Document:

Exhibit

EXHIBIT 10.1

UNIT POWER AGREEMENT

by and between

FIRSTENERGY SOLUTIONS CORP.

as Seller

and 

OHIO EDISON COMPANY

THE CLEVELAND ELECTRIC ILLUMINATING COMPANY

and 

THE TOLEDO EDISON COMPANY

as Buyers

dated as of

April 1, 2016

	TABLE OF CONTENTS

		
	 
	 

	 
	 

	ARTICLE I DEFINITIONS.........................................................................................................
	1

	1.1      Defined Terms................................................................................................................
	1

	1.2      Interpretation..................................................................................................................
	9

	1.3      Technical Meanings........................................................................................................
	9

	ARTICLE II TERM......................................................................................................................
	10

	2.1      Term................................................................................................................................
	10

	2.2      Delivery Period..............................................................................................................
	10

	ARTICLE III PURCHASE AND SALE OBLIGATION..........................................................
	10

	3.1      Seller's and Buyers' Obligations.....................................................................................
	10

	3.2      Unit Contingent..............................................................................................................
	10

	3.3      Delivery Point................................................................................................................
	11

	3.4      Scheduling and Dispatch................................................................................................
	11

	3.5      Force Majeure................................................................................................................
	12

	ARTICLE IV FACILITY OPERATIONS..................................................................................
	12

	4.1      Operation and Maintenance...........................................................................................
	12

	4.2      Capital Expenditures......................................................................................................
	12

	4.3      Planned Outage Schedule...............................................................................................
	13

	4.4      Auxiliary Power..............................................................................................................
	13

	ARTICLE V PRICING.................................................................................................................
	13

	5.1      Monthly Payment...........................................................................................................
	13

	5.2      Component of Monthly Payment...................................................................................
	13

	ARTIVLE VI BILLING AND PAYMENT..................................................................................
	14

i

	

		
	6.1      Billing and Payment, Netting.........................................................................................
	14

	6.2      Invoice Adjustment........................................................................................................
	14

	6.3      Books and Records; Audit..............................................................................................
	15

	ARTICLE VII LIMITATIONS....................................................................................................
	15

	7.1      Limitation of Remedies, Liability and Damages...........................................................
	15

	ARTICLE VIII TAXES................................................................................................................
	15

	8.1      Cooperation....................................................................................................................
	15

	8.2      Taxes...............................................................................................................................
	15

	8.3      Change-in-Law Taxes.....................................................................................................
	16

	8.4      Exemptions.....................................................................................................................
	16

	ARTICLE IX SEVERAL OBLIGATIONS OF BUYERS.........................................................
	16

	9.1      Several Obligations of Buyers.......................................................................................
	16

	ARTICLE X CONDITIONS........................................................................................................
	16

	10.1      Seller's Conditions........................................................................................................
	16

	10.2      Buyers' Conditions.......................................................................................................
	17

	10.3      Sale or Transfer of the Facilities..................................................................................
	17

	10.4      Obligations of Buyers and Seller..................................................................................
	17

	ARTICLE XI REPRESENTATIONS AND WARRANTIES....................................................
	17

	11.1      Representations and Warranties of All Parties.............................................................
	17

	ARTICLE XII MISCELLANEOUS............................................................................................
	18

	12.1      Title and Risk of Loss..................................................................................................
	18

	12.2      Indemnity......................................................................................................................
	18

	12.3      Amendments and Waivers............................................................................................
	19

	12.4      Notices..........................................................................................................................
	19

	12.5      Dispute Resolution.......................................................................................................
	19

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	12.6      Successors and Assigns; Assignment...........................................................................
	20

	12.7      Integration....................................................................................................................
	20

	12.8      Acknowledgments........................................................................................................
	20

	12.9      Waiver...........................................................................................................................
	21

	12.10    Counterparts.................................................................................................................
	21

	12.11    Headings.......................................................................................................................
	21

	12.12    Confidentiality..............................................................................................................
	21

	12.13    Governing Law.............................................................................................................
	21

	12.14    Severability...................................................................................................................
	21

	12.15    Standards of Review.....................................................................................................
	22

	 
	 

Schedules and Appendices

SCHEDULE 11.1    REPRESENTATIONS AND WARRANTIES OF ALL PARTIES 

SCHEDULE 12.4    NOTICE INFORMATION

EXHIBIT A        SAMPLE INVOICE

iii

THIS UNIT POWER AGREEMENT (this “Agreement”), dated as of April 1, 2016 is by and between FirstEnergy Solutions Corp. (“Seller”), and Ohio Edison Company, The Cleveland Electric Illuminating Company, and The Toledo Edison Company (each a “Buyer” and, collectively, “Buyers”). Each of Buyers and Seller are sometimes referred to herein individually as a “Party” and collectively as the “Parties.”

RECITALS

A.Seller, a subsidiary of FirstEnergy Corp., has ultimate ownership and control of the electric generation capacity and electric energy and ancillary services output of the Facilities as defined herein.

B.Buyers, subsidiaries of FirstEnergy Corp., operate as distribution utilities that provide, among other services, provider of last resort energy service to retail users in their respective franchised service territories in Ohio.

C.The Parties desire to enter into a transaction in which Buyers purchase all of Seller’s rights in the Capacity of each Facility, together with the associated Energy, Ancillary Services and Environmental Attributes, for a Delivery Period of eight (8) years.

D.The Parties desire to set forth certain terms and conditions applicable to such transaction.

In consideration of mutual covenants and agreements contained herein, the Parties agree as follows:

ARTICLE I

 DEFINITIONS

1.1    Defined Terms.  Unless otherwise defined herein, the following terms,
when used herein, shall have the meaning set forth below:

“Accumulated Deferred Income Taxes” means deferred tax assets and liabilities associated with the cumulative tax effect of temporary differences between the financial statement and the tax basis of the Facility or Facilities computed utilizing the most current tax rates that will be payable or refundable in future years, inclusive of reversing temporary difference and carryforwards.

“Affected Party” has the meaning set forth in Section 3.5.

“Agreement” has the meaning set forth in the preamble hereto.

“Allowances” means emission allowances, emission credits, and any similar rights related to emissions of NOx, SO2, CO2, mercury, particulates or any other substance under any relevant federal, state or local law or recognized by any Governmental Authority or other entity.

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“Amended and Restated ICPA” means the Amended and Restated Inter-Company Power Agreement, dated as of September 10, 2010, among OVEC and its sponsoring companies, as may be amended, supplemented or otherwise modified from time to time.

“Ancillary Services” means regulation and frequency response services, energy imbalance services, automatic generating control services, spinning, non-spinning, supplemental and replacement reserve services, reactive power and voltage support services, black start services and all other services or products ancillary to the operation of the Facilities that are defined as ancillary services in the Transmission Operator’s relevant transmission tariff or are commonly sold or saleable, to the extent that the assets comprising a given Facility are technically capable of providing those services or products.

“Approvals” means all approvals, permits, licenses, consents, waivers or other authorizations from, notifications to, or filings or registrations with, third parties, including Governmental Approvals.

“ATSI” means American Transmission Systems, Incorporated or any successor company.

 “Bankrupt” means such entity is generally not paying its debts as such debts become due, or has admitted in writing its inability to pay its debts generally.

“Business Day” means any day except a Saturday, Sunday, or a United States Federal Reserve Bank holiday. A Business Day shall open at 8:00 a.m. and close at 5:00 p.m. local time at the relevant Party’s principal place of business. The relevant Party in each instance, unless otherwise specified, shall be the Party from whom the notice, payment or delivery is being sent and by whom the notice, payment, or delivery is to be received.

“Buyer” or “Buyers” has the meaning set forth in the preamble hereto.

“Buyer Indemnified Parties” has the meaning set forth in Section 12.2.

“Buyers’ Contractual Capacity” means one hundred percent (100%) of Seller’s rights to the Capacity of each Facility; and shall include one hundred percent (100%) of Seller’s rights to any capacity derates, capacity uprates or capacity expansions at any Facility during the Term.

“Capacity” means the output level, expressed in MW, that each Facility, or the components of equipment thereof, is capable, as of a given moment, of continuously producing and making available at the Delivery Point associated with such Facility, taking into account the operating condition of the equipment at that time, the auxiliary loads and other relevant factors; provided, however, that the term “Capacity” shall include the capacity supply obligation that is associated with each of the Facilities in PJM’s eRPM system for any PJM Delivery Year (as defined in the PJM tariffs and agreements) for which a capacity supply obligation has been established under PJM’s tariffs.

“Capital Expenditures Work” means the modeling, studying, engineering, design, procurement, purchasing, construction, inspection, start-up and testing of capital expenditures, replacements, spares, repairs or additions to a given Facility, procurement of auxiliary power necessary to support other Capital Expenditures Work, procurement or retention of licenses (but 

2

only where applicable accounting rules permit such costs to be capitalized); including any and all such actions as may be required to comply with a Governmental Approval or other requirements of a Governmental Authority; and provided that maintenance or work in the normal course of any in-service capital project or equipment or facility is Operating Work as defined in this Agreement.

“Change-in-Law” means, after the Effective Date, the adoption, imposition, promulgation, change in interpretation or modification by a Governmental Authority of any law, regulation or Governmental Approval, or the issuance of a final and non-appealable order, judgment, award or decree of a Governmental Authority having the effect of the foregoing.

“Change-in-Law Taxes” means, after the Effective Date, any change (increase or decrease) in Taxes imposed on Seller on (a) the sale or use of fuel for generation of electricity by the Facilities, (b) the sale of Capacity, (c) the production or sale of Energy or Ancillary Services, or Environmental Attributes, or (d) any other facet of Seller’s performance of Operating Work, in any case, resulting from a Change-in-Law.

“Claims” means all claims or actions, threatened or filed and, whether groundless, false, fraudulent or otherwise, that directly or indirectly relate to the subject matter of an indemnity, and the resulting losses, damages, expenses (including reasonable attorneys’ fees and disbursements) and court costs, whether incurred by settlement or otherwise, and whether such claims or actions are threatened or filed prior to or after the termination of this Agreement.

“Code” means the Internal Revenue Code of 1986, as amended, and any successor federal tax statute.

“PJM Delivery Year” means each twelve (12)-month period beginning on June 1st of each calendar year during the Delivery Period.

“Delivery Period” has the meaning set forth in Section 2.2.

“Delivery Point” has the meaning set forth in Section 3.3.

“Dispatch” means the actions of Buyers’ designated agents or representatives in controlling and designating the quantity of Energy and Ancillary Services to be produced by each of the Facilities.

“Effective Date” means the date set forth in the preamble to this Agreement.

 “End Date” has the meaning set forth in Section 2.2.

“Energy” means three-phase, 60-cycle alternating current electric energy, expressed in MWh.

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“Environmental Attributes” means, to the extent associated with one or more of the Facilities or the generation of Energy at a given Facility, as applicable, any and all of the following: all Allowances; renewable energy credits; renewable energy certificates; alternative energy credits; and any other credits, including environmental air quality credits, emissions reduction credits, energy credits, and any allowances, reductions, offsets, certificates, property, and benefits, that are granted or awarded or transferred or conferred or acquired over the Delivery Period through existing or new governmental programs on the basis of environmental, or power source, or emissions characteristics that are or may be related to Facility operations, and actual or potential emissions or avoided emissions or reductions of waste of any kind, to the air, soil or water of substances (in whatsoever form) that is or are now or may be in the future regulated under federal, state or local laws. The term “Environmental Attributes” does not include Energy, Capacity or Ancillary Services or the power or energy attributes of any Facility.

“EPT” or “Eastern Prevailing Time” means the local time at the geographical location of the Delivery Point.

“Equitable Defenses” means any bankruptcy, insolvency, reorganization and other laws affecting creditors’ rights generally, and with regard to equitable remedies, the discretion of the court before which proceedings to obtain same may be pending.

“Facility” or “Facilities” means, as the context requires, one or more of the following generating units:

		
	•
	W. H. Sammis Plant, a 2,220 MW Capacity coal-fired and 13 MW diesel-fired power plant located in Stratton, Jefferson County, Ohio;

		
	•
	Davis-Besse Power Station, a 908 MW Capacity nuclear power plant located in Oak Harbor, Ottawa County, Ohio;

		
	•
	Seller’s 4.85% power participation ratio under the Amended and Restated ICPA, which represents Seller’s entitlement to a pro rata share of available energy and capacity from the generating units owned by OVEC;

“FERC” means the Federal Energy Regulatory Commission or any successor entity with similar jurisdiction.

“Force Majeure” means an event or circumstance which prevents one Party from performing its obligations under this Agreement, which is not within the reasonable control of the Affected Party, including, without limitation, the following events: (a) acts of God; (b) flood, fire, earthquake, or explosion; (c) war, invasion, hostilities (whether war is declared or not); (d) action, order, law, or determination by any Governmental Authority; (e) national or regional emergency; and (f) strikes, labor stoppages or slowdowns or other industrial disturbances; provided, however, that such term “Force Majeure” will not include any event, circumstance or occurrence which could have been avoided through the exercise of Good Utility Practice; and provided further, that “Force Majeure” will not apply to Seller’s capacity supply obligation that is associated with each of the Facilities in PJM’s eRPM system.

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“Fuel Expenses” means all fixed or variable costs, expenses, losses, liabilities, claims and charges related to the acquisition, storage, inventory, handling, balancing and transportation and delivery of fuel for each of the Facilities, including reagents, emissions allowances and related costs of credit at a weighted average cost; provided, however, that the term “Fuel Expenses” excludes the costs of any fuel that is capitalized under applicable accounting rules and guidance; and provided further, however, that all costs and expenses shall be calculated on a consumed basis.

“GAAP” means accounting principles generally accepted in the United States of America.

“Good Utility Practice” means any of the practices, methods and acts engaged in or approved by a significant portion of the electric utility industry during the relevant time period, or any of the practices, methods and acts which, in the exercise of reasonable judgment in light of the facts known at the time the decision was made, could have been expected to accomplish the desired result at a reasonable cost consistent with good business practices, reliability, safety and expedition. Good Utility Practice is not intended to be limited to the optimum practice, method, or act to the exclusion of all others, but rather to be acceptable practices, methods, or acts generally accepted in the region.

“Governmental Approval” means any permit, authorization, registration, consent, action, waiver, exception, variance, order, judgment, decree, license, exemption, publication, filing, notice to, or declaration of or with, or required by any Governmental Authority or applicable law; provided, however, that the term “Governmental Authority” as used in this definition does not include the Public Utilities Commission of Ohio or any successor agency.

“Governmental Authority” means any federal, state, local, or municipal government body; and any governmental, regulatory, or administrative agency, commission, body, agency, instrumentality, or other authority lawfully exercising or entitled to exercise any executive, judicial, legislative, administrative, regulatory, or taxing authority or power, including any court or other tribunal.

