Document:

EXHIBIT 10-18

[Execution Copy]

OE FOSSIL SECURITY AGREEMENT

SECURITY AGREEMENT, dated October 24, 2005 (the “Agreement”), by and between FIRSTENERGY GENERATION CORP. (”Debtor”), an Ohio corporation and OHIO EDISON COMPANY (“Secured Party”), an Ohio corporation. 

BACKGROUND

A. Debtor and Secured Party have entered into a certain Purchase and Sale Agreement, dated as of May 18, 2005 (“Purchase Agreement”), pursuant to which Debtor has purchased from Secured Party certain Purchased Assets, as defined in the Purchase Agreement.  Capitalized terms used herein shall have the meaning given to them in the Purchase Agreement unless otherwise defined herein.

B. As provided by the Purchase Agreement, Debtor has delivered to Secured Party a Secured Promissory Note, dated October 24, 2005, in payment of the Purchase Price for the Purchased Assets.

C. Debtor wishes to secure its obligations under the Secured Promissory Note by granting to Secured Party a security interest in the Purchased Assets.

1. Grant of Security Interest.  Debtor hereby conveys, assigns, transfers and grants to Secured Party a security interest in the Collateral (as defined in section 3) to secure the Debtor’s performance of the obligations set forth in Section 4.

2. Collateral.  The collateral covered by this Agreement (“Collateral”) shall consist of the following:

	
                         
 	
                        a.
 	
                        Seller’s 100% undivided ownership interest in Unit No. 3 of the R. E. Burger Generating Station, Meade Township, Ohio;
 

	
                         
 	
                        b.
 	
                        Seller’s 100% undivided ownership interest in Unit No. 4 of the R. E. Burger Generating Station, Meade Township, Ohio;
 

	
                         
 	
                        c.
 	
                        Seller’s 100% undivided ownership interest in Unit No. 5 of the R. E. Burger Generating Station, Meade Township, Ohio;
 

	
                         
 	
                        d.
 	
                        Seller’s 60% undivided ownership interest in Unit No. 1 of the Mansfield Generating Station, Borough of Shippingport, Pennsylvania;
 

	
                         
 	
                        e.
 	
                        Seller’s 43.06% undivided ownership interest in Unit No. 2 of the Mansfield Generating Station, Borough of Shippingport, Pennsylvania;
 

	
                         
 	
                        f.
 	
                        Seller’s 49.34% undivided ownership interest in Unit No. 3 of the Mansfield Generating Station, Borough of Shippingport, Pennsylvania;
 

	
                         
 	
      g.
 	
      Seller’s 100% undivided ownership interest in Unit No. 1 of the W. H. Sammis Generating Station, Village of Stratton, Ohio;
 

 

	
                         
 	
                        h.
 	
                        Seller’s 100% undivided ownership interest in Unit No. 2 of the W. H. Sammis Generating Station, Village of Stratton, Ohio;
 

	
                         
 	
                        i.
 	
                        Seller’s 100% undivided ownership interest in Unit No. 3 of the W. H. Sammis Generating Station, Village of Stratton, Ohio;
 

	
                         
 	
                        j.
 	
                        Seller’s 100% undivided ownership interest in Unit No. 4 of the W. H. Sammis Generating Station, Village of Stratton, Ohio;
 

	
                         
 	
                        k.
 	
                        Seller’s 100% undivided ownership interest in Unit No. 5 of the W. H. Sammis Generating Station, Village of Stratton, Ohio;
 

	
                         
 	
                        l.
 	
                        Seller’s 100% undivided ownership interest in Unit No. 6 of the W. H. Sammis Generating Station, Village of Stratton, Ohio;
 

	
                         
 	
                        m.
 	
                        Seller’s 48.00% undivided ownership interest in Unit No. 7 of the W. H. Sammis Generating Station, Village of Stratton, Ohio;
 

	
                         
 	
                        n.
 	
                        Seller’s 85.60% undivided ownership interest in the R.E. Burger Plant Diesel Generators, Meade Township, Ohio;
 

	
                         
 	
                        o.
 	
                        Seller’s 86.00% undivided ownership interests in the 48 MW Edgewater Peaking Facility, Lorain, Ohio;
 

	
                         
 	
                        p.
 	
                        Seller’s 85.60% undivided ownership interest in the 60 MW Mad River Peaking Facility, Springfield, Ohio;
 

	
                         
 	
                        q.
 	
