rate then applicable to an Interest Period of one month;

(e) whenever the last day of an Interest Period would otherwise occur on a day
other than a Business Day, the last day of such Interest Period shall be
extended to occur on the next succeeding Business Day; provided, however, that,
if such extension would cause the last day of any Interest Period specified in
months to occur in the next succeeding calendar month, then the last day of such
Interest Period shall occur on the next preceding Business Day; and

(f) if any Interest Period specified in months begins on a day for which there
is no numerically corresponding day in the calendar month at the end of such
Interest Period, such Interest Period shall end on the last Business Day of such
calendar month.

        "Lenders" has the meaning specified in the first sentence of this
Agreement.

        "Lien" means, with respect to any asset, (a) any lien, charge, option,
claim, mortgage, security interest, pledge or other encumbrance or any other
type of preferential arrangement of any kind in respect of such asset or (b) the
interest of a vendor or lessor under any conditional-sale agreement, Capital
Lease or other title-retention agreement relating to such asset.

        "Loan Documents" means this Agreement and the Notes.

        "Maturity Date" means December 30, 2005.

        "Moody’s" means Moody’s Investors Service, Inc.

        "Multiemployer Plan" means a multiemployer plan, as defined in Section
4001(a)(3) of ERISA, that is subject to Title IV of ERISA and to which the
Borrower or any ERISA Affiliate is making or accruing an obligation to make
contributions, or has within any of the preceding five plan years made or
accrued an obligation to make contributions, such plan being maintained pursuant
to one or more collective-bargaining agreements.

- 5-

        "Multiple Employer Plan" means a single employer plan, as defined in
Section 4001(a)(15) of ERISA, that is subject to Title IV of ERISA and that (a)
is maintained for employees of the Borrower or an ERISA Affiliate and at least
one Person other than the Borrower and an ERISA Affiliate or (ii) was so
maintained and in respect of which the Borrower or an ERISA Affiliate could have
liability under Section 4064 or 4069 of ERISA in the event such plan has been or
were to be terminated.

        "Nonrecourse Indebtedness" means, in respect of an obligor (the
"Debtor"), any Indebtedness that finances the acquisition, development,
ownership or operation of an asset in respect of which the Person to which such
Indebtedness is owed has no recourse whatsoever to the Debtor or any of its
Affiliates other than:

(a) recourse to the Debtor with respect to such Indebtedness for amounts limited
to the cash flow or net cash flow (other than historic cash flow) from the
asset;

(b) recourse to the Debtor for the purpose only of enabling amounts to be
claimed in respect to such Indebtedness in an enforcement of any Lien given by
the Debtor over the asset or the income, cash flow or other proceeds deriving
from the asset (or given by any equityholder in the Debtor over its shares or
like interest in the capital of the Debtor) to secure the Indebtedness, but only
if the extent of the recourse to the Debtor is limited solely to the amount of
any recoveries made on any such enforcement; and

(c) recourse to the Debtor generally, or indirectly to any Affiliate of the
Debtor under any form of assurance, undertaking or support, which recourse is
limited to a claim for damages (other than liquidated damages and damages
required to be calculated in a specified way) for a breach of an obligation
(other than a payment obligation or an obligation to comply or to procure
compliance by another with any financial ratios or other tests of financial
condition) by the Person against which such recourse is available.

        "Note" means a Promissory Note of the Borrower payable to the order of a
Lender, substantially in the form of Exhibit A, evidencing the aggregate
indebtedness of the Borrower to such Lender resulting from the Advances made by
such Lender to the Borrower.

        "Notice of Borrowing" has the meaning specified in Section 2.2(a).

        "Notice of Conversion" has the meaning specified in Section 2.6(a).

        "Participant" has the meaning specified in Section 10.8(e).

        "PBGC" means the Pension Benefit Guaranty Corporation established under
ERISA.

        "Person" means an individual, a corporation (including a business
trust), a joint stock company, a limited liability company, a partnership, a
trust, an unincorporated association, a joint venture or any other entity or
organization, including any Governmental Authority.

        "Plan" means a Single Employer Plan or a Multiple Employer Plan.

        "Reference Rate" means the variable rate of interest per annum
established by UBOC from time to time as its åreference rate.æ Such åreference
rateæ is set by UBOC as a general reference rate of interest, taking into
account such factors as UBOC may deem appropriate, it being understood that many
of UBOC’s commercial or other loans are priced in relation to such rate, that it
is not necessarily the lowest or best rate actually charged to any customer and
that UBOC may make various commercial or other loans at rates of interest having
no relationship to such rate. For purposes of this Agreement, each change in the
Reference Rate shall be effective as of the opening of business on the date
announced as the effective date of any change in such åreference rate.æ

        "Register" has the meaning specified in Section 10.8(c).

        "Required Lenders" means, at any time, Lenders owed at least 51% of the
Advances then outstanding or, if no Advances are then outstanding, Lenders
having at least 51% of the Commitments.

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

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        "Single Employer Plan" means a single employer plan, as defined is
Section 4401(a)(15) of ERISA, that is subject to Title IV of ERISA and that (a)
is maintained for employees of the Borrower or an ERISA Affiliate and no Person
other than the Borrower and its ERISA Affiliates or (b) was so maintained and in
respect of which the Borrower or an ERISA Affiliate could have liability under
Section 4069 of ERISA in the event such plan has been or were to be terminated.

        "Subsidiary" means, with respect to any Person, any corporation or other
legal entity of which more than 50% of the outstanding capital stock (or any
comparable interest) having ordinary voting power (irrespective of whether at
the time capital stock (or any comparable interest) of any other class or
classes of such corporation or entity has or might have voting power upon the
occurrence of any contingency) is at the time directly or indirectly owned by
said Person (whether directly or through one of more other Subsidiaries). In the
case of a legal entity other than a corporation, a Person shall be deemed to
have more than 50% of interests having ordinary voting power only if such
Person’s vote in respect of such interests comprises more than 50% of the total
voting power of all such interests in such entity.

        "Taxes" has the meaning specified in Section 3.4.

        "Termination Event" means (a) a "reportable event" as described in
Section 4043 of ERISA and the regulations issued thereunder (other than a
åreportable eventæ not subject to the provision for 30-day notice to the PBGC
under such regulations), (b) the withdrawal of either the Borrower or any member
of the Controlled Group from a Plan during a plan year in which it was a
åsubstantial employeræ as defined in Section 4001(a)(2) of ERISA, (c) the filing
of a notice of intent to terminate a Plan or the treatment of a Plan amendment
as a termination under Section 4041 of ERISA, (d) the institution of proceedings
to terminate a Plan by the PBGC or (e) any other event or condition that might
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan.

        "Total Capitalization" means the sum of Consolidated Debt of the
Borrower and its Consolidated Subsidiaries, consolidated equity of the common
stockholders of the Borrower and its Consolidated Subsidiaries and consolidated
equity of the preferred stockholders of the Borrower and its Consolidated
Subsidiaries.

        "2004 Form 10-K" means the Borrower’s Annual Report on Form 10-K for the
year ended on December 31, 2004 filed with the Securities and Exchange
Commission.

        "Type" has the meaning specified for that term in the definition of
"Advance."

        "UBOC" has the meaning specified in the first sentence of this
Agreement.

        "Unfunded Vested Liabilities" means, with respect to any Plan at any
time, the amount (if any) by which (a) the present value of all vested
nonforfeitable benefits under such Plan exceeds (ii) the fair-market value of
all Plan assets allocable to such benefits, all determined as of the then most
recent valuation date for such Plan, but only to the extent that such excess
represents a potential liability of a member of the Controlled Group to the PBGC
or the Plan under Title IV of ERISA.

Section 1.2     Accounting Terms. Unless otherwise specified herein, all
accounting terms used herein shall be interpreted, all accounting determinations
with respect to any Person required to be made hereunder shall be made, and all
financial statements of any Person required to be delivered hereunder shall be
prepared, in accordance with generally accepted accounting principles as in
effect from time to time, applied on a basis consistent (except for changes
concurred in by such Person’s independent public accountants) with the most
recent audited consolidated financial statements of such Person and its
Subsidiaries delivered to the Lenders.

Section 1.3     Interpretation. In this Agreement, the singular includes the
plural and the plural the singular; words importing any gender include the other
genders; references to statutes are to be construed as including all statutory
provisions consolidating, amending or replacing the statute referred to;
references to "writing" include printing, typing, lithography and other means of
reproducing words in a tangible, visible form; the words "including," "includes"
and "include" are deemed to be followed by the words "without limitation";
references to sections (or subdivisions of sections), recitals, exhibits,
annexes or schedules are to those of this Agreement unless otherwise specified;
references to agreements and other contractual instruments are deemed to include
all subsequent amendments and other modifications to such instruments, but only
to the extent such amendments and other modifications are not prohibited by the
terms of this Agreement; and references to Persons include their respective
permitted successors and assigns.

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Section 1.4     Computation of Time Periods. In the computation of periods of
time under this Agreement, any period of a specified number of days shall be
computed by including the first day occurring during such period and excluding
the last such day. In the case of a period of time "from" a specified date "to"
or "until" a later specified date, the word "from" means "from and including,"
and the words "to" and "until" each mean "to but excluding."

ARTICLE 2
AMOUNTS AND TERMS OF ADVANCES

Section 2.1     Commitments. Each Lender agrees severally, on the terms and
conditions contained in this Agreement, to make an Advance to the Borrower on
the Closing Date in the amount of such Lender’s Commitment. Any amounts that are
borrowed hereunder and are subsequently repaid or prepaid may not be reborrowed.

Section 2.2     Making Advances.

(a)     The Borrowing to be made on the Closing Date shall be made on notice
given by the Borrower to the Administrative Agent (i) if such Borrowing is to be
composed of Base Rate Advances, not later than 11:00 a.m., California time, on
the Business Day immediately preceding the date of the proposed Borrowing or
(ii) if such Borrowing is to be composed of Eurodollar Rate Advances, not later
than 3:00 p.m., California time, on the third Business Day before the date of
the proposed Borrowing. The Administrative Agent will give each Lender prompt
notice by telecopier of such Borrowing. The Borrower’s notice of such Borrowing
to the Administrative Agent shall be given by an Authorized Officer in the form
of Exhibit B (the "Notice of Borrowing"), specifying (A) the requested date of
such Borrowing (which shall be a Business Day), (B) the requested Type of the
Advances to compose such Borrowing, (C) that the amount of such Borrowing is
$100,000,000, (D) if such Borrowing is to be composed of Eurodollar Rate
Advances, the requested initial Interest Period for such Advances and (E) the
fact that the statements set forth in Section 4.1(b) are true as of the date of
such Borrowing. Each Lender shall, before 11:00 a.m., California time, on the
day of such Borrowing, make available to the Administrative Agent at its address
referred to in Section 10.2, in immediately available funds, such Lender’s
ratable portion of such Borrowing. After the Administrative Agent’s receipt of
such funds and upon fulfillment of the applicable conditions specified in
Article 4, the Administrative Agent will make such funds available to the
Borrower by crediting the following account: FirstEnergy Service Company account
number 323396496 at JPMorgan Chase Bank, ABA number 021000021, reference Penelec
Term Loan. The Notice of Borrowing shall be irrevocable and binding on the
Borrower.

(b)     Anything in Section 2.2(a) to the contrary notwithstanding, the Borrower
may not request Eurodollar Rate Advances for the Borrowing to be made on the
Closing Date if the obligation of the Lenders to make, or to Convert Advances
into, Eurodollar Rate Advances is then suspended pursuant to Section 2.6(c), 3.8
or 3.9.

(c)     The Notice of Borrowing shall be irrevocable and binding on the
Borrower. The Borrower will indemnify each Lender against any loss, cost or
expense incurred by such Lender as a result of any failure to fulfill, on or
before the date specified for a Borrowing in the Notice of Borrowing, the
applicable conditions set forth in Article 4, including any loss (including loss
of anticipated profits), cost or expense incurred by reason of the liquidation
or reemployment of deposits or other funds acquired by such Lender to fund the
Advance to be made by such Lender as part of such Borrowing when such Advance,
as a result of such failure, is not made on such date.

