Document:

EX-10.41

 

EXHIBIT 10.41

July 20, 2004

Mr. Richard R. Grigg

13000 West Hawthorne Lane

New Berlin, WI 53151

Dear Dick:

     The purpose of this letter agreement (“Agreement”) is to set forth the
general terms and conditions of your employment as Executive Vice President and
Chief Operating Officer of FirstEnergy Corp. (“FirstEnergy” or the “Company”).

     Your employment with the Company will commence on the Effective Date of
this Agreement (as defined below). Your duties and responsibilities as
Executive Vice President and Chief Operating Officer will be commensurate with
those customarily performed, undertaken and exercised by persons situated in a
similar executive capacity, including, without limitation responsibility for
the FirstEnergy Fossil, Energy Delivery and Commodity Business Units and such
other duties as may be assigned from time to time. In consideration of your
performance of such duties you will be compensated as follows:

	 	(a)	 	Base Salary. You will receive a base salary (the “Base
Salary”) at an annual rate of Six Hundred Thousand Dollars
($600,000) which will be payable in accordance with the existing
payroll practices of FirstEnergy. The Base Salary will be reviewed
at least annually at the same time as the base salaries of
FirstEnergy’s other senior executive officers.
	 
	 	(b)	 	Annual Bonus. You will become a participant in FirstEnergy’s
Executive and Director Incentive Compensation Plan (“EICP”) and be
eligible to receive an annual bonus each year under the Short-Term
Incentive Program (“STIP”) component of the EICP (or any successor
program). Your annual short-term target opportunity will be set by
the Compensation Committee of the Board of Directors at the same
time as other senior executive officers. For the remainder of the
2004 payroll year your target bonus opportunity will be 70% of the
Base Salary paid to you during that time. Any annual incentive
compensation awarded to you will be payable in accordance with the
provisions of the STIP. Note that any award based on performance
during 2004 as well as for the year in which your employment ends
shall be prorated based on the actual time worked during such years.
The Key Performance Indicators (“KPIs”), which serve as the basis
for determining the amount of the annual bonus earned, will be set
and approved by the Company’s Board of Directors and provided to you
as soon as practicable thereafter.
	 
	 	(c)	 	Long-Term Incentive Compensation. In lieu of participation
in FirstEnergy’s Long-Term Incentive Program (“LTIP”), a component
of

 

 

	 	 	 	the EICP, for the year 2004, the Company will grant you
non-qualified stock options to purchase shares of FirstEnergy
common stock on the Effective Date covering an approximate stock
value of 200% of the amount of Base Salary payable to you between
the Effective Date and the end of the 2004 payroll year, such
stock value being a binomial value of $7.67 per option. The
Option Price of the shares underlying the options will be equal to
the average price of FirstEnergy’s common stock on the New York
Stock Exchange on the Effective Date and rounded to the closest
number of whole shares. The options will be granted under and
subject to the terms of the Company’s EICP and will carry a
ten-year term with four-year equal annual step vesting. You will
receive a Stock Option Agreement setting forth additional terms of
the grant. For purposes of the Stock Option Agreement, you will
be deemed to have retired if you work at least three years from
the Effective Date of this Agreement.
	 
	 	 	 	The LTIP is currently under review by the Company, and we expect
the Compensation Committee of the Board of Directors to approve a
new LTIP design at the Committee’s September 2004 meeting. For
the 2005 payroll year and all subsequent payroll years during your
employment, you will be eligible for a long-term incentive
opportunity consistent with the approved and redesigned LTIP. Any
incentive compensation awarded to you will be payable according to
the provisions of the LTIP. Any award based on performance during
the year in which your employment ends shall be prorated based on
the actual time worked during such year and paid in accordance
with the terms of the LTIP. In the absence of the foregoing
provisions of this Agreement, your 2004 total target incentive
opportunity under the EICP would have been 240% of your base
compensation, such percentage being comprised of a 70% STIP
opportunity and 170% LTIP opportunity. Your 2005 total target
incentive opportunity will be set and approved by the Company’s
Board of Directors based on competitive data at the same time as
other senior executive officers.
	 