“Imbalance Charges” means any penalties, fees or charges assessed by PJM for failure to satisfy requirements for balancing of electric energy receipts and deliveries or loads and generation, or payable to any other Person in connection with the delivery of electrical energy in an amount(s) different from the amount(s) scheduled.

“Indemnified Parties” has the meaning set forth in Section 12.2.

“Indemnifying Party” has the meaning set forth in Section 12.2.

“kW” means kilowatt.

“Materials and Supplies Inventory” is as defined in Part 101, Uniform System of Accounts for Public Utilities, of FERC’s regulations (18 C.F.R. Part 101 (2015)), as such may be amended, supplemented or otherwise modified from time to time.

“Monthly Payment” has the meaning set forth in Section 5.1.

“MW” means megawatt.

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“MWh” means megawatt-hour.

“NRC” means the U.S. Nuclear Regulatory Commission or any successor agency.

 “Operating Work” means the operation, maintenance, use, repair or retirement of any and each Facility on or after the Start Date, including but not limited to labor; parts; supplies; insurance; permits; licensing; taxes other than income taxes; procurement of ancillary services, fuel and other consumables; fuel acquisition, transportation balancing and storage; waste handling and disposal (including coal ash or spent nuclear fuel); filing, defense and settlement of claims, suits and causes of action; procurement (or sale) of Allowances and settlement of all other environmental charges (or credits) pertaining to the operation of each such Facility; including any and all such actions as may be required to comply with a Governmental Approval or other requirements of a Governmental Authority; but excluding any Capital Expenditures Work.

“Operation and Maintenance Expenses” means all fixed or variable costs, expenses, losses, liabilities, claims, charges and associated credits incurred directly or indirectly in the performance of Operating Work of each Facility, but not including Fuel Expenses.

“OVEC” means Ohio Valley Electric Corporation. 

“Party” has the meaning set forth in the preamble hereto.

“Person” means any individual, corporation, partnership, limited liability company, other business organization of any kind, association, trust, or governmental entity, agency or instrumentality.

“PJM” means PJM Interconnection, L.L.C. or any successor entity.

“Pnode ID” means the Pnode ID set forth in the PJM system for identifying the point at which energy products are delivered to the grid by a generating unit, as such may be changed by PJM from time to time. The current Pnode IDs for the Facilities are:

	
		
	Unit Name
	Pnode ID

	Davis-Besse
	98370477

	W. H. Sammis 1
	98370511

	W. H. Sammis 2
	98370513

	W. H. Sammis 3
	98370515

	W. H. Sammis 4
	98370517

	W. H. Sammis 5
	98370509

	W. H. Sammis 6
	98370519

	W. H. Sammis 7
	98370521

	W. H. Sammis [EMDs]
	98370507

	OVEC
	34509945

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“Replacement Capacity” means an amount of Capacity expressed in MW, together with all associated Energy and Ancillary Services, that is equal to the Capacity of an unavailable Facility or part thereof, and that PJM agrees is deliverable on a firm basis to the ATSI load zone at all times and which is intended by Seller to be utilized in lieu of all or part of the Capacity, Energy and Ancillary Services of an unavailable Facility as described in this Agreement.

“Schedule” or “Scheduling” means the actions of Buyers’ designated agents or representatives, including the Transmission Operator, if applicable, in notifying, requesting and confirming to each other the quantity and type of Energy or Ancillary Services associated with each Facility to be delivered on any given day or days (or in any given hour or hours, or portion thereof) during the Delivery Period at the Delivery Point.

“Seller” has the meaning set forth in the preamble hereto; provided, however, whenever the context may require, “Seller” means FirstEnergy Solutions Corp., and its subsidiaries, which are consolidated under GAAP.

“Seller Indemnified Parties” has the meaning set forth in Section 12.2.

“Seller’s Invested Capital” or “SIC” means the total net book value of the in-service Facilities, including nuclear fuel (but only to the extent that applicable accounting rules permit nuclear fuel costs to be capitalized), any Accumulated Deferred Income Taxes associated with the invested capital, allocations of capital used to support the Facilities, Materials and Supplies Inventory (including to the extent that applicable accounting rules permit fossil fuel costs to be capitalized), and Capital Expenditures Work that is performed at any Facility and that is placed into service after the Effective Date. To the extent that there is a difference between costs associated with SIC included in Article 5.2 for a given month and collections of such costs for that month, the calculation of such costs for future months shall include a reconciliation to “true up” such difference. The total SIC shall be calculated as the average of the total net book value of the in-service Facilities at beginning of the month and the end of the month, respectively.

“Seller’s Return on Equity” or “ROE” means Seller’s rate of return on equity, which amount shall equal 10.38% for each calendar year and shall be fixed over the Term.

“Share” means, with respect to each Buyer, each Buyer’s several (and not joint) obligation, as such obligation is calculated as of June 1, 2016 based on each Buyer’s average of the coincident MW peaks, including distribution losses, on the ATSI transmission system from the months of June through September of 2015; and provided further that the Buyer’s several pro rata obligations will be updated on June 1st of each subsequent year during the term hereof based on each Buyer’s average of the coincident MW peaks, including distribution losses, on the ATSI transmission system from the months of June through September of the prior year during the term hereof based on each Buyer’s average of the coincident MW peaks, including distribution losses, on the ATSI transmission system from the months of June through September of the prior year.

“Start Date” has the meaning set forth in Section 2.2.

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“Tax” or “Taxes” means any federal, state, local, or foreign income, gross receipts, value added, windfall or other profits, alternative or add-on minimum, estimated, franchise, profits, sales, use, real property, personal property, ad valorem, vehicle, airplane, boat, license, payroll, employment, workers’ compensation, unemployment compensation, withholding, social security, disability, excise, severance, stamp, occupation, premium, environmental (including taxes under Code section 59A), customs duties, import fees, capital stock transfer, title, documentary, or registration, or other tax, duty, or impost of any kind whatsoever, whether disputed or not. “Taxes” includes (i) any liability for the payment of any amounts described in the preceding sentence as a result of being a member of an affiliated, consolidated, combined, or unitary group for any taxable period, (ii) any liability for the payment of any amount described in clause (i) above as a result of being a Person required to withhold or collect Taxes imposed on another Person, (iii) any liability for the payment of any amount described in the preceding sentence or in clause (i) or (ii) of this sentence as a result of being a transferee of, or successor in interest to, any Person or as a result of an express or implied obligation to indemnify any Person, and (iv) any and all interest, penalties, additions to tax, or additional amounts imposed in connection with or with respect to any amount described above in this definition.

“Taxing Authority” means, with respect to any Tax, the governmental entity (national, local, municipal or otherwise) or political subdivision thereof that imposes such Tax, the agency (if any) charged with the collection of such Taxes for such entity or subdivision, including any governmental or quasi-governmental entity, a council (if any) or agency that imposes, grants or monitors Taxes or the abatements thereof, or is charged with collecting social security or similar charges or premiums

“Tax Reimbursement Payment” has the meaning set forth in Section 5.2.

“Term” has the meaning set forth in Section 2.1.

“Transmission Operator” means PJM or any Transmission Provider, independent system operator, regional transmission operator or other transmission operator from time to time having authority to control the transmission control area to which any Facility is interconnected.

“Transmission Provider” means any Person or Persons that owns, operates or controls facilities used for the transmission of electrical energy in interstate commerce.

“Unit Contingent” or reference to “Unit Contingency” means, with respect to Buyers’ Contractual Capacity or Energy or Ancillary Services associated with Buyers’ Contractual Capacity, that such Buyers’ Contractual Capacity, Energy or Ancillary Services is intended to be supplied from a given Facility and Seller’s failure to deliver such Buyers’ Contractual Capacity, Energy or Ancillary Services is excused to the extent that a given Facility or portion of a Facility is unavailable; provided that Seller’s failure could not have been avoided by Seller’s exercise of Good Utility Practice.

“Weighted Average Cost of Capital” (“WACOC”) means the sum of the equity component and the debt component of the WACOC. WACOC is calculated using a fixed 50% equity and 50% debt capital structure during the term of the Agreement. The equity component of the WACOC will be the product of the equity share of the capital structure and the ROE (i.e., 

8

0.5 * 0.1038). The debt component will be the product of the debt share of the capital structure and the Seller’s long-term embedded cost of debt which changes annually (i.e., 0.5 * long-term embedded cost of debt).  An example formula for calculating the WACOC is:

WACOC = (0.5 * 0.1038) + (0.5 * long-term embedded cost of debt)

1.2    Interpretation. Unless the context otherwise requires:

(a)Words singular and plural in number will be deemed to include the other and pronouns having masculine or feminine gender will be deemed to include the other.

(b)Any reference herein to any Person includes its successors and permitted assigns and, in the case of any Governmental Authority or Taxing Authority, any Person succeeding to its functions and capacities.

(c)Any reference herein to any Article, Section, clause, Exhibit or Schedule means and refers to the appropriate Article, Section or clause in this Agreement or Exhibit or Schedule to this Agreement.

(d)Other grammatical forms of defined words or phrases have corresponding meanings.

(e)The term “including” when used in this Agreement means “including without limitation.”

(f)Unless otherwise specified, a reference to a specific time for the performance of an obligation is a reference to that time in the place where that obligation is to be performed.

(g)A reference to a document or agreement, including this Agreement, includes all appendices, schedules and exhibits thereto.

(h)A reference to a document or agreement, including this Agreement, includes a reference to that document or agreement as amended, supplemented, amended and restated or otherwise modified from time to time.

(i)If any payment, act, matter or thing hereunder would occur on a day that is not a Business Day, then such payment, act, matter or thing shall, unless otherwise expressly provided for herein, occur on the next succeeding Business Day.

(j)The words “hereof,” “hereunder,” “herein,” “herewith,” and “hereto,” and similar words refer to this Agreement as a whole and not to any particular Article, Section or clause in this Agreement.

1.3    Technical Meanings. Words not otherwise defined herein that have well- known and generally accepted technical or trade meanings are used herein in accordance with such recognized meanings, as of the Effective Date.

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ARTICLE II TERM

2.1    Term.  The term of this Agreement (“Term”) shall commence on the date
this Agreement is executed by all of the Parties and shall continue, unless earlier terminated in accordance with the provisions of this Agreement, until the End Date.

2.2    Delivery Period. The period during which the Parties will be obligated to purchase and sell Capacity, Energy and Ancillary Services as set forth in this Agreement (“Delivery Period”) will commence on June 1, 2016 (“Start Date”), and end on May 31, 2024 (“End Date”).

ARTICLE III

PURCHASE AND SALE OBLIGATION

3.1    Seller’s and Buyers’ Obligations. Subject to and in accordance with the terms and conditions of this Agreement, Seller agrees to sell and deliver to each Buyer, and each Buyer agrees to purchase, receive, and pay for, each Buyer’s Share of Buyers’ Contractual Capacity and the Energy and Ancillary Services associated with that Buyer’s Share of Buyers’ Contractual Capacity delivered by Seller to the Delivery Point, during each hour of the Delivery Period. Seller further agrees to sell and deliver to Buyers, and each Buyer agrees to receive and pay for, each Buyer’s Share of any and all Environmental Attributes associated with the Facilities over the Delivery Period. Each Buyer hereby assigns to Seller, and Seller hereby accepts without recourse, that Buyer’s Share of any and all Environmental Attributes awarded to the Facilities after the Term to the extent such Environmental Attributes are owned or otherwise controlled by that Buyer.

3.2    Unit Contingent. All Buyers’ Contractual Capacity and all Energy and Ancillary Services associated with Buyers’ Contractual Capacity and all of Seller’s obligations to sell and deliver, and all of Buyers’ obligations to purchase, receive, and pay for, Buyers’ Contractual Capacity and the Energy and Ancillary Services associated with Buyers’ Contractual Capacity are Unit Contingent; provided, however, that (i) the Unit Contingent nature of Seller’s obligations to sell and deliver such Buyers’ Contractual Capacity, Energy and Ancillary Services shall only excuse Seller’s obligations to sell and deliver such Buyers’ Contractual Capacity, Energy and Ancillary Services for the first one hundred and eighty (180) consecutive days of any period of unavailability, and (ii) for the remaining period of unavailability, and for an outage of any duration which Seller could have prevented through the exercise of Good Utility Practice, Seller shall be obligated to deliver to the ATSI transmission zone Replacement Capacity, and all Energy and Ancillary Services associated with such Replacement Capacity (or the financial equivalent thereof) in lieu of the Capacity, Energy or Ancillary Services from the applicable Facility. In the event that Seller provides Replacement Capacity, and associated Energy and Ancillary Services under this Section 3.2, Seller also shall provide to Buyers replacement Environmental Attributes of the same character and amount as the Environmental Attributes that would have been provided in relation to the applicable Facility.

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3.3    Delivery Point. The “Delivery Point” for Energy and Ancillary Services associated with Buyers’ Contractual Capacity will be at the applicable Pnode ID for each Facility, which Pnode IDs currently are described in the PJM systems as:
	
		
	Unit Name
	Pnode ID

	Davis-Besse
	98370477

	W. H. Sammis 1
	98370511

	W. H. Sammis 2
	98370513

	W. H. Sammis 3
	98370515

	W. H. Sammis 4
	98370517

	W. H. Sammis 5
	98370509

	W. H. Sammis 6
	98370519

	W. H. Sammis 7
	98370521

	W. H. Sammis [EMDs]
	98370507

	OVEC
	34509945

3.4    Scheduling and Dispatch. Buyers will jointly appoint a designated agent or representative, where such designated agent or representative is not Seller, to Schedule and Dispatch and will cause that agent or representative to Schedule and Dispatch one hundred percent (100%) of the Energy and Ancillary Services from each Facility in accordance with this Agreement and pursuant to all applicable laws and any rules, customs and usages typically employed by other Persons undertaking similar obligations and within the operating parameters of each of the Facilities, as such operating parameters are determined by Seller from time to time; provided, however, that Seller will not determine or set operating parameters that would cause a Facility to incur performance charges or penalties under PJM’s capacity tariffs.

Starting on the Effective Date, but no later than five (5) business days after the Effective Date, Seller will effect in PJM’s eRPM system the transfer of all capacity rights associated with the Facilities to Buyers or Buyers’ agent or representative for the Delivery Period. Buyers will be solely responsible for offering Buyers’ Contractual Capacity into the PJM capacity auctions occurring after the Effective Date, including during the Delivery Period. Seller hereby assigns to each Buyer, and each Buyer hereby accepts that Buyer’s Share of all rights and obligations for any portion of Buyers’ Contractual Capacity for any part of the Delivery Period that has cleared in a PJM capacity auction or that is committed to PJM or another third party as of the Effective Date; and Seller hereby acknowledges that each Buyer may after the Effective Date offer on an independent basis into the PJM capacity auction during any part of the Delivery Period that Buyer’s Share of Buyers’ Contractual Capacity where such capacity has not yet cleared in the PJM capacity auction. Buyers hereby assign to Seller, and Seller hereby accepts without recourse, all rights and obligations for any portion of Buyers’ Contractual Capacity that has cleared in a PJM capacity auction or that is otherwise committed to PJM or another third party for time periods at or after termination of this Agreement.