(d)     Unless the Administrative Agent receives notice from a Lender before the
Closing Date that such Lender will not make available to the Administrative
Agent such Lender’s ratable portion of the Borrowing to be made on the Closing
Date, the Administrative Agent may assume that such Lender has made such portion
available to the Administrative Agent on the Closing Date in accordance with
Section 2.2(a), and the Administrative Agent may, in reliance upon such
assumption, make available to the Borrower on such date a corresponding amount.
If and to the extent that such Lender has not made such ratable portion
available to the Administrative Agent, such Lender and the Borrower severally
agree to repay to the Administrative Agent forthwith on demand such
corresponding amount, together with interest thereon, for each day from the date
on which such amount is made available to the Borrower until the date on which
such amount is repaid to the Administrative Agent, at (i) in the case of the
Borrower, the interest rate applicable at the time to the Advances making up
such Borrowing and (ii) in the case of such Lender, the Federal Funds Rate. If
such Lender repays to the Administrative Agent such corresponding amount, such
amount so repaid shall constitute such Lender’s Advance as part of such
Borrowing for purposes of this Agreement.

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(e)     The failure of any Lender to make the Advance to be made by it as part
of the Borrowing to be made on the Closing Date shall not relieve any other
Lender of its obligation, if any, hereunder to make its Advance on the Closing
Date, but no Lender shall be responsible for the failure of any other Lender to
make the Advance to be made by such other Lender on the Closing Date.

Section 2.3     Repayment. On the Maturity Date, the Borrower will repay to the
Administrative Agent, for the account of the Lenders, the outstanding principal
amount of the Advances.

Section 2.4     Interest.

(a)     The Borrower will pay interest on the unpaid principal amount of each
Advance, from the date of such Advance until such principal amount is paid in
full, (i) during such periods as such Advance is a Base Rate Advance, at a rate
per annum equal at all times to the Base Rate in effect from time to time,
payable monthly in arrears on the last Business Day of each calendar month
during such periods and on the Maturity Date, and (ii) during such periods as
such Advance is a Eurodollar Rate Advance, at a rate per annum equal at all
times during each Interest Period for such Advance to the sum of the Eurodollar
Rate for such Interest Period plus 1% per annum, payable on the last day of such
Interest Period and, if such Interest Period is 6 months, on the day that is 3
months after the first day of such Interest Period.

(b)     Upon the occurrence and during the continuation of any Event of Default,
interest on the unpaid principal amount of each Advance shall instead accrue at
a rate per annum equal at all times to the sum of (i) the rate per annum
required to be paid on such Advance pursuant to Section 2.4(a) plus (ii) 2.00%
per annum, and such interest shall be payable on demand.

(c)     The Administrative Agent will give prompt notice to the Borrower and the
Lenders of each applicable interest rate determined by the Administrative Agent
for purposes of Section 2.4(a).

(d)     If the Borrower fails to select the duration of any Interest Period for
any Eurodollar Rate Advances in accordance with the provisions contained in the
definition of "Interest Period" in Section 1.1, such Advances shall
automatically, on the last day of the then effective Interest Period therefor,
Convert into Base Rate Advances.

Section 2.5     Prepayments. The Borrower may on any Business Day, in the case
of Base Rate Advances upon prior written notice to the Administrative Agent not
later than 11:00 a.m., California time, on the day of any prepayment of such
Advances, and in the case of Eurodollar Rate Advances upon at least 3 Business
Days’ prior written notice to the Administrative Agent, in each case stating the
proposed date of prepayment and the aggregate principal amount of such
prepayment and identifying the Borrowing to be prepaid, and if such notice is
given the Borrower will, prepay the outstanding principal amounts of the
Advances composing such Borrowing, in whole or ratably in part, together, in the
case of Eurodollar Rate Advances, with accrued interest to the date of such
prepayment on the principal amount prepaid; provided, however, that each partial
prepayment of a Borrowing shall be in the aggregate principal amount of
$5,000,000 or an integral multiple of $1,000,000 in excess thereof.

Section 2.6     Conversion of Advances.

(a)     The Borrower may on any Business Day, upon written notice in the form of
Exhibit C (a "Notice of Conversion") signed by an Authorized Officer and given
to the Administrative Agent, (i) with respect to any Conversion to Base Rate
Advances, not later than 11:00 a.m., California time, on the Business Day
immediately preceding the date of the proposed Conversion and (ii) with respect
to any Conversion to Eurodollar Rate Advances, not later than 11:00 a.m.,
California time, on the third Business Day before the date of the proposed
Conversion, subject to the provisions of Sections 2.6(c), 3.8 and 3.9, Convert
all or any portion of the Advances of one Type composing the same Borrowing into
Advances of the other Type or Convert all or any portion of the Eurodollar Rate
Advances composing a Borrowing into Eurodollar Rate Advances with a new or
renewed Interest Period; provided, however, that any Conversion of Advances into
Eurodollar Rate Advances shall be in the aggregate principal amount of
$5,000,000 or an integral multiple of $1,000,000 in excess thereof, and no
Conversion of Advances shall result in more than 5 different Interest Periods
for outstanding Eurodollar Rate Advances (provided that Interest Periods of the
same duration but commencing on different dates shall be treated as different
Interest Periods). Each Notice of Conversion shall, within the restrictions
specified above, specify (A) the date of such Conversion, (B) the Advances to be
Converted and (C) if such Conversion is into Eurodollar Rate Advances, the
duration of the Interest Period for such Advances. Each Notice of Conversion
shall be irrevocable and binding on the Borrower. The Administrative Agent shall
give each Lender prompt notice by telecopier of each Notice of Conversion.

- 9-

(b)     On any day on which the aggregate unpaid principal amount of Eurodollar
Rate Advances composing any Borrowing is reduced, by payment or prepayment or
otherwise, to less than $5,000,000, such Advances shall automatically Convert
into Base Rate Advances.

(c)     Upon the occurrence and during the continuation of any Default, (i) each
Eurodollar Rate Advance shall automatically, on the last day of the then
effective Interest Period therefor, Convert into a Base Rate Advance, and (ii)
the obligation of the Lenders to make, or to Convert Advances into, Eurodollar
Rate Advances shall be suspended.

Section 2.7     Payments.
          
              (a)     The Borrower will make each payment hereunder and under
the Notes not later than 11:00 a.m., California time, on the day when due, in
Dollars and immediately available funds, to such account of the Administrative
Agent as to which the Administrative Agent notifies the Borrower in writing from
time to time. The Administrative Agent will promptly thereafter cause to be
distributed like funds relating to the payment of principal, interest or fees
ratably (other than amounts payable pursuant to Section 2.2(c) or Article 3) to
the Lenders and like funds relating to the payment of any other amount payable
to any Lender to such Lender, in each case to be applied in accordance with the
terms of this Agreement. Upon its acceptance of an Assignment and Assumption and
recording of the information contained therein in the Register pursuant to
Section 10.8(c), from and after the effective date of such Assignment and
Assumption the Administrative Agent will make all payments hereunder in respect
of the interest assigned thereby to the Lender assignee thereunder, and the
parties to such Assignment and Assumption will make all appropriate adjustments
in such payments for periods before such effective date directly between
themselves.

(b)     The Borrower hereby authorizes each Lender, if and to the extent that
any payment owed to such Lender is not made when due hereunder or under any
other Loan Document, to charge from time to time against any or all of the
Borrower’s accounts with such Lender any amount so due.

(c)     Unless the Administrative Agent receives notice from the Borrower before
the date on which any payment is due to the Lenders hereunder that the Borrower
will not make such payment in full, the Administrative Agent may assume that the
Borrower has made such payment in full to the Administrative Agent on such date,
and the Administrative Agent may, in reliance upon such assumption, cause to be
distributed to each Lender on such due date an amount equal to the amount then
due to such Lender. If and to the extent that the Borrower has not so made such
payment in full to the Administrative Agent, each Lender will repay to the
Administrative Agent forthwith upon demand such amount distributed to such
Lender, together with interest thereon, for each day from the date on which such
amount was distributed to such Lender until the date on which such Lender repays
such amount to the Administrative Agent, at the Federal Funds Rate.

(d)     All computations of interest and fees hereunder shall be made on the
basis of a year of 360 days for the actual number of days occurring in the
period for which such interest or fees are payable; provided, however, that
computations of interest on Base Rate Advances shall be made on the basis of a
year of 365 or 366 days, as applicable. Each determination by the Administrative
Agent of an interest rate or fee hereunder shall be conclusive and binding for
all purposes, absent manifest error.

(e)     Whenever any payment to be made hereunder or under any other Loan
Document is stated to be due on a day other than a Business Day, such payment
shall be made on the next succeeding Business Day, and such extension of time
shall in such case be included in the computation of payment of interest or
fees, as the case may be; provided, however, that, if such extension would cause
payment of interest on or principal of any Eurodollar Rate Advances with an
Interest Period specified in months to be made in the next succeeding calendar
month, such payment shall be made on the next preceding Business Day.

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Section 2.8     Sharing of Payments, Etc. If any Lender obtains any payment
(whether voluntary, involuntary, through the exercise of any right of setoff, or
otherwise) on account of the Advances made by it (other than pursuant to Section
2.2(c) or Article 3) in excess of its ratable share of payments on account of
the Advances obtained by all of the Lenders, then such Lender will forthwith
purchase from the other Lenders such participations in the Advances made by them
as necessary to cause such purchasing Lender to share the excess payment ratably
with each of them; provided, however, that, if all or any portion of such excess
payment is thereafter recovered from such purchasing Lender, such purchase from
each other Lender shall be rescinded to the extent of such recovery, and each
such other Lender shall repay to the purchasing Lender the purchase price to the
extent of such recovery, together with an amount equal to such Lender’s ratable
share (according to the proportion of (a) the amount of such Lender’s required
repayment to (b) the total amount so recovered from the purchasing Lender) of
any interest or other amount paid or payable by the purchasing Lender in respect
of the total amount so recovered. The Borrower agrees that any Lender so
purchasing a participation from another Lender pursuant to this section may, to
the fullest extent permitted by Applicable Law, exercise all of its rights of
payment (including the right of setoff) with respect to such participation as
fully as if such Lender were the direct creditor of the Borrower in the amount
of such participation.

      Section 2.9     Evidence of Debt.
       
               (a)    The indebtedness of the Borrower resulting from the
Advances made by the Lenders from time to time shall be evidenced by the Notes.

        (b)     The Administrative Agent shall maintain, in accordance with its
usual practice, an account or accounts evidencing the indebtedness of the
Borrower resulting from each Advance made from time to time hereunder and the
amounts of principal and interest payable and paid from time to time hereunder;
provided, however, that the failure of the Administrative Agent to maintain any
such account or accounts shall not affect the payment obligations of the
Borrower hereunder.

ARTICLE 3
YIELD PROTECTION

       Section 3.1     Change in Circumstances. If, after the date hereof, any
Lender determines that the adoption of any Applicable Law, any change therein or
any change in the interpretation or administration thereof by any Governmental
Authority charged with the interpretation or administration thereof, or
compliance by such Lender with any request or directive (whether or not having
the force of law) of any Governmental Authority, (a) imposes, modifies or deems
applicable any reserve, special deposit, insurance assessment, capital adequacy
or similar requirement (including any such requirement imposed by the Board of
Governors of the Federal Reserve System) against assets held by, Advances made
by, or deposits in or for the account of, such Lender or any holding company
thereof, (b) imposes on such Lender any other condition regarding this Agreement
or the Advances or (c) changes the basis of taxation of payments to such Lender
of the principal of or interest on any Eurodollar Rate Advance made by such
Lender or any fees or other amounts payable hereunder (other than changes in
respect of taxes imposed on the overall net income of such Lender, or its
Applicable Lending Office, by any jurisdiction in which such Lender has an
office or by any political subdivision or taxing authority therein), and the
result of any event referred to in clause (a), (b) or (c) above is (i) to
increase the cost to such Lender and/or any holding company thereof of issuing
or maintaining any commitment or agreeing to make, making or maintaining
Advances or (ii) to reduce the return on capital of such Lender and/or any
holding company thereof with respect thereto to a level below that which such
Person could have achieved but for such adoption, change or compliance (taking
into consideration such Person’s policies with respect to capital adequacy) by
an amount deemed by such Lender to be material, then, within 15 days after
demand by such Lender through the Administrative Agent, the Borrower will pay to
such Lender through the Administrative Agent all additional amounts that are
necessary to compensate such Lender and/or any holding company thereof for such
increase in cost or reduction of return incurred thereby. Each Lender agrees
that it will designate a different Applicable Lending Office if such designation
would avoid the need for, or reduce the amount of, such increased costs or
reduction of return and would not, in the reasonable judgment of such Lender,
cause such Lender and/or any holding company thereof to suffer any economic loss
or legal or regulatory disadvantage.

