Document:

ex10_3.htm

    EXHIBIT 10.3

    
 

    EXECUTION
VERSION

    

    Surplus
Margin Guaranty

    

    

    GUARANTY (this
“Guaranty”),
dated as of June 16, 2009, made by FIRSTENERGY NUCLEAR GENERATION CORP., a
corporation organized and existing under the laws of the State of Ohio (the
“Guarantor”),
in favor of THE CLEVELAND ELECTRIC ILLUMINATING COMPANY, THE TOLEDO EDISON
COMPANY and OHIO EDISON COMPANY, corporations organized and existing under the
laws of the State of Ohio (the “Guaranteed
Parties”).  Terms not defined herein take on the meaning given
to them in the Master SSO Supply Agreements by and between the Guaranteed
Parties and each of the suppliers listed on Appendix A thereto, under which
FIRSTENERGY SOLUTIONS CORP., a corporation organized and existing under the laws
of the State of Ohio and the parent of the Guarantor, is an SSO Supplier (the
“SSO
Supplier”), relating to tranches referenced in Schedule 1 hereto (the
“Agreements”).

    

    PRELIMINARY
STATEMENTS

    

    WHEREAS, the SSO
Supplier has entered into or been assigned the Agreements with the Guaranteed
Parties pursuant to which it is obligated to post Surplus Margin;

    

    WHEREAS, the
Agreements provide that the SSO Supplier may satisfy such Surplus Margin
obligations through the delivery of First Mortgage Bonds by a Guarantor;
and

    

    WHEREAS, the SSO
Supplier and the Guarantor, as a wholly owned subsidiary of the SSO Supplier and
the owner of generating assets committed, in part, to the supply of a portion of
generation service under the Agreements, desire to deliver First Mortgage Bonds
of the Guarantor to the Guaranteed Parties in satisfaction of such Surplus
Margin obligations;

    

    NOW, THEREFORE, in
consideration of the execution and delivery by the SSO Supplier and the
Guaranteed Parties of the Agreements, which the Guarantor hereby agrees shall
benefit it and which the Guarantor acknowledges have been made in part in
reliance upon the availability and execution and delivery of this Guaranty, the
Guarantor hereby agrees as follows:

    

    1    (a)    The Guarantor hereby
irrevocably and unconditionally guarantees pursuant to the terms and conditions
hereof the SSO Supplier’s obligations to deliver Surplus Margin from time to
time in accordance with the Agreements (the “Guaranteed
Obligations”).  

     

              (b)    Upon or any time
after the occurrence or deemed occurrence and during the continuation of an
Event of Default or an Early Termination Date under the Agreements (a “Demand
Event”), the Guaranteed Parties may exercise their rights under

     

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    clause (iv) of
Section 6.8 of the Agreements in respect of the Guaranteed Obligations by
written notice of demand for payment (a “Demand
Notice”) to the Guarantor stating (i) that a Demand Event has occurred
and is continuing and (ii) the amount of the payment for Surplus Margin to which
the Guaranteed Parties are entitled to as of the time of such Demand Notice as
calculated for such day pursuant to the provisions of the Agreements (the “Demand
Amount”).  Any Demand Notice shall also be delivered to the
Trustee (as defined below).

     

              (c)    The Guarantor’s
payment obligation in respect of any Demand Amount under this Guaranty shall be
evidenced by Guaranty Bonds (as defined below) delivered concurrently herewith
to, and registered in the name of FirstEnergy Service Company (“Service
Co”) as custodian for the Guaranteed Parties.  Upon receipt by
the Guarantor of a Demand Notice, the Guaranty Bonds shall be subject to
mandatory redemption at an aggregate redemption price equal to the lesser of (i)
the Demand Amount and (ii) the maximum aggregate principal amount of all
Guaranty Bonds then outstanding.  Notwithstanding the foregoing, the
redemption price shall be reduced to the extent of the prior payment of Surplus
Margin owing from any other source available to the Guaranteed
Parties.  

     

              (d)    “Guaranty
Bonds” means First Mortgage Bonds of a series issued under the
Guarantor’s Open-End Mortgage,
General Mortgage Indenture and Deed of Trust, dated as of June 1, 2009 (as
amended and supplemented from time to time, the “Indenture”), to The Bank of New York Mellon
Trust Company, N.A, as trustee (the “Trustee”), which Guaranty Bonds
shall be substantially in the form attached hereto as Exhibit A.  Each
Guaranty Bond delivered pursuant to this Guaranty from time to time by the
Guarantor shall be in a maximum principal amount of not less than $250 million;
provided, however, that the initial Guaranty Bond delivered pursuant to this
Guaranty shall be in a maximum principal amount of no less than $500
million.

     

              (e)    In the event the principal of
the Guaranty Bonds are
declared or may become due before the maturity thereof upon the happening of an
“Event of Default” as therein defined, the aggregate amount due and payable in
respect of the Guaranty
Bonds shall be the lesser of (a) the aggregate maximum principal amount
of Guaranty Bonds then
outstanding and (b) the amount of the payment for Surplus Margin to
which the Guaranteed Parties otherwise would be entitled had a Demand Event
occurred on and as of such date of such declaration or acceleration (the
“Default
Amount”). Upon
notice to the Guaranteed Parties of any such declaration or acceleration, the
Guaranteed Parties shall promptly provide the Company and the Trustee with a
calculation of such Default Amount.

     

        2.   Subject to the requirements
in paragraph 1 above as to the delivery and receipt of a Demand Notice and to
the provisions of Section 6.7(b) of the Agreements, the Guarantor hereby waives
diligence, acceleration, notice of acceptance of this Guaranty and notice of any
liability to which it may apply, and waives presentment and all demands
whatsoever except as noted herein, notice of protest, notice of dishonor or
nonpayment of any such liability, suit or taking of other action by any
Guaranteed Parties 

     

     

    
      
        
        

      

      
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    against, and any
other notice to, any party liable thereon (including the Guarantor or any other
guarantor), filing of claims with a court in the event of the insolvency or
bankruptcy of the SSO Supplier, and any right to require a proceeding first
against the SSO Supplier. This Guaranty is a guarantee of payment and not of
collection.

     

           
3.   Subject to
the obligations of the Guaranteed Parties to return First Mortgage Bonds,
including the Guaranty Bonds, in accordance with the provisions of Section
6.7(b) of the Agreements, the Guaranteed Parties may, at any time and from time
to time, without notice to or consent of the Guarantor, without incurring
responsibility to the Guarantor and without impairing or releasing the
obligations of the Guarantor hereunder, upon or without any terms or conditions:
(i) take or refrain from taking any and all actions with respect to the
Guaranteed Obligations, any document or any person (including the SSO Supplier)
that the Guaranteed Parties determine in their sole discretion to be necessary
or appropriate; (ii) take or refrain from taking any action of any kind in
respect of any security for any Guaranteed Obligations or liability of the SSO
Supplier to the Guaranteed Parties; or (iii) compromise or subordinate any
Guaranteed Obligations or liability of the SSO Supplier to the Guaranteed
Parties including any security therefore.  Notwithstanding the
provisions of Section 1(d) above, if at any time the amount of Surplus Margin
falls below $250 million, the Guarantor may request that the Guaranteed Parties
consent to the return of an appropriate portion of the then remaining Guaranty
Bond, such consent not be unreasonably withheld.  Any Guaranty Bonds
to be returned pursuant to the foregoing or pursuant to Section 6.7(b) shall be
delivered to the Trustee for cancellation or, as the case may be, exchange for a
new Guaranty Bond in a lower principal amount, provided however, that the last
proviso in Section 6.7(b) shall continue in full force and effect at all times
during the term of the Agreements.

