FIRSTENERGY CORP.
EXECUTIVE AND DIRECTOR INCENTIVE COMPENSATION PLAN
FE Plan effective May 1, 1998
Revised November 16, 1998
Revised November 16, 1999
Amendment to Plan approved by
Shareholders on May 15, 2001
Table of Contents
Page
Article 1 Establishment, Purpose, and Duration
1.1 Establishment of the Plan 1
1.2 Purpose of the Plan 1
1.3 Duration of the Plan 1
Article 2 Definitions and Construction
2.1 Definitions
2.1.1 Beneficial Owner 1
2.1.3 Black-Scholes Value 1
2.1.4 Board or Board of Directors 1
2.1.5 Cash Award 1
2.1.6 Cause 1
2.1.7 Change in Control 2
2.1.8 Code 4
2.1.9 Committee 4
2.1.10 Company 4
2.1.11 Covered Employee 4
2.1.12 Directors' Award 4
2.1.13 Exchange Act 4
2.1.14 Fair Market Value 4
2.1.15 Incentive Stock Option or ISO 4
2.1.16 Key Employee 4
2.1.17 Nonqualified Stock Option or NSO 5
2.1.18 Option 5
2.1.19 Outside Director 5
2.1.20 Participant 5
2.1.21 Performance Share 5
2.1.22 Period of Restriction 5
2.1.23 Person 5
2.1.24 Plan 5
2.1.25 Restricted Stock 5
2.1.26 Subsidiary 5
2.1.27 Standard Rate 5
2.1.28 Stock 5
2.1.29 Stock Appreciation Right or SAR 5
2.1.30 Voting Stock 5
2.2 Gender and Number 5
2.3 Severability 5
Table of Contents
Article 3 Administration
3.1 The Committee 5
3.2 Authority of the Committee 6
3.3 Selection of Participants 6
3.4 Decisions Binding 6
3.5 Delegation of Certain Responsibilities 6
3.6 Procedures of the Committee 7
3.7 Award Agreements 7
3.8 Conditions on Awards 7
3.9 Saturdays, Sundays, and Holidays 7
Article 4 Stock Subject to the Plan
4.1 Number of Shares 7
4.2 Lapsed Awards 8
4.3 Adjustments in Authorized Shares 8
Article 5 Eligibility and Participation
5.1 Eligibility 8
5.2 Actual Participation 8
Article 6 Stock Options
6.1 Grant of Options 8
6.2 Option Agreement 9
6.3 Option Price 9
6.4 Duration of Options 9
6.5 Exercise of Options 9
6.6 Payment 9
6.7 Restrictions on Stock Transferability 10
6.8 Termination of Employment Due to Death, Disability, 10
or Retirement
6.9 Termination of Employment for Other Reasons 10
6.10 Nontransferability of Options 11
Table of Contents
Article 7 Stock Appreciation Rights
7.1 Grant of Stock Appreciation Rights 11
7.2 Exercise of SARS in Lieu of Options 11
7.3 Exercise of SARS in Addition to Options 11
7.4 Exercise of SARS Independent of Options 12
7.5 Payment of SAR Amount 12
7.6 Form and Timing of Payment 12
7.7 Term of SAR 12
7.8 Termination of Employment 12
7.9 Nontransferability of SARs 12
Article 8 Restricted Stock
8.1 Grant of Restricted Stock 12
8.2 Restricted Stock Agreement 12
8.3 Transferability 13
8.4 Other Restrictions 13
8.5 Certificate Legend 13
8.6 Removal of Restrictions 13
8.7 Voting Rights 13
8.8 Dividends and Other Distributions 13
8.9 Termination of Employment Due to Retirement 13
8.10 Termination of Employment Due to Death or Disability 14
8.11 Termination of Employment for Other Reasons 14
Article 9 Performance Shares
9.1 Grant of Performance Shares 14
9.2 Value of Performance Shares 14
9.3 Payment of Performance Shares 15
9.4 Committee Discretion to Adjust Awards 15
9.5 Form and Timing of Payment 15
9.6 Termination of Employment Due to Death, Disability, 15
or Retirement
9.7 Termination of Employment for Other Reasons 15
9.8 Nontransferability 16
Article 10 Cash Awards
10.1 Grant of Cash Award 16
10.2 Cash Award Performance Criteria 16
10.3 Payout of Cash awards 16
10.4 Conversion of Cash Award Payout to Restricted Stock 16
Table of Contents
Article 11 Directors' Awards
11.1 Grant of Director's Awards 17
11.2 Conversion of Retainer to Stock 17
11.3 Conversion of Retainer to Restricted Stock 17
11.4 Conversion of Retainer to Stock Options 17
Article 12 Beneficiary Designation 17
Article 13 Rights of Employees
13.1 Employment 18
13.2 Participation 18
13.3 No Implied Rights; Rights on Termination of Service 18
13.4 No Right to Company Assets 18
Article 14 Change in Control
14.1 Stock Based Awards 18
14.2 All Awards Other than Stock Based Awards 18
Article 15 Amendment, Modification, and Termination
15.1 Amendment, Modification, and Termination 19
15.2 Awards Previously Granted 19
15.3 Deferral of Payments and Distributions 19
Article 16 Withholding and Deferral
16.1 Tax Withholding 19
16.2 Stock Delivery or Withholding 19
Article 17 Successors 20
Article 18 Requirements of Law
18.1 Requirements of Law 20
18.2 Governing Law 20
Scope of Revision
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Rev. 3
Clairfy that 6.8 includes early retirement. Put 6.8 in plain English. Increase
the number of shares under the Plan and the limits as approved by Shareholders
on May 15, 2001.
Add "vesting or forfeiture" to 8.4 to strengthen the substantial forfeiture
clause as required by IRS.
Rev. 2
Change definition of Fair Market Value from 20 day average to high and low on
date of grant.
Rev. 1
Reformatted from Landscape to Portrait, made numbering consistence throughout
document. Included Table of Contents and Scope of Revision pages. Changed the
NQSO acronym to NSO throughout.
Clarified that the Chief Executive Officer could grant awards for all Key
employees, except those defined as Covered Employees. Incorporated the changes
to Rule 16b-3 requirements.
Clarified how dates referenced in the Agreements are to be handled when the date
falls on a Saturday, Sunday, or Holiday. Clarified how cashless exercises are
handled.
Clarified that exercising portions of grants are permissible. Added language to
18.2 regarding conflicts of law.
Rev. 0
Plan approved by FirstEnergy Board of Directors on February 17, 1998 Plan
approved by common shareholders on April 30, 1998 Plan became effective on May
1, 1998.
FirstEnergy Corp.
Executive and Director Incentive Compensation Plan
ARTICLE 1 ESTABLISHMENT, PURPOSE, AND DURATION
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1.1 ESTABLISHMENT OF THE PLAN. FirstEnergy Corp. (hereinafter referred to as
"FirstEnergy"), established, effective May 1, 1998, an incentive
compensation plan known as the "Executive and Director Incentive
Compensation Plan" (hereinafter referred to as the "Plan"), which permits
the grant of Incentive Stock Options, Non-qualified Stock Options, Stock
Appreciation Rights, Restricted Stock, Performance Shares, Cash Awards and
Directors' Awards.