All Energy and Ancillary Services associated with Buyers’ Contractual Capacity and made available at a given Delivery Point will be allocated to Buyers in accordance with their respective Shares and will be recorded by the Parties or their agents in PJM’s scheduling and settlement systems. All credits and charges (including Imbalance Charges) associated with the Capacity and 

11

Energy and Ancillary Services associated therewith and made available at a given Delivery Point will be allocated to Buyers in accordance with their respective Shares and will be settled in the respective PJM accounts of Buyers by means of the PJM settlement processes.

3.5    Force Majeure. To the extent any Party is prevented by Force Majeure from carrying out, in whole or part, its obligations under this Agreement (other than an obligation to pay money), and such Party (the “Affected Party”) will give notice and details of the Force Majeure to the other Parties as soon as practicable (but not later than thirty (30) days thereafter to the extent such details are then available), then the Affected Party shall be excused from the performance of its obligations under this Agreement (other than the obligation to make payments and, in the case of Seller, the obligation to sell and deliver Buyers’ Contractual Capacity) so long as the Affected Party shall be using all reasonable efforts to overcome the Force Majeure and resume performance as soon as possible. The non-Affected Party shall not be required to perform or resume performance of its obligations (excluding payment obligations) to the Affected Party corresponding to the obligations of the Affected Party excused by Force Majeure, until such time and to the extent the Affected Party resumes its performance.

ARTICLE IV

 FACILITY OPERATIONS

4.1    Operation and Maintenance. At all times during the Delivery Period, Seller
shall have an obligation to perform the Operating Work, or cause the Operating Work to be performed, in accordance with Good Utility Practice.

4.2    Capital Expenditures. From time to time during the Delivery Period, as deemed necessary by Seller, Seller shall perform, or cause to be performed, Capital Expenditures Work related to each of the W. H. Sammis Plant and the Davis-Besse Power Station. By no later than one hundred and thirty (130) days prior to the start of each PJM Delivery Year, Seller will develop and submit to Buyers for Buyers’ review and comment an annual, written capital expenditures plan for all Capital Expenditures Work deemed necessary by Seller that is scheduled to be performed at the W.H. Sammis Plant and the Davis-Besse Power Station during the referenced PJM Delivery Year. Within twenty (20) days of Buyers’ receipt of the referenced plan, Buyers will provide in writing to Seller any comments or queries to such plan, and Seller shall respond in writing (including where appropriate with documents as attachments or exhibits) to Buyers’ queries (if any) within twenty (20) days of receipt of Buyers’ comments or queries. By eighty (80) days prior to the referenced Delivery Period, Seller and Buyers will meet and discuss Buyers’ comments and queries, and Seller’s responses thereto. By seventy (70) days prior to the referenced Delivery Period, Seller will issue to Buyers a revised annual written capital expenditures plan that, to the extent reasonable, takes into account or responds to Buyers’ comments and queries, including for each instance where the Seller did not accept or adopt one or more of Buyers’ comments, an explanation for such non-acceptance or non-adoption.

Notwithstanding anything in Section 3.2 or this Section 4.2 to the contrary, in the event that a capital expenditure is required for Facility operations but such capital expenditure would render the affected Facility to be uneconomic (as determined by Seller), then, upon Buyers’ and Seller’s written agreement, Seller will either replace the Facility’s output of Capacity, Energy, Ancillary 

12

Services and Environmental Attributes (all to be delivered to the ATSI transmission zone at Seller’s cost), or this Agreement will be amended to (a) remove such Facility from the Agreement, and (b) Seller’s obligations under this Agreement will be reduced to reflect that the Facility was removed from this Agreement.

4.3    Planned Outage Schedule. Seller will develop and implement, or cause to be developed and implemented, an annual scheduled outage program for each Facility. Seller will review with Buyers the annual scheduled outage program for each such Facility by no later than one hundred and thirty (130) days prior to the start of each PJM Delivery Year. Seller agrees to notify Buyers of changes to the scheduled outage program as soon as is reasonably practicable.

4.4    Auxiliary Power. During any hour that any Facility is out of service, Seller will procure the energy used by such Facility auxiliaries during that hour.

ARTICLE V

 PRICING

5.1    Monthly Payment.  For each calendar month during the Delivery Period,
each Buyer shall pay Seller an amount (the “Monthly Payment”) as specified in Section 5.2. The Monthly Payment will be Seller’s sole compensation for Seller’s sale and delivery to Buyers of Capacity, Energy, Ancillary Services and Environmental Attributes associated with the Facilities.

5.2    Component of Monthly Payment. The Monthly Payment will comprise the sum of monthly charges for: (a) the W.H. Sammis Plant and Davis-Besse Power Station and (b) the OVEC entitlement interest.

(a)For each of the W.H. Sammis Plant and Davis-Besse Power Station, the Monthly Payment will be equal to the sum of (i) a Fuel Payment, (ii) an O&M Payment, (iii) a Depreciation Payment, (iv) a Capacity Payment, and (v) a Tax Reimbursement Payment.

(i)Fuel Payment: amount of Fuel Expenses for the given calendar month during each PJM Delivery Year.

(ii)O&M Payment: amount of Operation and Maintenance Expenses for the given calendar month during each PJM Delivery Year.

(iii)Depreciation Payment: for each calendar month during each PJM Delivery Year, amount of depreciation, accretion and decommissioning expenses actually incurred by Seller during the relevant month and directly related to each Facility. Except as may be required by law, adverse Governmental Authority action, or due to an impairment of the asset due to Governmental Authority action(s) or Change-in-Law, Seller agrees not to charge accelerated depreciation (i.e., advance the useful life of an asset) without Buyers’ written agreement.

(iv)Capacity Payment: an amount for the given calendar month during each PJM Delivery Year equal to:

13

	
			
	 
	SIC * WACOC
	 

	 
	12
	 

(v)Tax Reimbursement Payment: amount for the given calendar month of income taxes applicable to Buyers’ Capacity Payment based on the effective tax rate of the Seller equal to:

	
			
	 
	SIC *  (0.5*0.1038) * (1/(1-Seller's effective tax rate) -1)
	 

	 
	12
	 

The effective tax rate will be updated annually.

(b)For the OVEC entitlement interest, the Monthly Payment will be equal to those monthly costs or charges related to and deriving from Seller’s 4.85% entitlement in OVEC, as provided for in the Amended and Restated ICPA.

ARTICLE VI 

BILLING AND PAYMENT

6.1    Billing and Payment; Netting.  The calendar month shall be the standard
period for all payments under this Agreement. As soon as practicable after the end of each month, but no later than fifteen (15) days before payment is due, Seller will render to Buyers an invoice for the payment obligations incurred by Buyers during the preceding month. Each invoice will itemize for each Facility the components of the monthly charge to reflect the charges and components of the Monthly Payment that is described in Section 5.2 of this Agreement; a sample invoice is attached hereto as Exhibit A for reference. All invoices under this Agreement shall be due and payable on or before the twentieth (20th) day of each month. Each Buyer will make payments by electronic funds transfer to the account designated by Seller, or by other mutually agreeable method(s).

The Parties shall discharge mutual debts and payment obligations due and owing to each other under this Agreement through netting, in which case all amounts owed by Buyers and Seller to the other under this Agreement, including any related damages, interest, and payments or credits, shall be netted so that only the excess amount remaining due shall be due and payable as part of the Monthly Payment by the Buyer who owes it.

6.2    Invoice Adjustment With respect to any invoice for any Monthly Payment, a Party may in good faith identify the need for an adjustment to the invoice for any arithmetic or computational error for matters covered by the invoice. The need for any such adjustment must be identified in writing to the other Party within ninety (90) days after the month for which a Monthly Payment is due and owing, provided that such 90-day deadline will be tolled if and to the extent that Seller renders the invoice after the deadline described in Section 6.1 hereof. Absent good cause shown, failure to identify the need for any invoice adjustment for matters covered by such invoice within the 90-day deadline as described herein, including any tolling of the 90-day deadline as provided herein, constitutes acceptance of the accuracy of the invoice and no further adjustment to the invoice will be made.  If the Parties agree that an invoice should be adjusted, 

14

adjustments to payments made and received will be by netting as described in Section 6.1 hereof. Disputes about any identified adjustments to an invoice will be addressed as described in this Article VI.

6.3    Books and Records; Audit. Seller shall keep, or shall cause to be kept, all necessary books of record, books of account, and memoranda of all transactions involving each Facility, in conformance with GAAP (where required) and the FERC’s Uniform System of Accounts. Seller shall make, or shall cause to be made, all computations relating to each Facility and all allocations of the costs and expenses of each Facility. Each Buyer has the right to examine Seller’s records to the extent reasonably necessary to verify the accuracy of any statement, charge or computation made pursuant to this Agreement. If requested, Seller shall provide to any Buyer statements evidencing the quantities delivered to Buyers at the Delivery Points. If any such examination reveals any inaccuracy in any statement, the necessary adjustments in such statement and the payments thereof will be made promptly; provided, however, that any claim by a Party for overpayment or underpayment with respect to an invoice, or adjustment associated with failure to exercise Good Utility Practice, is waived unless the owing Party is notified of the claim within ninety (90) days after the invoice is rendered or any specific adjustment to the invoice is made. Seller shall reasonably and timely provide all data and information requested by any Buyer (i) to respond to a Governmental Authority’s request for information, (ii) to prepare for and make other regulatory filings or (iii) as required by law with respect to any Buyer.

ARTICLE VII LIMITATIONS

7.1       Limitation of Remedies, Liability and Damages.   FOR BREACH OF ANY
PROVISION OF THIS AGREEMENT, THE OBLIGOR’S LIABILITY SHALL BE LIMITED TO DIRECT DAMAGES ONLY, SUCH DIRECT DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY AND ALL OTHER REMEDIES OR DAMAGES AT LAW OR IN EQUITY ARE WAIVED. NO PARTY SHALL BE LIABLE FOR CONSEQUENTIAL, INCIDENTAL, PUNITIVE, EXEMPLARY OR INDIRECT DAMAGES, LOST PROFITS OR OTHER BUSINESS INTERRUPTION DAMAGES, BY STATUTE, IN TORT OR CONTRACT, UNDER ANY INDEMNITY PROVISION OR OTHERWISE.

ARTICLE VIII TAXES

8.1    Cooperation.   Each Party shall use reasonable efforts to implement the
provisions of and to administer this Agreement in accordance with the intent of the Parties to minimize all Taxes, so long as no Party is materially adversely affected by such efforts.

8.2    Taxes. Subject to the Tax Reimbursement Payment as set forth in Article V, Seller shall pay or cause to be paid all Taxes imposed on or with respect to Buyers’ Contractual Capacity and associated Energy and Ancillary Services arising prior to the Delivery Point for each Facility. Each Buyer shall pay or cause to be paid all Taxes on or with respect to that Buyer’s Share of Buyers’ Contractual Capacity and associated Energy and Ancillary Services at and from 

15

each Facility’s Delivery Point. In the event Seller is required by law or regulation to remit or pay Taxes which are any Buyer’s responsibility hereunder, that Buyer shall promptly reimburse Seller for such Taxes as set forth in Article V. If any Buyer is required by law or regulation to remit or pay Taxes which are Seller’s responsibility hereunder, that Buyer may deduct the amount of any such Taxes from the sums due to Seller under Article V of this Agreement. Nothing shall obligate or cause a Party to pay or be liable to pay any Taxes for which it is exempt under the law.

8.3    Change-in-Law Taxes. Each Buyer shall be responsible for (or receive the benefit of) all Change-in-Law Taxes on or with respect to that Buyer’s Share of Buyers’ Contractual Capacity and associated Energy and Ancillary Services.

8.4    Exemptions. Any Party, upon written request of any other Party, shall provide a certificate of exemption or other reasonably satisfactory evidence of exemption if any Party is exempt from any Taxes and shall use all reasonable efforts to obtain or maintain, or to enable the other Parties to obtain or maintain, any exemption from or reduction of any Taxes, whether currently available or becoming available in the future. Without limiting the generality of the foregoing, the Parties agree that, if beneficial to the efforts of any Party to obtain or maintain any exemption from or reduction of any Taxes, whether currently available or becoming available in the future, the Parties will cooperate to restructure the transactions contemplated by this Agreement so as to enable any Party to obtain or maintain such exemption or reduction, as the case may be; provided, however, that any such restructuring shall not affect adversely the economic consequences of this Agreement to any Party or subject any Party to any regulatory jurisdiction other than that to which it is subject on the Effective Date.

ARTICLE IX

SEVERAL OBLIGATIONS OF BUYERS

9.1   Several Obligations of Buyers.  The obligations of Buyers are several and not joint, and in no event shall a Buyer have any liability or obligation with respect to the acts or omissions of any other Buyer under this Agreement.

ARTICLE X
 CONDITIONS

10.1    Seller’s Conditions.   Seller’s obligation to consummate the transactions
contemplated hereunder is subject to Seller having obtained any and all Approvals required with respect to the performance of its obligations under this Agreement and such Approvals shall be in form and substance satisfactory to Seller in its sole and absolute discretion; provided that, in the event that Seller learns that a required Governmental Approval is lacking and after reasonable effort is not and will not be forthcoming (such reasonable effort to be determined by Seller), Seller may at any time upon ten (10) days’ written notice to Buyers terminate this Agreement. By way of emphasis and not limitation, a Governmental Approval is lacking if at any time during the Term hereof a Governmental Authority issues a determination that (i) revokes, denies, imposes, or materially and adversely modifies a Governmental Approval; (ii) results in a material change to this Agreement; (iii) materially impairs the Seller’s benefits under this Agreement or the Seller’s 

16

ability to perform hereunder; or (iv) creates material uncertainty that any of the foregoing could occur. Upon such a determination, then Seller may suspend its performance hereunder (in which event Buyer’s performance shall also be suspended) pending the resolution of such determination or uncertainty or the ultimate exercise of Seller’s termination rights under this Section 10.1.

10.2    Buyers’ Conditions. The Public Utilities Commission of Ohio (“PUCO”) approved with modifications Buyers’ Fourth Electric Security Plan (“ESP IV”) retail rate plan in Case No. 14-1297-EL-SSO on March 31, 2016 (the “March 31 Order”). If the PUCO subsequently revokes the March 31 Order or issues any order which materially and adversely impacts the Buyers’ ability to fulfill their payment obligations hereunder, then, for a period of thirty (30) days following the date such order becomes final and non-appealable, Buyers shall be entitled to terminate this Agreement upon ten (10) days’ written notice to the Seller.