	 	(d)	 	Change in Control Agreement. As a result of the passage of
a non-binding proposal by a shareholder with respect to future
change in control agreements, the Board of Directors is currently
reviewing this matter and has not yet determined what course of
action, if any, it might take in response. After completion of that
review, a change in control agreement will be extended to you on
the terms approved by the Board of Directors and consistent with its
course of action in response to the shareholder proposal.
	 
	 	(e)	 	Employee Benefits. The Company maintains a Flexible Benefits
Plan that includes programs providing health care insurance, dental
insurance, group term life insurance, accident death and
dismemberment insurance, long term disability, long term care,
dependent care and health care spending accounts. Except as set
forth in the following paragraph, you

 

 

	 	 	 	will be eligible to participate in the FirstEnergy Flexible
Benefits Plan, as well as all executive and employee welfare
benefit plans, programs, policies and arrangements sponsored,
maintained or contributed to by FirstEnergy on the same level as
other senior executive officers of FirstEnergy, subject to the
terms and conditions of such plans.
	 
	 	 	 	It is our understanding that you currently maintain health care
and life insurance coverage under the terms of your retirement
from your prior employer and will do so until March 1, 2007.
Consequently, your eligibility to participate in the health care
and group life insurance coverages under the Flexible Benefits
Plan will not commence until March 1, 2007. Moreover, at the
conclusion of your employment with the Company, you will be
granted seven (7) years of service credit in addition to any
service credit actually earned for purposes of calculating
eligibility and contribution towards retiree health care coverage
under the Flexible Benefits Plan or any successor plan.
	 
	 	(f)	 	Pension Benefits. You will be eligible to participate in any
and all of FirstEnergy’s qualified and non-qualified pension,
retirement, and deferred compensation plans, programs, policies, and
arrangements as they relate to FirstEnergy’s senior executive
officers with the exception of the Supplemental Executive
Retirement Program (“SERP”). Your participation in any of the
programs for which you are eligible will be on the same terms and
conditions as applicable to other participants in those programs and
will be governed by the applicable plan documents.
	 
	 	 	 	In lieu of participation in the SERP, you will receive a grant of
restricted FirstEnergy common stock on the Effective Date with an
approximate value of $500,000. The number of shares of restricted
stock granted will be equal to such value divided by the average
price of the Company’s common stock on the New York Stock Exchange
on the Effective Date and rounded to the closest number of whole
shares. The restricted stock will be granted under and subject to
the terms of the Company’s EICP and will 100% vest three years
from the date granted. Should your employment continue beyond
such time, you will not be permitted to sell the shares (other
than the minimum amount necessary to pay for the associated taxes)
until such time your employment terminates. A Restricted Stock
Agreement will be prepared outlining the specific details.
	 
	 	(g)	 	Expenses. You will be entitled to reimbursement of all
business, travel, and entertainment expenses incurred by you on
behalf of FirstEnergy in the course of the performance of your
duties hereunder in the same manner as other senior executive
officers. You will also be entitled to receive reimbursements and
benefits under FirstEnergy’s Relocation Program for Current
Employees, Package B, as set forth in Human Resources Letter 204.

 

 

	 	(h)	 	Vacations. You will be entitled to vacation in each calendar
year in accordance with the Company’s policy in effect from time to
time as it relates to the Company’s senior executive officers, but
in no event less than 25 days per full calendar year worked. For
2004, you will receive 15 days of vacation.
	 
	 	(i)	 	Financial Planning. You will be entitled to the financial
planning benefits available to other senior executive officers.
	 
	 	(j)	 	Other Interests. You agree to either resign from or not
begin, as appropriate, any term of office as a Director of Allete or
of any other Company. You further agree to obtain all appropriate
written assurances as determined to be sufficient by FirstEnergy
from Wisconsin Energy Corporation that your acceptance of employment
with FirstEnergy does not violate any noncompetition covenants that
may be in effect.