1.2 PURPOSE OF THE PLAN. The purpose of the Plan is to promote the success of
the Company and its Subsidiaries by providing incentives to Key Employees
and Directors that will link their personal interests to the long-term
financial success of the Company and its Subsidiaries, and to growth in
shareholder value. The Plan is designed to provide flexibility to the
Company and its Subsidiaries in their ability to motivate, attract, and
retain the services of Key Employees upon whose judgment, interest, and
special effort the successful conduct of their operations is largely
dependent. The Plan is intended to preserve maximum deductibility of all
awards made under the plan within the structure of Section 162(m) of the
Internal Revenue Code of 1986 as amended "the Code".
1.3 DURATION OF THE PLAN. The Plan will commence on May 1, 1998, as described
in Section 1.1 herein. The Plan shall remain in effect, subject to the
right of the Board of Directors to terminate the Plan at any time, until
all Shares subject to it shall have been purchased or acquired according to
the provisions herein.
ARTICLE 2 DEFINITIONS AND CONSTRUCTION
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2.1. DEFINITIONS. Whenever used in the Plan, the following terms shall have the
meanings set forth below and, when the meaning is intended, the initial
letter of the word is capitalized:
2.1.1 "Award" means, individually or collectively, a grant under this Plan
of Incentive Stock Options, Nonqualified Stock Options, Stock
Appreciation Rights, Restricted Stock, Performance Shares, Cash
Awards or Directors' Awards.
2.1.2 "Beneficial Owner" shall have the meaning ascribed to such term in
Rule 13d-3 of the General Rules and Regulations under the Exchange
Act.
2.1.3 "Black-Scholes Value" means the value of one stock option as
as calculated by the Black-Scholes Valuation Model as prescribed
under Financial Accounting Standard 123.
2.1.4 "Board" or "Board of Directors" means the Board of Directors of the
Company.
2.1.5 "Cash Award" means an award in the form of cash that is a bonus
bonus made pursuant to the terms of Article 10.
2.1.6 "Cause"shall mean the occurrence of any one of the following:
(i) the willful and continued failure by a Participant to
substantially perform his/her duties (other than any such
failure resulting from the Participant's disability), after a
written demand for substantial performance is delivered to the
Participant that specifically identifies the manner in which
the Company or any of its Subsidiaries, as the case may be,
believes that the Participant has not substantially performed
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his/her duties, and the Participant has failed to remedy the
situation within ten (10) business days of receiving such
notice; or
(ii) the Participant's conviction for committing a felony or a
crime involving an act of moral turpitude, dishonesty or
misfeasance; or
(iii) the willful engaging by the Participant in gross misconduct
materially and demonstrably injurious to the Company or any of
its Subsidiaries. However, no act, or failure to act, on the
Participant's part shall be considered "willful" unless done,
or omitted to be done, by the Participant not in good faith
and without reasonable belief that his/her action or omission
was in the best interest of the Company or any of its
Subsidiaries.
2.1.7 "Change in Control" shall mean:
(i) The acquisition by Person of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of
50% (25%if such Person proposes any individual for election to
the Board or any member of the Board is the representative of
such Person) or more of either
(a) the then outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or
(b) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company
Voting Securities"); provided, however, that the
following acquisitions shall not constitute a Change in
Control:
(1) any acquisition directly from the Company
(excluding an acquisition by virtue of the
exercise of a conversion privilege),
(2) any acquisition by the Company,
(3) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the
Company or any corporation controlled by the
Company, or
(4) any acquisition by any corporation pursuant to a
reorganization, merger or consolidation, if,
following such reorganization, merger or
consolidation, the conditions described in clauses
(a), (b) and (c) of subsection (iii) of this
subsection 2.1.7 are satisfied; or
(ii) Individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board; provided, however, that any
individual becoming a director subsequent to the date hereof
whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of
the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a
result of either an actual or threatened election contest (as
such terms are used in Rule 14a-11 of the Regulation 14A
promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on behalf
of a Person other than the Board; or
(iii) Approval by the shareholders of the Company of a
reorganization, merger or consolidation, in each case, unless,
following such reorganization, merger or consolidation,
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(a) more than 75% of, respectively, the then outstanding
shares of common stock of the corporation resulting from
such reorganization, merger or consolidation and the
combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally
in the election of directors is then beneficially owned,
directly or indirectly, by all or substantially all of
the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities
immediately prior to such reorganization, merger or
consolidation in substantially the same proportions as
their ownership, immediately prior to such
reorganization, merger or consolidation, of the
Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be,
(b) no Person (excluding the Company, an employee benefit
plan (or related trust) of the Company or such
corporation resulting from such reorganization, merger
or consolidation and any Person beneficially owning,
immediately prior to such reorganization, merger or
consolidation, directly or indirectly, 25% or more of
the Outstanding Company Common Stock or Outstanding
Voting Securities, as the case may be) beneficially
owns, directly or indirectly, 25% or more of,
respectively, the then outstanding shares of common
stock of the corporation resulting from such
reorganization, merger or consolidation or the combined
voting power of the then outstanding voting securities
of such corporation entitled to vote generally in the
election of directors and
(c) at least a majority of the members of the board of
directors of the corporation resulting from such
reorganization, merger or consolidation were members of
the Incumbent Board at the time of the execution of the
initial agreement providing for such reorganization,
merger or consolidation; or
(iv) Approval by the shareholders of the Company of (a) a complete
liquidation or dissolution of the Company or (b) the sale or
other disposition of all or substantially all of the assets of
the Company, other than to a corporation, with respect to which
following such sale or other disposition (1) more than 75% of,
respectively, the then outstanding shares of common stock of such
corporation and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally
in the election of directors is then beneficially owned, directly
or indirectly, by all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such sale or other disposition in
substantially the same proportion as their ownership, immediately
prior to such sale or other disposition, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities,
as the case may be, (2) no Person (excluding the Company and any
employee benefit plan (or related trust) of the Company or such
corporation and any Person beneficially owning, immediately prior
to such sale or other disposition, directly or indirectly, 25% or
more of the Outstanding Company Common Stock or Outstanding
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Company Voting Securities, as the case may be) beneficially owns,
directly or indirectly, 25% or more of, respectively, the then
outstanding share of common stock of such corporation and the
combined voting power of the then outstanding voting securities
of such corporation entitled to vote generally in the election of
directors and (3) at least a majority of the members of the board
of directors of such corporation were members of the Incumbent
Board at the time of the execution of the initial agreement or
action of the Board providing for such sale or other disposition
of assets of the Company.
However, in no event shall a Change in Control be deemed to have
occurred, with respect to a Participant, if the Participant is
part of a purchasing group, which consummates the Change in
Control transaction. The Participant shall be deemed "part of a
purchasing group. ." for purposes of the preceding sentence if
the Participant is an equity participant or has agreed to become
an equity participant in the purchasing company or group (except
for (i) passive ownership of less than 5% of the voting
securities of the purchasing company or (ii) ownership of equity
participation in the purchasing company or group which is
otherwise not deemed to be significant, as determined prior to
the Change in Control by a majority of the non-employee
continuing members of the Board).
2.1.8 "Code" means the Internal Revenue Code of 1986, as amended from time
to time.
