UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date
of Report (Date of earliest event reported): February 25, 2011
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Commission
File Number
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Registrant; State of Incorporation;
Address; and Telephone Number
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I.R.S. Employer
Identification No.
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333-21011
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FIRSTENERGY CORP.
(An Ohio Corporation)
76 South Main Street
Akron, OH 44308
Telephone (800)736
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3402
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34-1843785
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the
filing obligation of the registrant under any of the following provisions (see General Instruction
A.2.):
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.01. Completion of Acquisition or Disposition of Assets.
On
February 25, 2011, FirstEnergy Corp. (“FirstEnergy”) completed
its previously announced merger with Allegheny Energy, Inc. (“Allegheny Energy”). Pursuant to the terms and conditions of
the Agreement and Plan of Merger (the “Merger Agreement”), by and among FirstEnergy, Allegheny
Energy and Element Merger Sub, Inc., a direct wholly-owned subsidiary of FirstEnergy (“Merger
Sub”), dated as of February 10, 2010, as amended as of June 4, 2010, Merger Sub was merged with and
into Allegheny Energy, with Allegheny Energy surviving the merger (the “Merger”) and becoming a
wholly-owned subsidiary of FirstEnergy.
Pursuant to the Merger Agreement, FirstEnergy issued to Allegheny Energy stockholders 0.667
of a share of FirstEnergy common stock, par value $0.10 per share, for each outstanding share of
Allegheny Energy common stock. Upon closing of the Merger, Allegheny Energy became a wholly owned
subsidiary of FirstEnergy and the shares of Allegheny Energy common stock, which traded under the
symbol “AYE,” have ceased trading on, and are being delisted from, the New York Stock Exchange.
The foregoing description of the Merger Agreement and the Merger does not purport to be
complete and is qualified in it is entirety by reference to the Merger Agreement, which is
incorporated by reference as Exhibits 2.1 and 2.2 to this Current Report on Form 8-K and is
incorporated herein by reference.
Additional information regarding Allegheny Energy and its business can be found in its Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 23, 2011.
Item 3.03. Material Modifications to Rights of Security Holders.
The disclosure provided under Item 5.03 below is incorporated by reference herein.
Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of
Certain Officers; Compensatory Arrangements of Certain Officers.
Completion of Merger
In connection with the Merger described in Item 2.01 of this Current Report on Form 8-K and
pursuant to the terms of the Merger Agreement, the Board of Directors of FirstEnergy (the “Board”)
expanded its size from 11 to 13 and appointed two former directors of Allegheny Energy, Julia L.
Johnson and Ted J. Kleisner, as members of the Board, effective immediately after the Effective
Time (as defined in the Merger Agreement). Each director will serve for a term expiring at the annual meeting of
shareholders in 2011 and until his or her successor is
elected, or until his or her earlier resignation or removal.
The following is a brief biography of the directors appointed to the Board in connection with
the Merger:
Julia L. Johnson, age 48, has
been President of NetCommunications, LLC, a national regulatory and public affairs firm focusing
primarily on energy, telecommunications and broadcast regulation, since 2000.
She is a director of American Water Works Company, Inc., MasTec, Inc. and NorthWestern
Corporation. Ms. Johnson served as a director of Allegheny Energy, Inc.
from 2003 to 2011.
Ted J. Kleisner, age 66, has been Chief Executive Officer of Hershey
Entertainment & Resorts Company, an entertainment
and hospitality company, since 2007. He was also President of Hershey Entertainment & Resorts Company from 2007 to 2010. Mr. Kleisner
was the President of CSX Hotels, Inc. (d/b/a The Greenbrier) from 1988 to 2006 and President and Chief Executive Officer of
The Greenbrier Resort & Club Management Company from 1988 to 2006. Mr. Kleisner served as a director of Allegheny Energy, Inc. from 2001 to 2011.
The appointed directors will
be compensated for their services on the Board in the same manner as the other Board members. As of the date of this Current Report on Form 8-K, the Board committee assignments of Ms. Johnson and Mr. Kleisner have not yet been determined.
FirstEnergy will also
enter into an Indemnification Agreement with each of Ms. Johnson and Mr. Kleisner. The form of Indemnification
Agreement to be entered into with each director was previously filed with the SEC as Exhibit 10.1 to
FirstEnergy’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2009
and is incorporated into this Item 5.02 by reference.
Further, in
connection with the consummation of the Merger, Paul J. Evanson’s Employment Agreement,
dated March 19, 2010, has become effective. Mr. Evanson’s Employment Agreement was
previously summarized in FirstEnergy’s Registration Statement on Form S-4, as amended.
Mr. Evanson’s Employment Agreement is incorporated by reference as Exhibit 10.1 to this Current Report
on Form 8-K and is incorporated herein by reference.
Change in Control Definition
On February 25, 2011, the Board approved revisions to the definition of “change in control”
within the FirstEnergy Corp. 2007 Incentive Compensation Plan, effective January 1, 2011, and the
FirstEnergy Corp. Executive Deferred Compensation Plan, the FirstEnergy Corp. Deferred Compensation
Plan for Outside Directors and the FirstEnergy Corp. Supplemental Executive Retirement Plan,
effective January 1, 2012. The Board also granted authority to a designated officer of FirstEnergy
to make the same revisions to the “change in control” definition in the FirstEnergy Corp. Executive
Benefit Plans Security Trust Agreement Third Restatement and the FirstEnergy Corp. Trust Agreement
for Outside Directors Third Restatement, effective January 1, 2012. The definition of “change in
control” in the above referenced plans was revised by the Board to better align the definition with
market practice, conform the change in control definition among FirstEnergy’s various plans and
make certain other clarifying changes. Elements of the change in control trigger that were revised
include (i) the acquisition by a person of beneficial ownership of 25% or more of FirstEnergy’s
voting securities (from a previous level of 50% and without regard to whether such person proposed
a nominee to the Board) and (ii) the consummation of a Major Corporate Event (defined to include
mergers and consolidations and certain asset sales) where FirstEnergy shareholders hold less than
60% of the combined voting power of the surviving corporation (from the previous level of 75% with
a requirement that their pre-transaction and post-transaction holdings remain proportionate).
Except for the above-referenced terms and certain other clarifying changes, no other terms of the
existing definition were modified.
Change in Control Severance Plan
On February 25, 2011 the Board approved the FirstEnergy Corp. Change in Control Severance Plan
(the “CIC Severance Plan”) to provide for the payment of severance benefits to certain eligible
executives of FirstEnergy, including all actively employed named executive officers (the “NEOs”),
in the event their employment with FirstEnergy terminates involuntarily in connection with a change
in control of FirstEnergy. The CIC Severance Plan replaces the Change in Control Special Severance
Agreements (the “Severance Agreements”) previously entered into with certain of FirstEnergy’s NEOs,
including Mr. Alexander, Mr. Clark, Mr. Leidich and Ms. Vespoli. The CIC Severance Plan is
effective as of January 1, 2011, but NEOs party to a Severance Agreement will enter the plan upon
non-renewal of the Severance Agreements as of January 1, 2012. The CIC Severance Plan has an
initial three year irrevocable term that will automatically renew each year for an additional year.
During the three year initial term, and for the 24 month period following a change in control, the
CIC Severance Plan may not be amended, modified or terminated.
The CIC Severance Plan
contains terms substantially similar to those under the Severance
Agreements, subject to the changes in the definition of “change in control” discussed above.
Under the CIC Severance Plan, the NEOs are entitled to severance benefits triggered
only if during the 24 month period following a Change in Control a NEO incurs an involuntarily
Termination of Employment for any reason other than for Cause or a voluntary Termination of
Employment for Good Reason within 30 days following an event that constitutes Good Reason (as
defined in the CIC Severance Plan). Severance benefits will not be payable if a NEO dies or
is terminated for Cause or due to Disability (as defined in the CIC Severance Plan). The
severance benefits to the NEOs consist of a lump sum cash payment equal to
the NEO’s base salary through the date of the NEO’s termination and up to three times the sum of
his or her base salary and target annual short-term incentive amount. Upon termination, the NEO
will be entitled to receive his target bonus under the 2007 Incentive Plan (or any successor plan)
and the NEO will be credited with three additional years of age and service pursuant to the
FirstEnergy Corp. Executive Deferred Compensation Plan and the FirstEnergy Corp. Supplemental
Executive Retirement Plan and will also be entitled to up to three years of continuation of
coverage under FirstEnergy-group health and life insurance plans. The CIC Severance Plan also
contains a non-competition provision that precludes, among other things, direct or indirect
competition with FirstEnergy and the solicitation of FirstEnergy’s customers or employees for a
period of 24 months following the date of the NEO’s termination of employment.
Amendment to Employment Agreement of Gary R. Leidich
On February 25,
2011, the employment agreement, dated February 26, 2008 (the “Initial Leidich
Agreement”), as amended on January 29, 2010 and modified May 17, 2010 (the “Amended Leidich Agreement,” and collectively with
the Initial Leidich Agreement, the “Leidich Agreement”), between FirstEnergy Service Company
and Gary R. Leidich, Executive Vice President of FirstEnergy, was amended by mutual agreement to
extend for an additional period through December 31, 2011. All other terms of the Leidich
Agreement remain the same. The Initial Leidich Agreement was previously filed as Exhibit 10-4 (and
listed as Exhibit 10-88 in the Exhibit List) to FirstEnergy’s Form 10-K for the year ended
December 31, 2007 and the Amended Leidich Agreement was previously filed as Exhibit 10-39 to FirstEnergy’s
Form 10-K for the year ended December 31, 2009.
Item 5.03. Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.
In connection with the
Merger Agreement and as previously approved by FirstEnergy
shareholders, on February 25, 2011 FirstEnergy filed a Certificate of Amendment to its Amended
Articles of Incorporation to increase the number of shares of authorized common stock from
375,000,000 to 490,000,000. This amendment reflects changes contemplated or necessitated by the
Merger Agreement which are described in FirstEnergy’s Registration Statement on Form S-4, as amended.
The
Amendment to the Amended Articles of Incorporation is attached hereto as Exhibit 3.1 to this Current Report on
Form 8-K and is incorporated herein by reference.
Item 8.01. Other Events
Announcement of Completion of Merger
On February 25, 2011, FirstEnergy
issued a press release announcing that FirstEnergy completed its merger with Allegheny Energy. The news
release is attached hereto as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated
herein by reference.
Incorporation by Reference to Form S-3 Shelf Registration Statement
FirstEnergy intends to file a
prospectus supplement to its Form S-3 shelf registration statement
(File No. 333-153608) with the Securities and Exchange Commission relating to common stock to be
issued to former employees and former non-employee directors of Allegheny Energy under the
following plans that FirstEnergy has assumed in connection with the Merger: the Allegheny Energy,
Inc. 2008 Long-Term Incentive Plan, the Allegheny Energy, Inc. 1998 Long-Term Incentive Plan, the
Allegheny Energy, Inc. Non-Employee Director Stock Plan and the Allegheny Energy, Inc. Amended and
Restated Revised Plan for Deferral of Compensation of Directors. Such stock plans are attached
hereto as Exhibits 10.2, 10.3, 10.4 and 10.5, respectively, for the purpose of incorporating such
plans by reference into such Form S-3 shelf registration statement. Additionally, the opinion of
Robert P. Reffner, Vice President, Legal, of FirstEnergy’s subsidiary FirstEnergy Service Company,
with respect to certain legal matters related to the issuance of FirstEnergy common stock is filed
hereto as Exhibit 5.1.
Item 9.01. Financial Statements and Exhibits.
(a) Financial
Statements of Businesses Acquired.
FirstEnergy intends to file the financial statements of Allegheny Energy
required by Item 9.01(a) as part of an amendment to this Current Report on Form 8-K not
later than 71 calendar days after the date this Current Report is required to be filed.
(b) Pro Forma Financial Information.
FirstEnergy intends to file the pro forma
financial information required by Item 9.01(b) as part of an amendment to this Current Report on
Form 8-K not later than 71 calendar days after the date this Current Report is required to be filed.
(d) Exhibits.
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Exhibit No.
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Description
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2.1
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Agreement and Plan of Merger, dated as of February 10, 2010,
by and among FirstEnergy Corp., Element Merger Sub, Inc. and
Allegheny Energy, Inc. (incorporated by reference to
FirstEnergy’s Form 8-K filed February 11, 2010, Exhibit 2.1,
File No. 333-21011)
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2.2
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Amendment No. 1 to Agreement and Plan of Merger, dated as of
June 4, 2010, by and among FirstEnergy Corp., Element Merger
Sub, Inc. and Allegheny Energy, Inc. (incorporated by
reference to FirstEnergy’s Form S-4 filed June 4, 2010,
Exhibit 2.2, File No. 333-165640)
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3.1
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Amendment to the Amended Articles of
Incorporation of FirstEnergy Corp. dated as of February 25,
2011 (filed herewith)
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5.1
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Opinion of Robert P. Reffner, Esq., Vice President, Legal, of FirstEnergy Service
Company as to the validity of FirstEnergy’s common
stock being registered pursuant to FirstEnergy’s prospectus supplement filed February 25, 2011 to the
registration statement on Form S-3 filed with the Securities and Exchange Commission on
September 22, 2008 (File No. 333-153608) (filed herewith)
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10.1
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Employment Agreement, dated as of March 19, 2010, among
FirstEnergy Corp. and Paul J. Evanson (incorporated by
reference to FirstEnergy’s Form S-4 filed June 4, 2010,
Exhibit 10.1, File No. 333-165640)
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10.2
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Allegheny Energy, Inc. 1998
Long-Term Incentive Plan (filed herewith)
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10.3
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Allegheny Energy, Inc. 2008
Long-Term Incentive Plan (filed herewith)
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10.4
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Allegheny Energy, Inc. Non-Employee
Director Stock Plan (filed herewith)
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10.5
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Allegheny Energy, Inc. Amended and Restated Revised Plan for
Deferral of Compensation of Directors (filed herewith)
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23.1
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Consent of Robert P. Reffner, Esq. (included in Exhibit 5.1)
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99.1
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Press release dated February 25, 2011 (filed herewith)
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Forward-Looking Statements
: This Form 8-K includes forward-looking statements based on
information currently available to management. Such statements are subject to certain risks and
uncertainties. These statements include declarations regarding management’s intents, beliefs and
current expectations. These statements typically contain, but are not limited to, the terms
“anticipate,” “potential,” “expect,” “believe,” “estimate” and similar words. Forward-looking
statements involve estimates, assumptions, known and unknown risks, uncertainties and other factors
that may cause actual results, performance or achievements to be materially different from any
future results, performance or achievements expressed or implied by such forward-looking
statements. Actual results may differ materially due to the speed and nature of increased
competition in the electric utility industry, the impact of the regulatory process on the pending
matters in the various states in which we do business (including, but not limited to, proceedings
related to rates and matters with respect to the Trans-Allegheny Interstate Line and
Potomac-Appalachian Transmission Highline projects), business and regulatory impacts from American
Transmission Systems, Incorporated’s realignment into PJM Interconnection, L.L.C., economic or
weather conditions affecting future sales and margins, changes in markets for energy services,
changing energy and commodity market prices and availability, financial derivative reforms that
could increase our liquidity needs and collateral costs, replacement power costs being higher than
anticipated or inadequately hedged, the continued ability of FirstEnergy’s regulated utilities to
collect transition and other costs, operation and maintenance costs being higher than anticipated,
other legislative and regulatory changes, and revised environmental requirements, including
possible greenhouse gas emission and coal combustion residual regulations, the potential impacts of
any laws, rules or regulations that ultimately replace the Clean Air Interstate Rules, the
uncertainty of the timing and amounts of the capital expenditures needed to complete, among other
things, the Trans-Allegheny Interstate Line and Potomac-Appalachian Transmission Highline projects,
the uncertainty of the timing and amounts of the capital expenditures needed to resolve any New
Source Review litigation or other potential similar regulatory initiatives or rulemakings
(including that such expenditures could result in our decision to shut down or idle certain
generating units), adverse regulatory or legal decisions and outcomes (including, but not limited
to, the revocation of necessary licenses or operating permits and oversight by the Nuclear
Regulatory Commission), adverse legal decisions and outcomes related to Metropolitan Edison
Company’s and Pennsylvania Electric Company’s transmission service charge appeal at the
Commonwealth Court of Pennsylvania, any impact resulting from the receipt by Signal Peak of the
Department of Labor’s notice of a potential pattern of violations at Bull Mountain Mine No. 1, the
continuing availability of generating units and their ability to operate at or near full capacity,
the ability to comply with applicable state and federal reliability standards and energy efficiency
mandates, changes in customers’ demand for power, including but not limited to, changes resulting
from the implementation of state and federal energy efficiency mandates, the ability to accomplish
or realize anticipated benefits from strategic goals (including employee workforce initiatives),
the ability to improve electric commodity margins and the impact of, among other factors, the
increased cost of coal and coal transportation on such margins and the ability to experience growth
in the distribution business, the changing market conditions that could affect the value of assets
held in FirstEnergy’s nuclear decommissioning trusts, pension trusts and other trust funds, and
cause FirstEnergy to make additional contributions sooner, or in amounts that are larger than
currently anticipated, the ability to access the public securities and other capital and credit
markets in accordance with FirstEnergy’s financing plan and the cost of such capital, changes in
general economic conditions affecting the company, the state of the
capital and credit markets affecting the company, interest rates and any actions taken by credit
rating agencies that could negatively affect FirstEnergy’s access to financing or its costs and
increase its requirements to post additional collateral to support outstanding commodity positions,
letters of credit and other financial guarantees, the continuing uncertainty of the national and
regional economy and its impact on the company’s major industrial and commercial customers, issues
concerning the soundness of financial institutions and counterparties with which FirstEnergy does
business, issues arising from the recently completed merger of FirstEnergy and Allegheny Energy,
Inc. and the ongoing coordination of their combined operations, including FirstEnergy’s ability to
maintain relationships with customers, employees or suppliers as well as the ability to
successfully integrate the businesses and realize cost savings and any other synergies and the risk
that the credit ratings of the combined company or its subsidiaries may be different from what the
companies expect and the risks and other factors discussed from time
to time in FirstEnergy’s Securities and
Exchange Commission filings, and other similar factors. Dividends declared from time to time on
FirstEnergy’s common stock during any annual period may in aggregate vary from the indicated amount
due to circumstances considered by FirstEnergy’s Board of Directors at the time of the actual
declarations. The foregoing review of factors should not be construed as exhaustive. New factors
emerge from time to time, and it is not possible for management to predict all such factors, nor
assess the impact of any such factor on FirstEnergy’s business or the extent to which any factor,
or combination of factors, may cause results to differ materially from those contained in any
forward-looking statements. The Registrant expressly disclaims any current intention to update any
forward-looking statements contained herein as a result of new information, future events, or
otherwise.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto authorized.