     

           
4.   Subject to
the terms and conditions hereof and to the provisions of Section 6.7(b) of the
Agreements, the obligations of the Guarantor under this Guaranty are absolute
and unconditional and, without limiting the generality of the foregoing, shall
not be released, discharged or otherwise affected by: (i) any extension,
renewal, settlement, compromise, waiver, consent, discharge or release by the
SSO Supplier concerning any provision of the Agreements in respect of any
Guaranteed Obligations of the SSO Supplier; (ii) the rendering of any judgment
against the SSO Supplier or any action to enforce the same; (iii) the existence,
or extent of, any release, exchange, surrender, non-perfection or invalidity of
any direct or indirect security for any of the Guaranteed Obligations; (iv) any
modification, amendment, waiver, extension of or supplement to any of the
Agreements or the Guaranteed Obligations agreed to from time to time by the SSO
Supplier and the Guaranteed Parties; (v) any change in the corporate existence
(including its constitution, laws, rules, regulations or powers), structure or
ownership of the SSO Supplier or the Guarantor, or any insolvency, bankruptcy,
reorganization or other similar proceedings affecting the SSO Supplier or its
assets, the Guarantor or any other guarantor of any of the Guaranteed
Obligations; (vi) the existence of any claim, set-off or other rights which the
Guarantor may have at any time against the SSO Supplier, the Guaranteed Parties
or any other corporation or person, whether in connection herewith or in
connection with any unrelated transaction; provided that nothing herein

     

     

    
      
        
        

      

      
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    shall prevent the
assertion of any such claim by separate suit or compulsory counterclaim; (vii)
the invalidity, irregularity or unenforceability in whole or in part of the
Agreements or any Guaranteed Obligations or any instrument evidencing any
Guaranteed Obligations or the absence of any action to enforce the same, or any
provision of applicable law or regulation purporting to prohibit payment by the
SSO Supplier of amounts to be paid by it under the Agreements or any of the
Guaranteed Obligations; and (viii) except for a failure to comply with any
applicable statute of limitations, any other act or omission to act or delay of
any kind of the SSO Supplier, any other guarantor, the Guaranteed Parties or any
other corporation or person or any other event, occurrence or circumstance
whatsoever which might, but for the provisions of this paragraph, constitute a
legal or equitable discharge of the Guarantor’s obligations
hereunder.

     

           
5.   The
Guarantor hereby irrevocably waives (a) any right of reimbursement or
contribution, and (b) any right of salvage against the SSO Supplier or any
collateral security or guaranty or right of offset held by the Guaranteed
Parties therefor.

    

    6.   The Guarantor will not
exercise any rights, which it may acquire by way of subrogation until all
Guaranteed Obligations to the Guaranteed Parties pursuant to the Agreements have
been paid in full.

    

    7.   Subject to the terms and
conditions hereof, this Guaranty is a continuing one and all liabilities to
which it applies or may apply under the terms here of shall be conclusively
presumed to have been created in reliance hereon.  Except for a
failure to comply with any applicable statute of limitations, no failure or
delay on the part of the Guaranteed Parties in exercising any right, power or
privilege hereunder, and no course of dealing between the Guarantor and the
Guaranteed Parties, shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, power or
privilege.  The rights, powers and remedies herein expressly provided
are cumulative and not exclusive of any rights, powers or remedies, which the
Guaranteed Parties would otherwise have.  No notice to or demand on
the Guarantor in any case shall entitle the Guarantor to any other or further
notice of demand in similar or other circumstances or constitute a waiver of the
rights of the Guaranteed Parties to any other or further action in any
circumstances without notice or demand.

    

    8.   This Guaranty shall be
binding upon the Guarantor and upon its successors and assigns and shall inure
to the benefit of and be enforceable by the Guaranteed Parties and its
successors and assigns; provided, however, that the Guarantor may not assign or
transfer any of its rights or obligations hereunder without the prior written
consent of the Guaranteed Parties. The assignment rights of the Guaranteed
Parties will be in accordance with the terms of the underlying
Agreements.

    

    9.   Neither this Guaranty nor
any provision hereof may be changed, waived, discharged or terminated except
upon written agreement of the Guaranteed Parties and the Guarantor.

     

     

     

    
      
        
        

      

      
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    10.        
The Guarantor agrees that its liability as guarantor shall continue and remain
in full force and effect in the event that all or any part of any payment made
hereunder or any obligation or liability guaranteed hereunder is recovered (as a
fraudulent conveyance, preference or otherwise) rescinded or must otherwise be
reinstated or returned due to bankruptcy or insolvency laws or
otherwise.

    

    11.        
All notices and other communications hereunder shall be made at the addresses by
hand delivery, by the next day delivery service effective upon receipt or by
certified mail return receipt requested (effective upon scheduled weekday
delivery day) or telefacsimile (effective upon receipt of evidence, including
telefacsimile evidence, that telefacsimile was received):

    

    If
to the Guarantor:

    

    FirstEnergy Nuclear
Generation Corp.

    76
South Main Street, 17th
Floor 

    Akron, OH
44308

    Attention:  Randy
Scilla, Assistant Treasurer

    Telephone:
330-384-5202

    Facsimile:
330-384-3722

    scillar@firstenergycorp.com

    

    

    If
to the Trustee:

    

    The
Bank of New York Trust Company, N.A.

    Global Corporate
Trust

    1660 West 2nd Street,
Suite 830

    Cleveland, Ohio
44113

    Attention: Biagio S.
Impala, Vice President

    Telephone:
216-622-6516

    Facsimile:
216-621-1441

    biagio.impala@bnymellon.com

    

    

    If
to the Guaranteed Parties:

    

    The
Cleveland Electric Illuminating Company,

    The
Toledo Edison Company and

    Ohio Edison
Company

    c/o
FirstEnergy Corp.

    76
South Main Street

    18th Floor Akron, OH 44308

    Attention: Richard
R. Grigg, President

    Telephone:
330-384-5838

     

     

     

    
      
        
        

      

      
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    Facsimile:
330-384-5669

    rgrigg@firstenergycorp.com

    Thomas R. Sims,
Senior Business Analyst

    Telephone:
330-384-3808

    Facsimile:
330-255-1662

    simst@firstenergycorp.com

    

    

    12.        
If claim is ever made upon the Guaranteed Parties for repayment or recovery of
any amount or amounts received in payment or on account of any of the Guaranteed
Obligations and the Guaranteed Parties repay all or part of such amount by
reason of (a) any judgment, decree or order of any court or administrative body
having jurisdiction over such payee or any of its property, or (b) any
settlement or compromise of any such claim effected by such payee with any such
claimant (including the Guarantor), then and in such event the Guarantor agrees
that any such judgment, decree, order, settlement or compromise shall be binding
upon it, notwithstanding any revocation hereof or the cancellation of the
Agreements or other instrument evidencing any liability of the Guarantor, and
the Guarantor shall be and remain liable to the Guaranteed Parties hereunder for
the amount so repaid or recovered to the same extent as if such amount had never
originally been received by any such payee.

    

    13.        
The Guarantor hereby certifies that it satisfies the Minimum Rating by virtue of
the fact that its senior unsecured debt securities (in the form of outstanding
pollution control bonds for which it is the primary obligor and which are
guaranteed by the SSO Supplier) have heretofore been rated no lower than the
Minimum Rating by S&P and Moody’s.

    

    14.        
This Guaranty shall remain in full force and effect until all Guaranteed
Obligations have been fully and finally performed, at which point it will
expire. The Guarantor may terminate this Guaranty upon thirty (30) days prior
written notice to the Guaranteed Parties which termination shall be effective
only upon receipt by the Guaranteed Parties of alternative means of security or
credit support for Surplus Margin, as specified in the Agreements and in a form
reasonably acceptable to the Guaranteed Parties; provided, however, that nothing
herein shall be construed to affect in any way the obligations of the Guaranteed
Parties to return First Mortgage Bonds, including the Guaranty Bonds, in
accordance with the provisions of Section 6.7(b) of the
Agreements.  Upon the effectiveness of any such expiration or
termination, the Guarantor shall have no further liability under this Guaranty,
except with respect to the Guaranteed Obligations entered into prior to the time
the expiration or termination is effective, which Guaranteed Obligations shall
remain guaranteed pursuant to the terms of this Guaranty until finally and fully
performed.