2.1.9 "Committee" means the Compensation Committee of the Board.
2.1.10 "Company" means FirstEnergy Corp., an Ohio corporation, or any
successor thereto as provided in Article 17 herein.
2.1.11 "Covered Employee" means any Participant designated prior to the
grant of Stock Options, Stock Appreciation Rights, Restricted Stock,
Performance Shares or Cash Award by the Committee who is or may be a
"covered employee" within the meaning of Section 162(m)(3) of the
Code in the year in which such Stock Options, Stock Appreciation
Rights, Restricted Stock, Performance Shares or Cash Award are
taxable to such Participant.
2.1.12 "Directors' Award" means an Award made pursuant to Article 11 of
this Plan.
2.1.13 "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time.
2.1.14 "Fair Market Value" means the average of the high and low sale
prices of the common stock as reported on the composite tape of the
New York Stock Exchange for the date in which the determination of
the fair market value is made, or, if there are no sales of common
stock on that date, then on the next preceding date on which there
were sales of common stock.
2.1.15 "Incentive Stock Option" or "ISO" means an option to purchase
Stock, granted under Article 6 herein, which is designated as an
incentive stock option and is intended to meet the requirements of
Section 422 of the Code.
2.1.16 "Key Employee" means an employee of the Company or any of its
Subsidiaries, including an employee who is an officer or a director
of the Company or any of its Subsidiaries, who, in the opinion of
the Committee, can contribute significantly to the growth and
profitability of the Company and its Subsidiaries. "Key Employee"
also may include any other employee, identified by the Committee, in
special situations involving extraordinary performance, promotion,
retention, or recruitment. The granting of an Award under this Plan
shall be deemed a determination by the Committee that such employee
is a Key Employee, but shall not create a right to remain a Key
Employee.
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2.1.17 "Nonqualified Stock Option" or "NSO" means an option to purchase
Stock, granted under Article 6 herein, which is not intended to be
an Incentive Stock Option.
2.1.18 "Option" means an Incentive Stock Option or a Nonqualified Stock
Option.
2.1.19 "Outside Director" means any director who qualifies as an "outside
director" as that term is defined in Code Section 162(m) and the
regulations issued thereunder.
2.1.20 "Participant" means a Key Employee or Director who has been granted
an Award under the Plan.
2.1.21 "Performance Share" means an Award, designated as a performance
share, granted to a Participant pursuant to Article 9 herein.
2.1.22 "Period of Restriction" means the period during which the transfer
or sale of Shares of Restricted Stock by the participant is
restricted.
2.1.23 "Person" shall have the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d)
thereof, including a "group" as defined in Section 13(d) thereof.
2.1.24 "Plan" means this Executive and Director Incentive Compensation
Plan of FirstEnergy Corp., as herein described and as hereafter from
time to time amended.
2.1.25 "Restricted Stock" means an Award of Stock granted to a Participant
pursuant to Article 8 herein.
2.1.26 "Subsidiary" shall mean any corporation of which more than 50% (by
number of votes) of the Voting Stock at the time outstanding is
owned, directly or indirectly, by the Company.
2.1.27 "Standard Rate" means the electric utility median base salary level
for a given position as determined in the judgment of the Committee.
2.1.28 "Stock" or "Shares" means the common stock with a 10 cent par value
of the Company.
2.1.29 "Stock Appreciation Right" or "SAR" means an Award, designated as a
Stock Appreciation Right, granted to a Participant pursuant to
Article 7 herein.
2.1.30 "Voting Stock" shall mean securities of any class or classes of
stock of a corporation, the holders of which are ordinarily, in the
absence of contingencies, entitled to elect a majority of the
corporate directors.
2.2 GENDER AND NUMBER. Except where otherwise indicated by the context, any
masculine term used herein also shall include the feminine, the plural
shall include the singular, and the singular shall include the plural.
2.3. SEVERABILITY. In the event any provision of the Plan shall be held illegal
or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and
enforced as if the illegal or invalid provision had not been included.
ARTICLE 3 ADMINISTRATION
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3.1 THE COMMITTEE. The Plan shall be administered by the Committee, which
consists of not less than three Directors who shall be appointed from time
to time by, and shall serve at the discretion of, the Board of Directors.
To the extent required to comply with Rule 16b-3 under the Exchange Act,
each member of the Committee shall qualify as a "Non-Employee Director" as
defined in Rule 16b-3 or any successor definition adopted by the Securities
and Exchange Commission. To the extent required to comply with Code Section
162(m), each member of the Committee shall also be an Outside Director.
5
3.2 AUTHORITY OF THE COMMITTEE. Subject to the provisions of the Plan, the
Committee shall have full power to construe and interpret the Plan; to
establish, amend or waive rules and regulations for its administration; to
accelerate the exercisability of any Award or the end of a performance
period or the termination of any Period of Restriction or any award
agreement, or any other instrument relating to an Award under the Plan; and
(subject to the provisions of Article 15 herein) to amend the terms and
conditions of any outstanding Option, Stock Appreciation Right or other
Award to the extent such terms and conditions are within the discretion of
the Committee as provided in the Plan. Notwithstanding the foregoing, the
Committee shall have no authority to adjust upwards the amount payable to a
Covered Employee with respect to a particular Award, to take any of the
foregoing actions, or to take any other action to the extent that such
action or the Committee's ability to take such action would cause any Award
under the Plan to any Covered Employee to fail to qualify as
"performance-based compensation" within the meaning of Code Section
162(m)(4) and the regulations issued thereunder. Subject to section 4.3, in
no event shall the Committee have the right to i) cancel outstanding
Options or SARs for the purpose of replacing or regranting such Options or
SARs with an exercise price that is less than the original exercise price
of the Option or SAR, or ii) change the Option Price of an Option or SAR to
an exercise price that is less than the original Option or SAR exercise
price, without first obtaining the approval of shareholders. Also
notwithstanding the foregoing, no action of the Committee (other than
pursuant to Section 4.3 hereof or Section 9.4 hereof) may, without the
consent of the person or persons entitled to exercise any outstanding
Option or Stock Appreciation Right or to receive payment of any other
outstanding Award, adversely affect the rights of such person or persons.
3.3 SELECTION OF PARTICIPANTS. The Committee shall have the authority to grant
Awards under the Plan, from time to time, to such Key Employees and
Directors as may be selected by it. The Committee shall select Participants
from among those who they have identified as being Key Employees or
Directors.
3.4 DECISIONS BINDING. All determinations and decisions made by the Committee
pursuant to the provisions of the Plan and all related orders or
resolutions of the Board of Directors shall be final, conclusive and
binding on all persons, including the Company and its Subsidiaries, its
stockholders, employees, and Participants and their estates and
beneficiaries, and such determinations and decisions shall not be
reviewable.
3.5 DELEGATION OF CERTAIN RESPONSIBILITIES. The Committee may, in its sole
discretion, delegate to an officer or officers of the Company the
administration of the Plan under this Article 3; provided, however, that no
such delegation by the Committee shall be made with respect to the
administration of the Plan as it affects Directors of the Company or
Covered Employees and provided further that the Committee may not delegate
its authority to correct errors, omissions or inconsistencies in the Plan.