It is anticipated that you will begin working on or about August 20, 2004 or
such later date on which the conditions noted in subparagraph (j) above, have
been satisfied. August 20, 2004, or such later date, shall be considered the
Effective Date of this Agreement. This Agreement will expire three (3) years
from the Effective Date, unless either terminated early by either party for any
reason upon written notice given 60 days in advance, or mutually extended in
writing. This offer is contingent upon your taking and passing a
pre-employment physical, which includes a drug and alcohol test. The Company
will pay the cost of the medical examination.

If this Agreement accurately reflects our agreement and understanding, please
sign the enclosed copy and return it to me.

	 	 	 	 	 
	 	 	Very Truly Yours,
	 
	 	 	 	 
	 	 	First Energy Corp.
	 
	 	 	 	 
	

	 	By:	 	 
	

	 	 	 	

	

	 	 	 	Anthony J. Alexander
	

	 	 	 	Chief Executive Officer
	 
	 	 	 	 
	Agreed and Accepted:
	 	 	 	 
	 
	 	 	 	 
	

Richard R. Grigg	 	 
	 
	 	 	 	 
	Dated:EX-10.42

 

EXHIBIT 10.42

FirstEnergy Corp.

Executive and Directors Incentive Compensation Plan

Non-Qualifying Stock Option (NSO) Agreement

	 	 	 
	

	 	Option No.: 21A
	 
	 	 
	

	 	Number of Options Granted: 54,759.00 NSOs
	 
	 	 
	

	 	Option Price: $39.46 per share
	 
	 	 
	

	 	Option Closing Date: September 17, 2004

This Option Agreement (“Agreement”) is entered into as of the 20th day of
August, 2004, between FirstEnergy Corp., and Richard R. Grigg (“Optionee”) and
is not in lieu of salary or any other compensation for services. For the
purposes of this plan, the term “Company” or “FE” means FirstEnergy Corp. or
its subsidiaries, singularly or collectively.

SECTION ONE — AWARD

On February 17, 1998, the Board of Directors (“Board”) of FE adopted the FE
Executive and Director Incentive Compensation Plan (“Plan”), which was approved
and amended by the common stock shareholders. As of the date of this
Agreement, per the terms of the Plan, FE grants to the Optionee an option
(“Option”) to purchase the above number of shares of FE Common Stock (“Shares”)
at the option price reflected above.

All Grants are considered NSOs, not subject to the provisions of section 422 of
the Internal Revenue Code.

SECTION TWO — GENERAL TERMS

This Agreement is subject to the following terms and conditions, many of which
are described in greater detail in the Plan. Please consult the Plan document
for further information.

Vesting Provisions

These Options will vest in 25% increments starting one year from the date of
grant, as reflected in the schedule below.

	 	 	 	 	 
	Vesting Date
	 	Vesting Schedule

	August 20, 2005
	 	 	25	%
	August 20, 2006
	 	 	50	%
	August 20, 2007
	 	 	75	%
	August 20, 2008
	 	 	100	%

1

 

Expiration

These Options expire on August 20, 2014 at 2:00 PM, Akron time unless the
Options expire earlier due to termination of employment (or 2:00 PM on the last
business day prior to such date, if the date falls on a Saturday, Sunday, or
other day when the FirstEnergy General Office is closed).

