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FirstEnergy Corp.
Executive Deferred Compensation Plan
2002 Overview
Effective January 1, 2002
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INTRODUCTION
Overview of the Plan
o The Plan allows you to defer base salary, Annual Incentive Awards,
and Long-Term Incentive Awards.
o The Company retains amounts deferred and credits an account(s) in
your name.
o The Retirement Account, Retirement Stock Account and the
FirstEnergy Stock Account may earn a very attractive return. Your base
salary and/or the 2001 Annual Incentive Award payable in 2002 may be
deferred into a Retirement Account.
o Your 2001 Annual Incentive Award and/or your Long-Term Incentive
Award, that are payable in 2002, may be deferred into a FirstEnergy
Stock Account.
Why the Plan is Provided
To provide you with:
o Additional funds at your retirement to supplement other existing
benefit plans.
o Supplemental benefits in the event of preretirement death or
disability.
o Another opportunity to build assets on the most favorable tax basis.
o A vehicle to acquire additional FirstEnergy stock.
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DEFERRAL
OPTIONS
Annual Deferral Periods:* January 1 through December 31 of each year.
o Base Salary: You may defer from 1% to 50% of your Base Salary into
the Retirement Account.
o Annual Incentive Award: You may defer from 1% to 100% of your Annual
Incentive Award (payable in 2002) into the Retirement and/or the
FirstEnergy Stock Account.
o Long-Term Incentive Award: You may defer from 1% to 100% of your
Long-Term Incentive Award (payable in 2002) into the FirstEnergy
Stock Account.
o Roll-in of Savings Plan Excess.
*Elections for annual deferral periods must be made during the open
enrollment period ending no later than December 15 of the prior year.
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EFFECT ON
FIRSTENERGY
SAVINGS PLAN
401(k) Impact Your decision to defer a portion of your salary and/or
your Annual Incentive Award into this Plan will affect
your decision regarding how much you would like to
defer into the FirstEnergy Employee Savings Plan. In
making your deferral elections in these plans, it is
important to know that your deferrals into this Plan
will be made first; therefore, the amount of base
salary or Annual Incentive Award available to be
deferred into the Employee Savings Plan will be
reduced.
Example Amount of Annual Incentive Award you
elected to defer to this Plan: 50%
Amount of salary and Annual Incentive
you elected to defer to the Employee
Savings Plan: 16%
Annual Incentive Award $10,000
Deferral into this Plan 5,000
---------
Balance $5,000
Deferral into Savings Plan 800
---------
Payable in cash, subject to
taxation $4,200
Please take a moment to consider how your election to
defer into this Plan will affect the amount of money
available on which to base your Employee Savings Plan
deferral election.
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INCOME TAX
WITHHOLDING
o On your deferrals to the Retirement and FirstEnergy Stock Accounts
and on the Company 20% premium to the FirstEnergy Stock Account:
o Federal: No.
o State: No, except
Resident of Pennsylvania working in Pennsylvania--Yes;
Resident of Ohio or New Jersey working in Pennsylvania or resident
of Pennsylvania working in Ohio or New Jersey--Depends upon your
own tax election.
o Local: Yes.
o FICA: Yes.
o Medicare: Yes.
o On the interest credited to the Retirement Account:
o IRS regulations may require the withholding and payment of FICA and
Medicare taxes attributable to a portion of the interest credited
annually to you each year. You will be notified if this is the case.
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HOW A
MINIMUM
INVESTMENT
SAVES TAXES
The minimum salary deferral is 1% of base salary. If you earn $100,000
per year:
Deferred Nondeferred
------------------------------------------------------
Annual Minimum Deferral $1,000 $1,000
Current Income Tax (40%* Bracket) 0 400
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Your Annual Dollars to Invest $1,000 $600
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*Includes federal and state income taxes.
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YOUR
RETIREMENT
ACCOUNT
If You Elect to Defer Into the Retirement Account
Amounts you defer and interest earned will be tracked in an account
in your name.
The interest credited to your Retirement Account will be the annual
equivalent of the Average* Moody's Rate plus 3%. The rate cannot exceed
a maximum annual equivalent of a 15% yield.