    

    15.        
The Guarantor represents and warrants that: (i) it is duly organized and validly
existing under the laws of the State of Ohio and has the power and authority to
execute, deliver, and perform this Guaranty; (ii) no authorization, approval,
consent or order of, or registration or filing with, any court or other
governmental body having 

     

     

     

    
      
        
        

      

      
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      jurisdiction over
the Guarantor is required on the part of the Guarantor for the execution,
delivery and performance of this Guaranty except for those already made or
obtained; (iii) this Guaranty constitutes a valid and legally binding agreement
of the Guarantor, and is enforceable against the Guarantor, except as the
enforceability of this Guaranty may be limited by the effect of any applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditor’s rights generally and by general principles of equity; and (iv) the
execution, delivery and performance of this Guaranty by the Guarantor have been
and remain duly authorized by all necessary corporate or comparable action and
do not contravene any provision of its Articles of Incorporation or Code of
Regulations or any law, regulation or contractual restriction binding on it or
its assets.

    

    

    16.        
This Guaranty and the rights and obligations of the SSO Supplier and the
Guarantor hereunder shall be construed in accordance with and governed by the
laws of the State of Ohio. The Guarantor and Guaranteed Parties jointly and
severally agree to the exclusive jurisdiction of State and federal courts
located in the State of Ohio over any disputes arising or relating to this
Guaranty and waive any objections to venue or inconvenient forum. The Guarantor
and Guaranteed Parties each hereby irrevocably waive any and all rights to trial
by jury with respect to any legal proceeding arising out of or relating to this
Guaranty.

    

    17.        
This writing is the complete and exclusive statement of the terms of this
Guaranty and supersedes all prior oral or written representations,
understandings, and agreements between the Guaranteed Parties and the Guarantor
with respect to subject matter hereof. The Guaranteed Parties and the Guarantor
agree that there are no conditions to the full effectiveness of this
Guaranty.

    

    18.        
Every provision of this Guaranty is intended to be severable. If any term or
provision hereof is declared to be illegal or invalid for any reason whatsoever
by a court of competent jurisdiction, such illegality or invalidity shall not
affect the balance of the terms and provisions hereof, which terms and
provisions shall remain binding and enforceable. This Guaranty may be executed
in any number of counterparts, each of which shall be an original, but all of
which together shall constitute one instrument.

    

    19.        
No trustee or shareholder of the Guarantor shall be held to any liability
whatsoever for any obligation under this Guaranty, and this Guaranty shall not
be enforceable against any such trustee in their or his or her individual
capacities or capacity. This Guaranty shall be enforceable against the trustees
of the Guarantor only as such, and every person, firm, association, trust or
corporation having any claim or demand arising under this Guaranty and relating
to the Guarantor, its shareholders or trustees shall look solely to the trust
estate of the Guarantor for the payment or satisfaction thereof.

    

    20.        
Notwithstanding anything to the contrary in the Agreements, by their acceptance
of this Guaranty, the Guaranteed Parties hereby (i) accept the Guarantor as a
“Guarantor” of the SSO Supplier for purposes of posting First Mortgage Bonds to
cover 

     

     

     

    
      
        
        

      

      
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      Surplus
Margin obligations of the SSO Supplier, (ii) agree that the Guarantee Bonds
conform to the requirements set forth in Appendix F to each of the Agreements
and together with this Guaranty are satisfactory in form, amount and substance
and (iii) agree that this Guaranty is limited to a guaranty of such Surplus
Margin in accordance with its terms.

    

    

    

    [Signature
Page Follows]

    
      
         

      

      
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    IN
WITNESS WHEREOF, the Guarantor has caused this Guaranty to be executed,
delivered and effective as of the date first above written.

    

     

    
      
        
          
            
              	
                      FIRSTENERGY
      NUCLEAR

                      GENERATION
      CORP

                       

                      .

                    
	
                      By:

                    	
                      /s/ Randy
      Scilla

                    
	 	
                      Name: 
      Randy Scilla

                      Title:     
      Assistant
Treasurer

                    

            

          

        

      

    

     

     

    Accepted and Agreed
to as of the

    date set forth
above:

    

    THE
CLEVELAND ELECTRIC ILLUMINATING COMPANY

    

    

    By: /s/ Richard R.
Grigg

    
      	 	
              Name:  Richard
      R. Grigg

            

    

    
      	
               
      

            	
              Title:    President

            

    

    

    THE
TOLEDO EDISON COMPANY

    

    

    By: /s/ Richard R.
Grigg

    
      	
               
      

            	
              Name:  Richard
      R. Grigg

            

    

    
      	
               
      

            	
              Title:    President

            

    

    

    OHIO EDISON
COMPANY

    

    

    By: /s/ Richard R.
Grigg

    
      	
               
      

            	
              Name:  Richard
      R. Grigg

            

    

    
      	
               
      

            	
              Title:    President

            

    

    

    
      
        
          Signature
page to Surplus Margin Guaranty

        

         

      

      
         

        
          

        

      

      
         

      

    

    Schedule
1

     

    

     

    
      
        
          
            
              
                
                  
                    
                      
                        
                          	
                                  FirstEnergy
      Solutions Corp. Tranches

                                   

                                
	
                                  51 tranches
      per Master SSO

                                
	
                                  5 tranches
      assigned by Sempra Energy Trading

                                
	
                                  6 tranches
      assigned by JP Morgan Ventures Energy Corp.

                                
	
                                       62 Total
      Tranches

                                

                        

                      

                    

                  

                

              

            

          

        

      

    

    

     

    
      
         

      

      
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    Exhibit
A

     

    

     

    Form
of Guaranty Bond

     

    

     

    [FORM OF FIRST MORTGAGE BOND
OF GUARANTEE SERIES B]

     

    

    This Bond is not
transferable except (i) to a successor to FirstEnergy Service Company, as
Custodian, under the Custodian Agreement referred to herein pursuant to which it
acts on behalf of The Cleveland Electric Illuminating Company, The Toledo Edison
Company and Ohio Edison Company, as Guaranteed Parties under the Guaranty
Agreement, of the Company, as Guarantor, as referred to herein, (ii) in
connection with the exercise of the rights and remedies of the holder hereof
consequent upon an “Event of
Default” or an “Early Termination Date” as defined in the Agreements
referred to in the Guaranty Agreement
or an “Event of Default” as defined in the Indenture or (iii) as may be
necessary to comply with a final order of a court of competent jurisdiction in
connection with any bankruptcy or reorganization proceeding of the
Company.

    

    FIRSTENERGY
NUCLEAR GENERATION CORP.

     

    First Mortgage Bond,
Guarantee Series B of 2009 due 2011

     

    Due
May 31, 2011

     

    Maximum
Principal

     

    Amount:
$[_____________________]                                                                                      No. R-__

     

    

     

    FIRSTENERGY NUCLEAR GENERATION
CORP., a corporation of the State of Ohio (herein, together with its
successors and assigns, the “Company”),
for value received promises to pay to FirstEnergy Service Company, a corporation
of the State of Ohio (“FirstEnergy
Service”) as Custodian, under the Custodian Agreement (as defined below),
pursuant to which it acts on behalf of The Cleveland Electric Illuminating
Company, The Toledo Edison Company and Ohio Edison Company, as Guaranteed
Parties under the Company’s Guaranty Agreement (the “Guaranty
Agreement”), or registered assigns, on May 31, 2011, the principal sum
equal to the lesser of (a) the Demand Amount (as defined in the Guaranty
Agreement), if any, due and owing on such date and (b) the maximum principal
amount set forth above.  Interest on the Bonds of this series shall
only be payable in the case of any default by the Company in the payment of the
principal due on any Bonds of this series, until the Company’s obligation with
respect to the payment of such principal shall be discharged as provided in the
Indenture (as 

     

     

    
      
        
        

      

      
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      hereinafter
defined), and shall accrue from the date of such default until payment at a
default rate of 8.0% per annum.  The interest on each
Bond of this series so payable shall, subject to the exceptions provided in
Section 3.07 of the Indenture, be paid to the person in whose name such Bond is
registered on the date of such payment.  The principal of, and the
interest on, this Bond shall be payable at the office or agency of the Company
in the City of Cleveland, State of Ohio in any coin or currency of the United
States of America which at the time of payment is legal tender for the payment
of public and private debts.