                        Seller’s 85.60% undivided ownership interest in W. H. Sammis Plant Diesel Generators, Village of Stratton, Ohio;
 

	
                         
 	
                        r.
 	
                        Seller’s 100% undivided ownership interest in the 120 MW West Lorrain Peaking Facility, Lorain, Ohio; and
 

	
                         
 	
                        s.
 	
                        All of Seller’s right, title and interest in and to any and all contracts, fuel, spare parts, inventories, equipment, supplies and other assets associated with or necessary for the ownership or operation of the foregoing.
 

3. Debtor’s Obligations Secured Hereby.  This Agreement secures the obligations of the Debtor to make payment of principal and interest due on the Secured Promissory Note.

4. Debtor’s Covenants.  The Debtor agrees and covenants as follows:

a. Further Encumbrances. Until the obligations secured under this Agreement and the Note shall have been repaid in full, the Debtor shall not grant a security interest in any of the Collateral other than to Secured Party or execute any financing statements covering any of the Collateral in favor of any person other than Secured Party without Secured Party’s prior written consent.

b. Insurance on Collateral.  The Collateral will be insured at the Debtor’s expense against all risks and in such amounts as commonly insured by owners of like property and to the

 

extent Debtor can obtain such insurance at commercially reasonable rates and terms.  The Debtor agrees to pay or cause to be paid, when due, all premiums for such insurance and all taxes, license fees and other charges in connection with the Collateral.
c. Perfection of Security Interest. The Debtor shall execute and deliver such financing statements and other documents as Secured Party reasonably deems necessary to create, perfect and continue perfection of the security interest in the Collateral contemplated hereby.

d. Fees and Costs.  Upon any Event of Default, the Debtor shall pay all expenses, including reasonable attorneys’ fees, incurred by Secured Party in the preservation, realization, enforcement or exercise of any of Secured Party’s rights under this Agreement.

5. Remedies of Default.  Upon the occurrence of an Event of Default, Secured Party shall have all rights, privileges, powers and remedies provided by law, including, but not limited to, exercise of any or all of the remedies hereinafter set forth.  Such rights, privileges, powers and remedies shall be cumulative, and no single or partial exercise of any of them shall preclude the further or other exercise of the same or any of them.

a. Payment Under Note.  Secured Party may declare the aggregate unpaid principal balance of the Secured Promissory Note together with all unpaid accrued interest thereon, to be immediately due and payable, and thereupon all such amounts shall be and become immediately due and payable to Secured Party.

b. Possession of Collateral.  Secured Party may take possession of any or all of the Collateral covered hereby.

6. Power of Attorney.  The Debtor hereby appoints Secured Party the attorney-in-fact of the Debtor to prepare, sign and file or record, for the Debtor in the Debtor’s name, any financing statements, applications for registration and other similar instruments and documents and to take any other action deemed by Secured Party necessary or desirable in order to perfect or continue perfection of the security interest of Secured Party hereunder, and to perform any obligations of the Debtor hereunder, at the Debtor’s expense, but without obligation to do so.

7. Successors and Assigns.  This Agreement shall inure to the benefit of Secured Party and its successors and assigns, and shall be biding upon the Debtor and its successor and assigns.

8. Presentment, etc.  The Debtor hereby waives presentment, protest,, notice of protest, notice of dishonor and notice of nonpayment with respect to any proceeds to which Secured Party is entitled hereunder and any rights to direct the application of payments for security for indebtedness of the Debtor hereunder, or indebtedness of customers of the Debtor, and hereby waives any right to require proceedings against others or to require exhaustion of security.

9. Notices.  All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given upon receipt if: (a) mailed by certified or registered mail, return receipt requested; (b) sent for overnight delivery by Federal Express or other express carrier, (c) sent via facsimile; or (d) delivered personally, addressed as follows or to such other address or addresses of which the respective party shall have notified the other.

If to Secured Party:

Ohio Edison Company

c/o FirstEnergy Corp.

 

76 South Main Street

Akron, Ohio 44308

Attn: President

Facsimile: (330) 384-3875

If to Debtor:

FirstEnergy Generation Corp.

c/o FirstEnergy Corp.