*Average for November through October of the prior year.
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THE PLAN
VERSUS OUTSIDE
INVESTMENT
One Dollar Deferred Under This Plan
[GRAPHIC OMITTED]
Assumptions: Deferral at age 45; tax bracket 40%; interest rate 10%.
One Dollar Taken as Salary and Invested on the Outside
[GRAPHIC OMITTED]
Assumptions: Deferral at age 45; tax bracket 40%; interest rate 7%
pretax, 4.2% after-tax.
To obtain the same return under an outside investment, you would have to
earn an equivalent pretax rate of 16.67%.
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CREDITING
EARNINGS
Moody's Plus 3% Equals High Yields
Retirement Account
[GRAPHIC OMITTED]
The EDCP crediting rate for 2002 will be 10.56%.
The Moody's Index is a monthly average of long-term bond yields of
industrials and public utilities rated AAA, AA, A and BAA, published by
Moody's Investors' Service.
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RETIREMENT
How Your Retirement Account Grows
If you defer $1,000 annually:
Annual
Pretax Total
Account Payout Pretax
Beginning Balance at Each Year Payout
at Age Age 65* for 15 Years (15 Years)
-------------------------------------------------------
60 $ 6,716 $ 803 $12,045
55 17,531 2,095 31,425
50 34,950 4,177 62,655
45 63,002 7,530 112,950
40 108,182 12,930 193,950
-------------------------------------------------------
*Assuming 10% interest credited annually.
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YOUR DISTRIBU-
TION OPTIONS
Retirement Account
If You Retire on or After Age 55 and Are Eligible for a Pension Plan
Benefit
o Installments: Paid monthly for up to 25 years at the Average
Moody's Rate plus 3% interest rate. Rate cannot exceed an annual
equivalent of a 15% yield. If your Account balance, that is paid in
installments, is less than $100,000 on the date payments begin,
monthly installments will be paid for not more than 15 years.
o Lump sum.
o Combination of the above.
o Defer commencement of payouts to age 70.
o Your retirement benefit payout election may be amended up to 90 days
prior to retirement.
If You Leave the Company Prior to Age 55 and You Are Not Eligible for
Benefits Under the FirstEnergy Severance Plan or Are Not Eligible for
a Pension Plan Benefit
o Lump sum.
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YOUR DISTRIBU-
TION OPTIONS
Retirement Account
If You Leave the Company and You Are Eligible for and Elect to Receive
Benefits Under the FirstEnergy Severance Plan
o Lump sum.
o Three annual installments beginning on your date of termination and on
January 1 of the following two calendar years. You make your payout
election during open enrollment. It may be amended at any time up to
90 days prior to termination.
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DISABILITY
FEATURE
Retirement Account
Your Distribution Options
o Installments: Paid monthly for up to 25 years at the Average Moody's
Rate plus 3%. Rate cannot exceed an annual equivalent of a 15% yield.
If the portion of your Account balance that is to be paid in
installments is less than $100,000 on the date payments begin, monthly
installments will be paid for not more than 15 years.
o Lump sum.
o Combination of the above.
o Your disability benefit payout election may be amended anytime prior
to disability.
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PRERETIREMENT
DEATH BENEFITS
Retirement Account
Your Distribution Options for Your Beneficiary
o Installments: Paid monthly for up to 25 years at the Average Moody's
Rate plus 3%. Rate cannot exceed an annual equivalent of a 15% yield.
If the portion of your balance that is to be paid in installments is
less than $100,000 on your date of death, monthly installments will
be paid for not more than 15 years.
o Lump sum.
o Combination of the above.
o Your preretirement death benefit payout election may be amended
anytime prior to death.
POSTRETIRE-
MENT DEATH BENEFITS
Retirement Account
Your beneficiary will receive your remaining Retirement Account balance
on the same basis as you had elected.
If you elected to defer commencement of benefit payments and you die
prior to commencement, benefit payments to your beneficiary will begin
immediately.
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INCOME TAXATION
Taxation of Your Retirement Account Distribution After Separation of
Employment
o Federal: Yes.
o State: Based on the regulations and rates of the state in which you
live.