February 25, 2011
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FIRSTENERGY CORP.
Registrant
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By:
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/s/ Harvey L. Wagner
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Harvey L. Wagner
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Vice President, Controller and
Chief Accounting Officer
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Exhibit Index
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Exhibit No.
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Description
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2.1
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Agreement and Plan of Merger, dated as of February 10, 2010,
by and among FirstEnergy Corp., Element Merger Sub, Inc. and Allegheny Energy, Inc. (incorporated by reference to
FirstEnergy’s Form 8-K filed February 11, 2010, Exhibit 2.1, File No. 333-21011)
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2.2
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Amendment No. 1 to Agreement and Plan of Merger, dated as of
June 4, 2010, by and among FirstEnergy Corp., Element Merger Sub, Inc. and Allegheny Energy, Inc. (incorporated by
reference to FirstEnergy’s Form S-4 filed June 4, 2010, Exhibit 2.2, File No. 333-165640)
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3.1
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Amendment to the Amended Articles of
Incorporation of FirstEnergy Corp. dated as of February 25,
2011 (filed herewith)
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5.1
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Opinion of Robert P. Reffner, Esq., Vice President, Legal, of FirstEnergy Service
Company as to the validity of FirstEnergy’s common stock being registered pursuant to FirstEnergy’s
prospectus supplement filed February 25, 2011 to the registration statement on Form S-3 filed with the
Securities and Exchange Commission on September 22, 2008 (File No. 333-153608) (filed herewith)
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10.1
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Employment Agreement, dated as of March 19, 2010, among
FirstEnergy Corp. and Paul J. Evanson (incorporated by reference to FirstEnergy’s Form S-4 filed June 4, 2010,
Exhibit 10.1, File No. 333-165640)
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10.2
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Allegheny Energy, Inc. 1998 Long-Term Incentive Plan (filed herewith)
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10.3
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Allegheny Energy, Inc. 2008 Long-Term Incentive Plan (filed herewith)
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10.4
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Allegheny Energy, Inc. Non-Employee
Director Stock Plan (filed herewith)
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10.5
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Allegheny Energy, Inc. Amended and Restated Revised Plan for Deferral of Compensation of Directors (filed herewith)
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23.1
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Consent of Robert P. Reffner, Esq. (included in Exhibit 5.1)
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99.1
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Press release dated February 25, 2011 (filed herewith)
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Exhibit 10.2
ALLEGHENY ENERGY, INC.
1998 LONG-TERM INCENTIVE PLAN
Effective May 14, 1998
Amended and Restated January 1, 2008
ARTICLE I
PURPOSE AND ADOPTION OF THE PLAN
Sec. 1.01
Purpose
. The purpose of the Allegheny Energy, Inc. 1998 Long-Term Incentive
Plan (as the same may be amended from time to time, the “Plan”) is to assist Allegheny Energy,
Inc., a Maryland corporation (the “Company”), and its Subsidiaries (as defined below) in attracting
and retaining highly competent key employees and directors and to act as an incentive in motivating
selected key employees and directors of the Company and its Subsidiaries (as defined below) to
achieve long-term corporate objectives.
Sec. 1.02
Adoption and Term
. The Plan has been approved by the Board of Directors of
the Company (the “Board”) to be effective as of the date of approval of the Plan by the
shareholders of the Company (the “Effective Date”). The Plan shall remain in effect until the tenth
anniversary of the Effective Date; provided, however, that the provisions of Articles VII and VIII
with respect to performance-based awards to “covered employees” under Section 162(m) of the Code
(as defined below) shall expire as of the fifth anniversary of the Effective Date. This Plan is
hereby amended and restated effective as of January 1, 2008 to update it for changes in applicable
law and to make certain other clarifying changes.
ARTICLE II
DEFINITIONS
For the purposes of this Plan, capitalized terms shall have the following meanings:
Sec. 2.01 “Acquiring Corporation” shall have the meaning given to such term in Section
9.08(b).
Sec. 2.02 “Award” means any grant to a Participant of one or a combination of Non-Qualified
Stock Options or Incentive Stock Options described in Article VI, Restricted Shares described in
Article VII and Performance Awards described in Article VIII.
Sec. 2.03 “Award Agreement” means a written agreement between the Company and a Participant or
a written notice from the Company to a Participant specifically setting forth the terms and
conditions of an Award granted under the Plan.
Sec. 2.04 “Award Period” means, with respect to an Award, the period of time set forth in the
Award Agreement during which specified target performance goals must be achieved or other
conditions set forth in the Award Agreement must be satisfied.
Sec. 2.05 “Beneficiary” means an individual, trust or estate who or which, by a written
designation of the Participant filed with the Company or by operation of law, succeeds to the
rights and obligations of the Participant under the Plan and an Award Agreement upon the
Participant’s death.
Sec. 2.06 “Board” shall have the meaning given to such term in Section 1.02.
Sec. 2.07 “Change in Control” shall be deemed to have occurred at such time as (a) any
individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange
Act) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of 25% or more of the combined voting power of the Company Voting
Securities; or (b) during any period of not more than two years, individuals who constitute the
Board as of the beginning of the period and any new director (other than a director designated by a
person who has entered into an agreement with the Company to effect a transaction described in
clause (a) or (c) of this sentence) whose election by the Board or nomination for election by the
Company’s shareholders was approved by a vote of at least two-thirds (2/3) of the directors then
still in office who either were directors at such time or whose election or nomination for election
was previously so approved, cease for any reason to constitute a majority thereof; or (c) the
shareholders of the Company approve a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which would result in the Company Voting
Securities outstanding immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving entity) at least 50% of
the combined voting power of the Company Voting Securities or the voting securities of such
surviving entity outstanding immediately after such merger or consolidation, or the shareholders of
the Company approve a plan of complete liquidation of the Company or any agreement for the sale or
disposition by the Company of all or substantially all of the Company’s assets.
Sec. 2.08 “Code” means the Internal Revenue Code of 1986, as amended. References to a section
of the Code include that section and any comparable section or sections of any future legislation
that amends, supplements or supersedes said section.
Sec. 2.09 “Committee” means the committee established in accordance with Section 3.01.
Sec. 2.10 “Company” shall have the meaning given to such term in Section 1.01.
Sec. 2.11 “Common Stock” means Common Stock of the Company.
Sec. 2.12 “Company Voting Securities” means the combined voting power of all outstanding
securities of the Company entitled to vote generally in the election of directors of the Company.
Sec. 2.13 “Date of Grant” means the date as of which the Committee grants an Award. If the
Committee contemplates an immediate grant to a Participant, the Date of Grant shall be the date of
the Committee’s action. If the Committee contemplates a date on which the grant is to be made other
than the date of the Committee’s action, the Date of Grant shall be the date so contemplated and
set forth in or determinable from the records of action of the Committee; provided, however, that
the Date of Grant shall not precede the date of the Committee’s action.
Sec. 2.14 “Dividend Equivalent Account” shall have the meaning given to such term in Section
6.03(a).
Sec. 2.15 “Effective Date” shall have the meaning given to such term in Section 1.02.
Sec. 2.16 “Exchange Act” means the Securities Exchange Act of 1934, as amended.
Sec. 2.17 “Exercise Price” shall have the meaning given to such term in Section 6.01(b).
Sec. 2.18 “Fair Market Value” means, as of any applicable date, the closing price per share of
the Common Stock as quoted in the NYSE-Composite Transactions listing in The Wall Street Journal
(or such other reliable publication as the Committee, in its discretion, may determine to rely
upon) for the date as of which Fair Market Value is to be determined. If there are no sales on such
date, then Fair Market Value shall be the closing price per share of the Common Stock as so quoted
on the nearest date before the date as of which Fair Market Value is to be determined on which
there are sales. If the Common Stock is not listed on the New York Stock Exchange on the date as of
which Fair Market Value is to be determined, the Committee shall in good faith determine the Fair
Market Value of the Common Stock on such date. Fair Market Value shall be determined without regard
to any restriction other than a restriction which, by its terms, will never lapse. Notwithstanding
the foregoing, in the case of Options granted in connection with the assumption by the Company of
stock options of acquired companies, as described in Section 9.08(c) the Committee may determine
that the term “Fair Market Value” shall have the same meaning as is given to such term under the
provisions of such assumed stock option. All determinations regarding the Fair Market Value of the
Company’s Common Stock shall be consistent with the requirements of Section 409A of the Code and
its corresponding regulations and related guidance.
Sec. 2.19 “Incentive Stock Option” means a stock option within the meaning of Section 422 of
the Code.
Sec. 2.20 “Merger” means any merger, reorganization, consolidation, share exchange, transfer
of assets or other transaction having similar effect involving the Company.
Sec. 2.21 “Non-Qualified Stock Option” means a stock option which is not an Incentive Stock
Option.
Sec. 2.22 “Options” means all Non-Qualified Stock Options and Incentive Stock Options granted
at any time under the Plan.
Sec. 2.23 “Original Option” shall have the meaning given to such term in Section 6.04.
Sec. 2.24 “Participant” means a person designated to receive an Award under the Plan in
accordance with Section 5.01.
Sec. 2.25 “Performance Awards” means Awards granted in accordance with Article VIII.
Sec. 2.26 “Plan” shall have the meaning given to such term in Section 1.01.
Sec. 2.27 “Reload Option” shall have the meaning given to such term in Section 6.04.
Sec. 2.28 “Restricted Shares” means Common Stock subject to restrictions imposed in connection
with Awards granted under Article VII.
Sec. 2.29 “Retirement” means early or normal retirement under a pension plan or arrangement of
the Company or one of its Subsidiaries in which the Participant participates.
Sec. 2.30 “Subsidiary” means a subsidiary of the Company within the meaning of Section 424(f)
of the Code.
Sec. 2.31 “Termination of Employment” means the voluntary or involuntary termination of a
Participant’s employment with the Company or a Subsidiary for any reason, including death,
disability, retirement or as the result of the divestiture of the Participant’s employer or any
similar transaction in which the Participant’s employer ceases to be the Company or one of its
Subsidiaries. A leave of absence approved in accordance with Company policy shall not be deemed a
Termination of Employment. Whether entering military or other government service shall constitute
Termination of Employment, or whether a Termination of Employment shall occur as a result of
disability, shall be determined in each case by the Committee in its sole discretion. In the case
of a director who is not an employee of the Company or a Subsidiary, Termination of Employment
shall mean voluntary or involuntary cessation of Board service for any reason. Notwithstanding the
foregoing, Termination of Employment for purposes of determining whether an Award that is “deferred
compensation” and subject to Section 409A of the Code is payable from the Plan means a “separation
from service” as determined under Section 409A of the Code and its corresponding regulations and
related guidance.
ARTICLE III
ADMINISTRATION
Sec. 3.01
Committee
. The Plan shall be administered by a committee of the Board (the
“Committee”) comprised of at least two directors of the Company. The Committee shall have exclusive
and final authority in each determination, interpretation or other action affecting the Plan and
its Participants. The Committee shall have the sole discretionary authority to interpret the Plan,
to establish and modify administrative rules for the Plan, to impose such conditions and
restrictions on Awards as it determines appropriate, and to take such steps in connection with the
Plan and Awards granted hereunder as it may deem necessary or advisable. The Committee may, subject
to compliance with applicable legal requirements, delegate to any designated executive officer of
the Company the power to determine the employees (other than himself or herself or any employee to
whom such designated executive officer reports) to receive Awards under the Plan and the types and
amounts of such Awards, subject in each case to the terms and conditions of the Plan. In addition,
the Board may exercise any of the authority conferred upon the Committee hereunder. In the event
of any such delegation of authority or exercise of authority by the Board, references in the Plan
to the Committee shall be deemed to refer to the delegate of the Committee or the Board, as the
case may be.
ARTICLE IV
SHARES
Sec. 4.01
Number of Shares Issuable
. The total number of shares initially authorized
to be issued under the Plan shall be 10,000,000 shares of Common Stock. The number of shares
available for issuance under the Plan shall be subject to adjustment in accordance with Section
9.08. The shares to be offered under the Plan shall be authorized and unissued shares of Common
Stock, or issued shares of Common Stock which will have been reacquired by the Company.
Sec. 4.02
Shares Subject to Terminated Awards
. Shares of Common Stock covered by any
unexercised portions of terminated Options (including canceled Options) granted under Article VI,
shares of Common Stock forfeited as provided in Section 7.02(a) and shares of Common Stock subject
to any Award that are otherwise surrendered by a Participant or terminated may be subject to new
Awards under the Plan. If any shares of Common Stock are withheld from those otherwise issuable or
are tendered to the Company, by attestation or otherwise, in connection with the exercise of an
Option, only the net number of shares of Common Stock issued as a result of such exercise shall be
deemed delivered for purposes of determining the maximum number of shares available for delivery
under the Plan.
ARTICLE V
PARTICIPATION
Sec. 5.01
Eligible Participants
. Participants in the Plan shall be such key employees
and directors of the Company and its Subsidiaries as the Committee, in its sole discretion, may
designate from time to time. The Committee’s designation of a Participant in any year shall not
require the Committee to designate such person to receive Awards in any other year. The
designation of a Participant to receive an Award under one portion of the Plan does not require the
Committee to include such Participant under other portions of the Plan. The Committee shall
consider such factors as it deems pertinent in selecting Participants and in determining the types
and amounts of their respective Awards. Subject to adjustment in accordance with Section 9.08,
during any calendar year no Participant shall be granted Awards in respect of more than 600,000
shares of Common Stock (whether through grants of Options or other Awards of Common Stock or rights
with respect thereto); provided, however, that if it is the Committee’s intention as of the Date of
Grant of an Award, as evidenced by the applicable Award Agreement, that such Award shall be earned
by the Participant over a period of more than one calendar year, then for purposes of applying the
foregoing per calendar year share limitation, the shares of Common Stock subject to such Award
shall be allocated to the first calendar year in which such shares may be earned (determined
without regard to possible vesting as a result of a Change in Control or pursuant to any provision
of this Plan authorizing the Committee to accelerate the vesting of an Award).
ARTICLE VI
STOCK OPTIONS
Sec. 6.01
Option Awards
.
(a)
Grant of Options
. The Committee may grant, to such Participants as the Committee may
select, Options entitling the Participants to purchase shares of Common Stock from the Company in
such numbers, at such prices, and on such terms and subject to such conditions, not inconsistent
with the terms of the Plan, as may be established by the Committee. The terms of any Option granted
under the Plan shall be set forth in an Award Agreement.
(b)
Exercise Price of Options
. The exercise price of each share of Common Stock which may be
purchased upon exercise of any Option granted under the Plan (the “Exercise Price”) shall be
determined by the Committee; provided, however, that, except in the case of any substituted Options
described in Section 9.08(c), the Exercise Price shall in all cases be equal to or greater than the
Fair Market Value on the Date of Grant.
(c)
Designation of Options
. Except as otherwise expressly provided in the Plan, the Committee
may designate, at the time of the grant of an Option, such Option as an Incentive Stock Option or a
Non-Qualified Stock Option; provided, however, that an Option may be designated as an Incentive
Stock Option only if the applicable Participant is an employee of the Company or a Subsidiary on
the Date of Grant.
(d)
Special Incentive Stock Option Rules
. No Participant may be granted Incentive Stock
Options under the Plan (or any other plans of the Company and its Subsidiaries) that would result
in Incentive Stock Options to purchase shares of Common Stock with an aggregate Fair Market Value
(measured on the Date of Grant) of more than $100,000 first becoming exercisable by such
Participant in any one calendar year. Notwithstanding any other provision of the Plan to the
contrary, no Incentive Stock Option shall be granted to any person who, at the time the Option is
granted, owns stock (including stock owned by application of the constructive ownership rules in
Section 424(d) of the Code) possessing more than 10% of the total combined voting power of all
classes of stock of the Company or any Subsidiary, unless at the time the Incentive Stock Option is
granted the Exercise Price is at least 110% of the Fair Market Value on the Date of Grant of the
Common Stock subject to the Incentive Stock Option and the Incentive Stock Option by its terms is
not exercisable for more than five (5) years from the Date of Grant.