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       Section 3.2     Eurodollar Reserves. The Borrower will pay to each Lender
upon demand through the Administrative Agent, so long as such Lender is required
under regulations of the Board of Governors of the Federal Reserve System to
maintain reserves with respect to liabilities or assets consisting of or
including Eurocurrency Liabilities, additional interest on the unpaid principal
amount of each Eurodollar Rate Advance made by such Lender, for each Interest
Period for each such Advance so long as such requirement remains in effect, at
an interest rate per annum equal at all times to the remainder obtained by
subtracting (a) the Eurodollar Rate for such Interest Period from (b) the rate
obtained by dividing such rate by a percentage equal to 100% minus the
Eurodollar Reserve Percentage of such Lender for such Interest Period. Such
additional interest shall be determined by each Lender and notified to the
Borrower through the Administrative Agent.

      Section 3.3     Breakage Indemnity. The Borrower will indemnify each
Lender against any loss, cost or reasonable expense that such Lender may sustain
or incur as a consequence of (a) any failure by the Borrower to Convert an
Advance after a Notice of Conversion has been given with respect to such
Advance, (b) any payment, prepayment or Conversion of a Eurodollar Rate Advance
required or permitted to be made by any other provision of this Agreement, or
otherwise made or deemed made, on a day other than the last day of an Interest
Period applicable thereto, (c) any default in payment or prepayment of the
principal amount of any Advance or any part thereof or interest accrued thereon,
as and when due and payable (at the due date thereof, by notice of prepayment or
otherwise), or (d) any failure by the Borrower to satisfy the applicable
conditions specified in Article 4 after the delivery of the Notice of Borrowing
pursuant to Section 2.2(a). Such loss, cost or reasonable expense shall include
an amount equal to the excess, if any, as reasonably determined by such Lender,
of (i) its cost of obtaining the funds for the Advance being paid, prepaid or
Converted (based on the Eurodollar Rate) for the period from the date of such
payment, prepayment or Conversion to the last day of the Interest Period for
such Advance over (ii) the amount of interest (as reasonably determined by such
Lender) that would be realized by such Lender in re-employing the funds so paid,
prepaid or Converted for such period or Interest Period, as the case may be. For
purposes of this section, it shall be presumed that each Lender has funded each
Eurodollar Rate Advance with a fixed-rate instrument bearing the rate and
maturity designated in the determination of the applicable interest rate for
such Advance.

      Section 3.4     Taxes. All payments made by the Borrower to the
Administrative Agent or any Lender under this Agreement shall be made free and
clear of, and without reduction for or on account of, any stamp or other taxes,
levies, imposts, duties, charges, fees, deductions, withholdings, restrictions
or conditions of any nature whatsoever hereafter imposed, levied, collected,
withheld or assessed by any country (or by any political subdivision or taxing
authority thereof or therein), except for franchise taxes and taxes on the
overall net income of the Administrative Agent or such Lender (such nonexcluded
taxes being herein called åTaxesæ). If any Taxes are required to be withheld
from any amounts payable by the Borrower to the Administrative Agent or any
Lender, the amounts so payable shall be increased to the extent necessary to
yield to the Administrative Agent or such Lender, as the case may be (after
payment of all such Taxes), interest or any such other amounts payable hereunder
at the rates or in the amounts specified in this Agreement; provided, however,
that the Borrower shall not be obligated to pay such amounts for the benefit of
the Administrative Agent or any Lender with respect to any period in which such
Lender has failed (a) to file any form or certificate that it was entitled to
file that would have exempted the Administrative Agent or such Lender, as
applicable, from such Taxes or (b) to take other action that would have entitled
the Administrative Agent or such Lender, as applicable, to an exemption from
such Taxes, if such action would not, in the reasonable judgment of the
Administrative Agent or such Lender, as applicable, be otherwise disadvantageous
to it. Whenever any Tax is paid by the Borrower, the Borrower will send to the
affected Lender through the Administrative Agent, as promptly as possible
thereafter, a receipt or other evidence of payment thereof.

     Section 3.5     Notices. A certificate as to the nature of the occurrence
giving rise to, and the calculation of, compensation to the Administrative Agent
or any Lender pursuant to Section 3.1, 3.2, 3.3 or 3.4 shall be submitted by the
Administrative Agent or such Lender, as applicable, to the Borrower through the
Administrative Agent and shall be conclusive evidence (absent demonstrable
error) as to the amount thereof. Upon the reasonable request of the Borrower,
the Administrative Agent or such Lender, as applicable, will provide the
Borrower an estimate of the total additional compensation that would be payable
to the Administrative Agent or such Lender, as applicable, on an annual basis.

     Section 3.6     Participants. The Borrower agrees that each Participant
shall have the same rights and obligations under this Article 3 with respect to
its participation as if such Participant were a Lender.

     Section 3.7     Basis for Claims for Compensation. No law, rule or
regulation in the form in which it is in effect on the date hereof (but
excluding changes in the interpretation or administration thereof after the date
hereof) or Tax to which the Administrative Agent, any Lender or any Participant
is subject on the date hereof shall be used as the basis of a claim for
compensation pursuant to Section 3.1 or 3.4 by the Administrative Agent, such
Lender or such Participant, as the case may be.

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      Section 3.8     Change in Legality.
                
                       (a)     Notwithstanding any other provision of this
Agreement, if the adoption of or any change in any law or regulation or in the
interpretation or administration thereof by any Governmental Authority charged
with the administration or interpretation thereof makes it unlawful for any
Lender to make or maintain any Eurodollar Rate Advance or to give effect to its
obligations as contemplated hereby with respect to any Eurodollar Rate Advance,
then, by written notice to the Borrower through the Administrative Agent, such
Lender may (i) declare that it will not thereafter make Eurodollar Rate
Advances, whereupon the right of the Borrower to request that a Eurodollar Rate
Advance be made or maintained by such Lender pursuant to any Borrowing or
Conversion shall be forthwith suspended until such Lender withdraws such notice
as provided below, and (ii) require that all outstanding Eurodollar Rate
Advances of such Lender be Converted to Base Rate Advances, in which event all
such Eurodollar Rate Advances shall be automatically Converted to Base Rate
Advances as of the effective date of such notice as provided below.

     (b)     Promptly upon becoming aware that the circumstances that caused any
Lender to deliver a notice to the Borrower pursuant to Section 3.8(a) no longer
exist, such Lender will deliver notice thereof to the Borrower through the
Administrative Agent withdrawing such prior notice (but the failure to do so
shall impose no liability upon such Lender). Promptly upon the Borrower’s
receipt of such withdrawing notice from such Lender, the suspension pursuant to
Section 3.8(a) shall terminate. Prior to any Lender’s giving notice to the
Borrower through the Administrative Agent under this Section 3.8(b), such Lender
will use commercially reasonable efforts to change the jurisdiction of its
Applicable Lending Office if such change would avoid such suspension and would
not, in the reasonable judgment of such Lender, be otherwise disadvantageous to
such Lender. Any suspension notice to the Borrower by any Lender through the
Administrative Agent shall be effective as to each Eurodollar Rate Advance of
such Lender on the last day of the Interest Period currently applicable to such
Eurodollar Rate Advance; provided, however, that, if such notice states that the
maintenance of such Advance until such last day would be unlawful, such notice
shall be effective as to each Eurodollar Rate Advance on the date of its receipt
by the Borrower.

      Section 3.9     Market Rate Disruptions. If (a) the Administrative Agent
determines, in its reasonable judgment, that an adequate basis does not exist
for the determination of the Eurodollar Rate for one or more Eurodollar Rate
Advances or (b) the Administrative Agent determines, in its reasonable judgment,
that the Eurodollar Rate does not adequately reflect the cost to one or more
Lenders of making, funding or maintaining one or more Eurodollar Rate Advances,
then the right of the Borrower to request that Eurodollar Rate Advances be made
or maintained by the affected Lender or Lenders pursuant to any Borrowing or
Conversion shall be forthwith suspended until the Administrative Agent notifies
the Borrower that the circumstances causing such suspension no longer exist.

ARTICLE 4
CONDITIONS PRECEDENT TO ADVANCES

     Section 4.1     Conditions Precedent to Advances on Closing Date. The
obligation of each of the Lenders to make its Advance to the Borrower on the
Closing Date is subject to the conditions precedent set forth below.

    (a)     The Borrower has paid all amounts payable thereby to the
Administrative Agent as provided in Section 10.6 or otherwise, including the
accrued fees and disbursements of legal counsel to the Administrative Agent, to
the extent one or more statements for such amounts have been presented for
payment.

    (b)     The representations and warranties of the Borrower contained in
Article 5 are correct in all material respects on and as of the Closing Date,
before and after giving effect to the Advances to be made on such date and to
the application of the proceeds of such Advances, as though made on and as of
such date (other than any such representations or warranties that, by their
terms, refer to a specific date, in which case as of such specific date); and no
event has occurred and is continuing, or would result from such Advances or from
the application of the proceeds thereof, that constitutes a Default;

    (c)     The Administrative Agent has received the following, each dated the
Closing Date unless otherwise specified below, in form and substance
satisfactory to the Lenders and in the number of originals requested by the
Administrative Agent:

        (i)      this Agreement (which may be dated before the Closing Date),
duly executed by the Borrower and the Lenders;

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         (ii)      the Notice of Borrowing (which may be dated before the
Closing Date) and the Notes in favor of the respective Lenders, duly executed by
the Borrower;

        (iii)  a certificate of the Secretary or an Assistant Secretary of the
Borrower as to (A) the resolutions of the Board of Directors of the Borrower
approving the Loan Documents and (B) all documents evidencing other necessary
corporate action and Governmental Action, if any, with respect to the Loan
Documents, attaching such documents and certifying that they are correct and
complete and in full force and effect as of the date of execution of each such
document and as of the Closing Date;

        (iv)  certificate of the Secretary or an Assistant Secretary of the
Borrower as to the incumbency, and setting forth a specimen signature, of each
of the persons (A) who has signed or will sign any Loan Document on behalf of
the Borrower and (B) who will, until replaced by other persons duly authorized
for that purpose, act as the representatives of the Borrower for the purpose of
signing documents in connection with this Agreement and the transactions
contemplated hereby;

        (v)  a certificate of the Borrower, signed on behalf of the Borrower by
its Assistant Treasurer and its Secretary or Assistant Secretary, certifying as
to the following: (A) the correctness and completeness of the copies of the
Borrower’s Restated Articles of Incorporation and By-Laws attached to such
certificate and that such documents are in full force and effect; (B) the due
incorporation and good standing of the Borrower as a corporation organized under
the laws of the Commonwealth of Pennsylvania, the due qualification and good
standing of the Borrower to do business in the State of New York and the absence
of any proceeding for the dissolution or liquidation of the Borrower; (C) the
truthfulness in all material respects of the representations and warranties of
the Borrower contained in the Loan Documents, as though made on and as of the
Closing Date; and (D) the absence of any event occurring and continuing, or
resulting from the effectiveness of the Loan Documents, that constitutes a
Default;

        (vi)  certificates of the appropriate Governmental Authorities, dated
reasonably near the Closing Date, certifying that the Borrower is in good
standing under the laws of the Commonwealth of Pennsylvania and the State of New
York;

        (vii)  one or more favorable opinions of legal counsel for the Borrower,
as to such matters as any Lender through the Administrative Agent may reasonably
request; and

        (viii)  such other approvals, opinions, evidence and documents
(including such funds-transfer documents) as the Administrative Agent or any
Lender through the Administrative Agent may reasonably request.

    Section 4.2     Reliance on Certificates. The Lenders and the Administrative
Agent shall be entitled to rely conclusively upon the certificates delivered
from time to time by officers of the Borrower as to the names, incumbency,
authority and signatures of the respective persons named therein until such time
as the Lenders receive a replacement certificate, in form acceptable to the
Lenders, from an officer of the Borrower identified to the Lenders as having the
authority to deliver such certificate, setting forth the names and true
signatures of the officers and other representatives of the Borrower thereafter
authorized to act on behalf of the Borrower.