Note: Recent federal legislation prohibits any state from taxing plan
distributions of former residents if the distributions are made over a
ten-year or more period.
o Local: Check with your local taxing authority.
o FICA and Medicare: IRS regulations may require the withholding and
payment of FICA and Medicare taxes attributable to a portion of the
interest credited annually to you each year. You will be notified if
this is the case.
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FIRSTENERGY
STOCK
ACCOUNT
If You Elect to Defer Into the First-Energy Stock Account*
o You may defer from 1% to 100% of the Annual Incentive Award, less what
you defer into the Retirement Account, payable to you in 2002, to the
FirstEnergy Stock Account.
o You may defer from 1% to 100% of the Long-Term Incentive Award,
payable to you in 2002, to the FirstEnergy Stock Account.
o The Company will add a 20% premium to any deferrals made into the
FirstEnergy Stock Account.
o Your deferrals, plus the Company-provided 20% premium, less applicable
income tax withholding, will be converted to equivalent stock units
and credited to your FirstEnergy Stock Account.
o Your deferrals into the Stock Account and your vested company
premiums, plus earnings and dividends, will be distributed to you
in the form of FirstEnergy Stock three years after the deferral is
originally credited to your Account.
*Elections for annual deferral periods must be made during the open
enrollment period ending no later than December 15 of the prior year.
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FIRSTENERGY
STOCK
ACCOUNT
About the FirstEnergy Stock Account
o The Company will credit a 20% premium to your Stock Account when you
defer compensation into the Account.
Example: If you elect to defer $1,000, 20% of that amount
or $200 will be added to your deferral amount for a total
of $1,200. This $1,200 will then be converted to stock
units and held in your FirstEnergy Stock Account.
o The number of stock units credited to your account will be determined
by dividing the total, after applicable taxes, of your deferral and
the Company-provided 20% premium by the average daily closing price of
FirstEnergy common stock during February, 2002.
o At the time dividend payments are made to FirstEnergy shareholders
additional stock units will be credited to your account. The number
of additional units credited will be based on the number of units in
your account and the market price of the stock at the close of that
business day.
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FIRSTENERGY
STOCK
ACCOUNT
Vesting of the FirstEnergy Stock Account
o The FirstEnergy Stock Account will have a three-year restriction
period attached to the 20% premium and any appreciation on it.
o You will be fully vested in the 20% premium and associated
appreciation at the end of three years, assuming you are still
employed by FirstEnergy, or have retired at or after age 60.The
three-year premium restriction will continue to apply beyond your
retirement at or after age 60.
o You will be fully vested immediately if you terminate employment due
to:
Death.
Disability.
Involuntary Termination under conditions where you become
eligible for and elect to accept a FirstEnergy severance benefit.
o You will be fully vested immediately in the event of a Change of
Control that results in FirstEnergy not being the controlling
company.
o You will forfeit the nonvested 20% premium and associated
appreciation if you retire prior to age 60 or if you terminate
employment during the three-year restriction period for reasons
other than death, disability, Involuntary Termination, or change in
control as described above.
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FIRSTENERGY
STOCK
ACCOUNT
Distributions From the FirstEnergy Stock Account
Normally, your Stock Account will be paid to you in a lump sum three
years after the deferral was first made to the Stock Account. It will be
paid to you in the form of FirstEnergy stock.
If you terminate employment prior to age 60 with a Stock Account
balance, the balance, less any nonvested Company-paid premium, will be
converted to cash and transferred to your Retirement Account.
If you retire at or after reaching age 60 and you have a balance in the
Stock Account, at the end of the three year restriction period, the
Stock Account balance will be paid as elected. You may elect to receive
the distribution in FirstEnergy stock or have the balance converted to
cash and transferred to your Retirement Account.
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FIRSTENERGY
STOCK
ACCOUNT
Income Taxation of the FirstEnergy Stock Account
When you receive a distribution of stock from your Stock Account, you
will be taxed as follows:
o Federal: Yes.
o State: Based on the regulations and rates of the state in which you
live and the state in which you earned the compensation.
o Local: Check with your local taxing authority.
o FICA/Medicare: Withheld as you deferred compensation into the Stock
Account and on the 20% premium as it vests.