Termination of Employment

	 	 	 	 	 	 	 
	Event of Optionee’s	 	 	 	 	 	 
	Termination of	 	 	 	 	 	 
	Employment
	 	Vesting
	 	When Options Expire
	 	Further Information

	Retirement (including early retirement)

	 	Vesting continues per vesting schedule
	 	Options expire on
August 20, 2014
	 	As defined under
6.8 of the Plan
	 
	 	 	 	 	 	 
	Disability

	 	Vesting continues per vesting schedule
	 	Options expire on
August 20, 2014
	 	As defined under
6.8 of the Plan
	 
	 	 	 	 	 	 
	Death (including death after
retirement,
disability, or
Other Terminations
other than for
Cause)

	 	100% vesting upon
date of death
	 	All options expire
the earlier of one
year after date of
death or expiration
of the grant
	 	Shares exercisable
by the beneficiary
(as designated
under Article 12 of
the Plan, or by
will or by the laws
of descent and
distribution)
	 
	 	 	 	 	 	 
	For “Cause”

	 	Vesting stops upon
date of termination
	 	All vested and
unvested options
are immediately
forfeited back to
the Company
	 	Termination for
Cause is defined in
section 2.1.6 of
the Plan
	 
	 	 	 	 	 	 
	Other Separation (including
resignation)

	 	Vesting stops upon
date of termination
	 	All unvested
options are
immediately
forfeited back to
the Company.
All
vested options
expire the earlier
of 90 days after
you leave the
Company or
expiration of the
grant
	 	You may be subject
to the “Forfeiture
and Recovery”
provisions below.

Change in Control

In the event of a Change in Control (as defined in section 2.1.7 of the Plan),
all options under this Agreement become immediately exercisable as of the date
of the Change in Control, and the provisions under the section entitled
“Forfeiture and Recovery” shall not apply.

2

 

Forfeiture and Recovery

If it is determined, in the sole discretion of the Compensation Committee (the
“Committee”) of the FirstEnergy Board of Directors or its delegate, that the
Optionee has breached any of the covenants below, and unless such breach has
been waived by the Committee or its delegate in writing, all outstanding
Options shall be immediately forfeited back to FE, and any profits resulting
from the exercise of Options realized in the twelve (12) months preceding the
date of termination through the date of the breach shall be immediately
returned to FE. During the term of his/her employment with the Company and for
a period of twenty-four (24) months following termination of employment for any
reason, including without limitation, termination by mutual agreement, the
Optionee expressly covenants and agrees that he/she will not at any time for
himself/herself or on behalf of any other person, firm, association or other
entity do any of the following:

	1.	 	Participate or engage, by virtue of being employed or otherwise, directly
or indirectly, in the business of selling, servicing, and/or manufacturing
products, supplies or services of the kind, nature or description of those
sold by the Company except pursuant to his/her employment with the
Company;
	 
	2.	 	Directly participate or engage, on the behalf of other parties, in the
purchase of products, supplies or services of the kind, nature or
description of those sold by the Company except pursuant to his/her
employment with the Company;
	 
	3.	 	Solicit, divert, take away or attempt to take away any of the Company’s
Customers or the business or patronage of any such Customers of the
Company;
	 
	4.	 	Solicit, entice, lure, employ or endeavor to employ any of the Company’s
employees;
	 
	5.	 	Divulge to others or use to his/her own benefit any confidential
information obtained during the course of his/her employment with Company
relative to sales, services, processes, methods, machines, manufacturers,
compositions, ideas, improvements, patents, trademarks, or inventions
belonging to or relating to the affairs of Company; or
	 
	6.	 	Divulge to others or use to his/her own benefit any trade secrets
belonging to the Company obtained during the course of his/her employment
or of which he/she became aware during the course of his/her employment
with the Company.

The term “Customer” shall mean any person, firm, association, corporation or
other entity to which the Optionee or the Company has sold the Company’s
products or services within the twenty-four (24) month period immediately
preceding the termination of Optionee’s employment with the Company or to which
the Optionee or the Company is in the process of selling its products or
services, or to which the Optionee or the Company has submitted a bid, or is in
the process of submitting a bid to sell the Company’s products or services.

FE may offset any amount owed against any compensation due to the Optionee or
against any amounts otherwise due and distributable to the Optionee from any
benefit plan of FE in which the Optionee has participated, in accordance with
the terms of such benefit plan. Should it be necessary for FE to initiate
legal action to recover any amounts due, FE shall be entitled to recover from
Optionee, in addition to such amounts due, all costs, including reasonable
attorneys fees, incurred as a result of such legal action.