    

     

    This Bond is one of
an issue of Bonds of the Company known as its First Mortgage Bonds, issued and
to be issued in one or more series under and secured by an Open-End Mortgage,
General Mortgage Indenture and Deed of Trust, dated as of June 1, 2009, duly
executed by the Company to The Bank of New York Mellon Trust Company, N.A., a
national banking association organized and existing under the laws of the United
States of America, as Trustee (the “Trustee”),
and indentures supplemental thereto, heretofore or hereafter executed, including
the First Supplemental Indenture dated as of June 15, 2009 (as amended,
supplemented, modified or restated, the “Supplemental
Indenture”), to
which Open-End Mortgage, General Mortgage Indenture and Deed of Trust and all
indentures supplemental thereto (collectively referred to as the “Indenture”)
reference is hereby made for a description of the property mortgaged and
pledged, the nature and extent of the security, the terms and conditions upon
which such Bonds are, and are to be, issued and secured, and the rights of the
owners of such Bonds and the Trustee in respect of such security.  As
provided in the Indenture, such Bonds may be in various principal sums, are
issuable in series, may mature at different times, may bear interest at
different rates and may otherwise vary as therein provided; and this Bond is one
Bond of a series entitled “First Mortgage Bonds, Guarantee Series B of 2009 due
2011,” created by the Supplemental Indenture, as provided for in the Indenture,
and authorized for issuance in an aggregate principal amount of up to
$500,000,000.

     

    Upon receipt of a
Demand Notice (as defined in the Guaranty Agreement) by the Company and the
Trustee from an authorized representative of the holder hereof at any time prior
to maturity, the Bonds of this series shall be redeemed by the Company in whole
on the third Business Day following receipt of such notice at a redemption price
equal to the lesser of (a) the Demand Amount specified in such Demand Notice and
(b) 100% of the aggregate maximum principal amount of Bonds of this series then
outstanding.  Any such redemption shall become null and void for all
purposes under the Indenture upon receipt by the Company and the Trustee of
written notice from an authorized representative of the holder hereof of the
rescission of the aforesaid Demand Notice prior to the redemption date, and
thereupon no redemption of the Bonds of this series and no payment in respect
thereof as specified in the Demand Notice, shall be effected or
required.  But no such rescission shall extend to any subsequent
Demand Notice from an authorized representative of the holder hereof or impair
any right consequent on any such subsequent Demand Notice.

     

    The principal of
this Bond may be declared or may become due before the maturity hereof, on the
conditions, in the manner and at the times set forth in the Indenture, upon the
happening of an Event of Default as therein defined.  In such event,

     

     

    
      
        
        

      

      
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      the
aggregate amount due and payable in respect of the Bonds of this series shall be
the Default Amount (as defined in the Guaranty Agreement) as of such
date.  Upon notice to the holder hereof of any such declaration or
acceleration, the holder shall provide the Trustee with a calculation of such
Default Amount.

    

    

    No recourse shall be
had for the payment of the principal of or premium, or interest if any, on this
Bond, or any part hereof, or for any claim based hereon or otherwise in respect
hereof, or of the indebtedness represented hereby, or upon any obligation,
covenant or agreement under the Indenture, against any incorporator,
stockholder, officer or director, as such, past, present or future of the
Company or of any predecessor or successor corporation (either directly or
through the Company or a predecessor or successor corporation), whether by
virtue of any Constitutional provision, statute or rule of law, or by the
enforcement of any assessment or penalty or otherwise, all such liability of
incorporators, stockholders, officers and directors being released by the
registered owner hereof by the acceptance of this Bond and being likewise waived
and released by the terms of the Indenture.

    

    This Bond is
nontransferable except to (i) effect transfer to any successor to FirstEnergy
Service, as Custodian, under the Custodian Agreement, dated as of June 16, 2009,
among FirstEnergy Service and the Guaranteed Parties, relating to the Guaranty
Agreement (the “Custodian
Agreement”), (ii) in connection with the exercise of the rights and
remedies of the holder hereof consequent upon an “Event of Default” or an “Early
Termination Date” as defined in the Agreements (as defined in the
Guaranty Agreement) or an “Event of Default” as defined in the Indenture or
(iii) as may be necessary to comply with a final order of a court of competent
jurisdiction in connection with any bankruptcy or reorganization proceeding of
the Company.  But this Bond is exchangeable by the registered holder
hereof, in person or by attorney duly authorized, at the Corporate Trust Office
of the Trustee, any such permitted transfer or exchange to be made in the manner
and upon the conditions prescribed in the Indenture, upon the surrender and
cancellation of this Bond and the payment of any applicable taxes and fees
required by law, and upon any such transfer or exchange a new registered Bond or
Bonds of the same series and tenor, will be issued to the authorized transferee,
or the registered holder, as the case may be. The Company and the Trustee may
deem and treat the person in whose name this Bond is registered as the absolute
owner for the purpose of
receiving payment of or on account of the principal and interest due hereon and
for all other purposes.

    

    This Bond shall not
be valid until authenticated by the manual signature of the Trustee, or a
successor Trustee or Authenticating Agent appointed pursuant to the
Indenture.

    

    

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

    IN WITNESS WHEREOF,
the Company has caused this Bond to be executed in its name by the manual or
facsimile signature of an Authorized Executive Officer and attested by the
manual or facsimile signature of another Authorized Executive
Officer.

    

     

    
      Dated:
_____________

       

       

      
        
          
            
              
                
                  
                    	
                            FIRSTENERGY
      NUCLEAR

                            GENERATION
      CORP.

                          
	 	 
	 
    	 
    
	
                            By:

                          	 
    
	 	Name:
	 
    	
                            Title:

                          

                  

                

              

            

          

        

      

       

       

      
        
          
            
              
                
                  
                    	
                            Attest:

                          
	 
    	 
    
	
                             

                          
	Name:
	Title:

                  

                

              

            

          

        

      

       

      
 

      
        [FORM OF TRUSTEE’S
AUTHENTICATION CERTIFICATE]

         

        

         

        TRUSTEE’S
AUTHENTICATION CERTIFICATE

         

        

         

        This is one of the
Bonds of the series designated therein referred to in the within-mentioned
Indenture.

         

      

      
        
          
            
              
                	
                        THE BANK OF
      NEW YORK MELLON 

                        TRUST
      COMPANY, N.A., as
      Trustee

                      
	 	 
	 
    	 
    
	
                        By:

                      	 
    
	 
    	
                        Authorized
      Signatoryexh4-1.htm

    
      
         

      

      
         

        
          

        

      

      
         

        
          Execution
Version

        

      

    

    Exhibit
4.1

    

    Advance
Display Technologies, Inc.