ARTICLE 5
REPRESENTATIONS AND WARRANTIES

The Borrower represents and warrants to the Lenders and the Administrative Agent
as set forth below.

Section 5.1     Corporate Existence and Power. The Borrower (a) is a corporation
duly incorporated, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania, (b) is duly qualified to do business as a foreign
corporation in, and is in good standing under the laws of, the State of New York
and each other state in which the ownership of its properties or the conduct of
its business makes such qualification necessary, except where the failure to be
so qualified could not reasonably be expected to have a material and adverse
effect on the financial condition, results of operations, operations or
prospects of the Borrower or on the ability of the Borrower to perform its
obligations under the Loan Documents, and (c) has all corporate powers and all
material governmental licenses, authorizations, consents and approvals required
to carry on its business as now conducted.

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Section 5.2     Corporate Authorization. The execution, delivery and performance
by the Borrower of the Loan Documents have been duly authorized by all necessary
corporate action on the part of the Borrower and do not and will not require the
consent or approval of its shareholders or of any trustee or holder of any
Indebtedness or other obligation of the Borrower.

Section 5.3     No Violation, Etc. Neither the execution, delivery or
performance by the Borrower of the Loan Documents, nor the consummation by the
Borrower of the transactions contemplated thereby, nor the compliance by the
Borrower with the provisions thereof (a) conflicts or will conflict with, or
results or will result in a breach or contravention of any of the provisions of,
the Borrower’s Restated Articles of Incorporation or By-Laws, any Applicable Law
or any indenture, mortgage, lease or other agreement or instrument to which the
Borrower or any of its Affiliates is a party or by which the property of the
Borrower or any of its Affiliates is bound or (b) results or will result in the
creation or imposition of any Lien upon any of the property of the Borrower or
of any of its Affiliates. No provision of the Borrower’s Restated Articles of
Incorporation or By-Laws, of any Applicable Law or of any such indenture,
mortgage, lease or other agreement or instrument could reasonably be expected to
have a material and adverse effect on the financial condition, results of
operations, operations or prospects of the Borrower or on the ability of the
Borrower to perform its obligations under the Loan Documents.

Section 5.4     Governmental Action. No Governmental Action is required in
connection with the execution, delivery or performance by the Borrower of, or
the consummation by the Borrower of the transactions contemplated by, the Loan
Documents, other than such Governmental Action as has been duly obtained, taken,
given or made.

Section 5.5     Execution and Delivery. The Loan Documents have been duly
executed and delivered by the Borrower and are legal, valid and binding
obligations of the Borrower enforceable against it in accordance with their
respective terms, subject, however, to the application by a court of general
principles of equity and to the effect of any applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors’ rights
generally.

Section 5.6     Other Information. The reports, financial statements and other
written information furnished by the Borrower to the Lenders or the
Administrative Agent in connection with the negotiation of the Loan Documents or
pursuant to the terms of any of the Loan Documents do not contain, when taken as
a whole, any untrue statement of a material fact and do not omit to state, when
taken as a whole, any material fact or any fact necessary to make the statements
contained therein, in light of the circumstances in which made, not misleading.

Section 5.7     Litigation. Except as disclosed in the Borrower’s 2004 Form 10-K
(a copy of which has been furnished to the Lenders) or as otherwise disclosed to
the Lenders by the Borrower in writing prior to the date hereof, there is no
pending or threatened action or proceeding affecting the Borrower or any of its
Subsidiaries before any Governmental Authority that could reasonably be expected
to have a material and adverse effect on the financial condition, results of
operations, operations or prospects of the Borrower and its Subsidiaries taken
as a whole or on the ability of the Borrower to perform its obligations under
the Loan Documents.

Section 5.8     Fire, Etc. Neither the business nor the properties of the
Borrower or any Subsidiary thereof are affected by any fire, explosion,
accident, strike, lockout or other labor dispute, or other casualty (whether or
not covered by insurance) that could reasonably be expected to have a material
and adverse effect on the financial condition, results of operations, operations
or prospects of the Borrower and its Subsidiaries taken as a whole or on the
ability of the Borrower to perform its obligations under the Loan Documents.

Section 5.9    Financial Statements. The consolidated balance sheet of the
Borrower and its Subsidiaries as at December 31, 2004 and the related
consolidated statements of income, retained earnings and cash flows of the
Borrower and its Subsidiaries for the fiscal year then ended, certified by
PricewaterhouseCoopers LLP, independent public accountants, copies of all of
which have been furnished to the Lenders, present fairly the consolidated
financial position of the Borrower and its Subsidiaries as at such date and the
consolidated results of the operations of the Borrower and its Subsidiaries for
the fiscal year ended on such date, all in accordance with generally accepted
accounting principles consistently applied. Since December 31, 2004 there has
been no material and adverse change in the financial condition, results of
operations, operations or prospects of the Borrower and its Subsidiaries taken
as a whole, except as disclosed in the 2004 Form 10-K or otherwise in writing to
the Lenders prior to the date hereof.

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Section 5.10     ERISA.

(a)     No Termination Event has occurred or is reasonably expected to occur
with respect to any Plan.

(b)     Schedule B (Actuarial Information) to the most recent annual report
(Form 5500 Series) with respect to each Plan, copies of which have been filed
with the Internal Revenue Service and furnished to the Lenders, is complete and
accurate and fairly presents the funding status of such Plan, and since the date
of such Schedule B there has been no material and adverse change in such funding
status.

(c)     Neither the Borrower nor any member of the Controlled Group has incurred
or reasonably expects to incur any withdrawal liability under ERISA to any
Multiemployer Plan.

Section 5.11     Taxes. Each of the Borrower and its Subsidiaries has filed all
tax returns (Federal, state and local) required to be filed thereby and has paid
all taxes shown thereon to be due, including interest and penalties, or has
provided adequate reserves for payment thereof, other than such taxes that the
Borrower or such Subsidiary is contesting in good faith by appropriate legal
proceedings.

Section 5.12     Title to Properties. Each of the Borrower and its Subsidiaries
has good and marketable title to all properties, real or personal, purported to
be owned by it (subject to the Lien of any and all first mortgage indentures
thereof), except where the failure to have such title could not reasonably be
expect to have a material and adverse effect on the financial condition, results
of operations, operations or prospects of the Borrower and its Subsidiaries
taken as a whole.

Section 5.13     Hazardous Materials. Each of the Borrower and its Subsidiaries
is in compliance in all material respects with Applicable Law relating to
Hazardous Materials, air emissions, water discharge, noise emission, liquid
disposal and other environmental, health and safety matters, other than those
the noncompliance with which could not reasonably be expected to have a material
and adverse effect (taking into consideration all fines, penalties and sanctions
that may be imposed because of such noncompliance) on the financial condition,
results of operations, operations or prospects of the Borrower and its
Subsidiaries taken as a whole or on the ability of the Borrower to perform its
obligations under the Loan Documents. Except as disclosed in the 2004 Form 10-K,
neither the Borrower nor any of its Subsidiaries has received from any
Governmental Authority any notice of a material violation of any such Applicable
Law.

ARTICLE 6
AFFIRMATIVE COVENANTS

So long as any Lender has any Commitment hereunder or any amount remains unpaid
under any Loan Document, the Borrower will, unless the Required Lenders
otherwise consent in writing, comply with the covenants set forth below.

Section 6.1     Preservation of Existence, Etc. The Borrower will preserve and
maintain, and cause each of its Subsidiaries to preserve and maintain, its
corporate existence, material rights (statutory and otherwise) and franchises
and to take such other action as may be necessary or advisable to preserve and
maintain its right to conduct its business in the states where it is conducting
its business.

Section 6.2     Maintenance of Properties, Etc. The Borrower will preserve,
maintain, develop and operate, and cause each of its Subsidiaries to preserve,
maintain, develop and operate, in substantial conformity with Applicable Law and
all material contractual obligations, all of its properties that are used or
useful in the conduct of its business in good working order and condition,
ordinary wear and tear excepted, it being understood that this covenant relates
only to the good working order and condition of such properties and is not to be
construed as a covenant of the Borrower or any of its Subsidiaries not to
dispose of such properties by sale, lease, transfer or otherwise.

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Section 6.3     Compliance with Material Contractual Obligations, Laws, Etc. The
Borrower will comply, and cause each of its Subsidiaries to comply, with the
requirements of all material contractual obligations and all Applicable Law, the
failure to comply with which could reasonably be expected to materially and
adversely affect the financial condition, results of operations, operations or
prospects of the Borrower and its Subsidiaries taken as a whole or the ability
of the Borrower to perform its obligations under the Loan Documents, such
compliance to include (a) paying before the same become delinquent all taxes,
assessments and governmental charges imposed upon it or upon its property,
except to the extent that the same are being diligently contested in good faith
and by appropriate proceedings and that adequate reserves for the payment
thereof have been established, and (b) complying with the requirements of
Applicable Law relating to Hazardous Materials, air emissions, water discharge,
noise emission, liquid disposal and other environmental, health and safety
matters.

Section 6.4     Insurance. The Borrower will maintain, and cause each of its
Subsidiaries to maintain, insurance with financially sound and reputable
insurance companies or associations in such amounts and covering such risks as
is usually carried by companies engaged in the same or similar businesses,
owning similar properties and similarly situated.

Section 6.5     Visitation Rights. At any reasonable time and from time to time,
upon reasonable advance notice, the Borrower will permit each of the Lenders or
any agents or representatives thereof to (a) examine and make copies of and
abstracts from the records and books of account of, and visit the properties of,
the Borrower and any of its Subsidiaries and (b) discuss the affairs, finances
and accounts of the Borrower and any of its Subsidiaries with any of their
officers or directors; provided, however, that the Borrower reserves the right
to restrict access to its or any of its Subsidiaries’ facilities in accordance
with reasonable procedures relating to safety and security. The Administrative
Agent and each Lender agree to use reasonable efforts to ensure that any
information concerning the Borrower or any of its Subsidiaries obtained by the
Administrative Agent or such Lender pursuant to this section or Section 6.6 or
6.8 that is not contained in a report or other document filed with the
Securities and Exchange Commission, distributed by the Borrower to its security
holders or otherwise generally available to the public, will, to the extent
permitted by law and except as may be required by valid subpoena or in the
normal course of the Administrative Agent’s or such Lender’s business
operations, be treated confidentially by the Administrative Agent or such
Lender, as the case may be, and will not be distributed or otherwise made
available by the Administrative Agent or such Lender, as the case may be, to any
Person other than the Administrative Agent’s or such Lender’s employees,
authorized agents or representatives (including attorneys and accountants).

Section 6.6     Keeping of Books. The Borrower will keep, and cause each of its
Subsidiaries to keep, proper books of record and account in which full and
correct entries shall be made of all financial transactions and the assets and
liabilities of such Persons, in accordance with generally accepted accounting
principles consistent with those applied in the preparation of the financial
statements referred to in Section 6.8.

Section 6.7     Transactions with Affiliates. The Borrower will conduct, and
cause each of its Subsidiaries to conduct, all transactions otherwise permitted
under this Agreement with any of its Affiliates on terms that are fair and
reasonable and no less favorable to the Borrower or such Subsidiary than it
would obtain in a comparable arm’s-length transaction with a Person not an
Affiliate, other than such transactions, in the aggregate, with respect to which
the aggregate difference between the consideration paid for or by the Borrower
and/or any such Subsidiary and the amount the Borrower and/or any such
Subsidiary would have received or paid had such transaction been conducted on an
arm’s-length basis as described in this section is immaterial in the context of
the Borrower’s consolidated operations; provided, however, that any transaction
with an Affiliate of the Borrower, which transaction, or a plan of which such
transaction is a part, has been approved by the Pennsylvania Public Utility
Commission or the Securities and Exchange Commission, shall not be subject to
this section.