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FIRSTENERGY
RETIREMENT
STOCK
ACCOUNT
The Retirement Stock Account
As of January 1, 2002, a new account, called the Retirement Stock
Account, will be added to the Plan. This Account has been established so
that you can maintain an account based on the value of FirstEnergy stock
until you terminate your employment with FirstEnergy.
Transferring to the Retirement Stock Account
During the open enrollment period, immediately prior to the end of the
three-year vesting period, you will have the opportunity to elect to
defer receiving the Stock Account balance, which would otherwise be
payable to you during the following calendar year. If you make this
election, the value of the Stock Account, including the vested 20%
premium, will be transferred to your Retirement Stock Account. The
Retirement Stock Account will be credited with gains, losses and
dividends just as in the Stock Account and will maintain its
tax-deferred status until you receive a distribution.
During the 2001 enrollment period for the 2002 Plan year, you may, if
you have a 1999 Stock Account:
o Elect to transfer your 1999 Stock Account balance, including the
vested 20% premium, to the Retirement Stock Account.
o Make no election. In March 2002 when the premium vests, your
Stock Account balance will, after withholding the appropriate taxes,
be deposited as stock into a FirstEnergy Dividend Reinvestment
Account in your name.
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FIRSTENERGY
RETIREMENT
STOCK
ACCOUNT
Distributions From the Retirement Stock Account
When you terminate employment for any reason, including death and
disability, the balance in the Retirement Stock Account will be
converted to cash, transferred to your Retirement Account and paid out
according to your elections for the Retirement Account.
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IN-SERVICE
WITHDRAWAL
FEATURE
In-Service Withdrawal
o If you are an employee of the Company, who has been a Plan Participant
for at least five years, you may elect to withdraw all or a portion of
your Retirement Account and Retirement Stock Account. The amount
available to you is based on your account balance as of the request
date not the date that you actually receive payment.
o You may make one request per year. The request must specify the amount
to be withdrawn and the future date paid, which must be the first of a
month in the second calendar year following the calendar year in which
you make the request.
o Withdrawals must be taken from your Accounts in the following order
and you must exhaust the Retirement Account before withdrawing from
the Retirement Stock Account:
o Retirement Account
o Retirement Stock Account
o A request will be irrevocable after December 31 of the calendar year
in which you make it unless, prior to payment, you leave the Company
or die, at which time the request will become null and void and your
Accounts will be paid as you have previously elected or as dictated by
the Plan.
o The Plan also provides for another form of distribution called an
Accelerated Distribution. You may receive a distribution of your
entire Account balance, which is explained in detail under "Benefit
Security Provisions."
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SUPPLEMENTAL
PENSION
BENEFIT
Benefits from the Company's Pension Plan are based on an executive's
nondeferred earnings, which do not include Annual Incentive Awards, and
are subject to limitations imposed by the Internal Revenue Code.
The Supplemental Pension Benefit is provided by the Company to make up
for any reduction in an executive's pension as a result of participation
in the Executive Deferred Compensation Plan, or due to Internal Revenue
Code limitations, or due to the exclusion of Annual Incentive Awards
from pension earnings.
INCOME
TAXATION
Taxation of Supplemental Pension Benefit
o Federal: Yes.
o State: Based on the regulations and rates of the state in which you
live.
o Local: Check with your local taxing authority.
o FICA/Medicare: Withheld and paid on the present value of the
supplemental pension benefit in the year the executive or beneficiary
starts to receive a benefit. There is no further FICA or Medicare
taxation on the monthly supplemental pension payments.