10.3    Sale or Transfer of the Facilities. Upon Seller’s sale or transfer of one or more of the Facilities (except to an affiliate), including, without limitation, by operation of law, sale of assets or change of control, and there is a PUCO determination regarding such sale or transfer that adversely and materially affects the ESP IV, then upon ten (10) days’ written notice to the Seller, Buyers may terminate this Agreement. As used in this Section 10.3, “change of control” shall mean a change in the capital stock ownership greater than 50% of Seller or the applicable subsidiary owning the Facility, currently FirstEnergy Generation, LLC and FirstEnergy Nuclear Generation, LLC.

10.4    Obligations of Buyers and Seller. Commencing on the Effective Date, on the terms and subject to the conditions of this Agreement, each Party shall use its good faith efforts to take, or cause to be taken, appropriate action, and do, or cause to be done, and assist and cooperate with the other Parties in taking or doing, things necessary, proper or advisable to consummate and complete the transactions and implementing actions contemplated in this Agreement. Upon termination of this Agreement, except as otherwise expressly provided in the Agreement, all rights and obligations shall terminate and be of no further force or effect (except such rights and obligations as shall have accrued prior to termination). The Parties shall take all actions as may be reasonably necessary to effectuate such termination including all actions as may be necessary to effect such termination in PJM’s systems and provide for final billing and settlement.

ARTICLE XI

REPRESENTATIONS AND WARRANTIES

11.1    Representations and Warranties of All Parties.  As of and on the Effective
Date, Seller represents and warrants to each Buyer, and each Buyer represents to Seller, that except as set forth in Schedule 11.1 hereof, each of the following statements are true and correct:

(i)it is duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation and operation;

17

		
	(ii)
	the execution, delivery and performance of this Agreement are within its powers, have been duly authorized by all necessary action and do not violate any of the terms and conditions in its governing documents, any contracts to which it is a party;

		
	(iii)
	this Agreement constitutes a legally valid and binding obligation enforceable against it in accordance with its terms, subject to any Equitable Defenses;

		
	(iv)
	it is not Bankrupt;

		
	(v)
	there is not pending against it any legal proceedings that could materially adversely affect its ability to perform its obligations under this Agreement;

		
	(vi)
	no material breach of this Agreement with respect to it has occurred and is continuing and no such material breach would occur as a result of its entering into or performing its obligations under this Agreement; and

		
	(vii)
	it has entered into this Agreement in connection with the conduct of its business and it has the capacity or ability to make or take delivery of Buyers’ Contractual Capacity and associated Energy and Ancillary Services and Environmental Attributes as required herein.

ARTICLE XII

 MISCELLANEOUS

12.1    Title and Risk of Loss.  Title to and risk of loss related to Buyer’s Share of
Buyers’ Contractual Capacity and associated Energy and Ancillary Services shall transfer from Seller to Buyers at the Delivery Points. Seller warrants that it will deliver to each Buyer that Buyer’s Share of Buyers’ Contractual Capacity and associated Energy and Ancillary Services free and clear of all liens, security interests, claims and encumbrances or any interest therein or thereto by any Person arising prior to the Delivery Points.

12.2    Indemnity.

(a)Each Buyer shall indemnify, defend and hold harmless Seller and Seller’s partners, directors, officers, employees, agents and representatives (the “Seller Indemnified Parties”), and Seller shall indemnify, defend and hold harmless each Buyer and each Buyer’s partners, directors, officers, employees, agents and representatives (the “Buyer Indemnified Parties” and collectively with the Seller Indemnified Parties the “Indemnified Parties”), from and against any loss, cost, expense (including reasonable attorneys’ fees and disbursements), liability or Claim arising from (i) a breach of any representation, warranty or covenant under this Agreement; and (ii) any event, circumstance, act or incident first occurring or existing during the period when control of, risk of loss related to, and title to the Capacity and associated Energy and Ancillary Services is vested in such Party as provided in Section 12.1, except to the extent in the case of this Section 12.2(a)(ii), as to any Indemnified Party, such Claims are attributable to the gross negligence or willful misconduct of such Indemnified Party. Each Party shall indemnify, defend and hold harmless the other Parties against any Taxes for which such Party is responsible under Article VIII. The foregoing indemnities shall survive the termination of the Agreement.

18

(b)If any Indemnified Party receives notice of the assertion or Claim made or brought by any Person who is not a party to this Agreement or an affiliate of a party to this Agreement or a partner, director, officer, employee, agent or representative of the foregoing (an “Indemnity Claim”) against such Indemnified Party with respect to which the indemnifying Party (the “Indemnifying Party”) is obligated to provide indemnification under Section 12.2(a), the Indemnified Party shall give the Indemnifying Party reasonably prompt written notice thereof, but in any event not later than ten (10) calendar days after receipt of such notice of such Indemnity Claim. The failure to give such prompt written notice shall not, however, relieve the Indemnifying Party of its indemnification obligations, except and only to the extent that the Indemnifying Party is materially prejudiced thereby. The Indemnifying Party shall have the right to participate in, or by giving written notice to the Indemnified Party, to assume the defense of any Indemnity Claim at the Indemnifying Party’s expense and by the Indemnifying Party’s own counsel, and the Indemnified Party shall cooperate in good faith in such defense. In the event that the Indemnifying Party assumes the defense of any Indemnity Claim it shall have the right to take such reasonable action as it deems necessary to avoid, dispute, defend, appeal or make counterclaims pertaining to any such Indemnity Claim in the name and on behalf of the Indemnified Party. The Indemnified Party shall have the right to participate in the defense of any Indemnity Claim with counsel selected by it. Notwithstanding any other provision of this Agreement, the Indemnifying Party shall not enter into settlement of any Indemnity Claim without the prior written consent of the Indemnified Party (which consent shall not be unreasonably withheld or delayed).

12.3    Amendments and Waivers. Neither this Agreement nor any provisions hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by all Parties.

12.4    Notices. All notices, requests, statements or payments shall be made as specified in this Schedule 12.4. Notices, other than notices regarding availability, Scheduling and Dispatch of each Facility shall, unless otherwise specified herein, be in writing and shall be deemed to be given or made if delivered by (a) hand delivery, electronic mail or other electronic transmission device capable of written record or facsimile, in each case, effective at the close of business on the day actually received, if received during business hours on a Business Day, otherwise shall be effective at the close of business on the next Business Day, or (b) United States mail or overnight courier service, in each case, effective on the next Business Day after it was sent. Notices  regarding  the  availability,  Scheduling  and  Dispatch  of  each  Facility may be  made (x) telephonically, effective when made, or (y) by electronic mail or other electronic device capable of written record, effective when received. A Party may change its notice details by providing a notice of same to the other Parties in accordance herewith.

12.5    Dispute Resolution. The following shall apply in respect of any dispute that arises under or in connection with this Agreement:

(a)    Senior Officers Meeting Procedures. A Party may initiate a dispute resolution process by submitting written notice of such dispute to the other Party. Each of the Parties shall, within five (5) Business Days of such receipt of such written notice of dispute, designate in writing to the other Party a senior officer who shall be authorized to address and resolve any dispute under this Agreement. The respective senior officers will meet in person or via telecommunications conference within fifteen (15) Business Days of receipt of such written

19

notice of dispute to attempt to negotiate in good faith resolution of the dispute. Such negotiations will conclude within twenty (20) Business Days of receipt of such written notice of dispute.

(b)    Arbitration. In the event that any dispute is not resolved at the conclusion of the senior officers meeting procedures described herein, either Party may submit the dispute for resolution through binding arbitration. The arbitration shall be conducted by three (3) arbitrators.  Each group of Parties (i.e., Buyers and Seller) shall select an arbitrator within twenty (20) days of commencement of the arbitration who shall serve as a neutral arbitrator, and the two designated arbitrators shall select a third neutral arbitrator within thirty (30) days of their selection. If the two arbitrators cannot agree on election of a third arbitrator within thirty (30) days of their appointment, the American Arbitration Association shall select such arbitrator. The arbitration shall be conducted in accordance with the then existing Commercial Rules of the American Arbitration Association, except that the arbitrators shall have no authority to award punitive/consequential/special/indirect damages. The arbitration shall be conducted in Akron, Ohio. The laws of the State of Ohio shall be applied in any arbitration proceedings, without regard to principles of conflict of laws. The cost of the arbitration proceeding and any proceeding in court to confirm or to vacate any arbitration award, as applicable (including, without limitation, reasonable attorneys’ fees and costs), shall be borne by the unsuccessful Party, as determined by the arbitrators, and shall be awarded as part of the arbitrator’s award. It is specifically understood and agreed that any Party may enforce any award rendered pursuant to the arbitration provisions of this Section by bringing suit in any court of competent jurisdiction. This arbitration clause shall be specifically enforceable; a Party may apply to any court with jurisdiction to compel arbitration. This Section 12.5 shall survive termination of this Agreement.

12.6    Successors and Assigns; Assignment. The provisions of this Agreement shall be binding upon and inure to the benefit of the Parties and the Parties’ successors and assigns permitted hereby and no other Person (other than the Indemnified Parties) shall acquire or have any rights under or by virtue of this Agreement. No Buyer shall assign this Agreement or its rights hereunder without the prior written consent of Seller, and Seller shall not assign this Agreement or its rights hereunder without the prior written consent of each Buyer, which consent, in each case, may be withheld in the applicable Party’s sole and absolute discretion; provided, however, that any Party may, without the consent of any other Party (and without relieving itself from liability hereunder) (i) transfer, sell, pledge, encumber or assign this Agreement or the accounts, revenues or proceeds hereof in connection with any financing or other financial arrangements or transfer or assign this Agreement to an affiliate which shall agree in writing to be bound by the terms and conditions of this Agreement, provided that such affiliate must have and hold the financial and operational capabilities and resources necessary to accomplish all of the transferring Party’s obligations hereunder.

12.7    Integration. This Agreement constitutes the entire agreement between the Parties relating to the subject matter hereof and supersedes any and all previous and understandings, oral or written, between the Parties relating to the subject matter hereof.

12.8    Acknowledgments. This Agreement shall be considered for all purposes as prepared through the joint efforts of the Parties and shall not be construed against one Party or any other as a result of the preparation, substitution, submission or other event of negotiation, drafting or execution hereof.

20

12.9    Waiver. No failure to exercise and no delay in exercising by a Party any right, remedy, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any right, remedy power or privilege.

12.10 Counterparts. This Agreement may be executed by the Parties in any number of counterparts, which, taken together, shall constitute one and the same legal binding instrument. Delivery of an executed counterpart of a signature page of this Agreement by facsimile transmission shall be effective as delivery of a manually executed counterpart of this Agreement.

12.11 Headings.   The headings used herein are for convenience and reference purposes only.

12.12 Confidentiality. No Party shall disclose the terms or conditions of this Agreement to a third party (other than the Parties’ employees, lenders, counsel, accountants or advisors who have a need to know such information and have agreed to keep such terms confidential) except in order to comply with any applicable law, regulation, or any exchange, control area or independent system operator rule or in connection with any court or regulatory proceeding; provided, however, that each Party shall, to the extent practicable, use reasonable efforts to prevent or limit the disclosure. Subject to the provisions of Section 7.1, the Parties shall be entitled to all remedies available at law or in equity to enforce, or seek relief in connection with this confidentiality obligation; provided, however, that Section 7.1 shall not restrict a Party from any right it may have to apply to a court of competent jurisdiction for relief by way of injunction, restraining order, decree or other equitable remedies to ensure compliance by the breaching Party and its affiliates with the provisions of this Section 12.12.

12.13 Governing Law. THIS AGREEMENT AND THE RIGHTS AND DUTIES OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED, ENFORCED AND PERFORMED IN ACCORDANCE WITH THE LAWS OF THE STATE OF OHIO, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.

12.14 Severability. If and to the extent that a Governmental Authority rules that any term or provision of this Agreement is invalid, illegal, or unenforceable, such term or provision shall be severed from this Agreement and be of no force or effect and such invalidity, illegality or unenforceability shall not affect any other term or provision of this Agreement or invalidate or render unenforceable any other term or provision of this Agreement; provided, however, that upon a determination of invalidity, illegality or unenforceability of any the terms and provisions of Articles III, IV, V and X of this Agreement, the Parties may negotiate in good faith to modify this Agreement (which modification will be by a duly executed written amendment) to effect the original intent of the Parties as closely as possible in order that the transactions contemplated herein be consummated as originally contemplated if such consummation can be achieved lawfully; provided, however, that if the Parties are unable to reach an amended Agreement, then the remainder of this Agreement will be unenforceable except to the extent necessary for the Parties to take all actions as may be reasonably necessary to wind up their transactions under this Agreement.

21

12.15 Standard of Review. Absent the agreement of all Parties to the proposed change, the standard of review for changes to any rate, charge, classification, term or condition of this Agreement, whether proposed by a Party, a non-party or FERC acting sua sponte, shall be the “public interest” standard of review set forth in United Gas Pipe Line Co. v. Mobile Gas Service Corp., 350 U.S. 332 (1956) and Federal Power Commission v. Sierra Pacific Power Co., 350 U.S. 348 (1956) and clarified by Morgan Stanley Capital Group, Inc. v. Public Util. Dist. No. 1 of Snohomish 554 U.S. (2008) (the “Mobile-Sierra” doctrine).

[signatures appear on next page]

22

IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed and delivered by their duly authorized representatives as of the Effective Date.

FIRSTENERGY SOLUTIONS CORP.
     	
		
	By:

	Its:

	 
	 

	By:
	 /s/ Kevin T. Warvell

	Name:  Kevin T. Warvell

	Title:  VP, Commercial Operations Structuring & Pricing

 

OHIO EDISON COMPANY
     	
		
	By:     FirstEnergy Service Company

	Its:      Agent

	 
	 

	By:
	 /s/ Jay A. Ruberto

	Name:  Jay A. Ruberto

	Title:  Director, Regulated Generation & Dispatch

THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
     	
		
	By:     FirstEnergy Service Company

	Its:      Agent

	 
	 

	By:
	 /s/ Jay A. Ruberto

	Name:  Jay A. Ruberto

	Title:  Director, Regulated Generation & Dispatch

THE TOLEDO EDISON COMPANY
     	
		
	By:     FirstEnergy Service Company

	Its:      Agent

	 
	 

	By:
	 /s/ Jay A. Ruberto

	Name:  Jay A. Ruberto

	Title:  Director, Regulated Generation & Dispatch

SCHEDULE 11.1

REPRESENTATIONS AND WARRANTIES OF ALL PARTIES

Pending Proceedings

		
	a.
	In Electric Power Supply Association v. FirstEnergy Solutions Corporation, FERC Docket No. EL16-34-000, certain entities filed a complaint requesting FERC review of this Agreement under Section 205 of the Federal Power Act. This proceeding remains pending.

		
	b.
	In Calpine Corporation v. PJM Interconnection, L.L.C., FERC Docket No. EL16- 49-000, a number of generation owners filed a complaint against PJM requesting that FERC expand the Minimum Offer Price Rule in the PJM Tariff to prevent the alleged artificial suppression of prices in the PJM capacity markets by state-subsidized generation, in particular this Agreement and other similar agreements.