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Section 6.8     Reporting Requirements. The Borrower will furnish the following
to the Lenders:

(a)     as soon as available and in any event within 50 days after the end of
each of the first three quarters of each fiscal year of the Borrower, a
consolidated balance sheet of the Borrower and its Subsidiaries as at the end of
such quarter and consolidated statements of income, retained earnings and cash
flows of the Borrower and its Subsidiaries for the period commencing at the end
of the previous fiscal year and ending with the end of such quarter, all in
reasonable detail and duly certified by the chief financial officer, the
treasurer or an assistant treasurer of the Borrower as fairly presenting the
financial condition of the Borrower and its Subsidiaries as at such date and the
results of operations of the Borrower and its Subsidiaries for the period ended
on such date, all in accordance with generally accepted accounting principles
consistently applied (provided that for purposes hereof delivery of the
Borrower’s appropriately completed Form 10-Q shall be sufficient in lieu of
delivery of such consolidated balance sheet and consolidated statements of
income, retained earnings and cash flows), together with a certificate of the
chief financial officer, the treasurer or an assistant treasurer of the Borrower
(i) demonstrating and certifying compliance by the Borrower with the covenants
set forth in Sections 6.10 and 6.11 and (ii) stating that no Default has
occurred and is continuing or, if a Default has occurred and is continuing,
stating the nature thereof and the action that the Borrower has taken and
proposes to take with respect thereto;

(b)     as soon as available and in any event within 105 days after the end of
each fiscal year of the Borrower, a copy of the annual report for such year for
the Borrower and its Subsidiaries, containing financial statements for such year
certified by PricewaterhouseCoopers LLP or other independent public accountants
acceptable to the Required Lenders (provided that for purposes hereof delivery
of the Borrower’s appropriately completed Form 10-K will be sufficient in lieu
of delivery of such financial statements), together with a certificate of the
chief financial officer, the treasurer or an assistant treasurer of the Borrower
(i) demonstrating and certifying compliance by the Borrower with the covenants
set forth in Sections 6.10 and 6.11 and (ii) stating that no Default has
occurred and is continuing or, if a Default has occurred and is continuing,
stating the nature thereof and the action that the Borrower has taken and
proposes to take with respect thereto;

(c)     as soon as possible and in any event within five days after the
occurrence of each ERISA Event and each Default, but only if the same is
continuing on the date of such statement, a statement of the chief financial
officer of the Borrower setting forth the details of such ERISA Event or Default
and the action that the Borrower has taken and proposes to take with respect
thereto;

(d)     promptly after receipt thereof by the Borrower or any of its ERISA
Affiliates from the PBGC, copies of each notice received by the Borrower or such
ERISA Affiliate of the PBGC’s intention to terminate any Plan of the Borrower or
such ERISA Affiliate or to have a trustee appointed to administer any such Plan;

(e)     promptly after receipt thereof by the Borrower or any ERISA Affiliate
from a Multiemployer Plan sponsor, a copy of each notice received by the
Borrower or such ERISA Affiliate concerning the imposition of withdrawal
liability in the amount of at least $250,000 pursuant to Section 4202 of ERISA
in respect of which the Borrower or such ERISA Affiliate is reasonably expected
to be liable;

(f)     promptly after the Borrower becomes aware of the occurrence thereof,
notice of all actions, suits, proceedings or other events for which the Lenders
will be entitled to indemnity under Section 10.7;

(g)     promptly after the sending or filing thereof, copies of all reports that
the Borrower sends to any of its security holders and copies of all reports and
registration statements that the Borrower or any of its Subsidiaries files with
the Securities and Exchange Commission or any national securities exchange; and

(h)     promptly after requested, such other information respecting the
business, properties, results of operations, prospects, condition or operations,
financial or otherwise, of the Borrower or any of its Subsidiaries as any Lender
may from time to time reasonably request.

Section 6.9     Use of Proceeds. The Borrower will use the proceeds of each
Advance solely for its general corporate purposes but not, directly or
indirectly, for any purpose that would entail a violation of Regulation T, U or
X of the Board of Governors of the Federal Reserve System.

Section 6.10   Indebtedness to Total Capitalization. The Borrower will maintain
at all times a ratio of Consolidated Debt to Total Capitalization of the
Borrower and its Subsidiaries of not more than 0.65 to 1.0.

Section 6.11    Fixed Charge Ratio. The Borrower will maintain a Fixed Charge
Ratio of at least 2.0 to 1.0.

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Section 6.12    Further Assurances. The Borrower will promptly, at its expense,
execute and deliver, or cause to be executed and delivered, all further
instruments and documents, and take and cause to be taken all further actions,
that may be necessary or that any Lender through the Administrative Agent may
reasonably request to enable the Lenders to enforce the terms and provisions of
this Agreement and to exercise their rights and remedies hereunder.

ARTICLE 7
NEGATIVE COVENANTS

So long as any Lender has any Commitment hereunder or any amount remains unpaid
under any Loan Document, the Borrower will, unless the Required Lenders
otherwise consent in writing, comply with the covenants set forth below.

Section 7.1     Liens, Etc. Except as permitted under Section 7.2, the Borrower
will not create, incur, assume, or suffer to exist, or permit any of its
Subsidiaries to create, incur, assume, or suffer to exist, any Lien upon or with
respect to any of its properties, whether now owned or hereafter acquired, or
assign, or permit any of its Subsidiaries to assign, any right to receive
income, in each case to secure or provide for the payment of any Indebtedness of
any Person, other than the following: (a) purchase-money Liens upon or in any
property acquired or held by the Borrower or any of its Subsidiaries in the
ordinary course of business to secure the purchase price of such property or to
secure Indebtedness incurred solely for the purpose of financing the acquisition
of such property; (b) Liens for taxes, assessments or other governmental charges
or levies not yet due or the imposition or amount of which the Borrower or any
of its Subsidiaries is diligently contesting in good faith by appropriate
proceedings and for which adequate reserves for payment thereof have been
established; (c) pledges or deposits to secure performance in connection with
bids, tenders, contracts (other than contracts for the payment of money) or
leases to which the Borrower or any of its Subsidiaries is a party, in each case
made in the ordinary course of business; (d) materialmen’s, mechanics’,
carriers’, workmen’s, repairmen’s or other similar Liens arising in the ordinary
course of business, or deposits to obtain the release of such Liens; (e) Liens
existing on property, acquired by the Borrower or any of its Subsidiaries in the
ordinary course of business, at the time of acquisition of such property (other
than any such Lien created in contemplation of such acquisition); (f) Liens
created to secure Indebtedness in respect of First Mortgage Bonds issued after
the date hereof, all of the proceeds of which are used to repay the Advances;
(g) Liens in existence on the date of this Agreement; and (h) Liens created for
the sole purpose of extending, renewing or replacing in whole or in part
Indebtedness secured by any Lien referred to in the foregoing clauses (a)
through (g) (provided, however, that the principal amount of Indebtedness
secured thereby does not exceed the principal amount of Indebtedness so secured
at the time of such extension, renewal or replacement and that such extension,
renewal or replacement, as the case may be, is limited to all or a part of the
property that secured the Lien so extended, renewed or replaced and any
improvements on such property).

Section 7.2     Cash Collateral. The Borrower will not create or suffer to
exist, or permit any of its Subsidiaries to create or suffer to exist, any Lien
upon or with respect to any of its Cash and Cash Equivalents or marketable
securities, in each case to secure or provide for the payment of Indebtedness,
other than the following: (a) with respect to the First Mortgage Bonds, any
posting of Cash and Cash Equivalents with the trustee for the First Mortgage
Bonds for the purpose of procuring the release of property from the Lien of the
indenture relating to the First Mortgage Bonds, such posting to be limited to a
period of not more than 5 Business Days unless, on or prior to the date of such
posting, the Borrower has (i) pursuant to documentation satisfactory to the
Administrative Agent, equally and ratably secured the obligations of the
Borrower under this Agreement by a Lien on Cash and Cash Equivalents of a
similar type acceptable to the Required Lenders in their sole discretion and
(ii) caused the trustee for the First Mortgage Bonds to have entered into an
intercreditor agreement in form, scope and substance satisfactory to the
Required Lenders; (b) any Lien on Cash and Cash Equivalents granted by Penelec
Funding LLC, a Delaware limited liability company (åPenelec Fundingæ), to Bank
One, NA, as Agent, under the Receivables Purchase Agreement dated as of March
30, 2004 among Penelec Funding, as Seller, the Borrower, as Servicer, Jupiter
Securitization Corporation, as Conduit, Bank One, NA, as Agent, and the
financial institutions from time to time parties thereto, provided that the
principal amount of Indebtedness secured by such Lien does not exceed
$75,000,000; and (c) Liens created for the sole purpose of extending, renewing
or replacing in whole or in part Indebtedness secured by any Lien referred to in
the foregoing clause (b) (provided, however, that the principal amount of
Indebtedness secured thereby does not exceed the principal amount of
Indebtedness so secured at the time of such extension, renewal or replacement
and that such extension, renewal or replacement, as the case may be, is limited
to all or a part of the property or type of property (such as, for example, cash
received in payment of accounts receivable) that secured the Lien so extended,
renewed or replaced).

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Section 7.3     Mergers, Etc. The Borrower will not merge or consolidate with or
into any Person, or permit any of its Subsidiaries to do so, unless (a) the
merger or consolidation would not materially and adversely affect the ability of
the Borrower (or its successor by merger or consolidation as contemplated by
clause (b) below) to perform its obligations hereunder or under any other Loan
Document and (b) in the case of a merger or consolidation to which the Borrower
is a party, the corporation formed by such consolidation or into which the
Borrower would be merged assumes the Borrower’s obligations under this Agreement
and the other Loan Documents in a writing satisfactory in form and substance to
the Required Lenders; provided, however, that, in any case, (i) any Subsidiary
of the Borrower may merge or consolidate with or into any other Subsidiary of
the Borrower and (ii) any Subsidiary of the Borrower may merge or consolidate
with or into the Borrower provided that the Borrower is the surviving
corporation; further provided, however, that, in each case of a merger or
consolidation otherwise permitted above in this section, no Default would exist
immediately after giving effect to such merger or consolidation.

Section 7.4     Sales of Assets, Etc. From December 31, 2004 until the Maturity
Date, the Borrower will not sell, transfer, lease, assign or otherwise convey or
dispose of more than 20% of its assets (whether now owned or hereafter acquired)
in any single transaction or series of transactions, whether or not related,
except for (a) dispositions of current assets in the ordinary course of business
as currently conducted and (b) dispositions of assets not exceeding 5% of the
Borrower’s assets in connection with sale-leaseback transactions relating to
such assets.

Section 7.5     Compliance with ERISA. The Borrower will not (a) permit to exist
any åaccumulated funding deficiencyæ (as defined in Section 412(a) of the Code)
unless such deficiency exists with respect to a Multiple Employer Plan or
Multiemployer Plan and the Borrower has no control over the reduction or
elimination of such deficiency, (b) terminate, or permit any ERISA Affiliate to
terminate, any Plan of the Borrower or such ERISA Affiliate so as to result in
any material (in the opinion of the Required Lenders) liability of the Borrower
to the PBGC or (c) permit to exist any occurrence of any reportable event
(within the meaning of Section 4043 of ERISA), or any other event or condition,
that presents a material (in the opinion of the Required Lenders) risk of a
termination by the PBGC of any Plan of the Borrower or any ERISA Affiliate and
such a material liability of the Borrower to the PBGC.

Section 7.6     Constituent Documents, Etc. The Borrower will not change in any
material respect (a) its Restated Articles of Incorporation, By-Laws or other
similar documents, (b) its accounting policies or accounting practices (except
as required or permitted by the Financial Accounting Standards Board or
generally accepted accounting principles) or (c) its business (including ceasing
to engage in the business of the same general type as conducted by the Borrower
on December 31, 2004).