The Committee may delegate to the Chief Executive Officer of the Company
its authority under this Article 3 to grant Awards to Key Employees who are
not Covered Employees. All authority delegated by the Committee under this
Section 3.5 shall be exercised in accordance with the provisions of the
Plan and any guidelines for the exercise of such authority that may from
time to time be established by the Committee.
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3.6 PROCEDURES OF THE COMMITTEE. All determinations of the Committee shall be
made by not less than a majority of its members present at the meeting (in
person or otherwise) at which a quorum is present. A majority of the entire
Committee shall constitute a quorum for the transaction of business. Any
action required or permitted to be taken at a meeting of the Committee may
be taken without a meeting if a unanimous written consent, which sets forth
the action, is signed by each member of the Committee and filed with the
minutes for proceedings of the Committee. Service on the Committee shall
constitute service as a director of the Company so that members of the
Committee shall be entitled to indemnification, limitation of liability and
reimbursement of expenses with respect to their services as members of the
Committee to the same extent that they are entitled under the Company's
Articles of Incorporation and Ohio law for their services as directors of
the Company.
3.7 AWARD AGREEMENTS. Stock-based Awards under the Plan shall be evidenced by
an award agreement, which shall be signed by an authorized officer of the
Company or delegate and by the Participant, and shall contain such terms
and conditions as may be approved by the Committee. Such terms and
conditions need not be the same in all cases.
3.8 CONDITIONS ON AWARDS. Notwithstanding any other provision of the Plan, the
Board or the Committee may impose such conditions on any Award (including,
without limitation, the right of the Board or the Committee to limit the
time of exercise to specified periods).
Notwithstanding any other provisions of the Plan, all Awards under this
Plan shall be subject to the following conditions:
(i) Except in the case of death, no SAR, ISO, NSO or other option granted
pursuant to Article 6 shall be exercisable for at least six months
after its grant; and
(ii) Except in the case of death, no Restricted Stock or Performance Share
(or a Share issued in payment thereof) shall be sold for at least six
months after its grant.
3.9 SATURDAYS, SUNDAYS AND HOLIDAYS. When a date referenced in an award
Agreement falls on a Saturday, Sunday or other day when the FirstEnergy
General Office is closed, the date reference will revert back to the day
prior to such date.
ARTICLE 4 STOCK SUBJECT TO THE PLAN
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4.1 NUMBER OF SHARES. Subject to adjustment as provided in Section 4.3 herein,
the aggregate number of Shares that may be delivered under the Plan at any
time shall not exceed 15,000,000 Shares of common stock of the Company. No
more than three-quarters of such aggregate number of such Shares shall be
issued as Restricted Stock under Article 8 of the Plan or as Performance
Shares under Article 9. Stock delivered under the Plan may consist, in
whole or in part, of authorized and unissued shares, treasury shares or
shares purchased on the open market. The exercise of a Stock Appreciation
Right, whether paid in cash or Stock, shall be deemed to be an issuance of
Stock under the Plan.
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4.2 LAPSED AWARDS. If any Award granted under this Plan terminates, expires, or
lapses for any reason, any Stock subject to such Award again shall be
available for the grant of an Award under the Plan, subject to Section 7.2
herein. If the value of any Performance Shares issued under Article 9 are
paid in cash after a Performance Period has ended, such stock subject to
such award shall again be available for the grant of an award under the
Plan.
4.3 ADJUSTMENTS IN AUTHORIZED SHARES. In the event of any merger,
reorganization, consolidation, recapitalization, separation, liquidation,
stock dividend, split-up, share combination, or other change in the
corporate structure of the Company affecting the Stock, such adjustment
shall be made in the number and class of shares which may be delivered
under the Plan, and in the number and class of and/or price of shares
subject to outstanding Options, Stock Appreciation Rights, Restricted Stock
Awards and Performance Shares, granted under the Plan, as may be determined
to be appropriate and equitable by the Committee, in its sole discretion,
to prevent dilution or enlargement of rights; and provided that the number
of shares subject to any Award shall always be a whole number. Any
adjustment of an Incentive Stock Option under this paragraph shall be made
in such a manner so as not to constitute a modification within the meaning
of Section 425(h)(3) of the Code.
ARTICLE 5 ELIGIBILITY AND PARTICIPATION
-----------------------------
5.1 ELIGIBILITY. Persons eligible to receive Awards under all Articles of this
Plan except Article 11 include all employees of the Company and its
Subsidiaries who, in the opinion of the Committee, are Key Employees. Key
Employees may include employees who are members of the Board, but may not
include Directors who are not employees. Directors who are not employees
may receive Awards under this Plan exclusively under Articles 6 and 8,
subject to Article 11.
5.2 ACTUAL PARTICIPATION. Subject to the provisions of the Plan, the Committee
may from time to time select those Key Employees to whom Awards shall be
granted and determine the nature and amount of each Award. No employee
shall have any right to be granted an Award under this Plan even if
previously granted an Award.
ARTICLE 6 STOCK OPTIONS
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6.1 GRANT OF OPTIONS. Subject to the terms and provisions of the Plan, Options
may be granted to Participants at any time and from time to time as shall
be determined by the Committee. The maximum number of Shares subject to
Options granted to any individual Participant in any calendar year shall be
five hundred thousand (500,000) Shares. The Committee shall have the sole
discretion, subject to the requirements of the Plan, to determine the
actual number of Shares subject to Options granted to any Participant. The
Committee may grant any type of Option to purchase Stock that is permitted
by law at the time of grant, including, but not limited to, ISO's and
NSO's. However, no employee may receive an Award of Incentive Stock Options
that are first exercisable during any calendar year to the extent that the
8
aggregate Fair Market Value of the Stock(determined at the time the options
are granted) exceeds $100,000. Nothing in this Article 6 shall be deemed to
prevent the grant of NSO's in excess of the maximum established by Section
422 of the Code. Unless otherwise expressly provided at the time of grant,
Options granted under the Plan will be NSO's. Notwithstanding any other
provision of the Plan, no ISO shall be granted after May 1, 2008.
6.2 OPTION AGREEMENT. Each Option grant shall be evidenced by an Option
agreement that shall specify the type of Option granted, the Option price,
the duration of the Option, the number of Shares to which the Option
pertains, and such other provisions as the Committee shall determine. The
Option agreement shall specify whether the Option is intended to be an
Incentive Stock Option within the meaning of Section 422 of the Code, or a
Nonqualified Stock Option whose grant is not intended to be subject to the
provisions of Code Section 422.
6.3 OPTION PRICE. The purchase price per share of Stock covered by an Option
shall be determined by the Committee but shall not be less than 100% of the
Fair Market Value of such Stock on the date the Option is granted.
An Incentive Stock Option granted to an Employee who, at the time of grant,
owns (within the meaning of Section 425(d) of the Code) Stock possessing
more than 10% of the total combined voting power of all classes of stock of
the Company, shall have an exercise price which is at least 110% of the
Fair Market Value of the Stock subject to the Option.
6.4 DURATION OF OPTIONS. Each Option shall expire at such time as the Committee
shall determine at the time of grant; provided, however, that no Option
shall be exercisable later than the tenth (10th) anniversary date of its
grant.