SCHEDULE 12.4 
NOTICE INFORMATION

	
					
	 
	 
	 
	 
	 

	If to Seller:
	 
	If to Buyers:

	 
	 
	 
	 
	 

	 
	FirstEnergy Solutions Corp.
	 
	 
	Ohio Edison Company

	 
	341 White Pond Drive 
	 
	 
	c/o FirstEnergy Service Company

	 
	Akron, Ohio 44320
	 
	 
	5001 NASA Boulevard

	 
	Attention:  Vice President,
	 
	 
	Fairmont WV 26554

	 
	Commercial Ops, Structuring &
	 
	 
	Attention:  Director, Regulated

	 
	Pricing
	 
	 
	Generation & Dispatch

	 
	 
	 
	 
	 

	with a copy to:
	 
	 
	The Cleveland Electric Illuminating

	 
	 
	 
	 
	Company

	 
	FirstEnergy Service Company
	 
	 
	c/o FirstEnergy Service Company

	 
	76 South Main Street
	 
	 
	5001 NASA Boulevard

	 
	Akron, Ohio 44308
	 
	 
	Fairmont WV 26554

	 
	Attention:  Legal: Associate General
	 
	 
	Attention:  Director, Regulated

	 
	Counsel, State Comp
	 
	 
	Generation & Dispatch

	 
	 
	 
	 
	 

	 
	 
	 
	 
	The Toledo Edison Company

	 
	 
	 
	 
	c/o FirstEnergy Service Company

	 
	 
	 
	 
	5001 NASA Boulevard

	 
	 
	 
	 
	Fairmont WV 26554

	 
	 
	 
	 
	Attention:  Director, Regulated

	 
	 
	 
	 
	Generation & Dispatch

	 
	 
	 
	 
	 

	 
	 
	 
	with a copy to:

	 
	 
	 
	 
	 

	 
	 
	 
	 
	FirstEnergy Service Company

	 
	 
	 
	 
	76 South Main Street

	 
	 
	 
	 
	Akron, Ohio 44308

	 
	 
	 
	 
	Attention:  Legal: Associate General

	 
	 
	 
	 
	Counsel, State Reg

	 
	 
	 
	 
	 

EXHIBIT A 
SAMPLE INVOICE

FirstEnergy Solutions
341 White Pond Dr.                        Invoice Date:
Akron, OH 44320                        Invoice No.

Buyer Information:
Ohio Edison Company
The Cleveland Electric Illuminating Company 
The Toledo Edison Company
c/o FirstEnergy Service Company 
76 S. Main  St.
Akron, OH 44308

	
													
	Description of Charges
	 
	 
	 
	 
	 
	 

	 
	 
	OVEC
	 
	Davis Besse
	 
	Sammis

	 
	 
	 
	 
	 
	 
	 

	Fuel Payment
	 
	$
	—
	

	 
	$
	—
	

	 
	$
	—
	

	Operations & Maintenance Payment
	 
	—
	

	 
	—
	

	 
	—
	

	Depreciation Payment
	 
	—
	

	 
	—
	

	 
	—
	

	Capacity Payment
	 
	—
	

	 
	—
	

	 
	—
	

	Tax Reimbursement Payment
	 
	—
	

	 
	—
	

	 
	—
	

	Total Contract Monthly Payment by Facility
	 
	$
	—
	

	 
	$
	—
	

	 
	$
	—
	

	 
	 
	 
	 
	 
	 
	 

	Total Contract Monthly Payment
	 
	 
	 
	 
	 
	$
	—
	

PAYMENT DUE BY  ___ 20, 2016Exhibit 10.1

 

EPIQ SYSTEMS, INC.

2004 EQUITY INCENTIVE PLAN

 

(amended and restated effective as of January 1, 2016)

 

1. Purpose.

 

This plan shall be known as the Epiq Systems, Inc. Amended and Restated 2004 Equity Incentive Plan (this “Plan”). The purpose of this Plan shall be to promote the long-term growth and profitability of Epiq Systems, Inc. (the “Company”) and its Subsidiaries by (i) providing certain directors, officers and employees of, and certain other individuals who perform services for, or to whom an offer of employment has been extended by, the Company and its Subsidiaries with incentives to maximize stockholder value and otherwise contribute to the success of the Company and (ii) enabling the Company to attract, retain and reward the best available persons for positions of responsibility. Any combination of Awards may be made under this Plan.

 

2. Definitions.

 

(a) “Award” means any Non-Qualified Stock Option, Incentive Stock Option, SAR, Restricted Stock, Shares, Other Stock-Based Awards, cash or Performance Award.

 

(b) “Board of Directors” and “Board” mean the board of directors of the Company.

 

(c) “Cause,” unless otherwise defined in a participant’s award grant agreement or in a participant’s written employment arrangement with the Company or any of its Subsidiaries in effect on the Grant Date (as amended from time to time thereafter), means the occurrence of one or more of the following events:

 

(i) conviction of a felony or any crime or offense lesser than a felony involving fraud, embezzlement, dishonesty, moral turpitude or the property of the Company or a Subsidiary; or

 

(ii) conduct that has caused, or should have reasonably been expected to cause, demonstrable and serious injury to the Company or a Subsidiary, monetary or otherwise; or

 

(iii) refusal to perform or substantial disregard of material duties properly assigned, as determined by the Company; or

 

(iv) breach of duty of loyalty to the Company or a Subsidiary or other act of fraud or dishonesty with respect to the Company or a Subsidiary, including any unauthorized use or disclosure of any proprietary information or trade secrets of the Company or any other party to whom the participant owes an obligation of nondisclosure as a result of his or her relationship with the Company.

 

The definition of Cause set forth in a participant’s award grant agreement shall control only with respect to such award grant agreement (and no other agreement) if such definition is different from the definition of Cause set forth in this Plan or in the participant’s written employment arrangement with the Company or any of its Subsidiaries in effect on the Grant Date (as amended from time to time thereafter).

 

(d) “Change in Control” means the consummation of an event constituting one of the following:

 

(i) if any “person” or “group” as those terms are used in Sections 13(d) and 14(d) of the Exchange Act or any successors thereto is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act or any successor thereto), directly or indirectly, of securities of the Company representing 50% or more of the combined voting power of the Company’s then outstanding voting securities; or

 

(ii) during any period of two consecutive years, a majority of the Board ceases to be constituted by individuals who either (A) at the beginning of such period constituted the Board, or (B) thereafter became new directors whose election by the Board or nomination for election by the Company’s stockholders was approved by at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election was previously so approved; or

 

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(iii) a merger or consolidation of the Company with any other entity in which the Company is not the surviving entity (in each case, the surviving entity of such merger or consolidation shall be the New Employer, as defined below), other than a merger or consolidation (A) which would result in all or a portion of the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation or (B) by which the corporate existence of the Company is not affected and following which the Company’s chief executive officer and directors retain their positions with the Company (and constitute at least a majority of the Board);

 

(iv) for any and all Awards issued prior to July 28, 2016, the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all the Company’s assets; or

 

(v) for any and all Awards issued after July 28, 2016, (a) the consummation of a sale or disposition by the Company of all or substantially all of the Company’s assets other than the sale or disposition of all or substantially all of the Company’s assets to a person or persons who beneficially own, directly or indirectly, 50% or more of the combined voting power of the voting securities of the Company outstanding at the time of the sale, or (b) the stockholders of the Company approve a plan of complete liquidation of the Company.

 

(e) “Code” means the Internal Revenue Code of 1986, as amended.

 

(f) “Committee” means the Compensation Committee of the Board or such other committee that consists solely of two or more members of the Board, each of whom is a “Non-Employee Director” within the meaning of SEC Rule 16b-3 and is an “outside director” within the meaning of Treasury Regulation §1.162-27(e)(3); provided that, if for any reason the Committee shall not have been appointed by the Board to administer this Plan, all authority and duties of the Committee under this Plan shall be vested in and exercised by the Board, and the term “Committee” shall be deemed to mean the Board for all purposes herein.

 

(g) “Common Stock” means the common stock, par value $0.01 per share, of the Company, and any other shares into which such stock may be changed by reason of a recapitalization, reorganization, merger, consolidation or any other change in the corporate structure or capital stock of the Company.

 

(h) “Competition” is deemed to occur, unless otherwise defined in a participant’s award grant agreement or in the participant’s written employment arrangement with the Company or any of its Subsidiaries in effect on the Grant Date (as amended from time to time thereafter) if a person whose employment with the Company or its Subsidiaries has terminated obtains a position as a full-time or part-time employee of, as a member of the board of directors of, or as a consultant or advisor with or to, or acquires an ownership interest in excess of 5% of, a corporation, partnership, firm or other entity that engages in any of the businesses of the Company or any Subsidiary with which the person was involved in a management role at any time during his or her last five years of employment with or other service for the Company or any Subsidiaries. The definition of Competition set forth in a participant’s award grant agreement shall control only with respect to such award grant agreement (and no other agreement) if such definition is different from the definition of Competition set forth in this Plan or in the participant’s written employment arrangement with the Company or any of its Subsidiaries in effect on the Grant Date (as amended from time to time thereafter).

 

(i) “Covered Employee” is any Eligible Employee who (i) as of the close of the taxable year, is the chief executive officer of the Company or is an individual acting in that capacity, (ii) the total compensation of the employee for the taxable year is required to be reported to shareholders under the executive compensation disclosure rules under the Exchange Act, or (iii) is otherwise a “covered employee” for purposes of Section 162(m) of the Code.

 

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(j) “Disability” means a disability that would entitle an eligible participant to payment of monthly disability payments under any Company long-term disability plan or as otherwise determined by the Committee.

 

(k) “Eligible Person” means those directors (including Non-Employee Directors), officers (including non-employee officers) and employees of, and other individuals performing services for, or to whom an offer of employment has been extended by, the Company and its Subsidiaries selected by the Committee (including participants located outside the United States).

 

(l) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

(m) “Family Member” has the meaning given to such term in General Instructions A.1(a)(5) to Form S-8 under the Securities Act of 1933, as amended, and any successor thereto.

 

(n) “Fair Market Value” of a share of Common Stock of the Company means, as of the date in question, the officially-quoted closing selling price of the stock (or if no selling price is quoted, the bid price) on the principal securities exchange on which the Common Stock is then listed for trading (including for this purpose the Nasdaq Global Select Market) (the “Market”) for the applicable trading day or, if the Common Stock is not then listed or quoted in the Market, the Fair Market Value shall be the fair value of the Common Stock determined in good faith by the Committee; provided, however, that when Shares received upon exercise of an Option are immediately sold in the open market, the net sale price received may be used to determine the Fair Market Value of any shares used to pay the exercise price or applicable withholding taxes and to compute the withholding taxes.

 

(o) “Grant Date” means the date on which the Board or the Committee determines and approves the grant of an Award. Such approval shall include, but not be limited to, a final determination as to the Award recipient(s), exercise price (if any), number of Awards or shares subject to an Award granted to each recipient, vesting schedule, and the type of such Awards (e.g., Incentive Stock Options, Non-qualified Stock Options, Restricted Stock).

 

(p) “Incentive Stock Option” means an option conforming to the requirements of Section 422 of the Code and any successor thereto.

 

(q) “Market” has the meaning given such term in Section 2(n).

 

(r) “New Employer” means the employer of a participant under this Plan, or the parent or a subsidiary of such employer, immediately following a Change in Control.

 

(s) “Non-Employee Director” has the meaning given to such term in Rule 16b-3 under the Exchange Act and any successor thereto.

 

(t) “Non-qualified Stock Option” means any stock option other than an Incentive Stock Option.

 

(u) “Option” means a Non-Qualified Stock Option and/or an Incentive Stock Option.

 

(v) “Other Stock-Based Awards” has the meaning given such term in Section 9.

 

(w) “Performance Award” means a performance-based Award determined under Sections 8, 9 and 10 of this Plan.

 

(x) “Performance-Based Exception” means the performance-based exception from the tax deductibility limitations of Code Section 162(m) contained in Code Section 162(m)(4)(C) (including the special provision for options thereunder).

 

(y) “Performance Goals” means the objective criteria determined by the Committee, the degree of attainment of which shall determine the grant, payment or vesting of a Performance Award. Performance Goals may contain threshold and maximum levels of achievement and, with respect to Performance Awards granted to Covered Persons, must be based upon one or more of the Performance Measures set forth in Section 10(c)(i).

 

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(z) “Performance Period” means that period established by the Committee at the time any Award is granted or at any time thereafter during which the attainment of performance goals specified by the Committee with respect to that Award are to be measured. Except as provided in Section 10, a Performance Period may be a year or a longer or shorter period.

 

(aa) “Restricted Stock” means an Award of Shares under this Plan that is subject to restrictions under Section 8.

 

(bb) “Retirement” means, unless otherwise defined under an applicable award grant agreement, retirement as defined under the Company’s tax-qualified pension plan, or, if the Company does not maintain a tax-qualified pension plan, the Committee’s determination that a participant’s termination of employment is deemed to be a retirement.

 

(cc) “Shares” means any share of the Common Stock of the Company.

 

(dd) “SARs” means an Award of Stock Appreciation Rights under this Plan that is subject to Sections 7 and 8.

 

(ee) “Subsidiary” means a corporation or other entity of which outstanding shares or ownership interests representing 50% or more of the combined voting power of such corporation or other entity entitled to elect the management thereof, or such lesser percentage as may be approved by the Committee, are owned directly or indirectly by the Company.

 

(ff) “Year” means the fiscal year of the Company.

 

3. Administration.

 

The Plan shall be administered by the Committee; provided that a majority of the independent directors of the Board may, in their sole discretion, at any time and from time to time, resolve to administer this Plan, in which case the term “Committee” shall be deemed to mean such independent directors for all purposes herein. Subject to the provisions of this Plan, the Committee shall be authorized to:

 

(i) select persons to participate in this Plan;

 

(ii) determine the form and substance of grants made under this Plan to each participant, and the conditions and restrictions, if any, subject to which such grants will be made;

 

(iii) certify that the conditions and restrictions applicable to any grant have been met;

 

(iv) modify the terms of grants made under this Plan;

 

(v) interpret this Plan and grants made thereunder;

 

(vi) make any adjustments necessary or desirable in connection with grants made under this Plan to eligible participants located outside the United States; and

 

(vii) adopt, amend, or rescind such rules and regulations, and make such other determinations, for carrying out this Plan as it may deem appropriate.