ARTICLE 8
EVENTS OF DEFAULT

Section 8.1     Events of Default. If any one or more of the following events
(each an "Event of Default") occurs and is continuing:

(a)     the Borrower fails to pay (i) any principal of any Advance when the same
becomes due and payable or (ii) any interest on any Advance, or any other amount
payable under any Loan Document, within five Business Days of when the same
becomes due and payable;

(b)     any representation or warranty made by or on behalf of the Borrower in
any Loan Document or by or on behalf of the Borrower (or any of its officers) in
connection with any Loan Document proves to have been incorrect in any material
respect when made or deemed made;

(c)     the Borrower fails to perform or observe (i) any term, covenant or
agreement contained in Section 6.10 or 6.11 or in Article 7 or (ii) any other
term, covenant or agreement contained in this Agreement (other than obligations
specifically set forth elsewhere in this Section 8.1) on its part to be
performed or observed if the failure to perform or observe such other term,
covenant or agreement remains unremedied for 30 days after written notice
thereof has been given to the Borrower by the Administrative Agent;

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(d)     the Borrower and/or any Subsidiary thereof fails to pay any principal
of, or premium or interest on, any Indebtedness (other than Indebtedness
evidenced by the Notes) thereof outstanding in the aggregate (for all such
Persons) in excess of $20,000,000 when the same becomes due and payable (whether
by scheduled maturity, required prepayment, acceleration, demand or otherwise),
and such failure continues after the applicable grace period, if any, specified
in the agreement or instrument relating to such Indebtedness; any other event
occurs or condition exists under any agreement or instrument relating to any
such Indebtedness and continues after the applicable grace period, if any,
specified in such agreement or instrument, if the effect of such event or
condition is to accelerate, or permit the acceleration of, the maturity of such
Indebtedness; or any such Indebtedness is declared to be due and payable, or is
required to be prepaid (other than by a regularly scheduled required
prepayment), prior to the stated maturity thereof;

(e)    the Borrower or any Subsidiary thereof (i) applies for or consents to the
appointment of a receiver, trustee, liquidator or custodian or the like for
itself or for its property, (ii) admits in writing its inability to pay its
debts generally as they become due, (iii) makes a general assignment for the
benefit of creditors, (iv) is adjudicated a bankrupt or insolvent, (v) commences
a voluntary case under the Federal bankruptcy laws of the United States of
America or files a voluntary petition or answer seeking reorganization, an
arrangement with creditors or any order for relief or seeking to take advantage
of any insolvency law or (vi) files an answer admitting the material allegations
of a petition filed against it in any bankruptcy, reorganization or insolvency
proceeding; corporate action is taken by the Borrower or any such Subsidiary for
the purpose of effecting any of the foregoing; or, without the application,
approval or consent of the Borrower or any Subsidiary thereof, a proceeding is
instituted in any court of competent jurisdiction seeking in respect of it an
adjudication in bankruptcy, reorganization, dissolution, winding up,
liquidation, composition or arrangement with creditors, readjustment of debts,
appointment of a trustee, receiver, liquidator or custodian or the like with
respect to all or any substantial part of its assets, or other like relief in
respect thereof under any bankruptcy or insolvency law, and, if such proceeding
is being contested by the Borrower or such Subsidiary in good faith, the same
(A) results in the entry of an order for relief of any such adjudication or
appointment or (B) continues undismissed, or pending and unstayed, for any
period of 60 consecutive days;

(f)     one or more judgments or orders for the payment of money exceeding any
applicable insurance coverage by more than $15,000,000 in the aggregate are
rendered against the Borrower and/or any Subsidiary thereof, and either
(i) enforcement proceedings are commenced by any creditor upon such judgment(s)
or order(s) or (ii) there is any period of 30 consecutive days during which a
stay of enforcement of such judgment(s) or order(s), by reason of a pending
appeal or otherwise, is not in effect;

(g)     any Termination Event with respect to a Plan occurs, and, 30 days after
notice thereof is given to the Borrower by the Administrative Agent, (i) such
Termination Event (if correctable) has not been corrected and (ii) the then
Unfunded Vested Liabilities of such Plan exceed $10,000,000 (or, in the case of
a Termination Event involving the withdrawal of a åsubstantial employeræ (as
defined in Section 4001(a)(2) of ERISA), the withdrawing employer’s
proportionate share of such excess exceeds such amount); or the Borrower or any
member of the Controlled Group as employer under a Multiemployer Plan makes a
complete or partial withdrawal from such Multiemployer Plan, and the Plan
sponsor of such Multiemployer Plan notifies such withdrawing employer that such
employer has incurred withdrawal liability in an amount exceeding $10,000,000;

(h)     any change in Applicable Law or any Governmental Action occurs that has
the effect of making the transactions contemplated by this Agreement
unauthorized, illegal or otherwise contrary to Applicable Law;

(i)     any material provision of this Agreement (except pursuant to the terms
hereof) ceases to be valid and binding on the Borrower or is declared to be null
and void, at any time for any reason, or the validity or enforceability thereof
is contested by the Borrower or any Governmental Authority; or the Borrower
denies that it has any or further liability or obligation under this Agreement;
or

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(j)     a Change in Control occurs;

then, and in any such event, the Administrative Agent (i) shall at the request,
or may with the consent, of the Required Lenders, by notice to the Borrower,
declare the obligation of the Lenders to make Advances (if any such obligation
is then outstanding) to be terminated, whereupon the same shall forthwith
terminate, and (ii) shall at the request, or may with the consent, of the
Required Lenders, by notice to the Borrower, declare the Advances, all interest
thereon and all other amounts payable hereunder and under the other Loan
Documents to be due and payable within two Business Days after demand therefor
by the Administrative Agent to the Borrower, whereupon the Advances, all such
interest and all such other amounts shall become and be forthwith due and
payable at such time, without presentment, demand, protest or further notice of
any kind, all of which are hereby expressly waived by the Borrower; provided,
however, that, in the event of the occurrence of any Event of Default described
in Section 8.1(e) with respect to the Borrower, (A) the obligation of the
Lenders to make Advances (if any such obligation is then outstanding) shall
automatically be terminated, and (B) the Advances, all interest accrued and
unpaid thereon and all other amounts payable hereunder shall automatically
become due and payable, without presentment, demand, protest or any notice of
any kind, all of which are hereby expressly waived by the Borrower.

ARTICLE 9
ADMINISTRATIVE AGENT

Section 9.1     Appointment and Authority. Each of the Lenders hereby
irrevocably appoints UBOC to act on its behalf as the Administrative Agent
hereunder and under the other Loan Documents and authorizes the Administrative
Agent to take such actions on such Lender’s behalf and to exercise such powers
as are delegated to the Administrative Agent by the terms hereof or thereof,
together with such actions and powers as are reasonably incidental thereto. The
provisions of this Article 9 are solely for the benefit of the Administrative
Agent and the Lenders, and the Borrower shall not have rights as a third-party
beneficiary of any of such provisions.

Section 9.2     Rights as Lender. The Person serving as the Administrative Agent
hereunder shall have the same rights and powers in its capacity as a Lender as
any other Lender and may exercise the same as though it were not the
Administrative Agent, and the term åLenderæ or åLendersæ shall, unless otherwise
expressly indicated or unless the context otherwise requires, include the Person
serving as the Administrative Agent hereunder in its individual capacity. Such
Person and its Affiliates may accept deposits from, lend money to, act as the
financial advisor or in any other advisory capacity for and generally engage in
any kind of business with the Borrower or any Subsidiary or other Affiliate
thereof as if such Person were not the Administrative Agent hereunder and
without any duty to account therefor to the Lenders.

Section 9.3     Exculpatory Provisions.

(a)     The Administrative Agent shall not have any duties or obligations except
those expressly set forth herein and in the other Loan Documents. Without
limiting the generality of the foregoing, the Administrative Agent: (i) shall
not be subject to any fiduciary or other implied duties, regardless of whether a
Default has occurred and is continuing; (ii) shall not have any duty to take any
discretionary action or exercise any discretionary powers, except discretionary
action and powers expressly contemplated hereby or by the other Loan Documents
that the Administrative Agent is required to exercise as directed in writing by
the Required Lenders (or such other number or percentage of the Lenders as
expressly provided for herein or in the other Loan Documents), provided that the
Administrative Agent shall not be required to take any action that, in its
opinion or in the opinion of its counsel, may expose the Administrative Agent to
liability or that is contrary to any Loan Document or any Applicable Law; and
(iii) shall not, except as expressly set forth herein or in the other Loan
Documents, have any duty to disclose, and shall not be liable for the failure to
disclose, any information relating to the Borrower or any of its Affiliates that
is communicated to or obtained by the Person serving as the Administrative Agent
or any of its Affiliates in any capacity.

(b)     The Administrative Agent shall not be liable for any action taken or not
taken by it (i) with the consent or at the request of the Required Lenders (or
such other number or percentage of the Lenders as is necessary, or as the
Administrative Agent believes in good faith to be necessary, under the
circumstances as provided in Sections 8.1 and 10.1) or (ii) in the absence of
the Administrative Agent’s own gross negligence or willful misconduct. The
Administrative Agent shall be deemed not to have knowledge of any Default unless
and until notice describing such Default is given to the Administrative Agent by
the Borrower or a Lender.

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(c)     The Administrative Agent shall not be responsible for or have any duty
to ascertain or inquire into (i) any statement, warranty or representation made
in or in connection with this Agreement or any other Loan Document, (ii) the
contents of any certificate, report or other document delivered hereunder or
thereunder or in connection herewith or therewith, (iii) the performance or
observance of any of the covenants, agreements or other terms or conditions set
forth herein or therein or the occurrence of any Default, (iv) the validity,
enforceability, effectiveness or genuineness of this Agreement, any other Loan
Document or any other agreement, instrument or document or (v) the satisfaction
of any condition set forth in Article 4 or elsewhere herein, other than to
confirm receipt of items expressly required to be delivered to the
Administrative Agent.

Section 9.4     Reliance by Administrative Agent. The Administrative Agent shall
be entitled to rely upon, and shall not incur any liability for relying upon,
any notice, request, certificate, consent, statement, instrument, document or
other writing (including any electronic message, internet or intranet website
posting or other distribution) believed by it to be genuine and to have been
signed, sent or otherwise authenticated by the proper Person. The Administrative
Agent also may rely upon any statement made to it orally (including by
telephone) and believed by it to have been made by the proper Person and shall
not incur any liability for relying thereon. In determining compliance with any
condition hereunder to the making of an Advance that by its terms must be
fulfilled to the satisfaction of one or more Lenders, the Administrative Agent
may presume that such condition is satisfactory to each such Lender unless the
Administrative Agent receives notice to the contrary from such Lender before the
making of such Advance. The Administrative Agent may consult with legal counsel
(who may be counsel for the Borrower), independent accountants and other experts
selected by it, and shall not be liable for any action taken or not taken by it
in accordance with the advice of any such counsel, accountants or experts.

Section 9.5     Delegation of Duties. The Administrative Agent may perform any
and all of its duties and exercise any and all of its rights and powers
hereunder or under any other Loan Document by or through any one or more
subagents appointed by the Administrative Agent. The Administrative Agent and
any such subagent may perform any and all of its duties and exercise any and all
of its rights and powers by or through their respective Affiliates. The
exculpatory provisions of this Article 9 shall apply to any such subagent and to
the Affiliates of the Administrative Agent and any such subagent and shall apply
to their respective activities in connection with the syndication of the credit
facilities provided for herein as well as activities as Administrative Agent.

Section 9.6     Resignation of Administrative Agent. The Administrative Agent
may at any time give notice of its resignation to the Lenders and the Borrower.
Upon receipt of any such notice of resignation, the Required Lenders shall have
the right, in consultation with the Borrower, to appoint a successor, which
shall be a bank with an office in the United States of America or an Affiliate
of any such bank with an office in the United States of America. If no such
successor is so appointed by the Required Lenders and accepts such appointment
within 30 days after the retiring Administrative Agent gives notice of its
resignation, then the retiring Administrative Agent may, on behalf of the
Lenders, appoint a successor Administrative Agent meeting the qualifications set
forth above; provided, however, that, if the Administrative Agent notifies the
Borrower and the Lenders that no qualifying Person has accepted such
appointment, then (a) such resignation shall nonetheless become effective in
accordance with such notice, (b) the retiring Administrative Agent shall be
discharged from its duties and obligations hereunder and under the other Loan
Documents and (c) all payments, communications and determinations provided to be
made by, to or through the Administrative Agent shall instead be made by or to
each Lender directly, until such time as the Required Lenders appoint a
successor Administrative Agent as provided for above in this section. Upon the
acceptance of a successor’s appointment as Administrative Agent hereunder, such
successor shall succeed to and become vested with all of the rights, powers,
privileges and duties of the retiring (or retired) Administrative Agent, and the
retiring Administrative Agent shall be discharged from all of its duties and
obligations hereunder and under the other Loan Documents (if not already
discharged therefrom as provided above in this section). The fees payable by the
Borrower to a successor Administrative Agent shall be the same as those payable
to its predecessor unless otherwise agreed between the Borrower and such
successor. After the retiring Administrative Agent’s resignation hereunder and
under the other Loan Documents, the provisions of this Article 9 and Sections
10.6 and 10.7 shall continue in effect for the benefit of such retiring
Administrative Agent, its subagents and their respective Affiliates in respect
of any actions taken or omitted to be taken by any of them while the retiring
Administrative Agent was acting as Administrative Agent.