6.5 EXERCISE OF OPTIONS. Subject to Section 3.8 herein, Options granted under
the Plan shall be exercisable at such times and be subject to such
restrictions and conditions as the Committee shall in each instance
approve, which need not be the same for all Participants. All options
within a single grant need not be exercised at one time.
6.6 PAYMENT. Options shall be exercised by the delivery of a written notice to
the Company setting forth the number of Shares with respect to which the
Option is to be exercised, accompanied by full payment for the Shares. The
Option price upon exercise of any Option shall be payable to the Company
in full either:
(a) in cash or its equivalent;
(b) by tendering Shares of previously acquired Stock having a Fair Market
Value at the time of exercise equal to the total Option price,
(c) by foregoing compensation under rules established by the Committee,
(d) by delivery by the Participant of irrevocable instructions to an
approved broker to promptly deliver to the Company the amount of the
sale or loan proceeds to pay the exercise price, or
(e) such other consideration as the Committee may deem appropriate.
9
The proceeds from such a payment shall be added to the general funds of the
Company and shall be used for general corporate purposes. As soon as
practicable, after the Company's receipt of written notification and
payment, the Participant shall receive either:
(i) stock certificates in an appropriate amount based upon the number of
Options exercised, issued in the Participant's name:
(ii) cash in an amount equal to the difference between the sale price of
such Shares and the Option price less taxes and administrative
expenses; or
(iii)a combination of the foregoing.
6.7 RESTRICTIONS ON STOCK TRANSFERABILITY. The Committee shall impose such
restrictions on any Shares acquired pursuant to the exercise of an Option
under the Plan as it may deem advisable, including, without limitation,
restrictions under applicable Federal securities law, under the
requirements of any stock exchange upon which such Shares are then listed
and under any blue sky or state securities laws applicable to such Shares.
6.8 TERMINATION OF EMPLOYMENT DUE TO DEATH, DISABILITY, OR RETIREMENT. In the
event the employment of a Participant is terminated by reason of death, any
of such Participant's outstanding Options shall become immediately
exercisable at any time prior to the expiration date of the Options or
within one year after such date of termination of employment, whichever
period is shorter, by such person or persons as shall have acquired the
Participant's rights under the Option pursuant to Article 12 hereof or by
will or by the laws of descent and distribution.
In the event the employment of a Participant is terminated by reason of
disability or retirement, including early retirement, (as defined under the
then established rules of the Company or any of its Subsidiaries, as the
case may be), any of such Participant's outstanding Options shall continue
to vest per the vesting schedule of the Participant's Option Agreement;
provided, however, that if the Participant subsequently dies with
unexercised options, the vesting and exercisaeability will be governed by
the first sentence of 6.8.
Notwithstanding the foregoing to the contrary, the Committee may, in its
sole discretion, lengthen the exercise period up to the expiration date for
an individual participant if it deems this is in the best interest of the
Company. In the case of Incentive Stock Options, the favorable tax
treatment prescribed under Section 422 of the Internal Revenue Code of
l986, as amended, may not be available if the Options are not exercised
within the Code Section 422 prescribed time period after termination of
employment for death, disability, or retirement.
6.9 TERMINATION OF EMPLOYMENT FOR OTHER REASONS. If the employment of a
Participant shall terminate for any reason other than death, disability,
retirement (including early retirement) or for Cause, the Participant shall
have the right to exercise such Participant's outstanding Options within 90
days after the date of his termination, but in no event beyond the
expiration of the term of the Options and only to the extent that the
Participant was entitled to exercise the Options at the date of his
termination of employment. In its sole discretion, the Committee may extend
the 90 days to up to one year but, however, in no event beyond the
expiration date of the Option.
If the employment of the Participant shall terminate for Cause, all of the
Participant's outstanding Options shall be immediately forfeited back to
the Company.
10
6.10 NONTRANSFERABILITY OF OPTIONS. No Option granted under the Plan may be
sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, otherwise than by will or by the laws of descent and
distribution. Further, all Options granted to a Participant under the Plan
shall be exercisable during his lifetime only by such Participant.
ARTICLE 7 STOCK APPRECIATION RIGHTS
-------------------------
7.1 GRANT OF STOCK APPRECIATION RIGHTS. Subject to the terms and conditions of
the Plan, Stock Appreciation Rights may be granted to Participants, at the
discretion of the Committee, in any of the following forms:
(a) in lieu of Options;
(b) in addition to Options;
(c) independent of Options; or
(d) in any combination of (a), (b), or (c).
The maximum numbers of Shares subject to SARs granted to any individual
Participant in any calendar year shall be five hundred thousand (500,000)
Shares. Subject to the immediately preceding sentence, the Committee shall
have the sole discretion, subject to the requirements of the Plan, to
determine the actual number of Shares subject to SARs granted to any
Participant.
7.2 EXERCISE OF SARS IN LIEU OF OPTIONS. SARs granted in lieu of Options may be
exercised for all or part of the Shares subject to the related Option upon
the surrender of the related Options representing the right to purchase an
equivalent number of Shares. The SAR may be exercised only with respect to
the Shares of Stock for which its related Option is then exercisable.
Option Stock with respect to which the SAR shall have been exercised may
not be subject again to an Award under the Plan.
Notwithstanding any other provision of the Plan to the contrary, with
respect to a SAR granted in lieu of an Incentive Stock Option:
(i) the SAR will expire no later than the expiration of the underlying
Incentive Stock Option;
(ii) the SAR amount may be forno more than one hundred percent (100%) of
the difference between the exercise price of the underlying Incentive
Stock Option and the Fair Market Value of the Stock subject to the
underlying Incentive Stock Option at the time the SAR is exercised;
and
(iii) the SAR may be exercised only when the Fair Market Value of the Stock
subject to the Incentive Stock Option exceeds the exercise price of
the Incentive Stock Option.
7.3 EXERCISE OF SARS IN ADDITION TO OPTIONS. SARs granted in addition to
Options shall be deemed to be exercised upon the exercise of the related
Options. The deemed exercise of SARs granted in addition to Options shall
not necessitate a reduction in the number of related Options.
11
7.4 EXERCISE OF SARS INDEPENDENT OF OPTIONS. Subject to Section 3.8 herein and
Section 7.5 herein, SARs granted independently of Options may be exercised
upon whatever terms and conditions the Committee, in its sole discretion,
imposes upon the SARs, including, but not limited to, a corresponding
proportional reduction in previously granted Options.
7.5 PAYMENT OF SAR AMOUNT. Upon exercise of the SAR, the holder shall be
entitled to receive payment of an amount determined by multiplying:
(a) The difference between the market price of a Share on the date of
exercise over the price fixed by the Committee at the date of grant
(which price shall not be less than 100% of the market price of a
Share on the date of grant) (the Exercise Price); by
(b) The number of Shares with respect to which the SAR is exercised.
7.6 FORM AND TIMING OF PAYMENT. Payment to a Participant, upon SAR exercise,
will be made in cash or stock, at the discretion of the Committee, as soon
as administratively possible after exercise.
7.7 TERM OF SAR. The term of an SAR granted under the Plan shall not exceed ten
years.