(e)
Rights as a Shareholder
. A Participant or a transferee of an Option pursuant to Section
9.04 shall have no rights as a shareholder with respect to the shares of Common Stock covered by an
Option until that Participant or transferee shall have become the holder of record of any such
shares, and, except to the extent that Dividend Equivalent Accounts are granted in accordance with
Section 6.03, no adjustment shall be made with respect to any such shares of Common Stock for
dividends in cash or other property or distributions of other rights on the Common Stock for which
the record date is prior to the date on which that Participant or transferee shall have become the
holder of record of any shares covered by such Option; provided, however, that Participants are
entitled to the adjustments set forth in section 9.08.
Sec. 6.02
Terms of Stock Options
.
(a)
Conditions on Exercise
. An Award Agreement with respect to Options may contain such
waiting periods, exercise dates and restrictions on exercise (including, but not limited to,
periodic installments) as may be determined by the Committee at the time of grant.
(b)
Duration of Options
. Options shall terminate after the first to occur of the following
events:
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(i)
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Expiration of the Option as provided in the
related Award Agreement; or
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(ii)
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Termination of the Award as provided in Section
6.02(e) following the Participant’s Termination of Employment; or
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(iii)
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Ten years from the Date of Grant.
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(c)
Acceleration of Exercise Time
. The Committee, in its sole discretion, shall have the
right (but shall not in any case be obligated), exercisable at any time after the Date of Grant, to
permit the exercise of any Option prior to the time such Option would otherwise become exercisable
under the terms of the related Award Agreement.
(d)
Extension of Exercise Time
. In addition to the extensions permitted under Section 6.02(e)
in the event of Termination of Employment, the Committee, in its sole discretion, shall have the
right (but shall not in any case be obligated), exercisable on or at any time after the Date of
Grant, to permit the exercise of any Option after its expiration date described in Section 6.02(e),
subject, however, to the limitations described in Sections 6.02(b)(i) and (iii).
(e)
Exercise of Options Upon Termination of Employment
.
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(i)
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Termination
. In the event of Termination of
Employment of a Participant other than by reason of death, disability or
Retirement, all Options which were not exercisable as of the date of the
Termination of Employment shall expire as of such date and the right of
the Participant to exercise any Options which were exercisable as of the
date of Termination of Employment shall expire ninety (90) days after
the date of such Termination of Employment, unless the exercise period
is extended by the Committee in accordance with Section 6.02(d). In no
event, however, may the Option be exercised later than the date of
expiration of the Option determined pursuant to Section 6.02(b)(i) or
(iii).
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(ii)
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Disability or Retirement
. In the event of a
Participant’s Termination of Employment on or after January 1, 2004 by
reason of disability or Retirement, the right of the Participant to
exercise all Options which were not exercisable as of the date of the
Termination of Employment shall expire as of such date and all Options
which he or she was entitled to exercise upon Termination of Employment
shall expire three years after the date of such Termination of
Employment, unless the exercise period is extended by the Committee in
accordance with Section 6.02(d). In the event of a Participant’s
Termination of Employment prior to January 1, 2004 by reason of
disability or Retirement, the right of the Participant to exercise all
Options which were not exercisable as of the date of the Termination of
Employment shall expire as of such date and all Options which he or she
was entitled to exercise upon Termination of Employment shall expire one
year after the date of such Termination of Employment, unless the
exercise period is extended by the Committee in accordance with Section
6.02(d). In no event, however, may any Option be exercised later than
the date of expiration of the Option determined pursuant to Section
6.02(b)(i) or (iii).
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(iii)
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Death
. In the event of the death of a
Participant while employed by the Company or a Subsidiary and prior to
the expiration of any Option
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as provided pursuant to Section 6.02(e)(i) or Section 6.02(d) above,
all Options which were not exercisable as of the date of death shall
expire as of such date and to the extent the right to exercise the
Option was accrued as of the date of death, the right of the
Participant’s Beneficiary to exercise the Option shall expire one year
after the date of the Participant’s death. In the event of the death
of a Participant which occurs within any additional period of time
from the date of the Participant’s Termination of Employment, for
Terminations of Employment which occur prior to January 1, 2004, and
prior to the expiration of any Option as provided pursuant to Section
6.02(e)(i) or (ii) or Section 6.02(d) above, all Options which were
not exercisable as of the date of death shall expire as of such date
and to the extent the right to exercise the Option was accrued as of
the date of such Termination of Employment and had not expired during
such additional period, the right of the Participant’s Beneficiary to
exercise the Option shall expire one year after the date of the
Participant’s death (but in no event more than one year from the date
of the Participant’s Termination of Employment by reason of disability
or Retirement). In the event of the death of a Participant which
occurs within any additional period of time from the date of the
Participant’s Termination of Employment, for Terminations of
Employment which occur on or after January 1, 2004, and prior to the
expiration of any Option as provided pursuant to Section 6.02(e)(i) or
(ii) or Section 6.02(d) above, all Options which were not exercisable
as of the date of death shall expire as of such date and to the extent
the right to exercise the Option was accrued as of the date of such
Termination of Employment and had not expired during such additional
period, the right of the Participant’s Beneficiary to exercise the
Option shall expire upon the later of one year after the date of the
Participant’s death or, if applicable, three years from the date of
the Participant’s Termination of Employment by reason of disability or
Retirement. The exercise period may be extended by the Committee in
accordance with Section 6.02(d). In no event, however, may any Option
be exercised later than the date of expiration of the Option
determined pursuant to Section 6.02(b)(i) or (iii).
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Sec. 6.03
Dividend Equivalent Accounts
. The Committee shall have the discretion, upon
the grant of an Option or thereafter, to establish a dividend equivalent account (“Dividend
Equivalent Account”) with respect to the Option, and applicable Option Award Agreement or an
amendment thereto shall confirm such establishment. If a Dividend Equivalent Account is
established, the following terms apply:
(a)
Crediting of Dividends
. Subject to such conditions, limitations and restrictions as shall
be established by the Committee, from the Date of Grant of the Option or, if later, the date of
establishment of the Dividend Equivalent Account, to the earlier of (i) the date of payment of such
Dividend Equivalent Account or (ii) the date of cancellation, termination or expiration of the
Option, the Dividend Equivalent Account shall be credited as of the record date of
each cash dividend on the Common Stock with an amount equal to the cash dividends which would
be paid with respect to the Common Stock then covered by the Option if the Option had been
exercised and such Common Stock had been held of record on such record date. The Participant or
other holder of such Option shall be entitled to receive from the Company in cash the balance
credited to the Dividend Equivalent Account at such time, or from time to time, and subject to such
terms and conditions as shall be determined by the Committee and set forth in the applicable Option
Award Agreement or an amendment thereto.
(b)
Other Dividend Equivalent Terms
. To the extent that an Option is cancelled, terminates or
expires without being exercised, the Dividend Equivalent Account with respect to the Option shall
be eliminated, and no payment with respect to the Dividend Equivalent Account shall be made by the
Company. Dividend Equivalent Accounts shall be established and maintained only on the books and
records of the Plan and/or the Company and no assets or funds of the Company or of the Plan shall
be set aside, placed in trust, removed from the claims of the Company’s general creditors, or
otherwise made available until such amounts are actually payable as provided hereunder.
Sec. 6.04
Reload Options
. The Committee shall have the authority to specify, at or
after the time of grant of an Option, that, subject to the availability of shares of Common Stock
under the Plan at the time of such grant, a Participant shall be granted a reload option (“Reload
Option”) in the event(i) such Participant exercises all or a part of an Option (an “Original
Option”) by surrendering previously acquired shares of Common Stock in full or partial payment of
the Exercise Price under such Original Option, and/or (ii) a Participant’s withholding tax
obligation with respect to the exercise of an Original Option is satisfied in whole or in part by
the delivery of previously acquired shares of Common Stock by the Participant to the Company or the
withholding of shares of Common Stock from the shares otherwise issuable to the Participant upon
the exercise of the Original Option. Each such Reload Option shall cover a number of shares of
Common Stock equal to the number of shares of Common Stock surrendered in payment of the Exercise
Price under such Original Option and/or surrendered or withheld to pay withholding taxes with
respect to such Original Option. Each such Reload Option shall have an Exercise Price per share of
Common Stock equal to the Fair Market Value of the Common Stock on the date of exercise of the
Original Option in respect of which the Reload Option was granted and shall expire on the stated
expiration date of the Original Option. A Reload Option shall be exercisable at any time and from
time to time from and after the Date of Grant of such Reload Option, subject to such restrictions
on exercisability as may be imposed in the discretion of the Committee. Any Reload Option may
provide for the grant, when exercised, of subsequent Reload Options to the extent and upon such
terms and conditions, consistent with this Section 6.04, as the Committee in its sole discretion
shall specify at or after the time of grant of such Reload Option. A Reload Option shall contain
such other terms and conditions, which may include a restriction on the transferability of the
shares of Common Stock received upon exercise of the Reload Option, as the Committee in its sole
discretion shall deem desirable and which may be set forth in rules or guidelines adopted by the
Committee or in the Award Agreements evidencing the Reload Options.
Sec. 6.05
Option Exercise Procedures
. Each Option granted under the Plan shall be
exercised by written notice to the Company which must be received by the officer or employee of the
Company designated in the Award Agreement at or before the close of business on the
expiration date of the Award. The Exercise Price of shares purchased upon exercise of an
Option granted under the Plan shall be paid in full in cash by the Participant pursuant to the
Award Agreement; provided, however, that in lieu of such cash a Participant may (if authorized by
the Committee) pay the Exercise Price in whole or in part by delivering (actually or by
attestation) to the Company shares of the Common Stock having a Fair Market Value on the date of
exercise of the Option equal to the Exercise Price for the shares being purchased; except that (i)
any portion of the Exercise Price representing a fraction of a share shall in any event be paid in
cash and (ii) no shares of the Common Stock which have been held for less than six months may be
delivered in payment of the Exercise Price of an Option. Payment may also be made, in the
discretion of the Committee, by the delivery (including, without limitation, by fax) to the Company
or its designated agent of an executed irrevocable option exercise form together with irrevocable
instructions to a broker-dealer to sell or margin a sufficient portion of the shares and deliver
the sale or margin loan proceeds directly to the Company to pay for the Exercise Price. The date of
exercise of an Option shall be determined under procedures established by the Committee, and as of
the date of exercise the person exercising the Option shall, as between the Company and such
person, be considered for all purposes to be the owner of the shares of Common Stock with respect
to which the Option has been exercised. Any part of the Exercise Price paid in cash upon the
exercise of any Option shall be added to the general funds of the Company and may be used for any
proper corporate purpose. Unless the Committee shall otherwise determine, any shares of Common
Stock transferred to the Company as payment of all or part of the Exercise Price upon the exercise
of any Option shall be held as unauthorized but unissued shares.
Sec. 6.06
Change in Control
. Unless otherwise provided by the Committee in the
applicable Award Agreement, in the event of a Change in Control, all Options outstanding on the
date of such Change in Control shall become immediately and fully exercisable. The provisions of
this Section 6.06 shall not be applicable to any Options granted to a Participant if any Change in
Control results from such Participant’s beneficial ownership (within the meaning of Rule 13d-3
under the Exchange Act) of Common Stock or Company Voting Securities.
ARTICLE VII
RESTRICTED SHARES
Sec. 7.01
Restricted Share Awards
. The Committee may grant to any Participant an
Award of such number of shares of Common Stock on such terms, conditions and restrictions, whether
based on performance standards, periods of service, retention by the Participant of ownership of
specified shares of Common Stock or other criteria, as the Committee shall establish. With respect
to performance-based Awards of Restricted Shares intended to qualify for deductibility under the
“performance-based” compensation exception contained in Section 162(m) of the Code, performance
targets will include specified levels of one or more of the following (in absolute terms or
relative to one or more other companies or indices): operating income, return on investment, return
on shareholders’ equity, stock price appreciation, earnings before interest, taxes, depreciation
and amortization, earnings per share and/or growth in earnings per share. The terms of any
Restricted Share Award granted under this Plan shall be set forth in an Award Agreement which shall
contain provisions determined by the Committee and not inconsistent with this Plan.
(a)
Issuance of Restricted Shares
. As soon as practicable after the Date of Grant of a
Restricted Share Award by the Committee, the Company shall cause to be transferred on the
books of the Company or its agent, shares of Common Stock, registered on behalf of the
Participant, evidencing the Restricted Shares covered by the Award, subject to forfeiture to the
Company as of the Date of Grant if an Award Agreement with respect to the Restricted Shares covered
by the Award is not duly executed by the Participant and timely returned to the Company. All
shares of Common Stock covered by Awards under this Article VII shall be subject to the
restrictions, terms and conditions contained in the Plan and the applicable Award Agreements
entered into by the appropriate Participants. Until the lapse or release of all restrictions
applicable to an Award of Restricted Shares the share certificates representing such Restricted
Shares may be held in custody by the Company, its designee, or, if the certificates bear a
restrictive legend, by the Participant. Upon the lapse or release of all restrictions with respect
to an Award as described in Section 7.01(d), one or more share certificates, registered in the name
of the Participant, for an appropriate number of shares as provided in Section 7.01(d), free of any
restrictions set forth in the Plan and the related Award Agreement shall be delivered to the
Participant.
(b)
Shareholder Rights
. Beginning on the Date of Grant of a Restricted Share Award and
subject to execution of the related Award Agreement as provided in Section 7.01(a), and except as
otherwise provided in such Award Agreement, the Participant shall become a shareholder of the
Company with respect to all shares subject to the Award Agreement and shall have all of the rights
of a shareholder, including, but not limited to, the right to vote such shares and the right to
receive dividends; provided, however, that any shares of Common Stock distributed as a dividend or
otherwise with respect to any Restricted Shares as to which the restrictions have not yet lapsed,
shall be subject to the same restrictions as such Restricted Shares and held or restricted as
provided in Section 7.01(a).
(c)
Restriction on Transferability
. None of the Restricted Shares may be assigned or
transferred (other than by will or the laws of descent and distribution or to an inter vivos trust
with respect to which the Participant is treated as the owner under Sections 671 through 677 of the
Code), pledged or sold prior to the lapse of the restrictions applicable thereto.
(d)
Delivery of Shares Upon Vesting
. Upon expiration or earlier termination of the forfeiture
period without a forfeiture and the satisfaction of or release from any other conditions prescribed
by the Committee, or at such earlier time as provided under the provisions of Section 7.03, the
restrictions applicable to the Restricted Shares shall lapse. As promptly as administratively
feasible thereafter, subject to the requirements of Section 9.05, the Company shall deliver to the
Participant or, in case of the Participant’s death, to the Participant’s Beneficiary, one or more
share certificates for the appropriate number of shares of Common Stock, free of all such
restrictions, except for any restrictions that may be imposed by law.
Sec. 7.02
Terms of Restricted Shares
.
(a)
Forfeiture of Restricted Shares
. Subject to Sections 7.02(b) and 7.03, Restricted Shares
shall be forfeited and returned to the Company and all rights of the Participant with respect to
such Restricted Shares shall terminate unless the Participant continues in the service of the
Company or a Subsidiary until the expiration of the forfeiture period for such Restricted Shares
and satisfies any and all other conditions set forth in the Award Agreement. The Committee shall
determine the forfeiture period (which may, but need not, lapse in installments) and any other
terms and conditions applicable with respect to any Restricted Share Award.
(b)
Waiver of Forfeiture Period
. Notwithstanding anything contained in this Article VII to
the contrary, the Committee may, in its sole discretion, waive the forfeiture period and any other
conditions set forth in any Award Agreement under appropriate circumstances (including the death,
disability or Retirement of the Participant or a material change in circumstances arising after the
date of an Award) and subject to such terms and conditions (including forfeiture of a proportionate
number of the Restricted Shares) as the Committee shall deem appropriate.
Sec. 7.03
Change in Control
. Unless otherwise provided by the Committee in the
applicable Award Agreement, in the event of a Change in Control, all restrictions applicable to the
Restricted Share Award shall terminate fully and the Participant shall immediately have the right
to the delivery of share certificates for such shares in accordance with Section 7.01(d).
ARTICLE VIII
PERFORMANCE AWARDS
Sec. 8.01
Performance Awards
.
(a)
Award Periods and Determinations of Awards
. The Committee may grant Performance Awards to
Participants. A Performance Award shall consist of the right to receive a payment (measured by the
Fair Market Value of a specified number of shares of Common Stock, increases in such Fair Market
Value during the Award Period and/or a fixed cash amount) contingent upon the extent to which
certain predetermined performance targets have been met during an Award Period. Performance Awards
may be made in conjunction with, or in addition to, Restricted Share Awards made under Article VII.
The Award Period shall be two or more fiscal or calendar years or other annual periods as
determined by the Committee. The Committee, in its discretion and under such terms as it deems
appropriate, may permit newly eligible Participants, such as those who are promoted or newly hired,
to receive Performance Awards after an Award Period has commenced.