    

     

    

     

    WARRANT
FOR THE PURCHASE OF SHARES OF THE SERIES D CONVERTIBLE PREFERRED
STOCK

     

     

    No. 1 Shares
810,564                                                                                                                                June
15, 2009

     

     

    

     

    FOR VALUE
RECEIVED, Advance Display Technologies, Inc. (the “Company”), a Colorado
corporation, hereby certifies that DeGeorge Holdings Three LLC, a Delaware
limited liability company, or its successors, any subsequent transferees or
assignees are entitled to purchase from the Company, at any time or from time to
time prior to 5:00 P.M., New York City time then current, on June 15, 2013,
810,564 fully paid and non-assessable shares of the Series D Convertible
Preferred Stock of the Company at the purchase price of  $0.084 (eight
and four-tenths cents).  Any conversion of such stock is subject to
the terms set forth in the first two sentences of Section
2.  (Hereinafter, (i) said stock, together with any other equity
securities which may be issued by the Company with respect thereto or in
substitution therefor, is referred to as the “Series D Stock,” (ii) the shares
of the Series D Stock purchasable hereunder are referred to as the “Warrant
Shares,” (iii) the aggregate purchase price payable hereunder for the Warrant
Shares is referred to as the “Aggregate Warrant Price,” (iv) the price payable
hereunder for each of the shares of the Warrant Shares is referred to as the
“Per Share Warrant Price” and (v) this warrant and all warrants hereafter issued
in exchange or substitution for this warrant are referred to as
“Warrants.”)  The Aggregate Warrant Price is not subject to
adjustment.  The Per Share Warrant Price is subject to adjustment as
hereinafter provided; in the event of any such adjustment, the number of Warrant
Shares shall be adjusted by dividing the Aggregate Warrant Price by the Per
Share Warrant Price in effect immediately after such adjustment.

     

    1. Exercise of
Warrant.

     

    (a) This
Warrant may be exercised, in whole at any time or in part from time to time
prior to 5:00 P.M., New York City time then current, on June 15, 2013 (the
“Expiration Date”), by the holder of this Warrant (the “Holder”) by the
surrender of this Warrant (with the subscription form at the end hereof duly
executed) at the address set forth in Subsection 10(a) hereof, together with
proper payment of the Aggregate Warrant Price, or the proportionate part thereof
if this Warrant is exercised in part.  Payment for the Warrant Shares
shall be made by any method reasonably acceptable to the Company.  If
this Warrant is exercised in part, this Warrant must be exercised for a number
of whole shares of the Series D Stock, and the Holder is entitled to receive a
new Warrant covering the number of Warrant Shares in respect of which this
Warrant has not been exercised and setting forth the proportionate part of the
Aggregate Warrant Price applicable to such Warrant Shares.  Upon such
exercise and surrender of this Warrant, the Company will (i) issue a certificate
or certificates in the name of the Holder for the largest number of whole shares
of the Series D Stock to which the Holder shall be entitled and, if
this

     

    
      
        
           

        

         

      

      
         

        
          

        

      

      
         

      

    

    Warrant
is exercised in whole, in lieu of any fractional share of the Series D Stock to
which the Holder shall be entitled, pay cash equal to the fair market value of
such fractional share (reasonably determined by the Board of Directors of the
Company acting in good faith and reasonably acceptable to the Holder) and (ii)
deliver the other securities and properties receivable upon the exercise of this
Warrant, or the proportionate part thereof if this Warrant is exercised in part,
pursuant to the provisions of this Warrant.

     

    (b) In lieu
of exercising this Warrant in the manner set forth in paragraph 1(a) above, this
Warrant may be exercised in whole at any time or in part from time to time on or
prior to the Expiration Date by surrender of the Warrant without payment of any
other consideration, commission or remuneration, together with the cashless
exercise subscription form at the end hereof, duly executed.  The
number of shares to be issued in exchange for the Warrant shall be the product
of (x) the excess of the fair market value (reasonably determined by the Board
of Directors of the Company acting in good faith and reasonably acceptable to
the Holder) of the Series D Stock on the date of surrender of the Warrant and
the exercise subscription form over the Per Share Warrant Price and (y) the
number of shares subject to issuance upon exercise of the Warrant, divided by
such value of the Series D Stock on such date.  Upon such exercise and
surrender of this Warrant, the Company will (i) issue a certificate or
certificates in the name of the Holder for the largest number of whole shares of
the Series D Stock to which the Holder shall be entitled and, in lieu of any
fractional share of the Series D Stock to which the Holder shall be entitled,
pay cash equal to the fair market value of such fractional share (reasonably
determined by the Board of Directors of the Company acting in good faith and
reasonably acceptable to the Holder), and (ii) deliver the other securities and
properties receivable upon the exercise of this Warrant, pursuant to the
provisions of this Warrant.

     

    2. Reservation of Warrant
Shares.  Even though the Warrant Shares are by their terms
convertible into the Company's common stock, Holder acknowledges that the
Warrant Shares are not presently so convertible because there is not a
sufficient number of authorized but unissued shares of the Company's common
stock .  Holder further understands that Company has agreed to submit
to Company’s shareholders a resolution to increase the number of authorized
shares of the Company's common stock and to reserve a portion of the newly
authorized shares for the conversion of the Warrant Shares into the Company's
common stock. Company agrees to use its best efforts to cause such shares of its
common stock to be authorized by the shareholders and available for issuance
upon conversion of the Warrant Shares.  Holder agrees that the Warrant
Shares shall not be convertible into the Company's common stock until such time
that there are sufficient shares of the Company's common stock available for
issuance.  The Company agrees that, thereafter but prior to the
expiration of this Warrant, the Company will at all times have authorized and in
reserve, and will keep available, solely for issuance or delivery upon the
exercise of this Warrant, such number of shares of the Series D Stock (and
shares of any class or series into which the Series D Stock is convertible) and
such amount of other securities and properties as from time to time shall be
deliverable to the Holder upon the exercise of this Warrant, free and clear of
all restrictions on sale or transfer (except such as may be imposed under
applicable federal and state securities laws) and free and clear of all
preemptive rights and all other rights to purchase securities of the
Company.

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    3. Protection
Against Dilution.

     

    (a) If, at
any time or from time to time after the date of this Warrant, the Company shall
distribute to the holders of its outstanding Series D Stock (or shares of any
class or series into which the Series D Stock is convertible), (i) securities,
other than shares of Series D Stock, or (ii) property, other than cash not out
of earned surplus, without payment therefor, with respect to Series D Stock (or
shares of any class or series into which the Series D Stock is convertible),
then, and in each such case, the Holder, upon the exercise of this Warrant,
shall be entitled to receive the securities and property which the Holder would
hold on the date of such exercise if, on the date of this Warrant, the Holder
had been the holder of record of the number of shares of the Series D Stock (or
shares of any class or series into which the Series D Stock is convertible)
subscribed for upon such exercise and, during the period from the date of this
Warrant to and including the date of such exercise, had retained such shares and
the securities and properties receivable by the Holder during such period.
Notice of each such distribution shall be forthwith mailed to the
Holder.

     

    (b) If, at
any time or from time to time after the date of this Warrant, the Company shall
(i) pay a dividend or make a distribution on the Series D Stock (or shares of
any class or series into which the Series D Stock is convertible) in Series D
Stock, other capital stock or other securities, (ii) subdivide its outstanding
shares of Series D Stock into a greater number of shares, (iii) combine its
outstanding shares of Series D Stock into a smaller number of shares or (iv)
issue by reclassification of its Series D Stock any shares of capital stock of
the Company (or any shares of any class or series into which the Series D Stock
is convertible), the Per Share Warrant Price and Warrant Shares in effect
immediately prior to such action shall be adjusted so that the Holder of any
Warrant thereafter exercised shall be entitled to receive the number of shares
of Series D Stock or other capital stock or other securities of the Company
which he would have owned or been entitled to received immediately following the
happening of any of the events described above had such Warrant been exercised
immediately prior thereto.  An adjustment made pursuant to this (b)
shall become effective immediately after the record date in the case of a
dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or
reclassification.  If, as a result of an adjustment made pursuant to
this (b), the holder of any Warrant thereafter surrendered for exercise shall
become entitled to receive shares of two or more classes of capital stock or
shares of Series D Stock and other capital stock of the Company, the Board of
Directors (whose reasonable determination shall be conclusive and shall be
described in a written notice to the Holder of any Warrant promptly after such
adjustment) shall determine the allocation of the adjusted Per Share Warrant
Price between or among shares of such classes or capital stock or shares of
Series D Stock and other capital stock.