7.8 TERMINATION OF EMPLOYMENT. In the event the employment of a Participant is
terminated by reason of death, disability, retirement (including early
retirement), or any other reason, the exercisability of any outstanding SAR
granted in lieu of or in addition to an Option shall terminate in the same
manner as its related Option as specified under Sections 6.8 and 6.9
herein. The exercisability of any outstanding SARs granted independent of
Options also shall terminate in the manner provided under Sections 6.8 and
6.9 hereof.
7.9 NONTRANSFERABILITY OF SARS. No SAR granted under the Plan may be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated,
other than by will or by the laws of descent and distribution. Further, all
SARs granted to a Participant under the Plan shall be exercisable during
his lifetime only by such Participant.
ARTICLE 8 RESTRICTED STOCK
----------------
8.1 GRANT OF RESTRICTED STOCK. Subject to the terms and provisions of the Plan,
the Committee, at any time and from time to time, may grant Shares of
Restricted Stock under the Plan to such Participants and in such amounts,
as it shall determine. The Committee may condition the vesting or lapse of
the Period of Restriction established pursuant to Section 8.3 upon the
attainment of one or more of the performance goals utilized for purposes of
Performance Shares pursuant to Article 9 hereof. As required for valuation
of grants under the Plan, Restricted Stock will be valued at its Fair
Market Value. The maximum number of Shares subject to issuance as
Restricted Stock granted to any individual Participant in any calendar year
is two hundred fifty thousand (250,000) Shares.
8.2 RESTRICTED STOCK AGREEMENT. Each Restricted Stock grant shall be evidenced
by a Restricted Stock agreement that shall specify the Period of
Restriction, or periods, the number of Shares of Restricted Stock granted,
and such other provisions as the Committee shall determine.
12
8.3 TRANSFERABILITY. Except as provided in this Article 8 or in Section 3.8
herein, the Shares of Restricted Stock granted hereunder may not be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated
until the termination of the applicable Period of Restriction or for such
period of time as shall be established by the Committee and as shall be
specified in the Restricted Stock agreement, or upon earlier satisfaction
of other conditions (including any performance goals) as specified by the
Committee in its sole discretion and set forth in the Restricted Stock
agreement. All rights with respect to the Restricted Stock granted to a
Participant under the Plan shall be exercisable during his lifetime only by
such Participant.
8.4 OTHER RESTRICTIONS. The Committee shall impose such other restrictions on
any Shares of Restricted Stock granted pursuant to the Plan as it may deem
advisable including, without limitation, vesting or forfeiture restrictions
under applicable Federal or state securities laws, and the Committee may
legend certificates representing Restricted Stock to give appropriate
notice of such restrictions.
8.5 CERTIFICATE LEGEND. In addition to any legends placed on certificates
pursuant to Section 8.4 herein, each certificate representing Shares of
Restricted Stock granted pursuant to the Plan shall bear the following
legend:
"The sale or other transfer of the shares of stock represented by this
certificate, whether voluntary, involuntary, or by operation of law,
is subject to certain restrictions on transfer set forth in the
Executive and Director Incentive Compensation Plan of FirstEnergy
Corp., in the rules and administrative procedures adopted pursuant to
such Plan, and in a Restricted Stock Agreement dated __________. A
copy of the Plan, such rules and procedures, and such Restricted Stock
agreement may be obtained from the Secretary of FirstEnergy Corp."
8.6 REMOVAL OF RESTRICTIONS. Except as otherwise provided in this Article,
Shares of Restricted Stock covered by each Restricted Stock grant made
under the Plan shall become freely transferable by the Participant after
the last day of the Period of Restriction. Once the Shares are released
from the restrictions, the Participant shall be entitled to have the legend
required by Section 8.5 removed from his Stock certificate.
8.7 VOTING RIGHTS. During the Period of Restriction, Participants holding
Shares of Restricted Stock granted hereunder may exercise full voting
rights with respect to those Shares.
8.8 DIVIDENDS AND OTHER DISTRIBUTIONS. During the Period of Restriction,
Participants holding Shares of Restricted Stock granted hereunder shall be
entitled to receive all dividends and other distributions paid with respect
to those Shares while they are so held. If any such dividends or
distributions are paid in Shares, the Shares shall be subject to the same
restrictions on transferability as the Shares of Restricted Stock with
respect to which they were paid.
8.9 TERMINATION OF EMPLOYMENT DUE TO RETIREMENT (including early retirement).
In the event that a Participant terminates his employment with the Company
or any of its Subsidiaries because of retirement (as defined under the then
established rules of the Company or any of its Subsidiaries, as the case
may be), the Committee in its sole discretion (subject to Section 3.8
herein) may waive or modify the restrictions remaining on any or all Shares
of Restricted Stock as it deems appropriate.
13
8.10 TERMINATION OF EMPLOYMENT DUE TO DEATH OR DISABILITY. In the event a
Participant's employment is terminated because of death or disability (as
defined under the then established rules of the Company or any of its
Subsidiaries, as the case may be) during the Period of Restriction, any
remaining Period of Restriction applicable to the Restricted Stock shall
automatically terminate and, except as otherwise provided in Section 8.4.
herein, the Shares of Restricted Stock shall thereby be free of
restrictions and be fully transferable.
8.11 TERMINATION OF EMPLOYMENT FOR OTHER REASONS. In the event that a
Participant terminates his employment with the Company or any of its
Subsidiaries for any reason other than for death, disability, or retirement
(including early retirement), as set forth in Sections 8.9 and 8.10 herein,
during the Period of Restriction, then any Shares of Restricted Stock still
subject to restrictions as of the date of such termination shall
automatically be forfeited and returned to the Company; provided, however,
that in the event of a termination of the employment of a Participant by
the Company or any of its Subsidiaries other than for Cause, the Committee,
in its sole discretion (subject to Section 3.8 herein), may waive or modify
the automatic forfeiture of any or all such Shares as it deems appropriate.
ARTICLE 9 PERFORMANCE SHARES
------------------
9.1 GRANT OF PERFORMANCE SHARES. Subject to the terms and provisions of the
Plan, Performance Shares may be granted to Participants at any time and
from time to time as shall be determined by the Committee. The maximum
number of Shares that may be issued to any Participant in a calendar year
shall not exceed two hundred fifty thousand (250,000), subject to
adjustment as provided in Section 4.3.
9.2 VALUE OF PERFORMANCE SHARES. The Committee shall set performance goals over
certain periods to be determined in advance by the Committee ("Performance
Periods"). Prior to each grant of Performance Shares, the Committee shall
establish an initial number of Shares for each Performance Share granted to
each Participant for that Performance Period. Prior to each grant of
Performance Shares, the Committee also shall set the performance goals that
will be used to determine the extent to which the Participant receives a
payment of the number of Shares for the Performance Shares awarded for such
Performance Period. These goals will be based on the attainment by the
Company or its Subsidiaries of certain objective performance measures,
which may include, but are not limited to one or more of the following:
total shareholder return, return on equity, return on capital, earnings per
share, market share, stock price, sales, costs, net income, cash flow,
retained earnings, results of customer satisfaction surveys, aggregate
product price and other product price measures, safety record, service
reliability, demand-side management (including conservation and load
management), operating and maintenance cost management, and energy
production availability performance measures. Such performance goals also
may be based upon the attainment of specified levels of performance of the
Company or one or more Subsidiaries under one or more of the measures
described above, relative to the performance of other corporations. The
Committee may provide for the crediting of dividend equivalents during the
performance period. With respect to each such performance measure utilized
14
during a Performance Period, the Committee shall assign percentages to
various levels of performance which shall be applied to determine the
extent to which the Participant shall receive a payout of the number of
Performance Shares awarded. With respect to Covered Employees, all
performance goals shall be objective performance goals satisfying the
requirements for "performance-based compensation" within the meaning of
Section 162(m)(4) of the Code, and shall be set by the Committee within the
time period prescribed by Section 162(m) of the Code and related
regulations.