 

Decisions of the Committee on all matters relating to this Plan shall be in the Committee’s sole discretion and shall be conclusive and binding on all parties. The validity, construction, and effect of this Plan and any rules and regulations relating to this Plan shall be determined in accordance with applicable federal and state laws and rules and regulations promulgated pursuant thereto. No member of the Committee and no officer of the Company shall be liable for any action taken or omitted to be taken by such member, by any other member of the Committee or by any officer of the Company in connection with the performance of duties under this Plan, except for such person’s own willful misconduct or as expressly provided by statute.

 

The expenses of this Plan shall be borne by the Company. The Plan shall not be required to establish any special or separate fund or make any other segregation of assets to assume the payment of any Award under this Plan, and rights to the payment of such awards shall be no greater than the rights of the Company’s general creditors.

 

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4. Shares Available for this Plan.

 

Subject to adjustments as provided in Section 16, no more than a total of 10,825,000 shares of Common Stock are authorized for issuance pursuant to this Plan, and no equity awards shall be made under other Company plans after the date of shareholder approval of this most recent amendment and restatement; provided that there shall be added to the reserve of shares that are authorized and available for issuance pursuant to this Plan any shares that are currently subject to awards but as to which shares are not issued due to a forfeiture, cancellation, or other settlement thereof (except for any shares subject to inducement awards that were granted pursuant to an exemption from shareholder approval). Such Shares may be in whole or in part authorized and unissued or held by the Company as treasury shares. If any grant under this Plan expires or terminates unexercised, becomes unexercisable or is forfeited as to any Shares, or is tendered or withheld as to any shares in payment of the exercise price of the grant or the taxes payable with respect to the exercise, then such unpurchased, forfeited, tendered or withheld Shares shall thereafter be available for further grants under this Plan unless, in the case of Options granted under this Plan, related SARs are exercised. Upon termination of this Plan, any remaining unpurchased, forfeited, tendered or other withheld shares that were reserved for Awards shall be released to the Company and/or otherwise considered available for issuance outside of this Plan unless otherwise specifically determined by the Board or the Company by-laws, as applicable.

 

Without limiting the generality of the foregoing provisions of this Section 4 or the generality of the provisions of Sections 3, 6 or 18 or any other section of this Plan, the Committee may, at any time or from time to time, and on such terms and conditions (that are consistent with and not in contravention of the other provisions of this Plan) as the Committee may, in its sole discretion, determine, enter into agreements (or take other actions with respect to Options) for new Options containing terms (including exercise prices) more (or less) favorable than the outstanding Options, provided that no repricing under the rules of the Market shall occur unless approved by the Company’s shareholders.

 

5. Participation.

 

Participation in this Plan shall be limited to Eligible Persons. Nothing in this Plan or in any grant thereunder shall confer any right on a participant to continue in the employ as a director or officer of or in the performance of services for the Company or shall interfere in any way with the right of the Company to terminate the employment or performance of services or to reduce the compensation or responsibilities, with or without Cause, of a participant at any time. By accepting any Award under this Plan, each participant and each person claiming under or through him or her shall be conclusively deemed to have indicated his or her acceptance and ratification of, and consent to, any action taken under this Plan by the Company, the Board or the Committee.

 

Incentive Stock Options, Non-qualified Stock Options, SARs, alone or in tandem with Options, Restricted Stock Awards, or any combination thereof may be granted to such persons and for such number of Shares as the Committee shall determine subject to the terms of this Plan (such individuals to whom grants are made being sometimes herein called “optionees” or “grantees”). Determinations made by the Committee under this Plan need not be uniform and may be made selectively among Eligible Persons under this Plan, whether or not such persons are similarly situated. A grant of any type made hereunder in any one year to an Eligible Person shall neither guarantee nor preclude a further grant of that or any other type to such participant in that year or subsequent years.

 

Notwithstanding anything to the contrary, the maximum value as of the Grant Date of any Share-based Award granted to any Non-Employee Director during any calendar year will not exceed $270,000, such limit which, for the avoidance of doubt, applies to Awards granted under this Plan only and does not include Shares granted in lieu of all or any portion of such Non-Employee Director’s cash retainer fees.

 

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6. Incentive and Non-qualified Stock Options and SARs.

 

The Committee may from time to time grant to Eligible Persons Incentive Stock Options, Non-qualified Stock Options, or any combination thereof; provided that the Committee may grant Incentive Stock Options only to Eligible Persons that are employees of the Company or its Subsidiaries (as defined for this purpose in Section 424(f) of the Code or any successor thereto). In any one calendar year, the Committee shall not grant to any one participant Non-qualified Stock Options, Incentive Stock Options or SARs to purchase a number of Shares in excess of 300,000 Shares for each type of Award, as such number may be adjusted pursuant to Section 16 below. The Options granted shall take such written form as the Committee shall determine, subject to the following terms and conditions.

 

It is the Company’s intent that Non-qualified Stock Options granted under this Plan not be classified as Incentive Stock Options, that Incentive Stock Options be consistent with and contain or be deemed to contain all provisions required under Section 422 of the Code and any successor thereto, and that any ambiguities in construction be interpreted in order to effectuate such intent. Each award grant agreement shall specifically indicate whether the Option granted is an Incentive Stock Option or a Non-qualified Stock Option. If an Incentive Stock Option granted under this Plan does not qualify as such for any reason, then to the extent of such non-qualification, the Option represented thereby shall be regarded as a Non-qualified Stock Option duly granted under this Plan, provided that such Option otherwise meets this Plan’s requirements for Non-qualified Stock Options.

 

(a) Price. The price per Share deliverable upon the exercise of each Option (“exercise price”) shall be established by the Committee and may not be less than 100% of the Fair Market Value of a Share as of the Grant Date of the Option, and in the case of the grant of any Incentive Stock Option to an employee who, at the time of the grant, owns more than 10% of the total combined voting power of all classes of stock of the Company or any of its Subsidiaries, the exercise price may not be less than 110% of the Fair Market Value of a Share as of the Grant Date of the Option, in each case unless otherwise permitted by Section 422 of the Code or any successor thereto.

 

(b) Payment. Options may be exercised, in whole or in part, upon payment of the exercise price of the Shares to be acquired. Unless otherwise determined by the Committee, payment shall be made (i) in cash (including check, bank draft, money order or wire transfer of immediately available funds), (ii) by delivery of outstanding Shares with a Fair Market Value on the date of exercise equal to the aggregate exercise price payable with respect to the Options exercised, (iii) by simultaneous sale through a broker reasonably acceptable to the Committee of Shares acquired on exercise, as permitted under Regulation T of the Federal Reserve Board, (iv) by authorizing the Company to withhold from issuance a number of Shares issuable upon exercise of the Options, which, when multiplied by the Fair Market Value of a Share on the date of exercise, is equal to the aggregate exercise price payable with respect to the Options so exercised or (v) by any combination of the foregoing. Notwithstanding any other provision of this Plan to the contrary, no participant who is a director or an “executive officer” of the Company within the meaning of Section 13(k) of the Exchange Act shall be permitted to make payment with respect to any Awards, or continue any extension of credit with respect to such payment with a loan from the Company or a loan arranged by the Company in violation of Section 13(k) of the Exchange Act.

 

In the event a grantee elects to pay the exercise price payable with respect to an Option pursuant to clause (ii) above, (A) only a whole number of Shares (and not fractional Shares) may be tendered in payment, and (B) Common Stock must be delivered to the Company. Delivery for this purpose may, at the election of the grantee, be made either by (1) physical delivery of the certificate(s) for all such Shares tendered in payment of the price, accompanied by duly executed instruments of transfer in a form acceptable to the Company, or (2) direction to the grantee’s broker to transfer, by book entry, such Shares from a brokerage account of the grantee to a brokerage account specified by the Company. When payment of the exercise price is made by delivery of Shares, the difference, if any, between the aggregate exercise price payable with respect to the Option being exercised and the Fair Market Value of the Shares tendered in

 

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payment (plus any applicable taxes) shall be paid in cash. No grantee may tender Shares having a Fair Market Value exceeding the aggregate exercise price payable with respect to the Option being exercised (plus any applicable taxes).

 

In the event a grantee elects to pay the exercise price payable with respect to an Option pursuant to clause (iv) above, only a whole number of Share(s) (and not fractional Shares) may be withheld in payment. When payment of the exercise price is made by withholding of Shares, the difference, if any, between the aggregate exercise price payable with respect to the Option being exercised and the Fair Market Value of the Shares withheld in payment (plus any applicable taxes) shall be paid in cash. No grantee may authorize the withholding of Shares having a Fair Market Value exceeding the aggregate exercise price payable with respect to the Option being exercised (plus any applicable taxes). Any withheld Shares shall no longer be issuable under such Option.

 

(c) Terms of Options. The term during which each Option may be exercised shall be determined by the Committee; provided that: (i) no Option shall be exercisable in whole or in part more than ten (10) years after the Grant Date; and (ii) and no Incentive Stock Option granted to an employee who at the time of the grant owns more than 10% of the total combined voting power of all classes of stock of the Company or any of its Subsidiaries shall be exercisable more than five (5) years after the Grant Date; in each case unless otherwise permitted by Section 422 of the Code or any successor thereto. All rights to purchase Shares pursuant to an Option shall, unless sooner terminated, expire at the date designated by the Committee. Each Option shall be subject to a minimum vesting period of at least one (1) year commencing from the Grant Date; provided that up to an aggregate 540,000 Shares underlying Options and SARs may be issued during the effectiveness of this Plan without being subject to a minimum vesting period. For the purpose of clarity, this clause (c) will not prevent the Committee from accelerating the vesting of any Option in accordance with any of the provisions set forth in this Plan. The Committee may provide that an Option shall become exercisable in installments. The Shares constituting each installment may be purchased in whole or in part at any time after such installment becomes exercisable, subject to such minimum exercise requirements as may be designated by the Committee. Prior to the exercise of an Option and delivery of the Shares represented thereby, the optionee shall have no rights as a stockholder with respect to any Shares covered by such outstanding Option (including any dividend or voting rights).

 

(d) Limitations on Grants. If required by the Code, the aggregate Fair Market Value (determined as of the Grant Date) of Shares for which Incentive Stock Options are exercisable for the first time by any one participant during any calendar year under all equity incentive plans of the Company and its Subsidiaries (as defined for this purpose in Section 424(f) of the Code or any successor thereto) may not exceed $100,000.

 

(e) Termination; Forfeiture.

 

(i) Death or Disability. Unless otherwise provided in a participant’s award grant agreement, if a participant ceases to be a director, officer or employee of the Company and any Subsidiary due to death or Disability, (A) all of the participant’s Options and SARs that were exercisable on the date of death or Disability shall remain exercisable for, and shall otherwise terminate at the end of, a period of one year from the date of such death or Disability, but in no event after the expiration date of the Options or SARs; provided that, in the case of Disability, the participant does not engage in Competition during such one year period unless he or she received written consent to do so from the Board or the Committee, and (B) all of the participant’s Options and SARs that were not exercisable on the date of death or Disability shall be forfeited immediately upon such death or Disability; provided, however, that such Options or SARs may become fully vested and exercisable in the discretion of the Committee. If a participant other than a director, officer or employee of the Company and any Subsidiary ceases to perform services for the Company and any Subsidiary due to death or Disability, the provisions set forth in such participant’s award grant agreement shall control. Notwithstanding the foregoing, if the Disability giving rise to the termination of employment is not within the meaning of Section 22(e)(3) of the Code or any successor thereto, Incentive Stock Options not exercised by such

 

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participant within 3 months after the date of termination of employment will cease to qualify as Incentive Stock Options and will be treated as Non-qualified Stock Options under this Plan if required to be so treated under the Code.

 

(ii) Retirement. Unless otherwise provided in a participant’s award grant agreement, if a participant ceases to be a director, officer or employee of the Company and any Subsidiary upon the occurrence of his or her Retirement, (A) all of the participant’s Options and SARs that were exercisable on the date of Retirement shall remain exercisable for, and shall otherwise terminate at the end of, a five (5) year period or the remaining term of the Option or SAR, whichever is shorter, after the date of Retirement, but in no event after the expiration date of the Options or SARs; provided that the participant does not engage in Competition during such five-year or remaining period unless he or she receives written consent to do so from the Board or the Committee, and (B) all of the participant’s Options and SARs that were not exercisable on the date of Retirement shall be forfeited immediately upon such Retirement; provided, however, that such Options or SARs may become fully vested and exercisable in the discretion of the Committee. If a participant other than a director, officer or employee of the Company and any Subsidiary ceases to perform services for the Company and any Subsidiary upon the occurrence of his or her Retirement, the provisions set forth in such participant’s award grant agreement shall control. Notwithstanding the foregoing, Incentive Stock Options not exercised by such participant within 3 months after Retirement will cease to qualify as Incentive Stock Options and will be treated as Non-qualified Stock Options under this Plan if required to be so treated under the Code.

 

(iii) Discharge for Cause. If a participant ceases to be a director, officer or employee of, or to perform other services for, the Company or a Subsidiary due to Cause, or if a participant does not become a director, officer or employee of, or does not begin performing other services for, the Company or a Subsidiary for any reason, all of the participant’s Options and SARs shall expire and be forfeited immediately upon such cessation or non-commencement, whether or not then exercisable.

 

(iv) Other Termination. Unless otherwise provided in a participant’s award grant agreement, if a participant ceases to be a director, officer or employee of the Company or a Subsidiary for any reason other than death, Disability, Retirement or Cause, (A) all of the participant’s Options and SARs that were exercisable on the date of such cessation shall remain exercisable for, and shall otherwise terminate at the end of, a period of 30 days after the date of such cessation, but in no event after the expiration date of the Options or SARs; provided that the participant does not engage in Competition during such 30-day period unless he or she receives written consent to do so from the Board or the Committee, and (B) all of the participant’s Options and SARs that were not exercisable on the date of such cessation shall be forfeited immediately upon such cessation. If a participant other than a director, officer or employee of the Company and any Subsidiary ceases to perform services for the Company and any Subsidiary for any reason other than death, Disability, Retirement or Cause, the provisions set forth in such participant’s award grant agreement shall control.

 

(v) Black-out Periods. If there is a blackout period under Section 5 (“Confidential Information, Disclosure and Insider Trading”) of the Company’s Code of Business Conduct and Ethics or applicable law (or a Committee-imposed blackout period) that prohibits the buying or selling of shares during any part of the ten-day period before the expiration of any Option based on the termination of a participant’s service (as described above), the period for exercising the Options shall be extended until ten (10) days beyond when such blackout period ends. Notwithstanding any provision hereof or within an award agreement, no Option shall ever be exercisable after the expiration date of its original term as set forth in the award agreement.