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OTHER
PROVISIONS
o You are an unsecured general creditor of the Company. This provision
is required in order to avoid taxation of your benefits before
receipt. In the event of insolvency or bankruptcy, any payments from
the Plan within the preference period before bankruptcy may be subject
to recoupment by the Federal Bankruptcy Court. This preference period
is 90 days in most cases but one year for insiders. Any payments made
after bankruptcy may be subject to the disposition of the Federal
Bankruptcy Court.
o The percent of salary and/or Annual Incentive and/or Long-Term
Incentive Award you elect to defer remains in effect unless changed by
you. Changes, effective January 1, must be made no later than
December 15 of the prior year.
o Modification or waiver of the deferral commitment and distributions
prior to separation of employment will only be granted in rare
instances if you suffer a sudden and unforeseen financial emergency.
o The Company reserves the right to amend the Plan, including the
interest rate, or terminate the Plan at any time on a prospective
basis.
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COMPANY'S
INVESTMENT OF
AMOUNT
DEFERRED
Cost Recovery Insurance
o Insurance contracts may be purchased on each participant.
o Owned by and payable to the Executive Benefit Plans Security Trust
(participant has no right to policy or proceeds).
CLAIMS
PROCEDURE
(ARTICLE VIII)
o If you do not receive your benefits when due under the terms of this
Plan, you may file a claim in writing to:
FirstEnergy Corp.
76 South Main Street
Akron, Ohio 44308
Attention: Chairman, Executive Deferred
Compensation Plan Committee
o If your claim is denied or you do not receive a response within 63
days after the end of the month in which the request was received, you
may request a review by the Compensation Committee of the Board of
Directors.
o The final decision on review will normally be made within 60 days but
may be extended to 120 days due to special circumstances. The final
decision will be binding on all parties concerned.
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BENEFIT
SECURITY
PROVISIONS
o Plan provisions are binding on the Company and its successors.
o The Plan may be amended at any time, except that:
o No amendment shall decrease the amount of your Retirement Account,
Retirement Stock Account and your Stock Account, or your accrued
Supplemental Pension Benefit.
o No amendment shall restrict your right to receive a lump sum form of
benefit payment of your Retirement Account, Retirement Stock Account
or your Stock Account.
o No amendment shall decrease the interest rate credited to the
Retirement Account below the Average Moody's Rate less 1% or else
the Retirement Account balance will be paid to all participants
within 60 days.
o If the Plan is terminated, the Retirement Account, Retirement Stock
Account and Stock Account balances will be paid to all participants
within 60 days and will not adversely affect your accrued
Supplemental Pension Benefit.
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BENEFIT
SECURITY
PROVISIONS
Accelerated Distribution
o You may request an accelerated distribution of your Retirement Account
and Retirement Stock Account, subject to a 10% penalty. You will
receive 90% of your Account balances as a lump sum in cash and stock,
if applicable. This distribution will completely discharge the Company
from all liability with respect to your Retirement Account and
Retirement Stock Account. If you are actively employed by the Company,
you will not be permitted to resume any further deferrals into the
Plan until January 1 of the second calendar year following the
calendar year in which you receive the lump-sum distribution.
o You may request an accelerated distribution of your FirstEnergy Stock
Account, subject to the loss of the 20% premium and associated
earnings plus a 10% penalty on the balance. The remaining balance will
be paid as a lump sum in Company stock. This distribution will
completely discharge the Company from all liability with respect to
your FirstEnergy Stock Account. If you are actively employed by the
Company, you will not be permitted to resume any further deferrals
into the Plan until January 1 of the second calendar year following
the calendar year in which you receive the lump sum stock
distribution.
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ANNUAL SALARY
DEFERRAL ELECTION
To enroll or change your deferral commitments for the next annual
deferral period:
o Determine the percentage of salary, Annual Incentive Award, and/or
Long-Term Incentive Award you wish to defer.
o Complete the forms provided to you:
o Participation Agreement.
o Beneficiary Designation (at enrollment and to change your
beneficiary, if desired).
o Form of Benefit Payout (at enrollment and to change your form of
benefit payout, if desired).
o Return the forms by the date specified.
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The FirstEnergy Corp. Executive Deferred Compensation Plan was
established effective January 1, 1999 and is amended as of January 1,
2002.
This Overview has been prepared to give you a better understanding of
the benefits and features of the Plan. Each employee's benefits and
rights under the Plan are at all times governed by the official text of
the Executive Deferred Compensation Plan document and are in no way
altered or modified by the contents of this Overview.
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