76 South Main Street

Akron, Ohio 44308

Attn: President

Facsimile: (330) 384-3875

10. Reliance on Statement of a Secured Party.  In performing any obligations hereunder or in responding to any notice provided hereunder, the Debtor shall be entitled to rely on any statement made by Secured Party or its agent unless the Debtor has actual knowledge that the party making such statement is exceeding his or its authority to act as the agent of Secured Party.

11. Governing Law.  This Agreement shall be governed by the substantive laws of the State of Ohio, without giving effect to any conflict of laws principles.

12. Enforcement.  If any portion of this Agreement be determined to be invalid or unenforceable, the remainder shall be valid and enforceable to the maximum extent possible with the same effect as if the invalid or unenforceable portion were omitted from this Agreement.

13. Headings.  The headings set forth in this Agreement are for the convenience of the parties and shall not by themselves determine the interpretation or construction of this Agreement.

(signature page follows)

 

IN WITNESS WHEREOF, the parties have executed this Agreement on the date set forth above.

 

	
                         
 	
                         
 	
                        DEBTOR:
 
	 	 	 
	
                         
 	
                         
 	
                        FIRSTENERGY GENERATION CORP.
 
	
                          
 	
                         
 	
                        By: 
 	
                        
 /s/ Charles D. Lasky
 

 

	
                         
 	
                         
 	
                        SECURED PARTY:
 
	 	 	 
	
                         
 	
                         
 	
                        OHIO EDISON COMPANY
 
	
                          
 	
                         
 	
                        By: 
 	
                        
 /s/ David W. WhiteheadEXHIBIT 10-19
	 

	 
		AMENDMENT NO. 1
	 

	 
		to
	 

	 
		OE FOSSIL SECURITY AGREEMENT
	 

	 
		THIS AMENDMENT NO. 1 (this
		“Amendment”), dated as of June 30, 2007 (the
		“Amendment Effective
		Date”), to the Security
		Agreement, dated as of October 24, 2005 (the “Security Agreement”), is entered into by and between FIRSTENERGY
		GENERATION CORP., an Ohio corporation (“Debtor”), and OHIO EDISON COMPANY, an Ohio corporation
		(“Secured
		Party” or
		“Seller”). Capitalized terms used and not otherwise
		defined herein shall have the meanings ascribed thereto in the Security
		Agreement.
	 

	 
		W
		I T
		N E
		S S
		E T
		H :
	 

	 
		WHEREAS, Debtor and Secured Party entered
		into the Security Agreement and Debtor issued its related OE Fossil Note, dated
		October 24, 2005 (the “Note”),
		to Secured Party in the initial principal amount of $1,021,521,824.61 all in
		connection with Debtor’s purchase of Secured Party’s undivided
		ownership interests in certain generating assets (the “Assets”) pursuant to a purchase option under that certain
		Master Facility Lease, dated January 1, 2001 (the “Master
		Lease”), among the Debtor, the Secured Party,
		Pennsylvania Power Company, The Cleveland Electric Illuminating Company and The
		Toledo Edison Company;
	 

	 
		WHEREAS, in connection with the cumulative
		reduction in the outstanding principal amount of the Note of
		$801,549,850.61 to $219,971,974.00 through the date hereof as a result
		of Debtor’s prepayments from time to time of the Note in accordance with
		the terms thereof, Debtor has requested amendments to certain terms of the
		Security Agreement to reflect the release from the lien (the
		“Lien”) of the Security Agreement of a comparable
		portion of the Assets, and Secured Party has agreed to such amendments in as
		much as the aggregate purchase price paid by the Debtor for those Assets being
		released from the Lien, as reflected in the applicable purchase prices
		contained in the Master Lease is equal to or less than the aggregate reduction
		in the outstanding principal amount of the Note;
	 

	 
		WHEREAS, the aggregate purchase price paid
		by Debtor under the Master Lease for the ownership interests of Secured Party
		in Units Nos. 1 and 2 of the Bruce Mansfield Generating Station, located in the
		Borough of Shippingport, Pennsylvania (the “Mansfield
		Plant”), was $211,511,619.00; and 
	 

	 
		WHEREAS, such amendments shall be of
		benefit to Debtor.
	 