(b)
Performance Targets
. The performance targets may include such goals related to the
performance of the Company and/or the performance of a Participant as may be established by the
Committee in its discretion. In the case of Performance Awards intended to qualify for
deductibility under the “performance-based” compensation exception contained in Section 162(m) of
the Code, the targets will include specified levels of one or more of the following (in absolute
terms or relative to one or more other companies or indices): operating income, return on
investment, return on shareholders’ equity, stock price appreciation, earnings before interest,
taxes, depreciation and amortization, earnings per share and/or growth in earnings per share. The
performance targets established by the Committee may vary for different Award Periods and need not
be the same for each Participant receiving a Performance Award in an Award Period. Except to the
extent inconsistent with the performance-based compensation exception under Section 162(m) of the
Code, in the case of Performance Awards granted to Participants to whom such section is applicable,
the Committee, in its discretion, but only under extraordinary circumstances as determined by the
Committee, may change any prior determination of performance targets for any Award Period at any
time prior to the final determination of the value of a related Performance Award when events or
transactions occur to cause such performance targets to be an inappropriate measure of achievement.
(c)
Earning Performance Awards
. The Committee, on or as soon as practicable after the Date of
Grant, shall prescribe a formula to determine the percentage of the applicable Performance Award to
be earned based upon the degree of attainment of performance targets.
(d)
Payment of Earned Performance Awards
. Payments of earned Performance Awards shall be made
in cash, stock options or shares of Common Stock or a combination thereof, in the discretion of the
Committee. The Committee, in its sole discretion, may provide such terms and conditions with
respect to the payment of earned Performance Awards as it may deem desirable.
Sec. 8.02
Terms of Performance Awards
.
(a)
Termination of Employment
. Unless otherwise provided below or in Section 8.03, in the case
of a Participant’s Termination of Employment prior to the end of an Award Period, the Participant
will not have earned any Performance Awards for that Award Period.
(b)
Retirement
. If a Participant’s Termination of Employment is because of Retirement prior
to the end of an Award Period, the Participant will not be paid any Performance Award, unless the
Committee, in its sole and exclusive discretion, determines that an Award should be paid. In such a
case, the Participant shall be entitled to receive a pro-rata portion of his or her Award as
determined under subsection (d).
(c)
Death or Disability
. If a Participant’s Termination of Employment is due to death or to
disability (as determined in the sole and exclusive discretion of the Committee) prior to the end
of an Award Period, the Participant or the Participant’s personal representative shall be entitled
to receive a pro-rata share of his or her Award as determined under subsection (d).
(d)
Pro-Rata Payment
. The amount of any payment to be made to a Participant whose employment
is terminated by Retirement, death or disability (under the circumstances described in subsections
(b) and (c)) will be the amount determined by multiplying (i) the amount of the Performance Award
that would have been earned through the end of the Award Period had such employment not been
terminated by (ii) a fraction, the numerator of which is the number of whole months such
Participant was employed during the Award Period, and the Denominator of which is the total number
of months of the Award Period. Any such payment made to a Participant whose employment is
terminated prior to the end of an Award Period shall be made at the end of such Award Period,
unless otherwise determined by the Committee in its sole discretion. Any partial payment
previously made or credited to a deferred account for the benefit of a Participant in accordance
with Section 8.01(d) of the Plan shall be subtracted from the amount otherwise determined as
payable as provided in this Section 8.02(d).
(e)
Other Events
. Notwithstanding anything to the contrary in this Article VIII, the
Committee may, in its sole and exclusive discretion, determine to pay all or any portion of a
Performance Award to a Participant who has terminated employment prior to the end of an Award
Period under certain circumstances (including the death, disability or Retirement of the
Participant or a material change in circumstances arising after the Date of Grant), subject to such
terms and conditions as the Committee shall deem appropriate.
Sec. 8.03
Change in Control
. Unless otherwise provided by the Committee in the
applicable Award Agreement, in the event of a Change in Control, all Performance Awards for all
Award Periods shall immediately become fully payable to all Participants and shall be paid to
Participants within thirty (30) days after such Change in Control.
ARTICLE IX
TERMS APPLICABLE TO ALL AWARDS GRANTED UNDER THE PLAN
Sec. 9.01
Plan Provisions Control Award Terms
. The terms of the Plan shall govern all
Awards granted under the Plan, and in no event shall the Committee have the power to grant any
Award under the Plan the terms of which are contrary to any of the provisions of the Plan. In the
event any provision of any Award granted under the Plan shall conflict with any term in the Plan as
constituted on the Date of Grant of such Award, the term in the Plan as constituted on the Date of
Grant of such Award shall control. All Awards granted under the terms of the Plan and any related
Award Agreement shall be structured to comply with requirements of Section 409A of the Code and its
corresponding regulations and related guidance. Without limiting the foregoing, if and to the
extent that any Award is deemed to be deferred compensation for purposes of Section 409A of the
Code, the payment of such Award shall only be made upon the occurrence of an event that is a
permissible payment event for purposes of Section 409A of the Code.
Sec. 9.02
Award Agreement
. No person shall have any rights under any Award granted
under the Plan unless and until the Company and the Participant to whom such Award shall have been
granted shall have executed and delivered an Award Agreement or the Participant shall have received
and acknowledged notice of the Award authorized by the Committee expressly granting the Award to
such person and containing provisions setting forth the terms of the Award.
Sec. 9.03
Modification of Award After Grant
. No Award granted under the Plan to a
Participant may be modified (unless such modification does not materially decrease the value of
that Award) after its Date of Grant except by express written agreement between the Company and
such Participant, provided that any such change (a) may not be inconsistent with the terms of the
Plan, and (b) shall be approved by the Committee.
Sec. 9.04
Limitation on Transfer
. Except as provided in Section 7.01(c) in the case
of Restricted Shares, a Participant’s rights and interest under the Plan may not be assigned or
transferred other than by will or the laws of descent and distribution and, during the lifetime of
a Participant, only the Participant personally (or the Participant’s personal representative) may
exercise rights under the Plan. The Participant’s Beneficiary may exercise the Participant’s rights
to the extent they are exercisable under the Plan following the death of the Participant.
Notwithstanding the foregoing, the Committee may grant Non-Qualified Stock Options that are
transferable, without payment of consideration, to immediate family members of the Participant, to
trusts or partnerships for such family members, or to such other parties as the Committee may
approve (was evidenced by the applicable Award Agreement or an amendment thereto), and the
Committee may also amend outstanding Non-Qualified Stock Options to provide for such
transferability.
Sec. 9.05
Withholding Taxes
. The Company shall be entitled, if the Committee deems it
necessary or desirable, to withhold (or secure payment from the Participant in lieu of withholding)
the amount of any withholding or other tax required by law to be withheld or paid by the
Company with respect to any amount payable and/or shares issuable under such Participant’s Award or
with respect to any income recognized upon a disqualifying disposition of shares received pursuant
to the exercise of an Incentive Stock Option, and the Company may defer payment of cash or issuance
of shares upon exercise or vesting of an Award unless indemnified to its satisfaction against any
liability for any such tax. The amount of such withholding or tax payment shall be determined by
the Committee and shall be payable by the Participant at such time as the Committee determines.
With the approval of the Committee, the Participant may elect to meet his or her withholding
requirement (i) by having withheld from such Award at the appropriate time that number of shares of
Common Stock, rounded up to the next whole share, the Fair Market Value of which is equal to the
amount of withholding taxes due, (ii) by direct payment to the Company in cash of the minimum
amount of any taxes required to be withheld with respect to such Award or (iii) by a combination of
withholding such shares and paying cash.
Sec. 9.06
Surrender of Awards
. Any Award granted under the Plan may be surrendered to
the Company for cancellation on such terms as the Committee and the Participant approve.
Sec. 9.07
Cancellation and Rescission of Awards
.
(a)
Detrimental Activities
. Unless the Award Agreement specifies otherwise, the Committee may
cancel, rescind, suspend, withhold or otherwise limit or restrict any unexpired, unpaid, or
deferred Awards at any time if the Participant is not in compliance with all applicable provisions
of the Award Agreement and the Plan, or if the Participant engages in any “Detrimental Activity.”
For purposes of this Section 9.07, “Detrimental Activity” shall include: (i) the rendering of
services for any organization or engaging directly or indirectly in any business which is or
becomes competitive with the Company, or which organization or business, or the rendering of
services to such organization or business, is or becomes otherwise prejudicial to or in conflict
with the interests of the Company; (ii) the disclosure to anyone outside the Company, or the use in
other than the Company’s business, without prior written authorization from the Company, of any
confidential information or material relating to the business of the Company, acquired by the
Participant either during or after employment with the Company; (iii) any attempt directly or
indirectly to induce any employee of the Company to be employed or perform services elsewhere or
any attempt directly or indirectly to solicit the trade or business of any current or prospective
customer, supplier or partner of the Company; or (iv) any other conduct or act determined to be
injurious, detrimental or prejudicial to any interest of the Company.
(b)
Certification
. Upon exercise, payment or delivery pursuant to an Award, the Participant
shall certify in a manner acceptable to the Company that he or she is in compliance with the terms
and conditions of the Plan. In the event a Participant fails to comply with the provisions of
paragraphs (a)(i)-(vii) of this Section 9.07 prior to, or during the six months after, any
exercise, payment or delivery pursuant to an Award, such exercise, payment or delivery may be
rescinded within two years thereafter. In the event of any such rescission, the Participant shall
pay to the Company the amount of any gain realized or payment received as a result of the rescinded
exercise, payment or delivery, in such manner and on such terms and conditions as may be required,
and the Company shall be entitled to set-off against the amount of any such gain any amount owed to
the Participant by the Company.
Sec. 9.08
Adjustments to Reflect Capital Changes
.
(a)
Recapitalization
. The number and kind of shares subject to outstanding Awards, the
Exercise Price or Exercise Price for such shares, the number and kind of shares available for
Awards subsequently granted under the Plan and the maximum number of shares in respect of which
Awards can be made to any Participant in any calendar year shall be appropriately adjusted to
reflect any stock dividend, stock split, combination or exchange of shares, merger, consolidation
or other change in capitalization with a similar substantive effect upon the Plan or the Awards
granted under the Plan. The Committee shall have the power and sole discretion to determine the
amount of the adjustment to be made in each case.
(b)
Certain Mergers
. After any Merger in which the Company is not the surviving corporation
or pursuant to which a majority of the shares which are of the same class as the shares that are
subject to outstanding Options are exchanged for, or converted into, or otherwise become shares of
another corporation, the surviving, continuing, successor or purchasing corporation, as the case
may be (the “Acquiring Corporation”), will either assume the Company’s rights and obligations under
outstanding Award Agreements or substitute awards in respect of the Acquiring Corporation’s stock
for outstanding Awards, provided, however, that if the Acquiring Corporation does not assume or
substitute for such outstanding Awards, the Board shall provide prior to the Merger that any
unexercisable and/or unvested portion of the outstanding Awards shall be immediately exercisable
and vested as of a date prior to such Merger, as the Board so determines. The exercise and/or
vesting of any Award that was permissible solely by reason of this Section 9.08 shall be
conditioned upon the consummation of the Merger. Any Awards which are neither assumed by the
Acquiring Corporation nor exercised as of the date of the Merger shall terminate effective as of
the effective date of the Merger. Comparable rights shall accrue to each Participant in the event
of successive Mergers of the character described above.
(c)
Options to Purchase Shares or Stock of Acquired Companies
. After any Merger in which the
Company or a Subsidiary shall be a surviving corporation, the Committee may grant Options or other
Awards under the provisions of the Plan, pursuant to Section 424 of the Code or as is otherwise
permitted under the Code, in full or partial replacement of or substitution for old stock options
granted under a plan of another party to the merger whose shares of stock subject to the old
options may no longer be issued following the Merger. The manner of application of the foregoing
provisions to such options and any appropriate adjustments in the terms of such stock options shall
be determined by the Committee in its sole discretion. Any such adjustments may provide for the
elimination of any fractional shares which might otherwise become subject to any Options. The
foregoing shall not be deemed to preclude the Company from assuming or substituting for stock
options of acquired companies other than pursuant to this Plan.
(d)
Adjustments
. Any adjustments to outstanding Awards shall be consistent with Sections 409A
and 424 of the Code, to the extent applicable.
Sec. 9.09
Legal Compliance
. Shares of Common Stock shall not be issued hereunder
unless the issuance and delivery of such shares shall comply with applicable laws and shall be
further subject to the approval of counsel for the Company with respect to such compliance.
Sec. 9.10
No Right to Employment
. No Participant or other person shall have any claim
of right to be granted an Award under the Plan. Neither the Plan nor any action taken hereunder
shall be construed as giving any Participant any right to be retained in the service of the Company
or any of its Subsidiaries.
Sec. 9.11
Awards Not Includable for Benefit Purposes
. Payments received by a
Participant pursuant to the provisions of the Plan shall not be included in the determination of
benefits under any pension, group insurance or other benefit plan applicable to the Participant
which is maintained by the Company or any of its Subsidiaries, except as may be provided under the
terms of such plans or determined by the Board.
Sec. 9.12
Governing Law
. All determinations made and actions taken pursuant to the
Plan shall be governed by the laws of the State of Maryland, other than the conflict of laws
provisions thereof, and construed in accordance therewith.
Sec. 9.13
No Strict Construction
. No rule of strict construction shall be implied
against the Company, the Committee or any other person in the interpretation of any of the terms of
the Plan, any Award granted under the Plan or any rule or procedure established by the Committee.
Sec. 9.14
Captions
. The captions (i.e., all Section headings) used in the Plan are
for convenience only, do not constitute a part of the Plan, and shall not be deemed to limit,
characterize or affect in any way any provisions of the Plan, and all provisions of the Plan shall
be construed as if no captions had been used in the Plan.
Sec. 9.15
Severability
. Whenever possible, each provision in the Plan and every Award
at any time granted under the Plan shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of the Plan or any Award at any time granted under the
Plan shall be held to be prohibited by or invalid under applicable law, then (a) such provision
shall be deemed amended to accomplish the objectives of the provision as originally written to the
fullest extent permitted by law and (b) all other provisions of the Plan, such Award and every
other Award at any time granted under the Plan shall remain in full force and effect.
Sec. 9.16
Amendment and Termination
.
(a)
Amendment
. The Board shall have complete power and authority to amend the Plan at any
time; provided, that no termination or amendment of the Plan may, without the consent of the
Participant to whom any Award shall theretofore have been granted under the Plan, materially
adversely affect the right of such individual under such Award; and provided further, that no such
alteration or amendment of the Plan shall, without approval by the shareholders of the Company (a)
increase the total number of shares of Common Stock which may be issued or delivered under the
Plan, (b) increase the total number of shares which may be covered by Awards to any one
Participant, or (c) change the minimum Option Exercise Price.
(b)
Termination
. The Board shall have the right and the power to terminate the Plan at any
time. No Award shall be granted under the Plan after the termination of the Plan, but the
termination of the Plan shall not have any other effect and any Award outstanding at the time of
the termination of the Plan may be exercised after termination of the Plan at any time prior to the
expiration date of such Award to the same extent such Award would have been exercisable had the
Plan not been terminated. A termination of the Plan will comply with the requirements of
Section 409A of the Code and its corresponding regulations and related guidance.
Sec. 9.17
Compliance with Law
. The Plan is intended to comply with applicable law.
Without limiting the foregoing, the Plan is intended to comply with the applicable requirements of
Section 409A of the Code and its corresponding regulations and related guidance, and shall be
administered in accordance with Section 409A of the Code to the extent it applies to the Plan. To
the extent that any provision of the Plan or an Award Agreement would cause a conflict with the
requirements of Section 409A of the Code or would cause the administration of the Plan to fail to
satisfy the requirements of Section 409A of the Code, such provision shall be deemed null and void
to the extent permitted by applicable law.
Exhibit 10.3
ALLEGHENY ENERGY, INC.
2008 LONG-TERM INCENTIVE PLAN
ARTICLE I
Purpose and Adoption of the Plan
1.01
Purpose
. The purpose of the Allegheny Energy, Inc. 2008 Long-Term Incentive
Plan (as the same may be amended from time to time, the “
Plan
”) is to assist Allegheny
Energy, Inc., a Maryland corporation (the “
Company
”), and its Subsidiaries (as defined
below) in attracting and retaining highly competent key employees and directors and to act as an
incentive in motivating selected key employees and directors of the Company and its Subsidiaries
(as defined below) to achieve long-term corporate objectives.
1.02
Adoption and Term
. The Plan has been approved by the Board of Directors of the
Company (the “
Board
”) to be effective as of the date of approval of the Plan by the stockholders of
the Company (the “
Effective Date
”). The Plan shall remain in effect until the tenth
anniversary of the Effective Date;
provided
,
however
, that, to the extent necessary
to comply with the requirements of Section 162(m) of the Code (as defined below), the provisions of
ARTICLE VII and ARTICLE VIII with respect to performance-based awards to “covered employees” under
Section 162(m) of the Code shall expire as of the fifth anniversary of the Effective Date (unless
subsequently submitted to, and approved by, the Company’s stockholders).
ARTICLE II
Definitions
For the purposes of this Plan, capitalized terms shall have the following meanings:
2.01 “
Acquiring Corporation
” shall have the meaning given to such term in Section
9.08(b).
2.02 “
Award
” means any grant to a Participant of one or a combination of Non-Qualified
Stock Options or Incentive Stock Options or Stock Appreciation Rights described in ARTICLE VI,
Restricted Shares and Restricted Stock Units described in ARTICLE VII and Performance Awards
described in ARTICLE VIII.