     

    (c) Except as
provided in 3(e), in case the Company shall hereafter issue or sell any shares
of Series D Stock (or any shares of any class or series into which the Series D
Stock is convertible) for a consideration per share less than the fair market
value in effect immediately prior to such issuance or sale, the Per Share
Warrant Price shall be adjusted as of the date of such issuance or sale so that
the same shall equal the price determined by dividing (i) the sum of (A) the
number of shares of Series D Stock outstanding immediately prior to such
issuance or sale multiplied by the Per Share Warrant Price plus (B) the
consideration received by

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    the
Company upon such issuance or sale by (ii) the total number of shares of Series
D Stock outstanding after such issuance or sale.

     

    (d) Except as
provided in 3(e), in case the Company shall hereafter issue or sell any rights,
options, warrants or securities convertible into Series D Stock entitling the
holders thereof to purchase the Series D Stock or to convert such securities
into Series D Stock at a price per share (determined by dividing (i) the total
amount, if any, received or receivable by the Company in consideration of the
issuance or sale of such rights, options, warrants or convertible securities
plus the total consideration, if any, payable to the Company upon exercise or
conversion thereof (the “Total Consideration”) by (ii) the number of additional
shares of Series D Stock issuable upon exercise or conversion of such
securities) less than the then fair market value in effect on the date of such
issuance or sale, the Per Share Warrant Price shall be adjusted as of the date
of such issuance or sale so that the same shall equal the price determined by
dividing (i) the sum of (A) the number of shares of Series D Stock outstanding
on the date of such issuance or sale multiplied by the Per Share Warrant Price
plus (B) the Total Consideration by (ii) the number of shares of Series D Stock
outstanding on the date of such issuance or sale plus the maximum number of
additional shares of Series D Stock issuable upon exercise or conversion of such
securities.

     

    (e) No
adjustment in the Per Share Warrant Price shall be required in the case of (i)
the issuance of shares of Series D Stock upon the exercise of options
outstanding as of the date hereof which may be granted under the Company’s
official stock option plan as in effect on the date hereof, or (ii) the issuance
of shares pursuant to the exercise of this Warrant.

     

    (f) In case
of any consolidation or merger to which the Company is a party other than a
merger or consolidation in which the Company is the continuing corporation, or
in case of any sale or conveyance to another entity of the property of the
Company as an entirety or substantially as an entirety, or in the case of any
statutory exchange of securities with another entity (including any exchange
effected in connection with a merger of any other corporation with the Company),
the Holder of this Warrant shall have the right thereafter to convert such
Warrant into the kind and amount of securities, cash or other property which he
would have owned or have been entitled to receive immediately after such
consolidation, merger, statutory exchange, sale or conveyance had this Warrant
been exercised immediately prior to the effective date of such consolidation,
merger, statutory exchange, sale or conveyance and in any such case, if
necessary, appropriate adjustment shall be made in the application of the
provisions set forth in this Section 3 with respect to the rights and interests
thereafter of the Holder of this Warrant to the end that the provisions set
forth in this Section 3 shall thereafter correspondingly be made applicable, as
nearly as may reasonably be, in relation to any shares of stock or other
securities or property thereafter deliverable on the exercise of this
Warrant.  The above provisions of this 3(f) shall similarly apply to
successive consolidations, mergers, statutory exchanges, sales or
conveyances.  Notice of any such consolidation, merger, statutory
exchange, sale or conveyance, and of said provisions so proposed to be made,
shall be mailed to the Holder not less than twenty (20) days prior to such
event.  A sale of all or substantially all of the assets of the
Company for a consideration consisting primarily of securities shall be deemed a
consolidation or merger for the foregoing purposes.

     

    
      
         

      

      
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    (g) No
adjustment in the Per Share Warrant Price shall be required unless such
adjustment would require an increase or decrease of at least $0.001 per share of
Series D Stock; provided, however, that any adjustments which by reason of this
(g) are not required to be made shall be carried forward and taken into account
in any subsequent adjustment; and provided further, however, that adjustments
shall be required and made in accordance with the provisions of this Section 3
(other than this (g)) not later than such time as may be required in order to
preserve the tax-free nature of a distribution to the Holder of this Warrant or
Series D Stock.  All calculations under this Section 3 shall be made
to the nearest cent or to the nearest 1/100th of a share, as the case may
be.  Anything in this Section 3 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Per Share Warrant
Price, in addition to those required by this Section 3, as it in its reasonable
discretion shall deem to be advisable in order that any stock dividend,
subdivision of shares or distribution of rights to purchase stock or securities
convertible or exchangeable for stock hereafter made by the Company to its
shareholders shall not be taxable.

     

    (h) Whenever
the Per Share Warrant Price is adjusted as provided in this Section 3 and upon
any modification of the rights of the Holder of this Warrant in accordance with
this Section 3, the Company shall, at its own expense, within ten (10) days of
such adjustment or modification, deliver to the holder of this Warrant a
certificate of the principal financial officer of the Company setting forth the
Per Share Warrant Price and the number of Warrant Shares after such adjustment
or the effect of such modification, a brief statement of the facts requiring
such adjustment or modification and the manner of computing the
same.

     

    (i) If the
Board of Directors of the Company shall declare any dividend or other
distribution in cash with respect to the Series D Stock (or any class or series
into which the Series D Stock is convertible), the Company shall mail notice
thereof to the Holder not less than twenty (20) days prior to the record date
fixed for determining shareholders entitled to participate in such dividend or
other distribution.

     

    4. Fully Paid Stock;
Taxes.  The Company agrees that the shares of the Series D
Stock represented by each and every certificate for Warrant Shares delivered on
the exercise of this Warrant in accordance with the terms hereof shall, at the
time of such delivery, be validly issued and outstanding, fully paid and
non-assessable and not subject to preemptive rights, or other contractual rights
to purchase securities of the Company, and the Company will take all such
actions as may be necessary to assure that the par value or stated value, if
any, per share of the Series D Stock is at all times equal to or less than the
then Per Share Warrant Price.  The Company further covenants and
agrees that it will pay, when due and payable, any and all federal and state
stamp, original issue or similar taxes which may be payable in respect of the
issue of any Warrant Share or certificate therefor.

     

    5. Registration Under
Securities Act of 1933.

     

    (a) The
Company agrees that if, at any time and from time to time during the period
ending on the Expiration Date, the Holder and/or the holders of any other
Warrants, Series D Stock and/or common stock issued or issuable upon conversion
of the Warrant Shares (such common stock, the “Registrable Securities”) who or
which shall hold not less than 50% of

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    the
Warrants, the Series D Stock and/or the Registrable Securities outstanding at
such time and not previously sold pursuant to this Section 5, request that the
Company file a registration statement under the Securities Act of 1933 (the
“Act”) covering all or any of the Registrable Securities, the Company will (i)
promptly notify the Holder and all other registered holders, if any, of other
Warrants, Series D Stock and/or Registrable Securities that such registration
statement will be filed and that the Registrable Securities which are then held,
and/or which may be acquired upon the exercise of Warrants and the conversion of
the Warrant Shares, by the Holder and such holders will be included in such
registration statement at the Holder’s and such holders’ request, (ii) cause
such registration statement to cover all Registrable Securities which the
Company has been so requested to include, (iii) use its best efforts to cause
such registration statement to become effective as soon as practicable and to
remain effective and current for a period not to exceed 9 months and (iv) take
all other action necessary under any federal or state law or regulation of any
governmental authority to permit all Registrable Securities which it has been so
requested to include in such registration statement to be sold or otherwise
disposed of and will maintain such compliance with each such federal and state
law and regulation of any governmental authority for that period.