	 
		NOW, THEREFORE, in consideration of the
		covenants, conditions and agreements hereinafter set forth, and for other good
		and valuable consideration, the receipt and adequacy of which are hereby
		acknowledged, the parties hereto hereby agree as follows:
	 

	 
		 
	 

	 
		 
	 

	 
	 

	 

	 
		1. Amendment and Release. 
	 

	 
		(a) Effective upon and after the Amendment
		Effective Date, Section 1 (“Collateral”) of the Security Agreement shall be amended and
		restated to read in its entirety as follows:
	 

	 
		“2. Collateral. The
		collateral covered by this Agreement (“Collateral”) shall consist of
		the following:
	 

	 
			
				
				   
				

			 	
				
				  a.
				

			 	
				
				  Seller’s 100% undivided
				  ownership interest in Unit No. 3 of the R. E. Burger Generating Station, Meade
				  Township, Ohio;
				

			 

 

	 
			
				
				   
				

			 	
				
				  b.
				

			 	
				
				  Seller’s 100% undivided
				  ownership interest in Unit No. 4 of the R. E. Burger Generating Station, Meade
				  Township, Ohio;
				

			 

 

	 
			
				
				   
				

			 	
				
				  c.
				

			 	
				
				  Seller’s 100% undivided
				  ownership interest in Unit No. 5 of the R. E. Burger Generating Station, Meade
				  Township, Ohio;
				

			 

 

	 
			
				
				   
				

			 	
				
				  d.
				

			 	
				
				  Seller’s 49.34% undivided
				  ownership interest in Unit No. 3 of the Bruce Mansfield Generating Station,
				  Borough of Shippingport, Pennsylvania;
				

			 

 

	 
			
				
				   
				

			 	
				
				  e.
				

			 	
				
				  Seller’s 100% undivided
				  ownership interest in Unit No. 1 of the W. H. Sammis Generating Station,
				  Village of Stratton, Ohio;
				

			 

 

	 
			
				
				   
				

			 	
				
				  f.
				

			 	
				
				  Seller’s 100% undivided
				  ownership interest in Unit No. 2 of the W. H. Sammis Generating Station,
				  Village of Stratton, Ohio;
				

			 

 

	 
			
				
				   
				

			 	
				
				  g.
				

			 	
				
				  Seller’s 100% undivided
				  ownership interest in Unit No. 3 of the W. H. Sammis Generating Station,
				  Village of Stratton, Ohio;
				

			 

 

	 
			
				
				   
				

			 	
				
				  h.
				

			 	
				
				  Seller’s 100% undivided
				  ownership interest in Unit No. 4 of the W. H. Sammis Generating Station,
				  Village of Stratton, Ohio;
				

			 

 

	 
			
				
				   
				

			 	
				
				  i.
				

			 	
				
				  Seller’s 100% undivided
				  ownership interest in Unit No. 5 of the W. H. Sammis Generating Station,
				  Village of Stratton, Ohio;
				

			 

 

	 
			
				
				   
				

			 	
				
				  j.
				

			 	
				
				  Seller’s 100% undivided
				  ownership interest in Unit No. 6 of the W. H. Sammis Generating Station,
				  Village of Stratton, Ohio;
				

			 

 

	 
			
				
				   
				

			 	
				
				  k.
				

			 	
				
				  Seller’s 48.00% undivided
				  ownership interest in Unit No. 7 of the W. H. Sammis Generating Station,
				  Village of Stratton, Ohio;
				

			 

 

	 
			
				
				   
				

			 	
				
				  l.
				

			 	
				
				  Seller’s 85.60% undivided
				  ownership interest in the R. E. Burger Plant Diesel Generators, Meade Township,
				  Ohio;
				

			 

 

	 
			
				
				   
				

			 	
				
				  m.
				

			 	
				
				  Seller’s 86.00% undivided
				  ownership interest in the 48 MW Edgewater Peaking Facility, Lorain,
				  Ohio;
				

			 

 

	 
		 
	 

	 
		 
	 

	 
	 

	 

	 
			
				
				   
				

			 	
				
				  n.
				

			 	
				
				  Seller’s 85.60% undivided
				  ownership interest in the 60 MW Mad River Peaking Facility, Springfield,
				  Ohio;
				

			 

 

	 
			
				
				   
				

			 	
				
				  o.
				

			 	
				
				  Seller’s 85.60% undivided
				  ownership interest in the W. H. Sammis Plant Diesel Generators, Village of
				  Stratton, Ohio;
				

			 

 

	 
			
				
				   
				

			 	
				
				  p.
				