2.03 “
Award Agreement
” means a written or electronic agreement between the Company and
a Participant or a written or electronic notice from the Company to a
Participant specifically
setting forth the terms and conditions of an Award granted under the Plan.
2.04 “
Award Period
” means, with respect to an Award, the period of time set forth in
the Award Agreement during which specified target performance goals must be achieved or other
conditions set forth in the Award Agreement must be satisfied.
2.05 “
Beneficiary
” means an individual, trust or estate who or which, by a written
designation of the Participant filed with the Company or by operation of law, succeeds to the
rights
and obligations of the Participant under the Plan and an Award Agreement upon the
Participant’s death.
2.06 “
Board
” shall have the meaning given to such term in Section 1.02.
2.07 “
Change in Control
” shall be deemed to have occurred at such time as (i) any
individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange
Act) is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of 25% or more of the combined voting power of the Company Voting
Securities; or (ii) during any period of not more than two years, individuals who constitute the
Board as of the beginning of the period and any new director (other than a director designated by a
person who has entered into an agreement with the Company to effect a transaction described in
clause (i) or (iii) of this sentence) whose election by the Board or nomination for election by the
Company’s stockholders was approved by a vote of at least two-thirds of the directors then still in
office who either were directors at such time or whose election or nomination for election was
previously so approved, cease for any reason to constitute a majority thereof; or (iii) the
stockholders of the Company approve a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation which would result in the Company Voting
Securities outstanding immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving entity) at least 50% of
the combined voting power of the Company Voting Securities or the voting securities of such
surviving entity outstanding immediately after such merger or consolidation, or the stockholders of
the Company approve a plan of complete liquidation of the Company or any agreement for the sale or
disposition by the Company of all or substantially all of the Company’s assets.
2.08 “
Code
” means the Internal Revenue Code of 1986, as amended. References to a
section of the Code include that section and any comparable section or sections of any future
legislation that amends, supplements or supersedes said section.
2.09 “
Committee
” means the committee established in accordance with Section 3.01;
provided
,
however
, that with respect to Awards that are intended to be “qualified
performance-based compensation” under Section 162(m) of the Code, the “
Committee
” means a
committee that consists of two or more persons appointed by the
2
Board, all of whom shall be
“outside directors,” as defined under Section 162(m) of the Code and related regulations and
“non-employee” directors as defined under Rule 16b-3 promulgated under the Exchange Act.
2.10 “
Company
” shall have the meaning given to such term in Section 1.01.
2.11 “
Common Stock
” means Common Stock of the Company.
2.12 “
Company Voting Securities
” means the combined voting power of all outstanding
securities of the Company entitled to vote generally in the election of directors of the Company.
2.13 “
Date of Grant
” means the date as of which the Committee grants an Award. If
the Committee contemplates an immediate grant to a Participant, the Date of Grant shall be the date
of the Committee’s action. If the Committee contemplates a date on which the grant is to be made
other than the date of the Committee’s action, the Date of Grant shall be the date so contemplated
and set forth in or determinable from the records of action of the Committee;
provided
,
however
, that the Date of Grant shall not precede the date of the
Committee’s action.
2.14 “
Effective Date
” shall have the meaning given to such term in Section 1.02.
2.15 “
Exchange Act
” means the Securities Exchange Act of 1934, as amended.
2.16 “
Exercise Price
” shall have the meaning given to such term in Section 6.01(b).
2.17 “
Fair Market Value
” means, as of any applicable date, the closing price per share
of the Common Stock as quoted in the NYSE-Composite Transactions listing in
The Wall Street
Journal
(or such other reliable publication as the Committee, in its discretion, may determine
to rely upon) for the date as of which Fair Market Value is to be determined. If there are no
sales on such date, then Fair Market Value shall be the closing price per share of the Common Stock
as so quoted on the Date of Grant. If the Common Stock is not listed on the New York Stock
Exchange on the date as of which Fair Market Value is to be determined, the Committee shall in good
faith determine the Fair Market Value of the Common Stock on such date. Fair Market Value shall
be determined without regard to any restriction other than a restriction which, by its terms, will
never lapse. Notwithstanding the foregoing, in the case of Options granted in connection with the
assumption by the Company of stock options of acquired companies, as described in Section 9.08(c),
the Committee may determine that the term “Fair Market Value” shall have the same meaning as is
given to such term under the provisions of such assumed stock option. All determinations
regarding Fair Market Value of shares of
3
Common Stock shall be consistent with the requirements of
Section 409A of the Code and its corresponding regulations and related guidance.
2.18 “
Incentive Stock Option
” means a stock option within the meaning of Section 422
of the Code.
2.19 “
Merger
” means any merger, reorganization, consolidation, share exchange,
transfer of assets or other transaction having similar effect involving the Company.
2.20 “
Non-Qualified Stock Option
” means a stock option which is not an Incentive Stock
Option.
2.21 “
Options
” means all Non-Qualified Stock Options and Incentive Stock Options
granted at any time under the Plan.
2.22 “
Participant
” means a person designated to receive an Award under the Plan in
accordance with Section 5.01.
2.23 “
Performance Awards
” means Awards granted in accordance with ARTICLE VIII.
2.24 “
Plan
” shall have the meaning given to such term in Section 1.01.
2.25 “
Pool Limit
” shall have the meaning given to such term in Section 4.01.
2.26 “
Restricted Shares
” means Common Stock subject to restrictions imposed in
connection with Awards granted under ARTICLE VII.
2.27 “
Restricted Stock Unit
” means a Participant’s contractual right to receive a
stated number of shares of Common Stock or, if provided by the Committee on the Date of Grant, cash
equal to the Fair Market Value of such shares of Common Stock, under the Plan at the end of a
specified period of time that is forfeitable by the Participant until the completion of a specified
period of future service, or until otherwise determined by the Committee or in accordance with the
Plan and the applicable Award Agreement.
2.28 “
Retirement
” means early or normal retirement under a pension plan or arrangement
of the Company or one of its Subsidiaries in which the Participant participates.
2.29 “
Stock Appreciation Right
” means, with respect to shares of Common Stock, the
right to receive a payment from the Company in cash and/or shares of Common Stock equal to the
product of (i) the excess, if any, of the Fair Market Value of one share of Common Stock on the
exercise date over a specified base price fixed by the
4
Committee on the Date of Grant, multiplied
by (ii) a stated number of shares of Common Stock.
2.30 “
Subsidiary
” means a subsidiary of the Company within the meaning of Section
424(f) of the Code.
2.31 “
Termination of Employment
” means the voluntary or involuntary termination of a
Participant’s employment with the Company or a Subsidiary for any reason, including death,
disability, retirement or as the result of the divestiture of the Participant’s employer or any
similar transaction in which the Participant’s employer ceases to be the Company or one of its
Subsidiaries. A leave of absence approved in accordance with Company policy shall not be deemed a
Termination of Employment. Whether entering military or other government service shall constitute
Termination of Employment, or whether a Termination of Employment shall occur as a result of
disability, shall be determined in each case by the Committee in its sole discretion. In the case
of a director who is not an employee of the Company or a Subsidiary, Termination of Employment
shall mean voluntary or involuntary cessation of Board service for any reason. Notwithstanding
the foregoing, Termination of Employment for purposes of determining whether an Award that is
“deferred compensation” and subject to Section 409A of the Code is payable from the Plan means a
“separation from service” as determined under Section 409A of the Code and its corresponding
regulations and related guidance.
ARTICLE III
Administration
3.01
Committee
. The Plan shall be administered by a committee of the Board (the
“
Committee
”) comprised of at least two directors of the Company. The Committee shall have
exclusive and final authority in each determination, interpretation or other action affecting the
Plan and its Participants. The Committee shall have the sole discretionary authority to interpret
the Plan, to establish and modify administrative rules for the Plan, to impose such conditions and
restrictions on Awards as it determines appropriate, and to take such steps in connection with the
Plan and Awards granted hereunder as it may deem necessary or advisable. Subject to compliance
with applicable legal requirements, the Committee may (i) delegate to any designated executive
officer of the Company the power to determine the employees (other than himself or herself or any
employee to whom such designated executive officer reports) to receive Awards under the Plan and
the types and amounts of such Awards, subject in each case to the terms and conditions of the
Plan, and (ii) delegate to a committee or individual the authority to carry out ministerial
functions in respect of the Plan and Awards granted under the Plan. In addition, the Board may
exercise any of the authority conferred upon the Committee hereunder. In the event of any such
delegation of authority or exercise of authority by the
5
Board, references in the Plan to the
Committee shall be deemed to refer to the delegate of the Committee or the Board, as the case may
be.
ARTICLE IV
Shares
4.01
Number of Shares Issuable
. Subject to Section 4.02 and adjustments in accordance
with Section 9.08, the maximum aggregate number of shares of Common Stock initially authorized to
be issued under the Plan shall be 4,600,000 shares of Common Stock (the “
Pool Limit
”). The
shares to be offered under the Plan shall be authorized and unissued shares of Common Stock, or
issued shares of Common Stock which will have been reacquired by the Company.
4.02
Treatment of Awards
. Each share of Common Stock issued or to be issued in
connection with any Award other than an Option or a Stock Appreciation Right shall be counted
against the Pool Limit as one share of Common Stock. Each share of Common Stock issued or to be
issued in connection with any Option or Stock Appreciation Right shall be counted against the Pool
Limit as 0.49 of a share of Common Stock. For these purposes, the number of shares of Common Stock
taken into account with respect to a Stock Appreciation Right shall be the number of shares of
Common Stock underlying the Stock Appreciation Right at grant, and not the final number of shares
of Common Stock delivered upon exercise of the Stock Appreciation Right. Any shares of Common
Stock previously the subject of an Award that again become available for grant pursuant to Section
4.03 shall be added back to the Pool Limit in the same proportion, and using the same multiplier,
pursuant to which such Awards reduced the shares of Common Stock in the Pool Limit.
4.03
Shares Subject to Terminated Awards
. Shares of Common Stock covered by any
unexercised portions of terminated Options (including canceled Options) granted under ARTICLE VI,
shares of Common Stock forfeited as provided in Section 7.02(d) and shares of Common Stock subject
to any Award that are otherwise surrendered by a Participant or terminated may be subject to new
Awards under the Plan. If any shares of Common Stock are withheld from those otherwise issuable or
are tendered to the Company, by attestation or otherwise, in connection with the exercise of an
Option, the gross number of shares of Common Stock covered by the award as issued or portion
thereof exercised shall be deemed delivered for purposes of determining the maximum number of
shares available for delivery under the Plan.
4.04
Prohibition Against Repricing
. Except to the extent (i) approved in advance by
holders of a majority of the shares of the Company entitled to vote generally in the election of
directors or (ii) pursuant to Section 9.08, the Committee shall not have the power or authority to
reduce, whether through amendment or otherwise, the exercise
6
price of any outstanding Option or
base price of any outstanding Stock Appreciation Right or to grant any new Award in substitution
for or upon the cancellation of Options or Stock Appreciation Rights previously granted.
ARTICLE V
Participation
5.01
Eligible Participants
. Participants in the Plan shall be such key employees and
directors of the Company and its Subsidiaries as the Committee, in its sole discretion, may
designate from time to time. The Committee’s designation of a Participant in any year shall not
require the Committee to designate such person to receive Awards in any other year. The
designation of a Participant to receive an Award under a portion of the Plan does not require the
Committee to include such Participant under other portions of the Plan. The Committee shall
consider such factors as it deems pertinent in selecting Participants and in determining the types
and amounts of their respective Awards. Subject to adjustment in accordance with Section 9.08,
during any calendar year no Participant shall be granted Awards in respect of more than 1,000,000
shares of Common Stock (whether through grants of Options or other Awards of Common Stock or rights
with respect thereto);
provided
,
however
, that if it is the Committee’s intention
as of the Date of Grant of an Award, as evidenced by the applicable Award Agreement, that such
Award shall be earned by the Participant over a period of more than one calendar year, then for
purposes of applying the foregoing per calendar year share limitation, the shares of Common Stock
subject to such Award shall be allocated to the first calendar year in which such shares may be
earned (determined without regard to possible vesting as a result of a Change in Control or
pursuant to any provision of this Plan authorizing the Committee to accelerate the vesting of an
Award). In the case of Awards that are denominated in cash, during any calendar year no
Participant shall be granted Awards with a dollar value in excess of the Fair Market Value of
1,000,000 shares of Common Stock (such Fair Market Value determined as of the Date of Grant of the
Awards).
ARTICLE VI
Stock Options and Stock Appreciation Rights
6.01
Option Awards
.
(a)
Grant of Options
. The Committee may grant, to such Participants as the Committee
may select, Options entitling the Participants to purchase shares of Common Stock from the Company
in such numbers, at such prices, and on such terms and subject to such conditions, not inconsistent
with the terms of the Plan, as may be established by the Committee. The terms of any Option
granted under the Plan shall be set forth in an Award Agreement.
7
(b)
Exercise Price of Options
. The exercise price of each share of Common Stock which
may be purchased upon exercise of any Option granted under the Plan (the “
Exercise Price
”)
shall be determined by the Committee;
provided
,
however
, that, except in the case
of any substituted Options described in Section 9.08(c), the Exercise Price shall in all cases be
equal to or greater than the Fair Market Value on the Date of Grant.
(c)
Designation of Options
. Except as otherwise expressly provided in the Plan, the
Committee may designate, at the time of the grant of an Option, such Option as an Incentive Stock
Option or a Non-Qualified Stock Option;
provided
,
however
, that an Option may be
designated as an Incentive Stock Option only if the applicable Participant is an employee of the
Company or a Subsidiary on the Date of Grant.
(d)
Special Incentive Stock Option Rules
. No Participant may be granted Incentive
Stock Options under the Plan (or any other plans of the Company and its Subsidiaries) that would
result in Incentive Stock Options to purchase shares of Common Stock with an aggregate Fair Market
Value (measured on the Date of Grant) of more than $100,000 first becoming exercisable by such
Participant in any one calendar year. Notwithstanding any other provision of the Plan to the
contrary, no Incentive Stock Option shall be granted to any person who, at the time the Option is
granted, owns stock (including stock owned by application of the constructive ownership rules in
Section 424(d) of the Code) possessing more than 10% of the total combined voting power of all
classes of stock of the Company or any Subsidiary, unless at the time the Incentive Stock Option is
granted the Exercise Price is at least 110% of the Fair Market Value on the Date of Grant of the
Common Stock subject to the Incentive Stock Option and the Incentive Stock Option by its terms is
not exercisable for more than five years from the Date of Grant.
6.02
Stock Appreciation Rights
.
(a)
Grant of Stock Appreciation Rights
. The Committee may grant, to such Participants
as the Committee may select, Stock Appreciation Rights on such terms and subject to such
conditions, not inconsistent with the terms of the Plan, as may be established by the Committee.
Stock Appreciation Rights may be granted in tandem with Options which, unless otherwise determined
by the Committee at or after the Date of Grant, shall have substantially similar terms and
conditions to such Options to the extent applicable, or may be granted on a freestanding basis, not
related to any Option. The terms of any Stock Appreciation Right granted under the Plan shall be
set forth in an Award Agreement.
(b)
Base Price
. The base price for any Stock Appreciation Right shall be determined
by the Committee;
provided
that, except in the case of any substituted Award described in
Section 9.08(c), the base price shall in all cases be equal to or greater than the Fair Market
Value on the Date of Grant.
8
6.03
Terms of Stock Options and Stock Appreciation Rights
.
(a)
Conditions on Exercise
. An Award Agreement with respect to Options or Stock
Appreciation Rights may contain such waiting periods, exercise dates and restrictions on exercise
(including, but not limited to, periodic installments) as may be determined by the Committee at the
time of grant.
(b)
Duration of Options and Stock Appreciation Rights
. Options and Stock Appreciation
Rights shall terminate after the first to occur of the following events:
(i) Termination of the Award as provided in Section 6.03(e) following the Participant’s
Termination of Employment; or
(ii) Ten years from the Date of Grant.
(c)
Acceleration of Exercise Time
. The Committee, in its sole discretion, shall have
the right (but shall not in any case be obligated), exercisable at any time after the Date of
Grant, to permit the exercise of any Option or Stock Appreciation Right prior to the time such
Option or Stock Appreciation Right would otherwise become exercisable under the terms of the related
Award Agreement.
(d)
Extension of Exercise Time
. In addition to the extensions permitted under Section
6.03(e) in the event of Termination of Employment, the Committee, in its sole discretion, shall
have the right (but shall not in any case be obligated), exercisable on or at any time after the
Date of Grant, to permit the exercise of any Option or Stock Appreciation Right after its
expiration date described in Section 6.03(e), subject, however, to the limitation described in
Section 6.03(b)(ii).
(e)
Exercise of Options or Stock Appreciation Rights Upon Termination of Employment
.
(i)
Termination
. In the event of Termination of Employment of a Participant other
than by reason of death, disability or Retirement, all Options and Stock Appreciation Rights that
were not exercisable as of the date of the Termination of Employment shall expire as of such date
and the right of the Participant to exercise any Options or Stock Appreciation Rights that were
exercisable as of the date of Termination of Employment shall expire 90 days after the date of such
Termination of Employment, unless the exercise period is extended by the Committee in accordance
with Section 6.03(d). In no event, however, may the Option be exercised later than the date of
expiration of the Option or Stock Appreciation Right determined pursuant to Section 6.03(b)(ii).