Effect on the Employment Relationship

Nothing in this Agreement guarantees employment with the Company, nor does it
confer any special rights or privileges to the Optionee as to the terms of
employment.

3

 

Adjustments

In the event of any merger, reorganization, consolidation, recapitalization,
separation, liquidation, stock dividend, stock split, combination,
distribution, or other change in corporate structure of FE affecting the Common
Stock, the Committee will adjust the number and class of securities in this
option in a manner determined appropriate to prevent dilution or diminution of
the Option under this Agreement.

Administration

	1.	 	This Agreement is governed by the laws of the State of Ohio without
giving effect to the principles of the conflicts of laws.

	2.	 	The terms and conditions of this Option may be modified by the Committee:

	(a)	 	In any case permitted by the terms of the Plan or this Option,
	 
	(b)	 	with the written consent of the Optionee, and/or
	 
	(c)	 	without the consent of the Optionee if the amendment is either not
adverse to the interests of the Optionee or is required by law.

	3.	 	The administration of this Agreement and the Plan will be performed in
accordance with Article 3 of the Plan. All determinations and decisions
made by the Committee, the Board, or any delegate of the Committee as to
the provisions of the Plan shall be final, conclusive, and binding on all
persons.
	 
	4.	 	Except as provided otherwise herein, the terms of this Agreement are
governed at all times by the official text of the Plan and in no way alter
or modify the Plan.
	 
	5.	 	If a term is capitalized but not defined in this Agreement, it has the
meaning given to it in the Plan.
	 
	6.	 	To the extent a conflict exists between the terms of this Agreement and
the provisions of the Plan, the provisions of the Plan shall govern.

SECTION THREE — METHODS OF EXERCISING THE OPTION

Notification to Exercise

To exercise an option, the Optionee must submit to the Administrator of the
Plan the information below either on a form provided by FE, a broker form, or a
blank sheet of paper:

	1.	 	Number of shares being purchased,
	 
	2.	 	The grant price,
	 
	3.	 	The form of payment,
	 
	4.	 	A statement of intention to exercise,
	 
	5.	 	The signature of the Optionee, (or legal representative in the case of
death or disability), and
	 
	6.	 	Any representations or disclosures required by any applicable securities
law.

4

 

Method of Payment

Payment for the transaction and associated brokerage fees may be made through
the following methods:

	1.	 	Cash Exercise — Delivering cash equal to the cost of the exercise.
	 
	2.	 	Stock Swap Exercise — Surrendering certificates of FE stock previously
acquired having a Fair Market Value at the time of the exercise equal to
the amount of the exercise, and, if necessary, a small amount of cash, not
to exceed the price of one (1) share of stock.
	 
	3.	 	Cashless Exercise— Using the net proceeds from the immediate sale of
stock to pay for the exercise of the Option, as directed in the written
notification to exercise the option.

A combination of any of the above based upon Plan administrative rules.

Withholding Tax

FE shall have the right to deduct, withhold, or require the Optionee to
surrender an amount sufficient to satisfy federal (including FICA and
Medicare), state, and/or local taxes required by law to be withheld for any
exercise.

SECTION FOUR — TRANSFER OF OPTION

The Option is not transferable during the life of the Optionee. Only the
Optionee shall have the right to exercise an option, unless deceased, at which
time the option may be exercised by the Optionee’s beneficiary (as designated
under Article 12 of the Plan or by will or by the laws of descent and
distribution).

	 	 	 
	

	 	FirstEnergy Corp.
	 
	 	 
	

	 	By                                                         

           Corporate Secretary

     I acknowledge receipt of this NSO Agreement and I accept and agree with
the terms and conditions stated above.

	 	 	 
	

	 	                                                                            

          (Signature of Optionee)

                                                         

           (Date)

(This is RRG’s 1st grant under the FE Stock Option Program.)

5

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