 

7. Stock Appreciation Rights.

 

The Committee shall have the authority to grant SARs under this Plan, either alone or to any optionee in tandem with Options (either at the time of grant of the related Option or thereafter by amendment to an outstanding Option). SARs shall be subject to such terms and conditions as the Committee may specify. SARs

 

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shall be subject to a minimum vesting period of at least one (1) year commencing from the Grant Date; provided that up to an aggregate 540,000 Shares underlying Options and SARs may be issued during the effectiveness of this Plan without being subject to a minimum vesting period. No SAR shall be exercisable in whole or in part more than ten (10) years after the Grant Date. For the purpose of clarity, this Section 7 will not prevent the Committee from accelerating the vesting of any SAR in accordance with any of the provisions set forth in this Plan.

 

No SAR may be exercised unless the Fair Market Value of a Share on the date of exercise exceeds the exercise price of the SAR or, in the case of SARs granted in tandem with Options, the exercise price of any Options to which the SARs correspond. Prior to the exercise of the SAR and any delivery of the related Shares represented thereby, the participant shall have no rights as a stockholder with respect to Shares covered by such outstanding SAR (including any dividend or voting rights).

 

SARs granted in tandem with Options shall be exercisable only when, to the extent and on the conditions that any related Option is exercisable. The exercise of an Option shall result in an immediate forfeiture of any related SAR to the extent the Option is exercised, and the exercise of an SAR shall cause an immediate forfeiture of any related Option to the extent the SAR is exercised.

 

Upon the exercise of an SAR, the participant shall be entitled to a distribution in an amount equal to the difference between the Fair Market Value of a Share on the date of exercise and the exercise price of the SAR or, in the case of SARs granted in tandem with Options, the exercise price of any Option to which the SAR is related, multiplied by the number of Shares as to which the SAR is exercised. The Committee shall decide whether such distribution shall be in cash, in Shares having a Fair Market Value equal to such amount, or in a combination thereof.

 

All SARs will be exercised automatically on the last day prior to the expiration date of the SAR or, in the case of SARs granted in tandem with Options, any related Option, so long as the Fair Market Value of a share of Common Stock on that date exceeds the exercise price of the SAR or any related Option, as applicable. An SAR granted in tandem with Options shall expire at the same time as any related Option expires and shall be transferable only when, and under the same conditions as, any related Option is transferable.

 

8. Restricted Stock.

 

The Committee may at any time and from time to time grant Shares of Restricted Stock under this Plan to such participants and in such amounts as it determines. Each grant of Shares of Restricted Stock shall be subject to such terms and conditions as the Committee shall determine, including but not limited to applicable restrictions on such Shares, the duration of such restrictions, and the time or times at which such restrictions shall lapse with respect to all or a specified number of Shares that are part of the grant. The Committee may condition the grant or vesting of Shares of Restricted Stock upon the attainment of specified performance targets (including, without limitation, the Performance Goals) or such other factors as the Committee may determine in its sole discretion, including compliance with the requirements of Section 162(m) of the Code as and to the extent the Committee determines that complying with Section 162(m) of the Code is advisable for such Award.

 

Except as otherwise provided by the Committee or unless such Shares of Restricted Stock are treasury shares, the participant will be required to pay the Company the aggregate par value of any Shares of Restricted Stock (or such larger amount as the Board may determine to constitute capital under the General and Business Corporation Law of the State of Missouri, as amended, or any successor thereto) within ten days of the Grant Date. Unless otherwise determined by the Committee, certificates representing Shares of Restricted Stock granted under this Plan will be held in escrow by the Company on the participant’s behalf during any period of restriction thereon and will bear an appropriate legend specifying the applicable restrictions thereon, and the participant will be required to execute a blank stock power therefor. Except as otherwise provided by the Committee, during such period of restriction the participant shall have all of the rights of a holder of Common Stock, including but not limited to the rights to receive dividends and to vote, and any stock or other securities

 

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received as a distribution with respect to such participant’s Restricted Stock shall be subject to the same restrictions as then in effect for the Restricted Stock, provided that any dividends and distributions that would otherwise be payable shall accrue and be payable only if and when such Shares cease to be subject to restrictions.

 

Unless otherwise determined by the Committee, immediately prior to a Change in Control during any period of restriction, all restrictions on Shares granted to such participant shall lapse. At such time as a participant ceases to be, or in the event a participant does not become, a director, officer or employee of, or otherwise perform services for, the Company or its Subsidiaries for any reason, unless otherwise determined by the Committee, all Shares of Restricted Stock granted to such participant on which the restrictions have not lapsed shall be immediately forfeited to the Company.

 

9. Other Stock-Based Awards.

 

The Committee is authorized to grant to Eligible Persons Other Stock-Based Awards that are denominated in, valued in whole or in part by reference to, or otherwise based on or related to Shares, including but not limited to Shares in payment of the amounts due under an incentive or performance plan sponsored or maintained by the Company, stock equivalent units, restricted stock units, and Awards valued by reference to the value of Shares. Other Stock-Based Awards may be granted either alone or in addition to or in tandem with other Awards granted under the Plan. The Committee will determine the Eligible Persons to whom, and the time or times at which, grants of Other Stock-Based Awards will be made, the amount of consideration for any Other Stock-Based Awards, including no consideration or such minimum consideration as may be required by applicable law, the number of Shares subject to such Other Stock-Based Awards to be awarded, the price (if any) to be paid by the Eligible Person, the time or times within which such Other Stock-Based Awards may be subject to forfeiture, the vesting schedule and rights to acceleration thereof, and all other terms and conditions of the Other Stock-Based Awards. The Committee may condition the grant or vesting of Other Stock-Based Awards upon the attainment of specified performance targets (including, without limitation, the Performance Goals) or such other factors as the Committee may determine in its sole discretion, including compliance with the requirements of Section 162(m) of the Code as and to the extent the Committee determines that complying with Section 162(m) of the Code is advisable for such Award. Each Other Stock-Based Award will be evidenced by an award grant agreement in a form that the Committee may from time to time approve.

 

10. Performance Awards and 162(m) Compliance.

 

(a) Section 162(m) Compliance. If the Committee, in its discretion, determines that it is appropriate to establish a Performance Award for a Covered Employee, the terms of the Performance Award will comply with this Section 10. Performance Awards are intended to satisfy the Performance-Based Exception. If changes are made to Code Section 162(m) to permit flexibility with respect to an Award or Awards available under this Plan, the Committee may, subject to this Section 10, make any adjustments to Performance Awards as it deems appropriate and as permitted by the changes in Code Section 162(m).

 

(b) Performance Award Eligibility and Timing for Establishing Performance Goals.

 

(i) Eligibility. Subject to and consistent with the provisions of this Plan, Performance Awards may be granted to an Eligible Person who is, or is likely to be, as of the end of the tax year in which the Company would claim a tax deduction in connection with the Performance Award, a Covered Employee in accordance with this Section 10.

 

(ii) Timing. The Committee will designate the individuals eligible to be granted a Performance Award for a Year and establish the objective Performance Goals for the individuals within the first 90 days of that Year; provided, that for a hiring or promotion after that 90-day period that makes any individual eligible to be granted a Performance Award, the designation shall not be later than the elapse of 25% of the remainder of that Year after such hiring or promotion; provided further, that if the Committee designates a Performance Period of less than a full year, the establishment of the Performance Goals by the Committee will be made no later than the elapse of 25% of the Performance Period. The opportunity to be granted a Performance Award may be evidenced by an award grant

 

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agreement, which shall specify the individual’s bonus opportunity, the Performance Goals, and such other terms not inconsistent with the Plan as the Committee shall determine. The above notwithstanding, with respect to any Performance Award and its related Performance Goals, any dividend that would otherwise be payable during the Performance Period shall accrue and be payable only if and when such Performance Goals are achieved and such Award or portion thereof vests.

 

(c) Performance Goals.

 

(i) Establishment. Within the time period prescribed in Section 10(b)(ii), the Committee shall establish Performance Goals for the Year (which may be the same or different for some or all Covered Employees) and shall establish the threshold and maximum bonus opportunity for each Covered Employee for the attainment of specified threshold and maximum Performance Goals. Performance Goals and bonus opportunities may be weighted for different factors and measures as the Committee determines. For Performance Awards designed to qualify for the Performance-Based Exception, objective performance criteria used to establish Performance Goals shall be one or more of the following (each a “Performance Measure”):

 

(A) Earnings from continuing operations (either in the aggregate or on a per-Share basis);

 

(B) Growth or rate of growth in earnings (either in the aggregate or on a per-Share basis);

 

(C) Net income or loss (either in the aggregate or on a per-Share basis);

 

(D) Revenues (either operating or in total);

 

(E) Growth or rate of growth in revenues (either operating or in total)

 

(F) Net cash provided by operating activities;

 

(G) Growth or rate of growth in net cash provided by operating activities;

 

(H) Free cash flow (either in the aggregate on a per-Share basis);

 

(I) Earnings before interest, taxes, depreciation, amortization, and acquisition-related expenses;

 

(J) Growth or rate of growth in earnings before interest, taxes, depreciation, amortization, and acquisition-related expenses;

 

(K) Reductions in expense levels, determined either on a Company-wide basis or in respect of any one more business units;

 

(L) Expense management and employee productivity;

 

(M) Stockholder returns (including return on assets, investments, equity, or sales);

 

(N) Return measures (including return on assets, equity, sales or invested capital);

 

(O) Growth or rate of growth in return measures (including return on assets, equity, or sales);

 

(P) Share price (including attainment of a specified per-Share price during the Performance Period; growth measures and total stockholder return or attainment by the Shares of a specified price for a specified period of time);

 

(Q) Strategic business criteria, consisting of one or more objectives based on meeting specified hiring and/or retention of key employees, business expansion goals, objectively identified project milestones, debt targets, and goals relating to acquisitions or divestitures; or

 

(R) Achievement of business or operational goals such as market penetration, release of software upgrades, business development and/or regulatory compliance;

 

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provided that applicable Performance Measures may be applied on a pre-or post-tax basis; and provided further that the Committee may, on the Grant Date of a Performance Award intended to comply with the Performance-Based Exception, provide that the formula for such Performance Award include or exclude items to measure specific Performance Measures such as share-based compensation expense, acquisition related expenses, expense resulting from amortization of debt issuance costs or other loan fees, expense resulting from amortization of intangibles, gain or loss on extinguishment of debt, accreted interest expense, charges or credits related to the adjustment of assets or liabilities to fair value (for example, charges related to asset impairments or the mark-to-market adjustment of the convertible debt embedded option), gains or losses resulting from foreign exchange transaction or translation adjustments, restructuring charges, gains or losses from discontinued operations, any unusual or non-recurring charge or credit, extraordinary gains or losses, the current period income statement effect of businesses or assets acquired or divested; expense or income, including the cumulative effect, of any new accounting principle adopted during the year, and, expense or income related to the adoption of new accounting methods or principles.

 

(ii) Flexibility as to Timing, Weighting, Applicable Business Unit. For Performance Awards intended to comply with the Performance-Based Exception, the Committee shall set the Performance Goals within the time period prescribed by Section 162(m) of the Code. The levels of performance required with respect to Performance Measures may be expressed in absolute or relative levels and may be based upon a set increase, set positive result, maintenance of the status quo, set decrease or set negative result. Performance Measures may differ for Performance Awards to different grantees. The Committee shall specify the weighting (which may be the same or different for multiple objectives) to be given to each performance objective for purposes of determining the final amount payable with respect to any such Performance Award. Any one or more of the Performance Measures may apply to a grantee, to the Company as a whole, to one or more affiliates or to a department, unit, division or function within the Company, within any one or more affiliates or any one or more joint ventures, and may apply either alone or relative to the performance of other businesses or individuals (including industry or general market indices).

 

(iii) Discretion to Adjust. The Committee shall have the discretion to adjust the determinations of the degree of attainment of the pre-established Performance Goals; provided, however, Performance Award compensation that is designed to qualify for the Performance-Based Exception may not be adjusted upward. The Committee retains the discretion to adjust compensation under Performance Awards downward. The Committee may not delegate any responsibility with respect to Performance Awards intended to qualify for the Performance-Based Exception. All determinations by the Committee as to the achievement of the pre-established Performance Goals must be certified in writing prior to payment of the Performance Award.

 

(iv) Alteration of Performance Measures. If applicable laws allow a Performance Award to qualify for the Performance-Based Exception even if the Committee alters the governing Performance Measures without obtaining stockholder approval, the Committee will have sole discretion to make such changes without obtaining stockholder approval.

 

(d) Determination of Amount of Performance Awards.

 

(i) Restricted Stock Award Limitation. No grantee may be awarded Restricted Stock Performance Awards in any one calendar year, pursuant to this Section 10, in excess of 600,000 Shares, as such number may be adjusted pursuant to Section 16 below.

 

(ii) Other Stock-Based Award Limitation. No grantee may be awarded Other Stock-Based Awards Performance Awards in any one calendar year, pursuant to this Section 10, in excess of 600,000 Shares, as such number may be adjusted pursuant to Section 16 below.

 

(iii) Cash Award Limitation. No grantee may be granted cash Performance Awards, pursuant to this Section 10, in any one Year the maximum payout for which, when added to the maximum payout for all other cash Performance Awards granted to such grantee pursuant to this Section 10 in the same

 

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Year, could exceed 300% of the grantee’s annual base salary (up to a maximum of $1,000,000 of base salary) as of the first day the Year (or, if later, as of the date on which the grantee becomes an employee of the Company or a Subsidiary). If the Performance Period is greater than one year, the 300% limitation will apply separately for each 12 month period in the Performance Period.

 

(e) Committee Certification and Determination of Amount of Performance Award. The Committee shall determine and certify in writing the degree of attainment of Performance Goals as soon as administratively practicable after the end of each Year but not later than 90 days after the end of that Year. The Committee shall determine an individual’s maximum Performance Award based on the level of attainment of the Performance Goals (as certified by the Committee) and the individual’s bonus opportunity. The Committee reserves the discretion to reduce (but not below zero) the amount of an individual’s Performance Award below the maximum Performance Award. The determination of the Committee to reduce (or not pay) an individual’s Performance Award for a Year will not affect the maximum Performance Award payable to any other individual. No Performance Award will be payable to an individual unless at least the threshold Performance Goal is attained.

 

(f) Payment of Performance Awards.

 

(i) Timing. Performance Awards will be paid as soon as administratively practicable after the Committee determines the amount of the Performance Award, but not later than 90 days after the Committee certifies the degree of attainment of Performance Goals.

