FIRSTENERGY CORP.
EXECUTIVE AND DIRECTOR INCENTIVE
COMPENSATION PLAN
FE Plan effective May 1, 1998
Revised November 16, 1998
Table of Contents
Page
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Article 1 Establishment, Purpose, and Duration 1
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 1
2.1 Definitions
2.1.1 Award 1
2.1.2 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 4
2.1.18 Option 4
2.1.19 Outside Director 4
2.1.20 Participant 4
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 5
3.3 Selection of Participants 6
3.4 Decisions Binding 6
3.5 Delegation of Certain Responsibilities 6
3.6 Procedures of the Committee 6
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, 10
Disability, or Retirement
6.9 Termination of Employment for 10
Other Reasons
6.10 Nontransferability of Options 10
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 11
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 12
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 13
to Retirement
8.10 Termination of Employment Due to Death 14
or Disability
8.11 Termination of Employment for 14
Other Reasons
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, 15
Disability, or Retirement
9.7 Termination of Employment for 15
Other Reasons
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 16
Restricted Stock
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 18
of Service
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
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 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 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
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,
(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
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
closing prices for the 20 trading days preceding the relevant
date, as reported on the composite tape of the New York Stock
Exchange.
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.
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.
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.
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 7,500,000
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.
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 two hundred
thousand (200,000) 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
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.
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 (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 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. 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 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.
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 two
hundred thousand (200,000) 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 for no 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.
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, 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 one hundred
thousand (100,000) 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.
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, 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. 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.
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, 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 one hundred thousand (100,000), 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
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 $1,000,000.
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. 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, 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.
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 $1,000,000.
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.
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.
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.
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.
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.