(ii)
Disability or Retirement
. Unless otherwise provided for in an Award Agreement,
in the event of a Participant’s Termination of Employment by reason of
9
disability or Retirement,
the right of the Participant to exercise all Options and Stock Appreciation Rights that were not
exercisable as of the date of the Termination of Employment shall expire as of such date and all
Options and Stock Appreciation Rights that he or she was entitled to exercise upon Termination of
Employment shall expire three years after the date of such Termination of Employment, unless the
exercise period is extended by the Committee in accordance with Section 6.03(d),
provided
that, in no event, however, may any Option or Stock Appreciation Right be exercised later than the
date of expiration of the Option determined pursuant to Section 6.03(b)(ii).
(iii)
Death
. Unless otherwise provided for in an Award Agreement, in the event of the
death of a Participant while employed by the Company or a Subsidiary and prior to the expiration of
any Option or Stock Appreciation Right as provided pursuant to Section 6.03(e)(i) or Section
6.03(d) above, all Options and Stock Appreciation Rights that were not exercisable as of the date
of death shall expire as of such date and to the extent the right to exercise the Option or Stock
Appreciation Right was accrued as of the date of death, the right of the Participant’s Beneficiary
to exercise the Option or Stock Appreciation Right shall expire one year after the date of the
Participant’s death. In the event of the death of a Participant which occurs within any
post-termination exercise period, and prior to the expiration of any Option or Stock Appreciation
Right as provided pursuant to Section 6.03(e)(i) or 6.03(e)(ii)or Section 6.03(d) above, all such
Options and Stock Appreciation Rights that were not exercisable as of the date of death shall
expire as of such date and to the extent the right to exercise such Option or Stock Appreciation
Right was accrued as of the date of such Termination of Employment and had not expired during such
additional period, the right of the Participant’s Beneficiary to exercise the Option or Stock
Appreciation Right, as the case may be, shall expire upon the later of one year after the date of
the Participant’s death or, if applicable, three years from the date of the Participant’s
Termination of Employment by reason of disability or Retirement. The exercise period may be
extended by the Committee in accordance with Section 6.03(d). In no event, however, may any Option
be exercised later than the date of expiration of the Option or Stock Appreciation Right determined
pursuant to Section 6.03(b)(ii).
6.04
Option Exercise Procedures
. The Committee shall establish procedures governing
the exercise of Options, which procedures shall generally require that written or electronic notice
of exercise thereof be given and that the exercise price thereof be paid in full at the time of
exercise (i) in cash or cash equivalents, including by personal check, or (ii) in accordance with
such other procedures or in such other forms as the Committee shall from time to time determine.
The Exercise Price of any Options exercised may be paid in full or in part in the form of shares of
Common Stock, based on the Fair Market Value of such shares of Common Stock on the date of
exercise, subject to such rules and procedures as may be adopted by the Committee.
6.05
Stock Appreciation Right Exercise Procedures
. Each Stock Appreciation Right
granted under the Plan shall be exercised by written or electronic notice to the
10
Company which must
be received by the officer or employee of the Company designated in the Award Agreement at or
before the close of business on the expiration date of the Award. Subject to Section 9.05, upon
exercise of a Stock Appreciation Right, the Participant shall be entitled to receive payment in the
form, determined by the Committee, of cash or shares of Common Stock having a Fair Market Value
equal to such cash amount, or a combination of shares of Common Stock and cash having an aggregate
value equal to such amount, determined by multiplying:
(i) any increase in the Fair Market Value of one share of Common Stock on the exercise
date over the price fixed by the Committee on the Date of Grant of such Stock Appreciation
Right, by
(ii) the number of shares of Common Stock with respect to which the Stock Appreciation
Right is exercised;
provided
that on the Date of Grant, the Committee may establish, in its sole discretion, a
maximum amount per share that will be payable upon exercise of a Stock Appreciation Right. Stock
Appreciation Rights that are granted in tandem with an Option may only be exercised upon the
surrender of the right to exercise such Option for an equivalent number of shares of Common Stock,
and may be exercised only with respect to the shares of Common Stock for which the related Option
is then exercisable.
6.06
Rights as a Stockholder
. A Participant or a transferee of an Option or Stock
Appreciation Right pursuant to Section 9.04 shall have no rights as a stockholder with respect to
the shares of Common Stock covered by an Option or Stock Appreciation Right until that Participant
or transferee shall have become the holder of record of any such shares, and no adjustment shall be
made with respect to any such shares of Common Stock for dividends in cash or other property or
distributions of other rights on the Common Stock for which the record date is prior to the date on
which that Participant or transferee shall have become the holder of record of any shares covered
by such Option;
provided
,
however
, that Participants are entitled to the adjustments set forth in
Section 9.08.
6.07
Change in Control
. Unless otherwise provided by the Committee in the applicable
Award Agreement, in the event of a Change in Control, all Options or Stock Appreciation Rights
outstanding on the date of such Change in Control shall become immediately and fully exercisable.
ARTICLE VII
Restricted Shares and Restricted Stock Units
7.01
Restricted Share and Restricted Stock Unit Awards
. The Committee may grant to
any Participant an Award of such number of shares of Common Stock or
11
Restricted Stock Units on such
terms, conditions and restrictions, whether based on performance standards, periods of service,
retention by the Participant of ownership of specified shares of Common Stock or other criteria, as
the Committee shall establish. With respect to performance-based Awards of Restricted Shares or
Restricted Stock Units intended to qualify for deductibility under the “performance-based”
compensation exception contained in Section 162(m) of the Code, performance targets will include
specified levels of one or more of the following (in absolute terms or relative to one or more
other companies or indices): adjusted net income, operating income, operating expenses, return on
investment, return on stockholders’ equity, stock price appreciation, adjusted earnings before
interest, taxes, depreciation and amortization, service unavailability, generator availability,
OSHA recordable incident rate, customer satisfaction, relative total stockholder return, earnings
per share and/or growth in earnings per share. The terms of any Restricted Share Award or
Restricted Stock Unit granted under this Plan shall be set forth in an Award Agreement which shall
contain provisions determined by the Committee and not inconsistent with this Plan.
7.02
Terms of Restricted Share Awards
.
(a)
Issuance of Restricted Shares
. As soon as practicable after the Date of Grant of
a Restricted Share Award by the Committee, the Company shall cause to be transferred on the books
of the Company or its agent, shares of Common Stock, registered on behalf of the Participant,
evidencing the Restricted Shares covered by the Award, subject to forfeiture to the Company as of
the Date of Grant if an Award Agreement with respect to the Restricted Shares covered by the Award
is not duly executed by the Participant and timely returned to the Company. All shares of Common
Stock covered by Awards under this ARTICLE VII shall be subject to the restrictions, terms and
conditions contained in the Plan and the applicable Award Agreements entered into by the
appropriate Participants. Until the lapse or release of all restrictions applicable to an Award of
Restricted Shares the share certificates representing such Restricted Shares may be held in custody
by the Company, its designee, or, if the certificates bear a restrictive legend, by the
Participant. Upon the lapse or release of all restrictions with respect to an Award as described
in Section 7.02(c), one or more share certificates, registered in the name of the Participant, for
an appropriate number of shares as provided in Section 7.02(c), free of any restrictions set forth
in the Plan and the related Award Agreement shall be delivered to the Participant.
(b)
Stockholder Rights
. Beginning on the Date of Grant of a Restricted Share Award
and subject to execution of the related Award Agreement as provided in Section 7.02(a), and except
as otherwise provided in such Award Agreement, the Participant shall become a stockholder of the
Company with respect to all shares subject to the Award Agreement and shall have all of the rights
of a stockholder, including, but not limited to, the right to vote such shares and, unless
otherwise determined by the Committee, in its sole discretion, the right to receive dividends;
provided
,
however
, that,
12
unless otherwise determined by the Committee, in its sole discretion,
any shares of Common Stock distributed as a dividend or otherwise with respect to any Restricted
Shares as to which the restrictions have not yet lapsed, shall be subject to the same restrictions
as such Restricted Shares and held or restricted as provided in Section 7.02(a).
(c)
Delivery of Shares Upon Vesting
. Upon expiration or earlier termination of the
forfeiture period without a forfeiture and the satisfaction of or release from any other conditions
prescribed by the Committee, or at such earlier time as provided under the provisions of Section
7.06, the restrictions applicable to the Restricted Shares shall lapse. As of the date specified
in the Award Agreement, subject to the requirements of Section 9.05, the Company shall deliver to
the Participant or, in case of the Participant’s death, to the Participant’s Beneficiary, one or
more share certificates for the appropriate number of shares of Common Stock, free of all such
restrictions, except for any restrictions that may be imposed by law.
(d)
Forfeiture of Restricted Shares
. Subject to Sections 7.04 and 7.06, Restricted
Shares shall be forfeited and returned to the Company and all rights of the Participant with
respect to such Restricted Shares shall terminate unless the Participant continues in the service
of the Company or a Subsidiary until the expiration of the forfeiture period for such Restricted
Shares and satisfies any and all other conditions set forth in the Award Agreement. The Committee
shall determine the forfeiture period (which may, but need not, lapse in installments) and any
other terms and conditions applicable with respect to any Restricted Share Award.
7.03
Terms of Restricted Stock Units
.
(a)
Rights as a Stockholder
. Unless otherwise determined by the Committee at the Date
of Grant and as specified in the Award Agreement, (i) any cash dividends or distributions credited
to the Participant’s account shall be deemed to have been invested in additional Restricted Stock
Units on the record date established for the related dividend or distribution in an amount equal to
the greatest whole number which may be obtained by dividing (A) the value of such dividend or
distribution on the record date by (B) the Fair Market Value of one share of Common Stock on such
date, and such additional Restricted Stock Units shall be subject to the same terms and conditions
as are applicable in respect of the Restricted Stock Units with respect to which such dividends or
distributions were payable, and (ii) if any such dividends or distributions are paid in shares of
Common Stock or other securities, such shares and other securities shall be subject to the same
forfeiture period and other restrictions as apply to the Restricted Stock Units with respect to
which they were paid. Unless and until the Company issues a certificate or certificates to a
Participant for shares of Common Stock in respect of his or her Award of Restricted Stock Units, or
otherwise determined by the Committee at or after the Date of Grant, a Participant holding
outstanding Restricted Stock Units shall not
13
be entitled to exercise any voting rights and any
other rights as a stockholder with respect to the shares of Common Stock underlying such Award.
(b)
Settlement of Restricted Stock Units
. Unless the Committee determines otherwise
at the Date of Grant and as set forth in the Award Agreement, after the lapse of the forfeiture
period with respect to any Restricted Stock Units and as of the date specified in the Award
Agreement, the Company shall issue the shares of Common Stock underlying such Restricted Stock Unit
(plus additional shares of Common Stock for any Restricted Stock Units credited in respect of
dividends or distributions) or, if the Committee so determines in its sole
discretion, an amount in cash equal to the Fair Market Value of such shares of Common Stock.
Upon such terms and conditions as the Committee may establish from time to time, a Participant may
be permitted to defer the receipt of the shares of Common Stock or cash otherwise deliverable upon
settlement of Restricted Stock Units.
7.04
Waiver of Forfeiture Period
. Notwithstanding anything contained in this ARTICLE
VII to the contrary, the Committee may, in its sole discretion, waive the forfeiture period and any
other conditions set forth in any Award Agreement for a Participant who has terminated employment
prior to the end of the Award Period or under other appropriate circumstances (including the death,
disability or Retirement of the Participant or a material change in circumstances arising after the
Date of Grant) and subject to such terms and conditions (including forfeiture of a proportionate
number of the Restricted Shares or Restricted Stock Units) as the Committee shall deem appropriate.
7.05
Restriction on Transferability
. None of the Restricted Shares or Restricted
Stock Units may be assigned or transferred (other than by will or the laws of descent and
distribution or to an inter vivos trust with respect to which the Participant is treated as the
owner under Sections 671 through 677 of the Code), pledged or sold prior to the lapse of the
restrictions applicable thereto.
7.06
Change in Control
. Unless otherwise provided by the Committee in the applicable
Award Agreement, in the event of a Change in Control, all restrictions applicable to the Restricted
Share Award or Restricted Stock Unit shall terminate fully and the Participant shall immediately
have the right to the delivery of share certificates for such shares in accordance with Section
7.02(c).
14
ARTICLE VIII
Performance Awards
8.01
Performance Awards
.
(a)
Award Periods and Determinations of Awards
. The Committee may grant Performance
Awards to Participants. A Performance Award shall consist of the right to receive a payment
(measured by the Fair Market Value of a specified number of shares of Common Stock, increases in
such Fair Market Value during the Award Period and/or a fixed cash amount) contingent upon the
extent to which certain predetermined performance targets have been met during an Award Period.
Performance Awards may be made in conjunction with, or in addition to, any other Awards made under
the Plan. The Award Period shall be determined by the Committee and as specified in the applicable
Award Agreement. The Committee, in its discretion and under such terms as it deems appropriate,
may permit newly eligible Participants, such as those who are promoted or newly hired, to receive
Performance Awards after an Award Period has commenced.
(b)
Performance Targets
. The performance targets may include such goals related to
the performance of the Company and/or the performance of a Participant as may be established by the
Committee in its sole discretion. In the case of Performance Awards intended to qualify for
deductibility under the “performance-based” compensation exception contained in Section 162(m) of
the Code, the targets will include specified levels of one or more of the following (in absolute
terms or relative to one or more other companies or indices): adjusted net income, operating
income, operating expenses, return on investment, return on stockholders’ equity, stock price
appreciation, adjusted earnings before interest, taxes, depreciation and amortization, service
unavailability, generator availability, OSHA recordable incident rate, customer satisfaction,
relative total stockholder return, earnings per share and/or growth in earnings per share. The
performance targets established by the Committee may vary for different Award Periods and need not
be the same for each Participant receiving a Performance Award in an Award Period. Except to the
extent inconsistent with the performance-based compensation exception under Section 162(m) of the
Code, in the case of Performance Awards granted to Participants to whom such section is applicable,
the Committee, in its sole discretion, but only under extraordinary circumstances as determined by
the Committee, may change any prior determination of performance targets for any Award Period at
any time prior to the final determination of the value of a related Performance Award when events
or transactions occur to cause such performance targets to be an inappropriate measure of
achievement.
(c)
Earning Performance Awards
. The Committee, on or as soon as practicable after the
Date of Grant, shall prescribe a formula to determine the percentage
15
of the applicable Performance
Award to be earned based upon the degree of attainment of performance targets.
(d)
Payment of Earned Performance Awards
. Payments of earned Performance Awards shall
be made in Options, Stock Appreciation Rights, shares of Common Stock, cash, or a combination
thereof, in the discretion of the Committee and as set forth in the Award Agreement. The
Committee, in its sole discretion and as set forth in the Award Agreement, may provide such terms
and conditions with respect to the payment of earned Performance Awards as it may deem desirable.
8.02
Terms of Performance Awards
.
(a)
Termination of Employment
. Unless otherwise provided below or in Section 8.03, in
the case of a Participant’s Termination of Employment prior to the end of an Award Period, the
Participant will not have earned any Performance Awards for that Award Period.
(b)
Retirement
. If a Participant’s Termination of Employment is because of Retirement
prior to the end of an Award Period, the Participant will not be paid any Performance Award, unless
the Committee, in its sole and exclusive discretion, determines that an Award should be paid. In
such a case, the Participant shall be entitled to receive a pro-rata portion of his or her Award as
determined under subsection (d).
(c)
Death or Disability
. If a Participant’s Termination of Employment is due to death
or to disability (as determined in the sole and exclusive discretion of the Committee) prior to the
end of an Award Period, the Participant or the Participant’s Beneficiary, as the case may be, shall
be entitled to receive a pro-rata share of his or her Award as determined under subsection (d).
(d)
Pro-Rata Payment
. The amount of any payment to be made to a Participant whose
employment is terminated by Retirement, death or disability (under the circumstances described in
subsections (b) and (c)) will be the amount determined by multiplying (i) the amount of the
Performance Award that would have been earned through the end of the Award Period had such
employment not been terminated by (ii) a fraction, the numerator of which is the number of
whole months such Participant was employed during the Award Period, and the Denominator of which is
the total number of months of the Award Period. Any such payment made to a Participant whose
employment is terminated prior to the end of an Award Period shall be made as of such date
specified in the Award Agreement. Any partial payment previously made or credited to a deferred
account for the benefit of a Participant in accordance with Section 8.01(d) of the Plan shall be
subtracted from the amount otherwise determined as payable as provided in this Section 8.02(d).
16
(e)
Other Events
. Notwithstanding anything to the contrary in this ARTICLE VIII, the
Committee may, in its sole and exclusive discretion, determine to pay all or any portion of a
Performance Award to a Participant who has terminated employment prior to the end of an Award
Period or under other appropriate circumstances (including the death, disability or Retirement of
the Participant or a material change in circumstances arising after the Date of Grant), subject to
such terms and conditions (including forfeiture of a proportionate portion of the Performance
Award) as the Committee shall deem appropriate.
8.03
Change in Control
. Unless otherwise provided by the Committee in the applicable
Award Agreement, in the event of a Change in Control, all Performance Awards for all Award Periods
shall immediately become fully payable to all Participants and shall be paid to Participants within
30 days after such Change in Control.