 

(ii) Form. An individual’s Performance Award for a Year may be paid in cash or Restricted Stock as determined by the Committee at the time of the grant. The Committee may provide in an award grant agreement that payment of an Performance Award may be deferred in accordance with any rules or procedures that may be established by the Committee from time to time, either before or after the decision or election to defer is made.

 

(g) Cessation of Services. If an individual ceases to provide services to the Company or a subsidiary in the capacity of an employee or consultant during the Year, the Committee may authorize the payment of an Performance Award to that individual, and in the absence of the authorization, the individual will receive no Performance Award for that Year.

 

11. Withholding Taxes.

 

(a) Participant Election. Unless otherwise determined by the Committee, a participant who is an employee may elect to deliver Shares (or have the Company withhold Shares acquired upon exercise of an Option or SAR or deliverable upon grant or vesting of Restricted Stock or other Awards, as the case may be) to satisfy, in whole or in part, the amount the Company is required to withhold for federal, state or local taxes in connection with the exercise of an Option or SAR or the delivery of Restricted Stock or other Awards upon grant or vesting, as the case may be.

 

Such election for withholding taxes must be made on or before the date the amount of tax to be withheld is determined. Once made, the election shall be irrevocable. The fair market value of the Shares to be withheld or delivered will be the Fair Market Value as of the date the amount of tax to be withheld is determined; provided, however, in no event shall the Fair Market Value of Shares withheld exceed the applicable minimum statutory withholding rate (or, in the discretion of the Committee, the Fair Market Value of Shares withheld may be up to but not in excess of the maximum statutory withholding rate, provided that withholding Shares with a Fair Market Value in excess of the minimum statutory withholding rate will not result in an Award otherwise classified as an equity award under ASC Topic 718 to be classified as a liability award under ASC Topic 718). In the event a participant elects to deliver or have the Company withhold Shares pursuant to this Section 11(a), such delivery or withholding must be made subject to the conditions and pursuant to the procedures set forth in Section 6(b) with respect to the delivery or withholding of Common Stock in payment of the exercise price of Options. If no such election to withhold taxes is made from applicable Common Stock as set forth above, it shall be the participant’s obligation to have such monies paid or withheld by tendering a cash payment of such amounts instead.

 

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(b) Company Requirement. The Company may require, as a condition to any grant or exercise under this Plan or to the delivery of certificates for Shares issued hereunder, that the grantee make provision for the payment to the Company, either pursuant to Section 11(a) or this Section 11(b), of federal, state or local taxes of any kind required by law to be withheld with respect to any grant or delivery of Shares. The Company, to the extent permitted or required by law, shall have the right to deduct from any payment of any kind (including salary or bonus) otherwise due to a grantee, an amount equal to any federal, state or local taxes of any kind required by law to be withheld with respect to any grant or delivery of Shares under this Plan.

 

12. Written Agreement; Vesting.

 

Each participant to whom a grant is made under this Plan shall enter into a written agreement with the Company that shall contain such provisions, including, without limitation, vesting requirements, consistent with the provisions of this Plan, as may be approved by the Committee. Unless the Committee determines otherwise and except as otherwise provided in Sections 6, 7 and 8, in connection with a Change in Control or certain occurrences of termination, no Option grant under this Plan may vest fully less than three (3) years from the date such grant is made.

 

13. Transferability.

 

Unless the Committee determines otherwise, no Award granted under this Plan shall be transferable by a participant other than by will or the laws of descent and distribution or to a participant’s Family Member by gift or a qualified domestic relations order as defined by the Code. Unless the Committee determines otherwise, an Option or SAR may be exercised only by the optionee or grantee thereof; by his or her Family Member if such person has acquired the Option or SAR by gift or qualified domestic relations order; by the executor or administrator of the estate of any of the foregoing or any person to whom the Option is transferred by will or the laws of descent and distribution; or by the guardian or legal representative of any of the foregoing; provided that Incentive Stock Options may be exercised by any Family Member, guardian or legal representative only if permitted by the Code and any regulations thereunder. All provisions of this Plan shall in any event continue to apply to any Award granted under this Plan and transferred as permitted by this Section 13, and any transferee of any such Award shall be bound by all provisions of this Plan as and to the same extent as the applicable original grantee.

 

14. Listing, Registration and Qualification.

 

If the Committee determines that the listing, registration or qualification upon any securities exchange or under any law of Shares subject to any Award is necessary or desirable as a condition of, or in connection with, the granting of same or the issue or purchase of Shares thereunder, no such Award may be exercised in whole or in part, and no Shares may be issued, unless such listing, registration or qualification is effected free of any conditions not acceptable to the Committee.

 

15. Transfer of Employee.

 

The transfer of an employee from the Company to a Subsidiary, from a Subsidiary to the Company, or from one Subsidiary to another, shall not be considered a termination of employment; nor shall it be considered a termination of employment if an employee is placed on military or sick leave or such other leave of absence which is considered by the Committee as continuing intact the employment relationship.

 

16. Adjustments; Change in Control.

 

In the event of a reorganization, recapitalization, stock split, stock dividend, combination of shares, merger, consolidation, distribution of assets, or any other change in the corporate structure or shares of the Company, the Committee, as necessary to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under this Plan, shall appropriately and equitably make such adjustment in (i) the number and kind of Shares available for issuance under this Plan (including, without limitation, the total number

 

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of Shares available for issuance under this Plan pursuant to Section 4), (ii) the number and kind of Shares subject to outstanding Awards, and (iii) the exercise price of outstanding Options and SARs; provided, in each case, that with respect to Awards of Incentive Stock Options intended to qualify as Incentive Stock Options after such adjustment, no such adjustment shall be authorized to the extent such adjustment would cause the Incentive Stock Option to violate Section 424(a) of the Code. Any such adjustment shall be final, conclusive and binding for all purposes of this Plan. In the event of any merger, consolidation or other reorganization in which the Company is not the surviving or continuing corporation or in which a Change in Control is to occur, all of the Company’s obligations regarding Awards that were granted hereunder and that are outstanding on the date of such event shall, on such terms as may be approved by the Committee prior to such event, be assumed by the surviving or continuing corporation or canceled in exchange for property (including cash). Notwithstanding the foregoing, no amendment shall be made to any stock Option that would be deemed to be a repricing under the rules of the Market unless such amendment is first subject to and approved by the Company’s shareholders.

 

(a) Change in Control Generally. Unless the Committee otherwise determines in the manner set forth in Section 16(d) below or unless otherwise provided in a participant’s award grant agreement or employment agreement, upon the occurrence of a Change in Control, (i) all Options and SARs shall become exercisable, (ii) any restriction period on all Restricted Stock and/or other stock-based Awards shall lapse immediately prior to such Change in Control, (iii) Shares underlying Awards of Restricted Stock and/or Other Stock-Based Awards shall be issued to each participant then holding such Award immediately prior to such Change in Control or, (iv) at the discretion of the Committee (as constituted immediately prior to the Change in Control), each such Option, SAR, Restricted Stock, and/or Other Stock-Based Award shall be canceled in exchange for an amount equal to the product of (A)(I) in the case of Options and SARs, the excess, if any, of the product of the price paid for shares of the Company upon a Change in Control over the Fair Market Value at the Grant Date for such Award, and (II) in the case of other such Awards, the price paid for shares of the Company upon a Change in Control, multiplied by (B) the aggregate number of Shares covered by such Award, less any amount per Award to be paid by the participant or by which the amount ultimately to be paid to the participant is reduced.

 

(b) Performance Awards. Unless the Committee otherwise determines in the manner set forth in Section 16(d) below or unless otherwise provided in a participant’s award grant agreement or employment agreement, upon the occurrence of a Change in Control, (A) any Performance Period in progress at the time of the Change in Control for which performance-based Awards are outstanding shall end effective upon the occurrence of such Change in Control and (B) all participants granted such Awards shall be deemed to have earned and be vested in a pro rata award assuming achievement of the greater of target performance and actual performance.

 

(c) Timing of Payments. Payment of any amounts calculated in accordance with Sections 16(a) and (b) above shall be made in cash or, if determined by the Committee (as constituted immediately prior to the Change in Control), in shares of the common stock of the New Employer having an aggregate fair market value equal to such amount and shall be payable in full, as soon as reasonably practicable, but in no event later than 30 days, following the Change in Control. For purposes hereof, the fair market value of one share of common stock of the New Employer shall be determined by the Committee (as constituted immediately prior to the consummation of the transaction constituting the Change in Control), in good faith.

 

(d) Alternative Awards. Notwithstanding Sections 16(a), (b) and (c) above and unless otherwise provided in a participant’s award grant agreement or employment agreement, no cancellation, termination, acceleration of exercisability or vesting, lapse of any restricted period or settlement or other payment shall occur with respect to any outstanding Award if the Committee (as constituted immediately prior to the consummation of the transaction constituting the Change in Control) reasonably determines, in good faith, prior to the Change in Control that such outstanding Awards shall be honored or assumed, or new rights substituted therefore (such honored, assumed or substituted Award being hereinafter referred to as an “Alternative Award”) by the New Employer, provided that any Alternative Award must:

 

(i) be based on shares of common stock that are traded on an established U.S. securities market;

 

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(ii) provide the participant (or each participant in a class of participants) with rights and entitlements substantially equivalent to or better than the rights, terms and conditions applicable under such Award, including, but not limited to, an identical or better exercise or vesting schedule and identical or better timing and methods of payment;

 

(iii) have substantially equivalent economic value to such Award (determined at the time of the Change in Control); and

 

(iv) have terms and conditions which provide that in the event that the participant suffers an involuntary termination within two years following the Change in Control any conditions on such participant’s rights under, or any restrictions on transfer or exercisability applicable to, each such Award held by such participant shall be waived or shall lapse, as the case may be; provided, that (A) any Performance Period in progress at the time of such involuntary termination for which performance-based Awards are outstanding shall end effective upon the occurrence of such termination and (B) all participants granted such Awards shall be deemed to have earned and be vested in a pro rata award assuming achievement of the greater of target performance and actual performance.

 

17. Amendment and Termination of this Plan.

 

The Board of Directors or the Committee, without approval of the stockholders, may amend or terminate this Plan, except that no amendment shall become effective without prior approval of the stockholders of the Company if stockholder approval would be required by applicable law or regulations, including if required for continued compliance with the performance-based compensation exception of Section 162(m) of the Code or any successor thereto, under the provisions of Section 422 of the Code or any successor thereto, or by any listing requirement of the principal stock exchange or market on which the Common Stock is then listed. Notwithstanding the foregoing, no amendment shall be made to any Option that would be deemed to be a repricing under the rules of the Market unless such amendment is first subject to and approved by the Company’s shareholders.

 

18. Amendment or Substitution of Awards under this Plan.

 

The terms of any outstanding Award under this Plan may be amended from time to time by the Committee in its discretion in any manner that it deems appropriate (including, but not limited to, acceleration of the date of exercise of any Award or of the date of lapse of restrictions on Shares); provided that, (a) except as otherwise provided in Section 16, no such amendment shall adversely affect in a material manner any right of a participant under the Award without his or her written consent, (b) without the prior approval of the Company’s shareholders and except as provided for in Section 4, no Option or SAR may be (i) amended to reduce the exercise price thereof; (ii) cancelled in exchange for the grant of any new Option or SAR with an exercise price lower than the exercise price of the cancelled or exchanged Option or SAR; (iii) cancelled in exchange for cash, other property or the grant of any new Award at a time when the exercise price of the Option or SAR is greater than the current Fair Market Value of a Share or (iv) amended in any other manner that would be deemed to be a repricing under the rules of the Market, and (c) except as otherwise provided in Section 16 or as set forth in the applicable stock option agreements (e.g., with respect to cancellation of Options upon termination of employment), there shall be no adjustment to the grantees, number of shares, or exercise prices with regard to any Option grant after the Grant Date.

 

19. Commencement Date; Termination Date.

 

The date of original commencement of this Plan was June 2, 2004, and the effective date of this most recent amendment and restatement of the Plan shall be January 1, 2016, subject to approval by the stockholders of the Company. Unless previously terminated upon the adoption of a resolution of the Board terminating this Plan, this Plan shall terminate at the close of business on the date that is ten years after January 1, 2016. No termination of this Plan shall materially and adversely affect any of the rights or obligations of any person, without his or her written consent, under any grant of Options or other incentives theretofore granted under this Plan.

 

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20. Severability.

 

Whenever possible, each provision of this Plan shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Plan is held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Plan.

 

21. Governing Law.

 

The Plan shall be governed by the corporate laws of the State of Missouri, without giving effect to any choice of law provisions that might otherwise refer construction or interpretation of this Plan to the substantive law of another jurisdiction.

 

22. Compliance with Code Section 409A.

 

To the extent necessary and applicable, the provisions of this Plan are intended to comply with or be exempt from Code Section 409A and all applicable regulations, and shall otherwise be construed in the manner necessary to ensure compliance with those provisions to the extent required by applicable law. Notwithstanding any provision of this Plan to the contrary, to the extent an Award shall be deemed to be vested or restrictions lapse, expire or terminate upon the occurrence of a Change in Control and such Change in Control does not constitute a “change in ownership or effective control” or a “change in the ownership or a substantial portion of the assets” of the Company within the meaning of Code Section 409A(a)(2)(A)(v), then even though such Award may be deemed to be vested or restrictions lapse, expire or terminate upon the occurrence of the Change in Control or any other provision of this Plan, payment will be made, to the extent necessary to comply with the provisions of Code Section 409A, to the participant on the earliest of:

 

(a) the participant’s “separation from service” with the Corporation (determined in accordance with Code Section 409A); provided, however, that if the participant is a “specified employee” (within the meaning of Code Section 409A), the payment date shall be the date that is six (6) months after the date of the participant’s separation from service with the employing Company or Subsidiary, as the case may be (except that during such 6 month period the participant may receive total payments from the Company that do not exceed the amount specified in Treas. Reg. Section 1.409A-1(b)(9)(iii)(A));

 

(b) the date payment otherwise would have been made in the absence of any provisions in this Plan to the contrary (provided such date is permissible under Code Section 409A); or 

 

(c) the participant’s death.

 

23. Company Recoupment of Awards.

 

A participant’s rights with respect to any Award under this Plan and any Shares or cash payment delivered pursuant to an Award under this Plan will in all events be subject to forfeiture, recovery by the Company or other action (i) pursuant to any right that the Company may have under any Company recoupment policy or other agreement or arrangement with a participant, (ii) pursuant to any right or obligation that the Company may have regarding the clawback of “incentive-based compensation” under Section 10D of the Exchange Act and any applicable rules and regulations promulgated thereunder from time to time by the Securities and Exchange Commission or (iii) as required by any other applicable law.

 

*   *   *

 

A-17

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