9.3 PAYMENT OF PERFORMANCE SHARES. After a Performance Period has ended, the
holder of a Performance Share shall be entitled to receive the value
thereof as determined by the Committee. The Committee shall make this
determination by first determining the extent to which the performance
goals set pursuant to Section 9.2 have been met. It will then determine the
applicable percentage (which may exceed 100%) to be applied to, and will
apply such percentage to, the number of Performance Shares to determine the
payout to be received by the Participant. In addition, with respect to
Performance Shares granted to any Covered Employee, no payout shall be made
hereunder except upon written certification by the Committee that the
applicable performance goal or goals have been satisfied to a particular
extent. The amount payable in cash in a calendar year to any Participant
with respect to any Performance Period pursuant to any Performance Share
award shall not exceed $2,000,000.
9.4 COMMITTEE DISCRETION TO ADJUST AWARDS. Subject to Section 3.2 regarding
Awards to Covered Employees, the Committee shall have the authority to
modify, amend or adjust the terms and conditions of any Performance Share
award, at any time or from time to time, including but not limited to the
performance goals.
9.5 FORM AND TIMING OF PAYMENT. The payment described in Section 9.3 herein
shall be made in cash, Stock, or a combination thereof as determined by the
Committee. Payment may be made in a lump sum or installments as prescribed
by the Committee. If any payment is to be made on a deferred basis, the
Committee may provide for the payment of dividend equivalents or interest
during the deferral period. Any stock issued in payment of a Performance
Share shall be subject to the restrictions on transfer in Section 3.8
herein.
9.6 TERMINATION OF EMPLOYMENT DUE TO DEATH, DISABILITY, OR RETIREMENT
(including early retirement). In the case of death, disability, or
retirement (each of disability and retirement as defined under the
established rules of the Company or any of its Subsidiaries, as the case
may be), the holder of a Performance Share shall receive a prorated payment
based on the Participant's number of full months of service during the
Performance Period, further adjusted based on the achievement of the
performance goals, as computed by the Committee. The Committee may require
that a Participant have a minimum number of full months of service during
the Performance Period to qualify for an Award payout.
9.7 TERMINATION OF EMPLOYMENT FOR OTHER REASONS. In the event that a
Participant terminates employment with the Company or any of its
Subsidiaries for any reason other than death, disability, or retirement
(including early retirement), all Performance Shares shall be forfeited;
provided, however, that in the event of a termination of the employment of
the Participant by the Company or any of its Subsidiaries other than for
Cause, the Committee in its sole discretion may waive the automatic
forfeiture provisions.
15
9.8 NONTRANSFERABILITY. No Performance Shares granted under the Plan may be
sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will or by the laws of descent and distribution
until the termination of the applicable Performance Period. All rights with
respect to Performance Shares granted to a Participant under the Plan shall
be exercisable during his/her lifetime only by such Participant.
ARTICLE 10 CASH AWARDS
-----------
10.1 GRANT OF CASH AWARD. Subject to the terms of this Plan, Cash Awards may be
made to Participants at any time and from time to time as shall be
determined by the Committee. The Committee shall have complete discretion
in the determining the form of the Cash Awards granted to Participants
10.2 CASH AWARD PERFORMANCE CRITERIA. All Cash Awards made under this Plan shall
be subject to pre-established, objective, business-related Performance
Measures. The performance measures shall be approved for use by the
Committee and the Committee shall certify their attainment and the
resulting payout of Cash Awards. Performance Measures for Cash Awards may
be measurable for periods of one year to five years (allowing for prorated
periods for new Participants). The Performance Measures may include, but
shall not be limited to: operational measures (e.g. attaining merger
milestones, customer satisfaction, service reliability, safety and tactical
objectives), financial measures (e.g. expense control, revenue, margins and
shareholder value added levels "SVA") and individual measures. Performance
Measures can be made on overlapping cycles, (i.e. one-year cycles could
emphasize operational measures and three-year cycles could emphasize SVA
Performance Measures.) Each cycle of Performance Measures could have a
distinct Cash Award associated with it.
10.3 PAYOUT OF CASH AWARDS. Payouts of Cash Awards are made in relationship to a
target payout level determined prior to each cycle on a per Participant
basis. Target levels under multiple cycles will be calibrated to provide,
in total, an annualized level of incentives consistent with the Company's
compensation philosophy as set by the Committee. Actual payouts of Cash
Awards will vary with performance results as follows: actual payouts based
upon operational or individual Performance Measures will vary from 50% (if
threshold performance is attained) to 150% of the target level; actual
payouts based upon Company SVA and other corporate financial measures will
vary from 50% (if threshold performance is attained) up to 200% of the
target level. The maximum Cash Award payable in a calendar year to any
Participant with respect to any Performance Period shall not exceed
$2,000,000.
10.4 CONVERSION OF CASH AWARD PAYOUT TO RESTRICTED STOCK. At the request of the
Participant, but subject to the discretion of the Committee, any Cash Award
payout may be converted to Restricted Stock at a discount. The conversion
to Restricted Stock will occur by multiplying the Cash Award by a premium,
but in no event more than 120% and dividing the product by the Fair Market
Value of the Restricted Stock on the date of conversion, which shall be
chosen by the Committee at least 10 days in advance, to determine the
number of shares of Restricted Stock that will be provided as full
settlement of the Cash Award. The shares of Restricted Stock provided to
Participants in settlement of Cash Awards shall be Restricted Stock subject
to Article 8.
16
ARTICLE 11 DIRECTORS' AWARDS
-----------------
11.1 GRANT OF DIRECTORS' AWARDS. In lieu of a portion of their retainer,
Directors' Awards can be made in the form of Stock Options or Restricted
Stock under Articles 6 and 8 respectively. No other Awards may be made to
Directors under the Plan.
11.2 CONVERSION OF RETAINER TO STOCK. At the request of a Director but subject
to the election of the Committee, a Director may convert any retainer
otherwise due to be paid by the Company in cash to an aggregate equivalent
value of either Stock Options, Restricted Stock or both.
11.3 CONVERSION OF RETAINER TO RESTRICTED STOCK. Retainer, otherwise payable in
cash may be converted to Restricted Stock under Article 8. The conversion
to Restricted Stock will occur by multiplying the retainer by a premium,
but in no event more than 120% and dividing the product by the Fair Market
Value of the Restricted Stock on the date of conversion, which shall be
chosen by the Committee at least 10 days in advance, into the amount of the
retainer to determine the number of shares of Restricted Stock that will be
provided as full settlement of the retainer.