ARTICLE IX
Terms Applicable to All Awards Granted Under the Plan
9.01
Plan Provisions Control Award Terms
. The terms of the Plan shall govern all
Awards granted under the Plan, and in no event shall the Committee have the power to grant any
Award under the Plan the terms of which are contrary to any of the provisions of the Plan. In the
event any provision of any Award granted under the Plan shall conflict with any term in the Plan as
constituted on the Date of Grant of such Award, the term in the Plan as constituted on the Date of
Grant of such Award shall control. All Awards granted under the terms of the plan and any related
Award Agreement shall be structured to comply with 409A of the Code, its corresponding Treasury
regulations and related guidance. Without limiting the foregoing, if and to the extent that any
Award is deemed to be deferred compensation for purposes of Section 409A of the Code, the payment
of such Award shall only be made upon the occurrence of an event that is permissible payment event
for purposes of Section 409A of the Code.
9.02
Award Agreement
. No person shall have any rights under any Award granted under
the Plan unless and until the Company and the Participant to whom such Award shall have been
granted shall have executed and delivered an Award Agreement or the Participant shall have received
notice of the Award authorized by the Committee.
9.03
Modification of Award After Grant
. No Award granted under the Plan to a
Participant may be modified (unless such modification does not materially decrease the value of
that Award) after its Date of Grant except by express written agreement between the Company and
such Participant, provided that any such change (i) may not be inconsistent with the terms of the
Plan, and (ii) shall be approved by the Committee;
provided
,
however
, that, with
the exception of adjustments permitted in Section 9.08, the Exercise Price of any outstanding Award
granted under the Plan may not be reduced after
17
the Date of Grant nor may any outstanding Award granted
under the Plan be surrendered to the Company in exchange for a new Award with a lower Exercise
Price nor may any other action that would constitute repricing under the applicable rules of the
New York Stock Exchange be taken with respect to any outstanding Award.
9.04
Limitation on Transfer
. Except as provided in Section 7.05 in the case of
Restricted Shares, a Participant’s rights and interest under the Plan may not be assigned or
transferred other than by will or the laws of descent and distribution and, during the lifetime of
a Participant, only the Participant personally (or, if applicable, the Participant’s Beneficiary)
may exercise rights under the Plan. The Participant’s Beneficiary may exercise the Participant’s
rights to the extent they are exercisable under the Plan following the death of the Participant.
Notwithstanding the foregoing, the Committee may grant Non-Qualified Stock Options that are
transferable, without payment of consideration, to immediate family members of the Participant, to
trusts or partnerships for such family members, or to such other parties as the Committee may
approve (as evidenced by the applicable Award Agreement or an amendment thereto), and the Committee
may also amend outstanding Non-Qualified Stock Options to provide for such transferability.
9.05
Withholding Taxes
. The Company shall be entitled, if the Committee deems it
necessary or desirable, to withhold (or secure payment from the Participant in lieu of withholding)
the amount of any withholding or other tax required by law to be withheld or paid by the Company
with respect to any amount payable and/or shares issuable under such Participant’s Award or with
respect to any income recognized upon a disqualifying disposition of shares received pursuant to
the exercise of an Incentive Stock Option, and the Company may defer payment of cash or issuance of
shares upon exercise or vesting of an Award unless indemnified to its satisfaction against any
liability for any such tax. The amount of such withholding or tax payment shall be determined by
the Committee and shall be payable by the Participant at such time as the Committee determines.
With the approval of the Committee, the Participant may elect to meet his or her withholding
requirement (i) by having withheld from such Award at the appropriate time that number of shares of
Common Stock, rounded up to the next whole share, the Fair Market Value of which is equal to the
amount of the minimum withholding taxes due, (ii) by direct payment to the Company in cash of the
minimum amount of any taxes required to be withheld with respect to such Award or (iii) by a
combination of withholding such shares and paying cash.
9.06
Surrender of Awards
. Any Award granted under the Plan may be surrendered to the
Company for cancellation on such terms as the Committee and the Participant approve.
18
9.07
Cancellation and Rescission of Awards
.
(a)
Detrimental Activities
. Unless the Award Agreement specifies otherwise, the
Committee may cancel, rescind, suspend, withhold or otherwise limit or restrict any unexpired,
unpaid, or deferred Awards at any time if the Participant is not in compliance with all applicable
provisions of the Award Agreement and the Plan, or if the Participant engages in any “Detrimental
Activity” (as determined by the Committee in its sole discretion). For purposes of this Section
9.07, “Detrimental Activity” shall include: (i) the rendering of services for any organization or
engaging directly or indirectly in any business which is or becomes competitive with the Company,
or which organization or business, or the rendering of services to such organization or business,
is or becomes otherwise prejudicial to or in conflict with the interests of the Company; (ii) the
disclosure to anyone outside the Company, or the use in other than the Company’s business, without prior
written authorization from the Company, of any confidential information or material relating to the
business of the Company, acquired by the Participant either during or after employment with the
Company; (iii) any attempt directly or indirectly to induce any employee of the Company to be
employed or perform services elsewhere or any attempt directly or indirectly to solicit the trade
or business of any current or prospective customer, supplier or partner of the Company; or (iv) any
other conduct or act determined to be injurious, detrimental or prejudicial to any interest of the
Company.
(b)
Certification
. Upon exercise, payment or delivery pursuant to an Award, the
Participant shall certify in a manner acceptable to the Company that he or she is in compliance
with the terms and conditions of the Plan. In the event a Participant fails to comply with the
provisions of paragraphs (a)(i)-(iv) of this Section 9.07 prior to, or during the six months after,
any exercise, payment or delivery pursuant to an Award, such exercise, payment or delivery may be
rescinded within two years thereafter. In the event of any such rescission, the Participant shall
pay to the Company the amount of any gain realized or payment received as a result of the rescinded
exercise, payment or delivery, in such manner and on such terms and conditions as may be required,
and the Company shall be entitled to set-off against the amount of any such gain any amount owed to
the Participant by the Company.
9.08
Adjustments to Reflect Capital Changes
.
(a)
Recapitalization
. The number and kind of shares subject to outstanding Awards,
the Exercise Price or base price of an Award, the number and kind of shares available for Awards
subsequently granted under the Plan and the maximum number of shares in respect of which Awards can
be made to any Participant in any calendar year shall be appropriately adjusted to reflect any
stock dividend, stock split, combination or exchange of shares, merger, consolidation or other
change in capitalization with a similar substantive effect upon the Plan or the Awards granted
under
19
the Plan. The Committee shall have the power and sole discretion to determine the amount of
the adjustment to be made in each case.
(b)
Certain Mergers
. After any Merger in which the Company is not the surviving
corporation or pursuant to which a majority of the shares which are of the same class as the shares
that are subject to outstanding Awards are exchanged for, or converted into, or otherwise become
shares of another corporation, the surviving, continuing, successor or purchasing corporation, as
the case may be (the “
Acquiring Corporation
”), will either assume the Company’s rights and
obligations under outstanding Award Agreements or substitute awards in respect of the Acquiring
Corporation’s stock for outstanding Awards,
provided
,
however
, that if the
Acquiring Corporation does not assume or substitute for such outstanding Awards, the Board shall
provide prior to the Merger that any unexercisable and/or unvested portion of the outstanding
Awards shall be immediately exercisable and vested as of a date prior to such Merger, as the Board
so determines. The exercise and/or vesting of any Award that was permissible solely by reason of
this Section 9.08 shall be conditioned upon the consummation of the Merger. Any Awards which are
neither assumed by the Acquiring Corporation nor exercised as of the date of the Merger shall
terminate effective as of the effective date of the Merger. Comparable rights shall accrue to each
Participant in the event of successive Mergers of the character described above.
(c)
Options to Purchase Shares or Stock of Acquired Companies
. After any Merger in
which the Company or a Subsidiary shall be a surviving corporation, the Committee may grant Options
or other Awards under the provisions of the Plan, pursuant to Section 424 of the Code or as is
otherwise permitted under the Code, in full or partial replacement of or substitution for old stock
options granted under a plan of another party to the merger whose shares of stock subject to the
old options may no longer be issued following the Merger. The manner of application of the
foregoing provisions to such options and any appropriate adjustments in the terms of such stock
options shall be determined by the Committee in its sole discretion. Any such adjustments may
provide for the elimination of any fractional shares which might otherwise become subject to any
Options. The foregoing shall not be deemed to preclude the Company from assuming or substituting
for stock options of acquired companies other than pursuant to this Plan.
(d)
Adjustments
. Any adjustment to outstanding Awards shall be consistent with
Sections 409A and 424 of the Code, to the extent applicable.
9.09
Recoupment
. Pursuant to the Company’s recoupment policies, if applicable, a
Participant may be required to reimburse the Company for any compensation paid to such Participant
with respect to an Award granted under this Plan upon the occurrence of certain specified events
set forth in the Company’s applicable recoupment policies.
20
9.10
Legal Compliance
. Shares of Common Stock shall not be issued hereunder unless
the issuance and delivery of such shares shall comply with applicable laws and shall be further
subject to the approval of counsel for the Company with respect to such compliance.
9.11
No Right to Employment
. No Participant or other person shall have any claim of
right to be granted an Award under the Plan. Neither the Plan nor any action taken hereunder shall
be construed as giving any Participant any right to be retained in the service of the Company or
any of its Subsidiaries.
9.12
Awards Not Includable for Benefit Purposes
. Payments received by a Participant
pursuant to the provisions of the Plan shall not be included in the determination of benefits under
any pension, group insurance or other benefit plan applicable to the Participant which is
maintained by the Company or any of its Subsidiaries, except as may be provided under the terms of
such plans or determined by the Board.
9.13
Governing Law
. This Plan, and any agreement or determination shall be governed
by the laws of the State of Maryland, regardless of principles of conflict of laws, except to the
extent that the law of the State of Maryland specifically and mandatorily applies.
9.14
No Strict Construction
. No rule of strict construction shall be implied against
the Company, the Committee or any other person in the interpretation of any of the terms of the
Plan, any Award granted under the Plan or any rule or procedure established by the Committee.
9.15
Captions
. The captions (i.e., all Section headings) used in the Plan are for
convenience only, do not constitute a part of the Plan, and shall not be deemed to limit,
characterize or affect in any way any provisions of the Plan, and all provisions of the Plan shall
be construed as if no captions had been used in the Plan.
9.16
Severability
. Whenever possible, each provision in the Plan and every Award at
any time granted under the Plan shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of the Plan or any Award at any time granted under the
Plan shall be held to be prohibited by or invalid under applicable law, then (i) such provision
shall be deemed amended to accomplish the objectives of the provision as originally written to the
fullest extent permitted by law and (ii) all other provisions of the Plan, such Award and every
other Award at any time granted under the Plan shall remain in full force and effect.
21
9.17
Amendment and Termination
.
(a)
Amendment
. The Board shall have complete power and authority to amend the Plan at
any time; provided, that no termination or amendment of the Plan may, without the consent of the
Participant to whom any Award shall theretofore have been granted under the Plan, materially
adversely affect the right of such individual under such Award; and provided further, that no such
alteration or amendment of the Plan shall, without approval by the stockholders of the Company (i)
increase the total number of shares of Common Stock which may be issued or delivered under the
Plan, (ii) increase the total number of shares which may be covered by Awards to any Participant,
or (iii) change the minimum Option Exercise Price or base price of a Stock Appreciation Right or
otherwise reprice an outstanding Award.
(b)
Termination
. The Board shall have the right and the power to terminate the Plan
at any time. No Award shall be granted under the Plan after the termination of the Plan, but the
termination of the Plan shall not have any other effect and any Award outstanding at the time of
the termination of the Plan may be exercised after termination of the Plan at any time prior to the
expiration date of such Award to the same extent such Award would have been exercisable had the
Plan not been terminated. A termination of the Plan will comply with Section 409A of the Code, its
corresponding Treasury regulations and related guidance.
9.18
Compliance with Law
. The Plan is intended to comply with applicable law.
Without limiting the foregoing, the Plan is intended to comply with the applicable requirements of
Section 409A of the Code and its corresponding regulations and related guidance, and shall be
administered in accordance with Section 409A of the Code to the extent it applies to the Plan. To
the extent that any provision of the Plan or an Award Agreement would cause a conflict with the
requirements of Section 409A of the Code or would cause the administration of the Plan to fail to
satisfy the requirements of Section 409A of the Code, such provision shall be deemed null and void
to the extent permitted by applicable law.
22
Exhibit 10.4
Adopted March 4, 2004
Approved by Stockholders May 13, 2004
Amended May 17, 2007
ALLEGHENY ENERGY, INC.
NON-EMPLOYEE DIRECTOR STOCK PLAN
1.
Purpose And Effective Date
. The purpose of this Plan is to aid the Company in
attracting and retaining Non-Employee Directors by encouraging and enabling the acquisition of a
financial interest in the Company by Non-Employee Directors through the issuance of Shares with
respect to their services as a director of the Company. This Plan shall supersede and replace the
Company’s policy of granting $12,000 worth of the Company’s common stock to each Non-Employee
Director annually as part of their director compensation.
This Plan shall become effective upon its approval by the stockholders of the Company, but
issuance of Shares shall not be made until the receipt of any required regulatory approvals.
2.
Definitions
.
As used in this Plan:
2.1. The term “
Board
” means the Board of Directors of the Company.
2.2. The term “
Company
” means Allegheny Energy, Inc., a Maryland corporation.
2.3. The term “
Non-Employee Director
” means any person who is elected or appointed to the
Board and who is not, as of the date eligibility for participation in this Plan is determined, an
employee of the Company or any of its subsidiaries.
2.4. The term “
Payment Date
” means March 31, June 30, September 30 and December 31 of each
Year.
2.5. The term “
Plan
” means this 2004 Non-Employee Director Stock Plan, as it may be amended
from time to time.
2.6. The term “
Quarter
” means the three (3) month period preceding a Payment Date.
2.7. The term “
Share
” means a share of common stock, $1.25 par value, of the Company.
2.8. The term “
Share Payment
” has the meaning set forth in Section 4.1.
2.9. The term “
Year
” means the calendar year.
3.
Eligibility
. Participation in this Plan is limited to Non-Employee Directors.
4.
Share Payment
.
4.1. Subject to Section 4.2, on March 31, 2004, and on each Payment Date thereafter, the
Company shall issue to each person then serving as a Non-Employee Director (and to any person whose
services as a
Non-Employee Director terminated during the Quarter as a result of death or disability) such
number of Shares as shall be determined by the Board from time to time (the “Share Payment”), not
to exceed one thousand (1,000) shares per quarter (the “Quarterly Limit”), as compensation for
services performed as a Non-Employee Director during the Quarter.
4.2. No Share Payments will be made under this Plan until after the approval of this Plan
by the stockholders of the Company and the receipt of any required regulatory approvals;
provided
,
however
, that
Adopted March 4, 2004
Approved by Stockholders May 13, 2004
Amended May 17, 2007
any Share Payments otherwise payable but for this Section 4.2 will be paid within 10
business days of the Company’s receipt of the last of any such required approvals.
4.3. As soon as practicable after each Payment Date, the Company shall cause to be issued
and delivered to each Non-Employee Director a stock certificate, registered in the name of such
Non-Employee Director, evidencing the Share Payment pursuant to this Plan. Each such stock
certificate will bear an appropriate legend with respect to restrictions on transferability, if
applicable.
The Share Payment may be effected on a noncertificated basis, to the extent not prohibited by
applicable law or the rules or requirements of any applicable stock exchange.
4.4. Non-Employee Directors shall not be deemed for any purpose to be, or have any rights
as, stockholders of the Company with respect to any Shares awarded under this Plan except if, as
and when Shares are issued and then only from the date of issuance of such Shares. No adjustment
shall be made for dividends or distributions or other rights for which the record date is prior to
the date of issuance.
5.
Shares Subject To The Plan
. Subject to adjustment as provided below, an aggregate of
300,000 Shares shall be available for issuance under the Plan. The Shares to be issued under the
Plan may be made available from authorized but unissued Shares or Shares held in the treasury. Any
change in the number of outstanding Shares of the Company occurring through stock splits,
combination of Shares, recapitalization, stock dividends, or other similar changes in the Company’s
capital stock after the adoption of Plan shall be appropriately reflected in an increase or
decrease in the amount of the Quarterly Limit and the aggregate number of Shares available for
issuance under the Plan. The Board shall have the power and sole discretion to determine the
amount of the adjustment to be made in each case.
6.
Amendment And Discontinuance
.
6.1. The Board may, without further action by the stockholders, amend this Plan or
condition or modify Shares issued under this Plan (a) to conform this Plan to securities or other
laws, or rules, regulations or regulatory interpretations thereof, applicable to this Plan, or (b)
to comply with stock exchange rules or requirements.
6.2. Subject to Section 6.4, the Board may from time to time amend this Plan, or any
provision thereof, without further action of the Company’s stockholders, except that:
(a) No amendment may affect a Non-Employee Director’s rights with respect to any
Shares issued under this Plan prior to such amendment without such Non-Employee
Director’s consent.
(b) No amendment may change the number of Shares available for issuance under the
Plan or increase the Quarterly Limit without the approval of the stockholders of the
Company.
(c) This Section 6.2 may not be amended.
6.3 The Board may suspend or discontinue this Plan in whole or in part, but any such
suspension or discontinuance shall not affect Share Payments under this Plan prior thereto.