			 	
				
				  Seller’s 100% undivided
				  ownership interest in the 120 MW West Lorrain Peaking Facility, Lorain, Ohio;
				  and
				

			 

 

	 
			
				
				   
				

			 	
				
				  q.
				

			 	
				
				  all of Seller’s right, title
				  and interest in and to any and all contracts, fuel, spare parts, inventories,
				  equipment, supplies and other assets associated with or necessary for the
				  ownership or operation of the foregoing.”
				

			 

 

	 
		(b) Effective upon and from and after the
		Amendment Effective Date, Secured Party hereby releases, terminates and
		discharges, without recourse and without any representation or warranty of any
		kind, express or implied, all security interests and liens of any nature
		whatsoever in its favor in or on the 60% and 43.06% undivided ownership
		interests in Units Nos. 1 and 2, respectively, of the Mansfield Plant purchased
		from Secured Party and now owned by Debtor, together with all of Secured
		Party’s right, title and interest in and to any and all contracts, fuel,
		spare parts, inventories, equipment, supplies and other assets associated with
		or necessary for the ownership or operation of the foregoing (the
		“Released
		Collateral”). Nothing
		contained herein shall be deemed a release or termination by Secured Party of
		any security interests in and liens on any assets of Debtor other than the
		Released Collateral, all of which shall continue in full force and effect.
		Except as specifically set forth herein, nothing contained herein shall be
		construed in any manner to constitute a waiver, release or termination or to
		otherwise limit or impair any of the obligations or indebtedness of Debtor or
		any other person or entity to Secured Party, or any duties, obligations or
		responsibilities of Debtor or any other person or entity to Secured
		Party.
	 

	 
		(c) Promptly after the Amendment Effective
		Date, Secured Party shall file with the office of the Secretary of State of the
		State of Ohio a UCC-3 financing statement amendment in the form attached as
		Annex A hereto evidencing the termination of Secured
		Party’s security interest in the Released Collateral.
	 

	 
		2. Effectiveness.
		This Amendment shall become effective on the Amendment Effective Date.
	 

	 
		3. Counterparts.
		This Amendment may be executed in counterparts and by different parties hereto
		in separate counterparts, each of which, when so executed and delivered, shall
		be deemed to be an original and all of which, when taken together, shall
		constitute one and the same instrument.
	 

	 
		4. Ratification.
		The Security Agreement, as amended by this Amendment, is and shall continue to
		be in full force and effect and is hereby in all respects confirmed, approved
		and ratified.
	 

	 
		 
	 

	 
		 
	 

	 
	 

	 

	 
		5. Governing Law.
		This Amendment shall be governed by the substantive laws of the State of Ohio,
		without giving effect to any conflict of laws principles.
	 

	 
		6. Reference to Security Agreement. From and after the Amendment Effective Date, each
		reference in the Security Agreement to “this Agreement,”
		“hereof,” “hereunder” or words of like import, and all
		references to the Security Agreement in any and all agreements, instruments,
		documents, notes, certificates and other writings of every kind and nature,
		shall be deemed to mean the Security Agreement as modified and amended by this
		Amendment. 
	 

	 
		[Signature page follows]
	 

	 
		 
	 

	 
		 
	 

	 
	 

	 

	 
		IN WITNESS WHEREOF, the parties hereto have
		caused this Amendment to be executed as of the date first written above.

	 

	 
		 
	 

	 
			
				
				   
				

			 	
				
				   
				

			 	
				
				  DEBTOR:
 

				  FIRSTENERGY GENERATION CORP.
				

			 
	
				
				

			 	
				
				   
				

			 	
				
				  By: 
				

			 	
				
				  
 /s/ Randy Scilla
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				  Name: Randy Scilla

				  Title: Assistant Treasurer
				

			 

 

	 
		 
	 

	 
		 
	 

	 
			
				
				   
				

			 	
				
				   
				

			 	
				
				  SECURED PARTY:

				  
 OHIO EDISON COMPANY
				

			 
	
				
				

			 	
				
				   
				

			 	
				
				  By: 
				

			 	
				
				  
 /s/ Randy Scilla
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				  Name: Randy Scilla

				  Title: Assistant Treasurer
				

			 

 

	 
		 
	 

	 
		Signature Page to Amendment No. 1 OE Fossil
		Security Agreement

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