11.4 CONVERSION OF RETAINER TO STOCK OPTIONS. Retainer otherwise due to be paid
in cash may be converted to Stock Options under Article 6 at the request of
the Participant but subject to the election of the Committee. Retainer
shall be converted by multiplying the retainer by a premium, but in no
event more than 120% and dividing the product by the amount equal to the
Black-Scholes Value of the Stock Option on the date of conversion. The
quotient of which is the number of Stock Options that shall be awarded.
ARTICLE 12 BENEFICIARY DESIGNATION
-----------------------
Each Participant under the Plan may, from time to time, name any beneficiary or
beneficiaries (who may be named contingently or successively and who may include
a trustee under a will or living trust) to whom any benefit under the Plan is to
be paid in case of his/her death before he receives any or all of such benefit.
Each designation will revoke all prior designations by the same Participant,
shall be in a form prescribed by the Committee, and will be effective only when
filed by the Participant in writing with the Committee during his lifetime. In
the absence of any such designation or if all designated beneficiaries
predecease the Participant, benefits remaining unpaid at the Participant's death
shall be paid to the Participant's estate.
17
ARTICLE 13 RIGHTS OF EMPLOYEES
-------------------
13.1 EMPLOYMENT. Nothing in the Plan shall interfere with or limit in any way
the right of the Company or any of its Subsidiaries to terminate any
Participant's employment at any time, nor confer upon any Participant any
right to continue in the employ of the Company or any of its Subsidiaries.
13.2 PARTICIPATION. No employee shall have a right to be selected as a
Participant, or, having been so selected, to be selected again as a
Participant.
13.3 NO IMPLIED RIGHTS; RIGHTS ON TERMINATION OF SERVICE. Neither the
establishment of the Plan nor any amendment thereof shall be construed as
giving any Participant, beneficiary, or any other person any legal or
equitable right unless such right shall be specifically provided for in the
Plan or conferred by specific action of the Committee in accordance with
the terms and provisions of the Plan. Except as expressly provided in this
Plan, neither the Company nor any of its Subsidiaries shall be required or
be liable to make any payment under the Plan.
13.4 NO RIGHT TO COMPANY ASSETS. Neither the Participant nor any other person
shall acquire, by reason of the Plan, any right in or title to any assets,
funds or property of the Company or any of its Subsidiaries whatsoever
including, without limiting the generality of the foregoing, any specific
funds, assets, or other property which the Company or any of its
Subsidiaries, in its sole discretion, may set aside in anticipation of a
liability hereunder. Any benefits which become payable hereunder shall be
paid from the general assets of the Company or the applicable subsidiary.
The Participant shall have only a contractual right to the amounts, if any,
payable hereunder unsecured by any asset of the Company or any of its
Subsidiaries. Nothing contained in the Plan constitutes a guarantee by the
Company or any of its Subsidiaries that the assets of the Company or the
applicable subsidiary shall be sufficient to pay any benefit to any person.
ARTICLE 14 CHANGE IN CONTROL
-----------------
14.1 STOCK BASED AWARDS. Notwithstanding any other provisions of the Plan, in
the event of a Change in Control, all Stock based awards granted under this
Plan shall immediately vest 100% in each Participant (subject to Section
3.8 herein), including Incentive Stock Options, Nonqualified Stock Options,
Stock Appreciation Rights, and Restricted Stock.
14.2 ALL AWARDS OTHER THAN STOCK BASED AWARDS. Notwithstanding any other
provisions of the Plan, in the event of a Change in Control, all Awards
other than Stock Based Awards granted under this Plan shall be immediately
paid out in cash, including Performance Shares. The amount of the payout
shall be based on the higher of: (i) the extent, as determined by the
Committee, to which performance goals, established for the Performance
Period then in progress have been met up through and including the
effective date of the Change in Control or (ii) 100% of the value on the
date of grant of the number of Performance Shares.
18
ARTICLE 15 AMENDMENT, MODIFICATION, AND TERMINATION
----------------------------------------
15.1 AMENDMENT, MODIFICATION, AND TERMINATION. At any time and from time to
time, the Board or Committee may terminate, amend, or modify the Plan.
However, without the approval of the stockholders of the Company if
required by the Code, by the insider trading rules of Section 16 of the
Exchange Act, by any national securities exchange or system on which the
Stock is then listed or reported, or by any regulatory body having
jurisdiction with respect hereto, no such termination, amendment, or
modification may:
(a) Increase the total amount of Stock which may be issued under this
Plan, except as provided in Section 4.3 herein; or
(b) Change the class of Employees eligible to participate in the Plan;
(c) Materially increase the cost of the Plan or materially increase the
benefits to Participants; or
(d) Extend the maximum period after the date of grant during which Options
or Stock Appreciation Rights may be exercised.
15.2 AWARDS PREVIOUSLY GRANTED. No termination, amendment or modification of the
Plan other than pursuant to Section 4.3 hereof shall in any manner
adversely affect any Award theretofore granted under the Plan, without the
written consent of the Participant.
15.3 DEFERRAL OF PAYMENTS AND DISTRIBUTIONS. Cash Awards pursuant to Article 10
may be eligible for deferral by any plan(s) offered by the company, subject
to the approval of the Committee and any administrative requirements
imposed by the Committee.
ARTICLE 16 WITHHOLDING AND DEFERRAL
------------------------
16.1 TAX WITHHOLDING. The Company and any of its Subsidiaries shall have the
power and the right to deduct or withhold, or require a Participant to
remit to the Company or any of its Subsidiaries, an amount sufficient to
satisfy Federal, state and local taxes (including the Participant's FICA
obligation) required by law to be withheld with respect to any grant,
exercise, or payment made under or as a result of this Plan.
16.2 STOCK DELIVERY OR WITHHOLDING. With respect to withholding required upon
the exercise of Stock Options, or upon the lapse of restrictions on
Restricted Stock, participants may elect, subject to the approval of the
Committee, to satisfy the withholding requirement, in whole or in part, by
tendering to the Company Shares of previously acquired Stock or by having
the Company withhold Shares of Stock, in each such case in an amount having
a Fair Market Value equal to the amount required to be withheld to satisfy
the tax withholding obligations described in Section 16.1. The value of the
Shares to be tendered or withheld is to be based on the Fair Market Value
of the Stock on the date that the amount of tax to be withheld is to be
determined.
All Stock withholding elections shall be irrevocable and made in writing,
signed by the Participant on forms approved by the Committee in advance of
the day that the transaction becomes taxable.
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Stock withholding elections made by Participants who are subject to the
short-swing profit restrictions of Section 16 of the Exchange Act must
comply with the additional restrictions of Section 16 and Rule 16b-3 in
making their elections.
ARTICLE 17 SUCCESSORS
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All obligations of the Company under the Plan, with respect to Awards granted
hereunder, shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
merger, consolidation or otherwise, of all or substantially all of the business
and/or assets of the Company.
ARTICLE 18 REQUIREMENTS OF LAW
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18.1 REQUIREMENTS OF LAW. The granting of Awards and the issuance of Shares of
Stock under this Plan shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required.
18.2 GOVERNING LAW. The Plan, and all agreements hereunder, shall be construed
in accordance with and governed by the laws of the State of Ohio without
giving effect to the principles of the conflicts of laws.
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