6.4 Notwithstanding anything to the contrary in this Section 6, any amendment to this Plan
must comply with all applicable legal requirements including without limitation, compliance with
securities, tax, or other laws, or rules, regulations or regulatory interpretations thereof,
applicable to this Plan, or the requirements of the exchanges on which Shares may, at the time, be
listed, and any requirements of other governmental or regulatory authorities (including, without
limitation, any requirements for stockholder approval).
Adopted March 4, 2004
Approved by Stockholders May 13, 2004
Amended May 17, 2007
7.
Compliance With Applicable Legal Requirements
. No Share Payments shall be made unless
such Share Payments comply with all applicable legal requirements including without limitation,
compliance with the provisions of the Securities Act of 1933, as amended, the Public Utility
Holding Company Act of 1935, as amended, the requirements of the exchanges on which Shares may, at
the time, be listed, and any requirements of other governmental or regulatory authorities.
8.
Deferral Election
. Notwithstanding Section 4 or any other provision in this Plan to
the contrary, each Non-Employee Director shall have the right to elect to defer the entire amount
of the Share Payments otherwise payable to him in accordance with the Allegheny Energy, Inc.
Revised Plan for Deferral of Compensation of Directors or any successor plan, as long as any such
plan shall remain in effect.
9.
Administration
. Subject to all applicable legal requirements, including without
limitation, compliance with securities, tax or other laws, or rules, regulations or regulatory
interpretations thereof, applicable to the Plan, or the requirements of the exchanges on which
Shares may, at the time, be listed, and any requirements of other governmental or regulatory
authorities (including, without limitation, any requirements for stockholder approval), the Plan
shall be administered by the Board, which shall have the sole authority to construe and interpret
the terms and provisions of the Plan. The Board shall maintain records and disburse payments
hereunder. The Board’s interpretations, determinations, regulations and calculations shall be final
and binding on all persons and parties concerned. The Board may adopt, amend and rescind such rules
and regulations as it deems necessary, desirable or appropriate in administering the Plan, and the
Board may act at a meeting, in a written action without meeting or by having actions otherwise
taken by a member of the Board pursuant to a delegation of duties from the Board. The determination
of the Board as to any disputed questions arising under the Plan, including questions of
construction and interpretation, shall be final, binding and conclusive upon all persons.
Exhibit 10.5
ALLEGHENY ENERGY, INC.
AMENDED AND RESTATED
REVISED PLAN FOR DEFERRAL OF COMPENSATION OF DIRECTORS
1. Name and Purpose. Allegheny Energy, Inc. (the “Company”) originally established the
Revised Plan for Deferral of Compensation of Directors as of December 2, 1993 (the “Plan”). The
purpose of the Plan is to provide a means for the elective deferral of fees payable to non-employee
directors of the Company. This amended and restated version of the Plan shall become effective
upon October 5, 2006.
2. Participation. Each member of the Company’s Board of Directors (the “Board”) who is not
an employee of the Company or any subsidiary of the Company (each a “Non-Employee Director”) may
participate in the Plan.
3. Deferral Elections.
3.1 Cash and Common Stock Deferral Elections. Pursuant to the terms of the Plan, a
Non-Employee Director may make an election to defer all or a portion of (i) any retainer fee
payable in cash with respect to the Non-Employee Director’s service on the Board, (ii) the Board
meeting fees and committee meeting fees payable in cash with respect to the Non-Employee Director’s
attendance at such meetings, (iii) awards of shares of common stock of the Company (“Common Stock”)
made to the Non-Employee Director pursuant to the terms of the Company’s Non-Employee Director
Stock Plan (the “Stock Plan”), and (iv) other cash fees paid to Non-Employee Directors
(collectively, “Fees”). A Non-Employee Director may make a separate deferral election with respect
to the portion of the Fees payable in cash and the portion of the Fees payable in Common Stock.
3.2 Timing and Effect of Elections. Each initial deferral election and each change to (or
revocation of) an existing deferral election shall be made by the submission of a written election
form to the Secretary of the Company (or its authorized delegate) as follows:
(a) Annual Deferral Election. By December 31 of any calendar year, each Non-Employee
Director may make a deferral election that will be given effect with respect to Fees earned by the
Non-Employee Director for the succeeding calendar year. If a Non-Employee Director does not make a
deferral election by December 31, no Fees will be deferred for the succeeding calendar year.
(b) Deferral Election for New Non-Employee Directors. Each Non-Employee Director first
elected or appointed to the Board during a calendar year may make a deferral election within 30
days of commencing service as a Non-Employee Director. This election will be given effect with
respect to Fees earned by the Non-Employee Director after the date of the election.
(c) Duration, Change or Revocation of Deferral Election. A Non-Employee Director may change
or revoke an annual deferral election at any time before the calendar year for which the election
will be given effect. Once a calendar year for which an annual election will be given effect
begins, a Non-Employee Director’s election shall be irrevocable. Once made, a new Non-Employee
Director may not change or revoke a deferral election made during a calendar year. Any deferral
election shall apply only to the deferrals for the calendar year for which the election is made and
shall not apply to Fees earned in subsequent calendar years.
4. Maintenance of Deferral Accounts.
4.1 Deferral Account for Fees Payable in Common Stock. The Company shall establish and
maintain a recordkeeping deferral account (the “Stock Account”) for each Non-Employee Director who
elects to defer a portion of the Fees attributable to grants of Common Stock under the Stock Plan
for a particular calendar year. The Non-Employee Director’s Stock Account shall be credited with
the number of shares of Common Stock (but not actual shares of Common Stock) deferred by the
Non-Employee Director at the end of each calendar quarter. In addition, at the end of each
calendar quarter, the Stock Account shall be credited with Dividend Equivalents (as defined below),
if any.
4.2 Deferral Accounts for Fees Payable in Cash. The Company shall establish and maintain
recordkeeping deferral accounts for each Non-Employee Director who elects to defer a portion of
the Fees payable in cash as follows:
(a) Cash Deferral Account. A Non-Employee Director may elect to have all or a portion of the
Fees payable to him in cash for a particular calendar year credited to a cash deferral account (the
“Cash Deferral Account”). Any such amounts shall be credited to the Cash Deferral Account on the
15th of the calendar month following the date the Fees otherwise would have been paid to the
Non-Employee Director, or if the 15th is a non-business day, the next following business day of the
month. In addition, at the end of each calendar quarter, the Cash Deferral Account shall be
credited with interest (compounded monthly based on the average daily outstanding balance) at a
rate equivalent to the prime rate of interest used by a majority of top 25 insured U.S. chartered
commercial banks as published by the Federal Reserve Board in the Federal Reserve Statistical
Release, H. 15 Selected Interest Rates (Daily), on the first business day of such calendar quarter.
(b) Stock Unit Account. A Non-Employee Director may elect to have all or a portion of the
Fees payable to him in cash credited to a stock unit account (the “Stock Unit Account”). Any such
amounts shall be credited to the Stock Unit Account on the 15th of the calendar month following the
date the Fees otherwise would have been paid to the Non-Employee Director or if the 15th is a
non-business day, the next following business day of the month. Any amount credited to the Stock
Unit Account shall be deemed to be invested in a number of units of Common Stock obtained by
dividing such amount by the Market Value Per Share (as defined below) as of the day such amounts
are credited to the Stock Unit Account. Further, the Stock Unit Account shall be credited on the
last day of each calendar quarter with Dividend Equivalents, if any.
4.3 Election Rules. Any election made by a Non-Employee Director under this Section 4 shall
be subject to the same timing and effect requirements that apply to deferral elections as set forth
in Section 3.2. Further, any election made by a Non-Employee Director under this Section 4 shall
apply only to the deferrals for the calendar year for which the election is made and, as such, a
Non-Employee Director shall not be permitted to make an election under this Section 4 for amounts
deferred in a prior calendar year, other than that described in Section 6.1.
4.4 Dividend Equivalents. Each Non-Employee Director who elects to defer amounts to his
Stock and/or Stock Unit Account shall also be entitled to receive additional credits for each
dividend declared by the Company until such time as his Stock and/or Stock Unit Account is
distributed to him (“Dividend Equivalents”). The amount of any such Dividend Equivalents shall be
equal to: (1) in the case of a cash dividend or a dividend paid in property (other than shares of
Common Stock), the number of shares or units of Common Stock determined by dividing (A) the amount
of any cash dividend (or the fair market value of a dividend paid in property, other than a
dividend paid in Common Stock) which the Non-Employee Director would have received if on the
payment date for such dividend the Non-Employee Director had been the owner of record of a number
of shares of Common Stock (or units) then credited to the Non-Employee Director’s Stock and/or
Stock Unit Accounts by (B) the Market Value Per Share (as defined below) as of such payment date;
and (2) in the case of a stock dividend, the number of full and fractional shares of Common Stock
which the Non-Employee Director would have received if on the payment date for a dividend which is
to be paid in Common Stock, the Non-Employee Director had been the owner of record of a number of
shares of Common Stock (or units) then credited to the Non-Employee Director’s Stock and/or Stock
Unit Accounts.
4.5 Definition of Market Value Per Share. For purposes of the Plan, the term “Market Value
Per Share” shall mean the average of the highest and the lowest sale price per share on the date of
reference for shares of Common Stock as reported on the New York Stock Exchange on such date (or,
if such date shall not be a business day, the next preceding day which shall be a business day).
If no sale occurs on such date, the Market Value Per Share shall be determined, in the manner
described above, as of the first preceding business day on which a sale occurs.
4.6 Changes in Capitalization. A Non-Employee Director’s Stock Account and Stock Unit
Account shall be appropriately adjusted for any change in the Common Stock by reason of any stock
dividend, stock split, combination or exchange of shares, merger, consolidation or other change in
capitalization with a similar substantive effect on the Common Stock and the Plan.
5. Beneficiary Designation. Each Non-Employee Director may, at any time, designate a
“Beneficiary” or “Beneficiaries” to receive amounts credited to the Non-Employee Director’s
deferral accounts in the event of the Non-Employee Director’s death. A Non-Employee Director may
make an initial Beneficiary designation, or change an existing Beneficiary designation, by
completing and signing a Beneficiary designation form and submitting it to the Secretary of the
Company (or its authorized delegate). Upon receipt by the Secretary of the Company of a
Non-Employee Director’s Beneficiary designation form, all
Beneficiary designations previously filed shall automatically be canceled. In the absence of an
effective Beneficiary designation, amounts credited to a Non-Employee Director’s deferral accounts
as of his death shall be paid to the person(s) legally entitled to such amount under the
Non-Employee Director’s will or, if none, to the Non-Employee Director’s estate.
6. Distribution of Deferrals.
6.1 Distribution Election. At the time that a Non-Employee Director makes an election to
defer Fees for a particular calendar year as described in Section 3, the Non-Employee Director
shall make an irrevocable distribution election to have the Fees deferred for such calendar year
(and any interest or Dividend Equivalents accrued thereon) distributed to him in a single lump sum
payment as soon as administratively practicable after: (i) the first day of a calendar year that is
no less than 12 months and a day from the date of the distribution election, or (ii) the date that
the Non-Employee Director terminates his service with the Company. In the event that a
Non-Employee Director fails to make the election provided in the preceding sentence, such
Non-Employee Director shall be deemed to have made an election to receive the payment described in
clause (ii) of the preceding sentence. Notwithstanding the foregoing, in accordance with the
special transition relief set forth in Proposed Treasury Regulations issued pursuant to Section 409
of the Internal Revenue Code of 1986, as amended (the “Code”), and no later than December 31, 2006,
each Non-Employee Director shall be permitted to make a new distribution election to have all
amounts previously deferred under the Plan on his behalf (except for amounts that otherwise are
payable in 2006) distributed to him in a single lump sum payment as soon as administratively
practicable after: (y) the first day of any future calendar year, or (z) the date that the
Non-Employee Director terminates his service with the Company. In the event that a Non-Employee
Director fails to make the election provided in the preceding sentence, such Non-Employee Director
shall be deemed to have made an election to receive the payment described in clause (z) of the
preceding sentence.
6.2 Form and Amount of Distribution. Any distribution of Fees deferred to a Non-Employee
Director’s Cash Deferral Account for a particular calendar year shall be paid in cash and the
amount of such distribution shall be equal to the Fees deferred for such calendar year and any
interest accrued thereon up to the distribution date elected by the Non-Employee Director in
accordance with Section 6.1. Any distribution of Fees deferred to a Non-Employee Director’s Stock
Unit Account for a particular calendar year shall be paid in cash and the amount of such
distribution shall be equal to (i) the number of units credited to the Stock Unit Account for Fees
deferred by the Non-Employee Director for such calendar year (and any Dividend Equivalents credited
with respect to such units) as of the distribution date elected by the Non-Employee Director in
accordance with Section 6.1, multiplied by (ii) the Market Value Per Share as of the distribution
date elected by the Non-Employee Director in accordance with Section 6.1. Any distribution of Fees
deferred to a Non-Employee Director’s Stock Account for a particular calendar year shall be paid in
the form of shares of Common Stock from the Company’s Stock Plan (except that any fraction of a
share of Common Stock shall be paid in cash) and the number of shares of Common Stock paid shall be
equal to the number of shares of Common Stock credited to the Stock Account for Fees deferred by
the Non-Employee Director for such calendar year (and any Dividend Equivalents credited with
respect to such shares).
6.3 Death. If a Non-Employee Director should die before full payment of the balance in his
accounts, the remaining balance shall be paid in a lump sum to his or her designated Beneficiaries
or his estate in accordance with Section 5. Such payment shall be made within the 60-day period
following the date of a Non-Employee Director’s death.
7. Unfunded Status of the Plan. A Non-Employee Director shall not have any interest in any
amount credited to his deferral accounts until it is distributed in accordance with the Plan.
Distributions under the Plan shall be made only from the general assets of the Company. All
amounts deferred under the Plan shall remain the sole property of the Company, subject to the
claims of its general creditors and available for its use for whatever purposes are desired. With
respect to amounts deferred, a Non-Employee Director is a general creditor of the Company and the
obligation of the Company hereunder is purely contractual and shall not be funded or secured in any
way.
8. Administration. Subject to all applicable legal requirements, including without
limitation, compliance with securities, tax or other laws, or rules, regulations or regulatory
interpretations thereof, applicable to the Plan, the Plan shall be administered by the Board (or
Board Committee as designated by the Board), which shall have the sole authority to construe and
interpret the terms and provisions of the Plan. The Board (or its authorized delegate) shall
maintain records and disburse payments or shall cause such records to be maintained and payments
to be disbursed. The Board’s interpretations, determinations, regulations and calculations shall
be final and binding on all persons and parties concerned. The Board may adopt, amend and rescind
such rules and regulations as it deems necessary, desirable or appropriate in administering the
Plan, and the Board may act at a meeting, in a written action without meeting or by having actions
otherwise taken by a member of the Board pursuant to a delegation of duties from the Board. The
determination of the Board as to any disputed questions arising under the Plan, including questions
of construction and interpretation, shall be final, binding and conclusive upon all persons.
9. Amendment and Termination. The Plan may, at any time, be amended, modified or terminated
by the Board. No amendment, modification or termination shall, without the consent of a
Non-Employee Director, adversely affect such Non-Employee Director’s rights with respect to amounts
accrued under his or her deferral accounts.
10. Miscellaneous Provisions.
10.1 Nothing contained herein shall be construed as conferring upon a Non-Employee Director
the right to continue in such capacity.
10.2 The rights and obligations created hereunder shall be binding on a Non-Employee
Director’s heirs, executors and administrators and on the successors and assigns of the Company.
10.3 The provisions of the Plan shall be construed and applied under the laws of the State of
New York, without regard to its conflict of laws principles.
10.4 If any provision of the Plan shall be held invalid or unenforceable, such invalidity or
unenforceability shall not effect any other provisions hereof and the Plan shall be construed and
enforced as if such provisions had not been included.
10.5 The headings and captions herein are provided for convenience only, and shall not be
construed as part of the Plan, and shall not be employed in the construction of the Plan.
10.6 Any benefit payable to or for the benefit of a payee who is a minor, an incompetent
person, or is otherwise incapable of receipting therefor shall be deemed paid when paid to such
person’s guardian or to the party providing, or a reasonably appearing to provide, the care for
such person, and such payment shall fully discharge the Company, the Board and all other parties
with respect thereto.
10.7 The rights of a Non-Employee Director to the payment of amounts credited to his or her
deferral account shall not be assigned, transferred, pledged or encumbered or be subject in any
manner to alienation or anticipation. A Non-Employee Director may not borrow against amounts
credited to the Non-Employee Director’s account and such amounts shall not be subject in any manner
to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, change,
garnishment, execution or levy of any kind, whether voluntary or involuntary, prior to
distribution.
10.8 The terms of the Plan are intended to, and shall be interpreted and applied so as to,
comply in all respects with the provisions of Section 409A of the Code and its corresponding
regulations and related guidance to the extent it applies to the Plan. Notwithstanding any
provision of the Plan to the contrary, to the extent applicable, deferrals and distributions under
the Plan may only be made in a manner and upon an event permitted by Code Section 409A. To the
extent that any provision of the Plan would cause a conflict with the requirements of Code Section
409A or would cause the administration of the Plan to fail to satisfy the requirements of Code
Section 409A, such provision shall be deemed null and void to the extent permitted by applicable
law. Further, the Board shall have the authority to amend the Plan or take such other actions as
the Board determines is necessary to comply with the requirements of Code Section 409A and its
corresponding regulations and related guidance.