     

    (b) The
Company agrees that if, at any time and from time to time, the Board of
Directors of the Company shall authorize the filing of a registration statement
(any such registration statement being sometimes hereinafter called a
“Subsequent Registration Statement”) under the Act (otherwise than pursuant to
5(a) hereof) in connection with the proposed offer of any of its securities by
it or any of its shareholders, the Company will (i) promptly notify the Holder
and all other registered holders, if any, of other Warrants, Series D Stock
and/or Registrable Securities that such Subsequent Registration Statement will
be filed and that the Registrable Securities which are then held, and/or which
may be acquired upon the exercise of the Warrants and the conversion of the
Warrant Shares, by the Holder and such holders will be included in such
Subsequent Registration Statement at the Holder’s and such holders’ request,
(ii) cause such Subsequent Registration Statement to cover all Registrable
Securities which the Company has been so requested to include, (iii) cause such
Subsequent Registration Statement to become effective as soon as practicable and
to remain effective and current for a period not to exceed and (iv) take all
other action necessary under any federal or state law or regulation of any
governmental authority to permit all Registrable Securities which it has been so
requested to include in such Subsequent Registration Statement to be sold or
otherwise disposed of and will maintain such compliance with each such federal
and state law and regulation of any governmental authority for that
period.

     

    (c) Whenever
the Company is required pursuant to the provisions of this Section 5 to include
Registrable Securities in a Subsequent Registration Statement, the Company shall
(i) furnish each holder of any such Registrable Securities and each underwriter
of such Registrable Securities with such copies of the prospectus, including the
preliminary prospectus, conforming to the Act (and such other documents as each
such holder or each such underwriter may reasonably request) in order to
facilitate the sale or distribution of the Registrable Securities, (ii) use its
best efforts to register or qualify such Registrable Securities under the blue
sky laws (to the extent applicable) of such jurisdiction or jurisdictions as the
holders of any such Registrable Securities and each underwriter of Registrable
Securities being sold by such holders shall reasonably request and (iii) take
such other actions as may be reasonably necessary or advisable to enable such
holders and such underwriters provided, however, that nothing

     

    
      
         

      

      
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    contained
in the paragraph (b) shall obligate the company to file or obtain an effective
date for the registration statement unless it shall otherwise choose to do so to
consummate the sale or distribution in such jurisdiction or jurisdictions in
which such holders shall have reasonably requested that the Registrable
Securities be sold provided, however, that nothing contained in this paragraph
(c) shall obligate the company to file or obtain an effective date for the
registration statement unless it shall otherwise choose to do so.

     

    (d) The
Company shall pay all expenses incurred in connection with any registration or
other action pursuant to the provisions of this Section, including the
attorneys’ fees and expenses of the holder(s) of the Registrable Securities
covered by such registration incurred in connection with such registration or
other action, other than underwriting discounts, commissions or applicable
transfer taxes relating to the Registrable Securities.

     

    6. Indemnification.

     

    (a) The
Company agrees to indemnify and hold harmless each selling holder of Registrable
Securities and each person who controls any such selling holder within the
meaning of Section 15 of the Act, and each and all of them, from and against any
and all losses, claims, damages, liabilities or actions, joint or several, to
which any selling holder of Registrable Securities or they or any of them may
become subject under the Act or otherwise and to reimburse the persons
indemnified as above for any legal or other expenses (including the cost of, and
for the personnel time spent in connection with, any investigation, testimony
and preparation) incurred by them in connection with any litigation or
threatened litigation, whether or not resulting in any liability, but only
insofar as such losses, claims, damages, liabilities or actions arise out of, or
are based upon, (i) any untrue statement or alleged untrue statement of a
material fact contained in any registration statement pursuant to which
Registrable Securities were registered under the Act (hereinafter called a
“Registration Statement”), any preliminary prospectus, the final prospectus or
any amendment or supplement thereto (or in any application or document filed in
connection therewith) or document executed by the Company based upon written
information furnished by or on behalf of the Company filed in any jurisdiction
in order to register or qualify the Registrable Securities under the securities
laws thereof or the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading, or
(ii) the employment by the Company of any device, scheme or artifice to defraud,
or the engaging by the Company in any act, practice or course of business which
operates or would operate as a fraud or deceit, or any conspiracy with respect
thereto, in which the Company shall participate, in connection with the issuance
and sale of any of the Registrable Securities; provided, however, that (i) the
indemnity agreement contained in this (a) shall not extend to any selling holder
of Registrable Securities in respect of any such losses, claims, damages,
liabilities or actions arising out of, or based upon, any such untrue statement
or alleged untrue statement, or any such omission or alleged omission, if such
statement or omission was based upon and made in conformity with information
furnished in writing to the Company by a selling holder of Registrable
Securities specifically for use in connection with the preparation of such
Registration Statement, any final prospectus, any preliminary prospectus or any
such amendment or supplement thereto.  The Company agrees to pay any
legal and other expenses for which it is liable under this (a) from time to time
within thirty (30) days after its receipt of a bill therefor.

     

    
      
         

      

      
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    (b) Each
selling holder of Registrable Securities, severally and not jointly, will
indemnify and hold harmless the Company, its directors, its officers who shall
have signed the Registration Statement and each person, if any, who controls the
Company within the meaning of Section 15 of the Act to the same extent as the
foregoing indemnity from the Company, but in each case to the extent, and only
to the extent, that any statement in or omission from or alleged omission from
such Registration Statement, any final prospectus, any preliminary prospectus or
any amendment or supplement thereto was made in reliance upon information
furnished in writing to the Company by such selling holder specifically for use
in connection with the preparation of the Registration Statement, any final
prospectus or the preliminary prospectus or any such amendment or supplement
thereto; provided, however, that the total obligation of any holder of
Registrable Securities to indemnify any and all such indemnified parties under
the provisions of this (b) shall be limited to the product of the number of
Registrable Securities being sold by the selling holder and the excess of the
market price of the Series D Stock on the date of the sale to the public of
these Registrable Securities over the Per Share Warrant Price.  Each
selling holder of Registrable Securities agrees to pay any legal and other
expenses for which it is liable under this (b) from time to time within thirty
(30) days after receipt of a bill therefor.

     

    (c) If any
action is brought against a person entitled to indemnification pursuant to the
foregoing 5 (a) or (b) (an “indemnified party”) in respect of which indemnity
may be sought against a person granting indemnification (an “indemnifying
party”) pursuant to such 5(a) or (b), such indemnified party shall promptly
notify such indemnifying party in writing of the commencement thereof; but the
omission to so notify the indemnifying party of any such action shall not
release the indemnifying party from any liability it may have to such
indemnified party in accordance with (a) or (b) of this Section 6.  In
case any such action is brought against an indemnified party and it notifies an
indemnifying party of the commencement thereof, the indemnifying party against
which a claim is to be made will be entitled to participate therein at its own
expense and, to the extent that it may wish, to assume at its own expense the
defense thereof, with counsel reasonably satisfactory to such indemnified party;
provided, however, that (i) if the defendants in any such action include both
the indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded based upon advice of counsel that there may be legal
defenses available to it and/or other indemnified parties which are different
from or additional to those available to the indemnifying party, the indemnified
party shall have the right to select separate counsel to assume such legal
defenses and otherwise to participate in the defense of such action on behalf of
such indemnified party or parties and (ii) in any event, the indemnified party
shall be entitled to have counsel chosen by such indemnified party participate
in, but not conduct, the defense at the expense of the indemnifying
party.  Upon receipt of notice from the indemnifying party to such
indemnified party of its election to so assume the defense of such action and
approval by the indemnified party of counsel, the indemnifying party will not be
liable to such indemnified party under this Section 6 for any legal or other
expenses subsequently incurred by such indemnified party in connection with the
defense thereof unless (i) the indemnified party shall have employed such
counsel in connection with the assumption of legal defenses in accordance with
provisos (i) or (ii) to the preceding sentence (it being understood, however,
that the indemnifying party shall not be liable for the expenses of more than
one separate counsel), (ii) the indemnifying party shall not have
employed

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

    counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party within a reasonable time after notice of commencement of the action or
(iii) the indemnifying party has authorized the employment of counsel for the
indemnified party at the expense of the indemnifying party.  An
indemnifying party shall not be liable for any settlement of any action or
proceeding effected without its written consent, which consent shall not be
unreasonably withheld.