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Section 9.7     Non-Reliance on Administrative Agent and Other Lenders. Each
Lender acknowledges that it has, independently and without reliance upon the
Administrative Agent or any other Lender or any of their Affiliates and based on
such documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon the
Administrative Agent or any other Lender or any of their Affiliates and based on
such documents and information as it shall from time to time deem appropriate,
continue to make its own decisions in taking or not taking action under or based
upon this Agreement, any other Loan Document or any related agreement or any
document furnished hereunder or thereunder.

Section 9.8     No Duties, Etc. Notwithstanding anything in this Agreement to
the contrary, no Person designated as lead arranger, arranger or syndication
agent on the cover page of this Agreement shall have any powers, duties,
liabilities or responsibilities under this Agreement or any of the other Loan
Documents in such capacity.

ARTICLE 10
MISCELLANEOUS

Section 10.1     Amendments and Waivers. Neither this Agreement nor any
provision hereof may be amended, waived or otherwise modified except pursuant to
an agreement or agreements in writing entered into by the Borrower and the
Required Lenders or by the Borrower and the Administrative Agent with the
consent of the Required Lenders; provided, however, that no such agreement shall
(a) increase the Commitment of any Lender without the written consent of such
Lender, (b) reduce the principal amount of any Advance or the rate of interest
thereon, or reduce any fees payable hereunder, without the written consent of
each Lender affected thereby, (c) postpone the scheduled date of payment of the
principal amount of any Advance, or any interest thereon, or any fees payable
hereunder, or reduce the amount of, waive or excuse any such payment, or
postpone the scheduled date of expiration of any Commitment, without the written
consent of each Lender affected thereby, (d) change Section 2.8 in a manner that
would alter the pro rata sharing of payments required thereby, without the
written consent of each Lender, or (e) change any of the provisions of this
section, the definition of åRequired Lendersæ or any other provision hereof
specifying the number or percentage of Lenders required to amend, waive or
otherwise modify any rights hereunder or make any determination or grant any
consent hereunder, without the written consent of each Lender; further provided,
however, that no such agreement shall amend, modify or otherwise affect the
rights or duties of the Administrative Agent hereunder without the prior written
consent of the Administrative Agent.

Section 10.2     Notices. All notices, requests and other communications to any
party hereunder shall be in writing (including by telecopier) and shall be given
to such party, addressed to it, at its address or telecopier number set forth
below the name of such party on the signature pages hereof or at such other
address or telecopier number as such party may hereafter specify for that
purpose by notice to the other parties. Each such notice, request or
communication shall be effective (a) if given by telecopier, on the Business Day
following the sending thereof, (b) if given by mail, upon receipt but not later
than five days after such communication is deposited into the mails with
first-class postage prepaid, addressed as aforesaid, or (c) if given by any
other means, when delivered at the address for notice referred to above;
provided, however, that notices and other communications to the Administrative
Agent pursuant to Article 2 shall not be effective until received by the
Administrative Agent.

Section 10.3     No Waiver; Remedies. No failure on the part of any Lender or
the Administrative Agent to exercise, and no delay in exercising, any power or
right hereunder for any period of time shall operate as a waiver thereof, nor
shall any single or partial exercise of any such power or right preclude any
other or further exercise thereof or the exercise of any other power or right.
The rights and remedies provided herein to the Lenders and the Administrative
Agent are cumulative and not exclusive of any other rights or remedies that the
Lenders or the Administrative Agent may otherwise have. No waiver of any
provision of this Agreement or consent to any departure by the Borrower
therefrom shall in any event be effective unless the same is authorized as
provided in Section 10.1, and then such waiver or consent shall be effective
only in the specific instance and for the purpose for which given. No notice to
or demand on the Borrower in any case shall entitle the Borrower to any other or
further notice or demand in similar or other circumstances.

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Section 10.4     Right of Setoff. Upon (a) the occurrence and during the
continuation of any Event of Default and (b) the making of the request or the
granting of the consent specified by Section 8.1 to authorize the Administrative
Agent to declare the Advances due and payable pursuant to the provisions of
Section 8.1, each Lender is hereby authorized at any time and from time to time,
to the fullest extent permitted by Applicable Law, to set off and apply any or
all deposits (general or special, time or demand, provisional or final) at any
time held and other indebtedness at any time owing by such Lender to or for the
credit or the account of the Borrower against any or all of the obligations of
the Borrower now or hereafter existing under this Agreement and the other Loan
Documents, irrespective of whether such Lender has made any demand under this
Agreement or any such other Loan Document and although such obligations may be
unmatured. Each Lender agrees to notify the Borrower promptly after any such
setoff and application made by such Lender; provided, however, that the failure
to give such notice shall not affect the validity of such setoff and
application. The rights of each Lender under this section are in addition to
other rights and remedies (including other rights of setoff) that such Lender
may have.

Section 10.5     Continuing Obligation. Except with respect to Sections 10.6 and
10.7, the obligations of the Borrower under this Agreement (a) shall continue
until the later of (i) the date on which the Commitments terminate and (ii) the
date on which all amounts due and owing to the Lenders and the Administrative
Agent hereunder and under the other Loan Documents (including all Advances,
interest thereon, fees and expenses) have been paid in full, (b) shall be
binding upon the Borrower and its successors and assigns and (c) shall inure to
the benefit of and be enforceable by the Lenders and the Administrative Agent
and their respective successors, transferees and assigns; provided, however,
that the Borrower may not assign all or any part of its rights and obligations
under this Agreement without the prior written consent of the Required Lenders,
and the Lenders shall have the right to assign their respective rights and
obligations hereunder only in accordance with Section 10.8.

Section 10.6     Costs, Expenses and Taxes. The Borrower agrees to pay, promptly
after demand therefor, (a) whether or not the transactions contemplated herein
are consummated, all reasonable costs and expenses of the Administrative Agent
in connection with the preparation, execution, delivery, administration, waiver
and other modification of this Agreement, the other Loan Documents and any other
documents that may be delivered in connection herewith or therewith, including
the reasonable fees and out-of-pocket expenses of counsel for the Administrative
Agent with respect thereto and with respect to advising the Administrative Agent
as to its rights and responsibilities under the Loan Documents, and (b) all
reasonable costs and expenses of the Administrative Agent and the Lenders,
including the reasonable fees and out-of-pocket expenses of counsel for the
Administrative Agent and the Lenders, that may be incurred by the Administrative
Agent and the Lenders in connection with the enforcement (whether through
negotiations, legal proceedings or otherwise) of this Agreement, the other Loan
Documents and any other documents that may be delivered in connection herewith
or therewith, whether in any action, suit or litigation, any bankruptcy,
insolvency or similar proceeding, or otherwise. Without prejudice to the
survival of any other obligation of the Borrower hereunder, the obligations of
the Borrower contained in this section shall survive the payment in full of
amounts payable by the Borrower under this Agreement and the termination hereof.

Section 10.7     Indemnification. The Borrower hereby agrees to indemnify and
hold harmless the Administrative Agent and each Lender and each of their
respective officers, directors, employees, agents, advisors and Affiliates (each
an "Indemnified Person") from and against any and all claims, damages, losses,
liabilities, costs or expenses whatsoever that any of them may incur or that may
be claimed against any of them by any Person whatsoever (a) by reason of any
inaccuracy in any material respect in, or untrue statement or alleged untrue
statement of any material fact contained or incorporated by reference in, any
offering document or information memorandum distributed by or on behalf of the
Borrower referring to this Agreement and the transactions contemplated hereby,
or in any supplement or amendment to either thereof, or the omission or alleged
omission to state therein a material fact necessary to make such statements, in
the light of the circumstances under which they are or were made, not
misleading, or (b) by reason of or in connection with the execution, delivery
and performance of this Agreement or any other Loan Document, except to the
extent that any such claim, damage, loss, liability, cost or expense resulted
from such Indemnified Person’s gross negligence or willful misconduct. Nothing
in this section is intended to limit the Borrower’s repayment obligations under
this Agreement. Without prejudice to the survival of any other obligation of the
Borrower hereunder, the indemnities and obligations of the Borrower contained in
this section shall survive the payment in full of amounts payable by the
Borrower under this Agreement and the termination of this Agreement.

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Section 10.8     Assignments and Participations.

(a)     Each Lender may assign to one or more banks or other entities acceptable
to the Administrative Agent, in the exercise of its reasonable discretion, all
or a portion of such Lender’s rights and obligations under this Agreement
(including all or a portion of its Commitment or the Advances owing to it);
provided, however, that (i) except in the case of an assignment to a Person
that, immediately before such assignment, was a Lender, the amount of the
Commitment or Advances of the assigning Lender being assigned pursuant to each
such assignment (determined as of the date of the Assignment and Assumption with
respect to such assignment) shall in no event be less than the lesser of (A) the
entire Commitment or all Advances of such Lender at such time and (B)
$10,000,000, and (ii) the parties to each such assignment shall execute and
deliver to the Administrative Agent, for its acceptance and recording in the
Register, an Assignment and Assumption, together with a processing and recording
fee of $3,500. Upon such execution, delivery, acceptance and recording, from and
after the effective date specified in the applicable Assignment and Assumption,
which effective date shall be at least 5 Business Days after the date of
delivery thereof to the Administrative Agent or, if so specified in such
Assignment and Assumption, the date of acceptance thereof by the Administrative
Agent, (i) the assignee thereunder shall be a party hereto and, to the extent
that rights and obligations hereunder have been assigned to it pursuant to such
Assignment and Assumption, shall have the rights and obligations of a Lender
hereunder and (ii) the Lender assignor thereunder shall, to the extent that
rights and obligations hereunder have been assigned by it pursuant to such
Assignment and Assumption, relinquish its rights and be released from its
obligations under this Agreement (and, in the case of an Assignment and
Assumption covering all or the remaining portion of an assigning Lender’s rights
and obligations under this Agreement, such Lender shall cease to be a party
hereto, except that such Lender shall continue to be an åIndemnified Personæ
under Section 10.7).

(b)     By executing and delivering an Assignment and Assumption, the Lender
assignor thereunder and the assignee thereunder confirm to and agree with each
other and the other parties hereto as follows: (i) other than as provided in
such Assignment and Assumption, such assigning Lender makes no representation or
warranty and assumes no responsibility with respect to any statement, warranty
or representation made in or in connection with this Agreement or the execution,
legality, validity, enforceability, genuineness, sufficiency or value of this
Agreement or any other instrument or document furnished pursuant hereto; (ii)
such assigning Lender makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Borrower or any
Subsidiary thereof or the performance or observance by the Borrower of any of
its obligations under any Loan Document or any other instrument or document
furnished pursuant hereto; (iii) such assignee confirms that it has received a
copy of this Agreement, together with copies of the financial statements
referred to in Sections 5.9 and 6.8 and such other documents and information as
it has deemed appropriate to make its own credit analysis and decision to enter
into such Assignment and Assumption; (iv) such assignee will, independently and
without reliance upon the Administrative Agent, such assigning Lender or any
other Lender and based on such documents and information as it may deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement; (v) such assignee appoints and
authorizes the Administrative Agent to take such action as agent on its behalf
and to exercise such powers under the Loan Documents as are delegated to the
Administrative Agent by the terms thereof, together with such powers as are
reasonably incidental thereto; and (vi) such assignee agrees that it will
perform in accordance with their terms all of the obligations that by the terms
of the Loan Documents are required to be performed by it as a Lender.

(c)     The Administrative Agent will maintain at its address referred to in
Section 10.2 a copy of each Assignment and Assumption delivered to and accepted
or consented to by it and a register for the recordation of the names and
addresses of the Lenders and the Commitment of, or the principal amount of
Advances owing to, each Lender from time to time (the åRegisteræ). The entries
in the Register shall be conclusive and binding for all purposes, absent
manifest error, and the Borrower, the Administrative Agent and the Lenders may
treat each Person whose name is recorded in the Register as a Lender hereunder
for all purposes of this Agreement. The Register shall be available for
inspection by the Borrower or any Lender at any reasonable time and from time to
time upon reasonable prior notice.