     

    (d) In order
to provide for an equitable contribution in circumstances in which the indemnity
agreement provided for in (a) of this Section 6 is unavailable to a selling
holder of Registrable Securities in accordance with its terms, the Company and
the selling holder of Registrable Securities shall contribute to the aggregate
losses, claims, damages and liabilities, of the nature contemplated by said
indemnity agreement, incurred by the Company and the selling holder of
Registrable Securities, in such proportions as is appropriate to reflect the
relative benefits received by the Company and the selling holder of Registrable
Securities from any offering of the Registrable Securities; provided, however,
that if such allocation is not permitted by applicable law or if the indemnified
party failed to give the notice required under (c) of this Section 6, then the
relative fault of the Company and the selling holder of Registrable Securities
in connection with the statements or omissions which resulted in such losses,
claims, damages and liabilities and other relevant equitable considerations will
be considered together with such relative benefits and provided, however, that
the limitations in the proviso in (b) of this Section 6 shall apply in all
cases.

     

    (e) The
respective indemnity and contribution agreements by the Company and the selling
holder of Registrable Securities in (a), (b), (c) and (d) of this Section 6
shall remain operative and in full force and effect regardless of (i) any
investigation made by any selling holder of Registrable Securities or by or on
behalf of any person who controls such selling holder or by the Company or any
controlling person of the Company or any director or any officer of the Company,
(ii) payment for any of the Registrable Securities or (iii) any termination of
this Agreement, and shall survive the delivery of the Registrable Securities,
and any successor of the Company, or of any selling holder of Registrable
Securities, or of any person who controls the Company or any selling holder of
Registrable Securities, as the case may be, shall be entitled to the benefit of
such respective indemnity and contribution agreements.  The respective
indemnity and contribution agreements by the Company and the selling holder of
Registrable Securities contained in (a), (b), (c) and (d) of this Section 6
shall be in addition to any liability which the Company and the selling holder
of Registrable Securities may otherwise have.

     

    7. Transferability.

     

    (a) This
Warrant is fully transferable or assignable by the Holder.  The
Company may treat the registered holder of this Warrant as he or it appears on
the Company’s books at any time as the Holder for all purposes.  The
Company shall permit any holder of a Warrant or his duly authorized attorney,
upon written request during ordinary business hours, to inspect and copy or make
extracts from its books showing the registered holders of
Warrants.  All Warrants will be dated the same date as this
Warrant.

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    

    (b) By
acceptance hereof, the Holder represents and warrants that this Warrant is being
acquired, and all Warrant Shares to be purchased upon the exercise of this
Warrant will be acquired, by the Holder solely for the account of such Holder
and not with a view to the fractionalization and distribution thereof and will
not be sold or transferred except in accordance with the applicable provisions
of the Act and the rules and regulations of the Securities and Exchange
Commission promulgated thereunder, and the Holder agrees that neither this
Warrant nor any of the Warrant Shares may be sold or transferred except under
cover of a Registration Statement under the Act which is effective and current
with respect to such Warrant Shares or pursuant to an opinion, in form and
substance reasonably acceptable to the Company’s counsel, that registration
under the Act is not required in connection with such sale or
transfer.  Any Warrant Shares issued upon exercise of this Warrant
shall bear the following legend:

     

    “The
securities represented by this certificate have not been registered under the
Securities Act of 1933 and are restricted securities within the meaning thereof.
Such securities may not be sold or transferred except pursuant to a registration
statement under such Act which is effective and current with respect to such
securities or pursuant to an opinion of counsel reasonably satisfactory to the
issuer of such securities that such sale or transfer is exempt from the
registration requirements of such Act.”

     

    8. Loss, etc. of
Warrant.  Upon receipt of evidence satisfactory to the Company
of the loss, theft, destruction or mutilation of this Warrant, and of indemnity
reasonably satisfactory to the Company, if lost, stolen or destroyed, and upon
surrender and cancellation of this Warrant, if mutilated, and upon reimbursement
of the Company’s reasonable incidental expenses, the Company shall execute and
deliver to the Holder a new Warrant of like date, tenor and
denomination.

     

    9. Warrant Holder Not
Shareholders.  Except as otherwise provided herein, this
Warrant does not confer upon the Holder any right to vote or to consent to or
receive notice as a shareholder of the Company, as such, in respect of any
matters whatsoever, or any other rights or liabilities as a shareholder, prior
to the exercise hereof.

     

    10. Communication.  No
notice or other communication under this Warrant shall be effective unless, but
any notice or other communication shall be effective and shall be deemed to have
been given if, the same is in writing and is mailed by first-class mail, postage
prepaid, addressed to:

     

    (a) the
Company at 7334 South Alton Way, Building 14, Suite F, Englewood, CO 80112,
Attention: Matthew W. Shankle or such other address as the Company has
designated in writing to the Holder; or

     

    (b) the
Holder at such address as the Holder has designated in writing to the
Company.

     

    11. Headings.  The
headings of this Warrant have been inserted as a matter of convenience and shall
not affect the construction hereof.

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    

    12. Applicable
Law.  This Warrant shall be governed by and construed in
accordance with the laws of the State of New York without giving effect to the
principles of conflicts of law thereof.

     

     

    

     

     

    [Signature Page
Follows]

     

    
      
         

      

      
         
11

        
          

        

      

      
         

      

    

    IN
WITNESS WHEREOF, Advance Display Technologies, Inc. has caused this Warrant to
be signed by its President and its corporate seal to be hereunto affixed and
attested by its Secretary on this 15th day of June, 2009.

     

    ATTEST:

    

    By:              /s/ Rebecca McCall                 By: /s/ Matthew W. Shankle    

    Rebecca
McCall                                                     Matthew
W. Shankle

    Secretary                                                                 President

    

    [Corporate
Seal]

    

    

    
      
        
          Signatue
Page to Warrant for the Purchase of Shares of

          the
Series D Convertible Preferred Stock

        

         

      

      
         

        
          

        

      

      
         

      

    

    SUBSCRIPTION

     

    

    The
undersigned, _______________ , pursuant to the provisions of the foregoing
Warrant, hereby agrees to subscribe for and purchase shares of the Series D
Stock of Advance Display Technologies, Inc. covered by said Warrant, and makes
payment therefor in full at the price per share provided by said
Warrant.

    

    

    Dated:                                                                                  Signature:

    

    ________________________________                                                                                  

    

    Address:

    

    

    

    
      
        
          [
Subscription ]

        

         

      

      
         

        
          

        

      

      
         

      

    

    SUBSCRIPTION
FOR CASHLESS WARRANT SUBSCRIPTION

     

    The
undersigned, ____________________ , pursuant to the provisions of the foregoing
Warrant, hereby agrees to subscribe to that number of shares of the Series D
Stock as are issuable in accordance with the formula set forth in Section 1(b)
of the Warrant, and makes payment therefor in full by surrender and delivery of
this Warrant.

     

    Dated:                                                                                  Signature:

    

    

    

    Address:

    

    

    

    

    
      
        
          

          [Subscription
for Cashless Warrant Subscription]

        

         

      

      
         

        
          

        

      

      
         

      

    

    ASSIGNMENT

     

    

    

    FOR VALUE
RECEIVED, ________________ hereby sells, assigns and transfers unto the
foregoing Warrant and all rights evidenced thereby, and does irrevocably
constitute and appoint __________, attorney, to transfer said Warrant on the
books of Advance Display Technologies, Inc.

    

    

    Dated:                                                                                  Signature:

    

    

    

    Address:

    

    

    

    
      
        
          [Assignment]

        

         

      

      
         

        
          

        

      

      
         

      

    

    PARTIAL
ASSIGNMENT

     

    FOR VALUE
RECEIVED, ______________________ hereby assigns and transfers unto
_______________ the right to purchase ____________________ shares of the Series
D Stock of by the foregoing Warrant, and a proportionate part of said Warrant
and the rights evidenced hereby, and does irrevocably constitute and appoint
___________________, attorney, to transfer that part of said Warrant on the
books of Advance Display Technologies, Inc.

     

    

    Dated:                                                                                  Signature:

    

    

    

    Address:

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