(d)     Upon its receipt of an Assignment and Assumption that has been properly
executed, accepted and consented to, as applicable, as specified above, the
Administrative Agent shall, if such Assignment and Assumption has been properly
completed and is in proper form, (i) accept such Assignment and Assumption, (ii)
record the information contained therein in the Register and (iii) give prompt
notice thereof to the Borrower.

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(e)     Each Lender may sell participations to one or more banks or other
entities (each a "Participant") in or to all or a portion of its rights and
obligations under this Agreement (including all or a portion of its Commitments
or the Advances owing to it); provided, however, that (i) such Lender’s
obligations under this Agreement (including its Commitment, if any) shall remain
unchanged, (ii) such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations, (iii) the Borrower, the
Administrative Agent and the other Lenders shall continue to deal solely and
directly with such Lender in connection with such Lender’s rights and
obligations under this Agreement and (iv) no Participant under any such
participation shall have any right to approve any amendment or waiver of any
provision of any Loan Document, or any consent to any departure by the Borrower
therefrom, except to the extent that such amendment, waiver or consent would
reduce the principal of, or interest on, the Advances or any other amounts
payable hereunder, in each case to the extent subject to such participation,
postpone any date fixed for any payment of principal of, or interest on, the
Advances or any other amounts payable hereunder, in each case to the extent
subject to such participation. If, at the time of a grant of a participation
pursuant to this section, the proposed Participant is subject to Taxes that
would result in a claim for compensation pursuant to Section 3.4 materially
greater than that to which the Lender selling a participation is entitled, such
grant shall be subject to the consent of the Borrower (which consent shall not
be unreasonably withheld).

(f)     Any Lender or the Administrative Agent may, in connection with any
assignment or participation or proposed assignment or participation pursuant to
this Section 10.8, disclose to the assignee or Participant or proposed assignee
or Participant any information relating to the Borrower that was furnished to
such Lender or the Administrative Agent by or on behalf of the Borrower;
provided, however, that such assignee or Participant agrees to be bound by the
obligations of such Lender to maintain the confidentiality of such information.

(g)     Nothing herein shall prohibit any Lender from pledging or assigning any
Advance or any Note to any Federal Reserve Bank in accordance with Applicable
Law.

Section 10.9     Severability. Any provision of this Agreement that is
prohibited, unenforceable or not authorized in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition,
unenforceability or nonauthorization without invalidating the remaining
provisions hereof or affecting the validity, enforceability or legality of such
provision in any other jurisdiction. The parties shall endeavor in good-faith
negotiations to replace any such invalid, illegal or unenforceable provision
with a valid provision, the economic effect of which comes as close as possible
to that of the invalid, illegal or unenforceable provision.

Section 10.10    Governing Law. THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED
BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
CALIFORNIA. EACH OF THE BORROWER, THE ADMINISTRATIVE AGENT AND THE LENDERS (A)
IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT SITTING IN
LOS ANGELES IN ANY ACTION ARISING OUT OF THIS AGREEMENT, (B) AGREES THAT ALL
CLAIMS IN ANY SUCH ACTION MAY BE DECIDED IN SUCH COURT, (C) WAIVES, TO THE
FULLEST EXTENT IT MAY EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT FORUM
AND (D) CONSENTS TO THE SERVICE OF PROCESS BY MAIL. A FINAL JUDGMENT IN ANY SUCH
ACTION SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS. NOTHING
HEREIN SHALL AFFECT THE RIGHT OF ANY PARTY TO SERVE LEGAL PROCESS IN ANY MANNER
PERMITTED BY APPLICABLE LAW OR AFFECT ITS RIGHT TO BRING ANY ACTION IN ANY OTHER
COURT.

Section 10.11     Execution in Counterparts. This Agreement may be executed in
any number of counterparts and by the parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement.

Section 10.12     Headings. Section headings in this Agreement are included
herein for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose.

Section 10.13     Patriot Act Notice. Each Lender subject to Title III of the
Uniting and Strengthening America by Providing Appropriate Tools Required to
Intercept and Obstruct Terrorism Act of 2001 (Public Law 107-56) (the "Patriot
Act") hereby notifies the Borrower that, pursuant to the requirements of the
Patriot Act, such Lender is required to obtain, verify and record information
that identifies the Borrower, which information includes the name and address of
the Borrower and other information that will allow such Lender to identify the
Borrower in accordance with the Patriot Act.

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Section 10.14     WAIVER OF JURY TRIAL. TO THE EXTENT PERMITTED BY APPLICABLE
LAW, EACH OF THE BORROWER, THE LENDERS AND THE ADMINISTRATIVE AGENT HEREBY
IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, RELATING TO THIS
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, ANY NEGOTIATIONS OR COMMUNICATIONS
RELATING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, OR ANY
TRANSACTION CONTEMPLATED HEREBY OR THEREBY.

The parties hereto have caused this Agreement to be executed by their respective
duly authorized representatives as of the date first written above.

        PENNSYLVANIA ELECTRIC COMPANY

        By:  /s/Randy Scilla  
        Name:  Randy Scilla   
        Title:  Assistant Treasurer  

                                          Address for Notice

        Pennsylvania Electric Company
        76 South Main Street
        Akron, Ohio 44308
        Telecopier: 330-384-3772
        Attention: Randy Scilla
      Assistant Treasurer

        UNION BANK OF CALIFORNIA, N.A.,
                             as Administrative Agent and a Lender

        By:  /s/Kevin M. Zitar  
        Name:  Kevin M. Zitar  
        Title:  Vice President   

        Address for Notice

        Union Bank of California, N.A.
        445 South Figueroa Street
        Los Angeles, California 90071
        Telecopier: 213-236-4096
        Attention: Power & Utilities

        Domestic Lending Office

        Union Bank of California, N.A.
        445 South Figueroa Street
      Los Angeles, California 90071

S-1

        NATIONAL CITY BANK

        By:  /s/Kevin O. Thompson 
        Name:  Kevin O. Thompson  
        Title:  Senior Vice President  

        Address for Notice

        National City Bank
        One Cascade Plaza
        Akron, Ohio 44308
        Telecopier: 330-375-8029
        Attention: Kevin O. Thompson
        Senior Vice President

        Domestic Lending Office

        National City Bank
        One Cascade Plaza
        Akron, Ohio 44308

 

S-2

 
 

EXHIBIT A

PROMISSORY NOTE

U.S.$________________                                                                         __________,
200_

For value received, the undersigned, PENNSYLVANIA ELECTRIC COMPANY, a
Pennsylvania corporation (the "Borrower"), hereby promises to pay to the order
of _________________________ (the "Lender"), on the Maturity Date, the principal
amount of _________________________ Dollars (U.S.$__________) lent by the Lender
to the Borrower pursuant to the Loan Agreement referred to below. Terms defined
in the Loan Agreement and not otherwise defined herein have the same respective
meanings when used herein.

The Borrower promises to pay interest on the unpaid principal amount of each
Advance from the Lender, from the date of such Advance until such principal
amount is paid in full, at such interest rates, and payable at such times, as
specified in the Loan Agreement.

Both principal and interest are payable in Dollars, in immediately available
funds, to Union Bank of California, N.A., a national banking association, as
administrative agent (the "Administrative Agent"), at its office located at 445
South Figueroa Street, Los Angeles, California 90071 or as otherwise directed by
the Administrative Agent. The Advances from the Lender and all payments made on
account of the principal thereof shall be recorded by the Lender and, before any
transfer hereof, endorsed on the schedule attached hereto, which is part of this
Note.

This Note is one of the "Notes" referred to in, and is entitled to the benefits
of, the Term Loan Agreement dated as of March __, 2005 (as it may hereafter be
amended, restated or otherwise modified from time to time, the "Loan Agreement")
among the Borrower, the Lender and the other financial institutions party
thereto, and the Administrative Agent. The Loan Agreement, among other things,
(1) provides for Advances from the Lender to the Borrower in the aggregate
Dollar amount first set forth above, the indebtedness of the Borrower resulting
from such Advances being evidenced by this Note, and (2) contains provisions for
acceleration of the maturity hereof upon the happening of certain stated events
and also for prepayments on account of principal hereof before the maturity
hereof upon the terms and conditions specified therein.

The Borrower hereby waives presentment, demand, protest and notice of any kind.
No failure to exercise, and no delay in exercising, any rights hereunder on the
part of the holder hereof shall operate as a waiver of any such rights.

The Borrower has caused this Note to be executed by its duly authorized
representative as of the date first written above.

        PENNSYLVANIA ELECTRIC COMPANY

        By:      
        Name:      
        Title:      

-

A-1

SCHEDULE TO PROMISSORY NOTE

   
Amount of
Unpaid
   
Amount of
Principal Paid
Principal
Notation
Date
Advance
or Prepaid
Balance
Made By

-

A-2

 
EXHIBIT B

NOTICE OF BORROWING

__________, 2005

Union Bank of California, N.A.,
as Administrative Agent
445 South Figueroa Street
Los Angeles, California 90071

Attention: Power & Utilities

Ladies and Gentlemen:

The undersigned, Pennsylvania Electric Company, a Pennsylvania corporation,
refers to the Term Loan Agreement dated as of March __, 2005 (the "Loan
Agreement") among the undersigned, the lenders referred to therein and Union
Bank of California, N.A., a national banking association, as administrative
agent. Terms defined in the Loan Agreement and not otherwise defined herein have
the same respective meanings when used herein.

Pursuant to Section 2.2(a) of the Loan Agreement, the undersigned hereby
requests a Borrowing and in that connection sets forth below the information
relating to such Borrowing (the "Proposed Borrowing"), as required by Section
2.2(a) of the Loan Agreement.

1. The date of the Proposed Borrowing is __________, 2005.

2. The Proposed Borrowing will be composed of [Base] [Eurodollar] Rate Advances.

3. The amount of the Proposed Borrowing is $100,000,000.

[4. The initial Interest Period for the Eurodollar Rate Advances is _____
[week[s]] [month[s]].]

The undersigned hereby certifies that the following statements are true on the
date hereof and will be true on the date of the Proposed Borrowing:

(a)     the representations and warranties contained in Article 5 of the Loan
Agreement are true and correct in all material respects, before and after giving
effect to the Proposed Borrowing and to the application of the proceeds thereof,
as though made on and as of each such date (other than any such representations
or warranties that, by their terms, refer to a specific date, in which case as
of such specific date); and

(b)     no event has occurred and is continuing, or would result from the making
of the Proposed Borrowing or from the application of the proceeds thereof, that
constitutes a Default.

        Very truly yours,

        PENNSYLVANIA ELECTRIC COMPANY

        By:      
        Name:      
        Title:      

 

B-1

EXHIBIT C

NOTICE OF CONVERSION

__________, 200_

Union Bank of California, N.A.,
as Administrative Agent
445 South Figueroa Street
Los Angeles, California 90071

Attention: Power & Utilities

Ladies and Gentlemen:

The undersigned, Pennsylvania Electric Company, a Pennsylvania corporation,
refers to the Term Loan Agreement dated as of March __, 2005 (the "Loan
Agreement") among the undersigned, the lenders referred to therein and Union
Bank of California, N.A., a national banking association, as administrative
agent (the "Administrative Agent"). Terms defined in the Loan Agreement and not
otherwise defined herein have the same respective meanings when used herein.

Pursuant to Section 2.6(a) of the Loan Agreement, the undersigned hereby
notifies the Administrative Agent that the undersigned elects to [Convert
Advances of one Type into Advances of the other Type] [Convert Eurodollar Rate
Advances into Eurodollar Rate Advances with a new Interest Period] and in that
connection sets forth below the information relating to such Conversion, as
required by the Loan Agreement.

1. The date of such Conversion is __________, 200_.

2. The Advances to be Converted are [describe Type, principal amount, date made,
last day of Interest Period, etc. of Advances to be Converted].

[3. The duration of the [initial] [new] Interest Period for the Eurodollar Rate
Advances is _____ [week[s]] [month[s]].]

        Very truly yours,

        PENNSYLVANIA ELECTRIC COMPANY

        By:      
        Name:      
        Title:
 
     
C-1