Form of 2014-2016 Performance Share Award Agreement
Exhibit 10-4
Form of 2014-2016 Performance Share Award Agreement
This Performance Share Award Agreement (the "Award Agreement") with the Participant is granted on January 1, 2014 (the “Award Date”), and is not in lieu of salary or any other compensation for services. The Performance Period for this Award is January 1, 2014 through December 31, 2016. For the purposes of this Award Agreement, the term "Company" means FirstEnergy Corp., its successors and/or its Subsidiaries, singularly or collectively.
SECTION ONE - AWARD
As of the Award Date, in accordance with the FirstEnergy Corp. 2007 Incentive Plan, as amended (the “Plan”) and the terms and conditions of this Award Agreement, the Company grants to the Participant an award of Performance Shares in an amount equal to the fixed number of shares of common stock of the Company listed as “Awarded” on the Award Detail Page. The Performance Shares will be placed into a Performance Share account until paid out or forfeited.
Until the Performance Period ends pursuant to the terms and conditions described in this Award Agreement, the Performance Share account of the Participant will be credited with an amount per each Performance Share equal to the amount per share of any cash dividends declared by the Board with a record date on or after the Award Date on the outstanding common stock of the Company (the “Dividend Equivalent”). Such Dividend Equivalents will be credited in the form of an additional number of Performance Shares (which Performance Shares, from the time of crediting, will be deemed to be in addition to and part of the base number of Performance Shares awarded by this Award Agreement for all purposes hereunder). The additional number of Performance Shares will be equal to the aggregate amount of Dividend Equivalents credited on this Award on the respective dividend payment date divided by the average of the high and low prices per share of common stock on the respective dividend payment date. The Performance Shares attributable to the Dividend Equivalents will be either paid out or forfeited, as appropriate, under the same terms and conditions that apply to the other Performance Shares under this Award Agreement and, to the extent applicable, the Company’s Executive Deferred Compensation Plan.
The value of the Participant’s account at the end of the three-year Performance Period will be based on the average of the high and low prices of common stock for the month of December 2016 and may be adjusted upward or downward based upon the total shareholder return (“TSR”) of common stock relative to an energy services company index during the same three-year period. If the TSR rating is at or above the 90th percentile, the payout will be 200% of the account value. If the TSR is at the 50th percentile, the payout will be 100% of the account value. If the TSR is at the 40th percentile, the payout will be 50% of the account value. Payouts for a ranking above the 40th percentile and below the 90th percentile will be interpolated. For a TSR ranking below the 40th percentile, no payout will be made.
Subject to any election the Participant makes to defer any of the Performance Shares, as provided below, the payout under this Award will be made between February 15 and March 15, 2017 if the payout is on account of the completion of the Performance Period and satisfaction of the TSR ranking, as specified above, or, if earlier, on the payment date as specified in Section Two below (all payment dates are referred to as “Payment Date”). The payout will be made in cash. Notwithstanding the foregoing, if the Participant
is eligible to participate in the Company’s Executive Deferred Compensation Plan, the Participant may elect to defer the payment made with respect to the Performance Shares to the extent permitted by the Committee in accordance with the terms and conditions of the Company’s Executive Deferred Compensation Plan. Any payment made with respect to any Performance Shares that are deferred under the Company’s Executive Deferred Compensation Plan shall be paid in cash or Shares, as applicable, pursuant to the administrative procedures, terms and conditions of the Executive Deferred Compensation Plan. Any election to defer shall be made in a manner as required under administrative rules established by the Company and shall be made in a manner that complies with Section 409A of the Internal Revenue Code (“Section 409A”).
SECTION TWO - GENERAL TERMS
Forfeiture
The Participant shall forfeit all or a portion of the Award and any rights hereunder to receive the Award upon the occurrence of any of the following events before the expiration of the Performance Period:
Event of Participant | Effect on Award | Further Information | Payment Form and Time |
Termination due to retirement (including early retirement) | Account balance prorated based on full months of service during Performance Period. | Single lump sum between February 15 and March 15, 2017. | |
Termination due to Disability | Account balance prorated based on full months of service during Performance Period. | As provided under 9.5 of the Plan. | Single lump sum between February 15 and March 15, 2017. |
Death | Account balance prorated based on full months of service during Performance Period. | Payout made to beneficiary as provided under Article 15 of the Plan or by will or by the laws of descent and distribution. | Single lump sum as soon as practicable after the Participant’s death but by the earliest to occur of March 15 following the calendar year of death, the end of the 90 day period commencing on the date of death or March 15, 2017. |
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Event of Participant | Effect on Award | Further Information | Payment Form and Time |
Termination for Cause | Award immediately forfeited. | Termination for Cause as provided under 2.7 of the Plan. | N/A |
Termination in which the Participant qualifies for and receives any employer severance benefit that may be offered, provided that the Participant executes, submits and does not revoke an agreement to release the Company in full against any and all claims as required by (and within the time period mandated by) the arrangement or plan providing the employer severance benefit | Account balance prorated based on full months of service during Performance Period. | Single lump sum between February 15 and March 15, 2017. | |
Other Termination (including resignation) | Award immediately forfeited. | N/A | |
Transfer out of an executive eligible position and employed by the Company on December 31, 2016 | Account balance prorated based on full months in an executive eligible position during Performance Period. | If the Participant terminates prior to December 31, 2016, the Participant may still be entitled to a prorated account balance as described above. | Single lump sum between February 15 and March 15, 2017. |
Prorated awards will be calculated using the average high and low prices of common stock for the month of December 2016 or, in the case of death, a thirty day period ending immediately before the date of death and the most recent quarterly TSR factor.
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Notwithstanding the foregoing, in the event the Participant is involuntarily terminated in connection with and resulting from a Change in Control within the two-year period following the date of the Change in Control under conditions in which the Participant qualifies for and receives any employer severance benefit that may be offered, including satisfaction of any requirement to execute and submit an agreement to release the Company in full against any and all claims as required by the arrangement or plan providing the employer severance benefit, this Award will be fully vested and will be paid at the target amount in a single lump sum as soon as practicable but by the earliest to occur of March 15 following the year in which such involuntary termination occurs, the end of the 90-day period commencing on the date of the involuntary termination or March 15, 2017. In the event no employer severance benefit is offered or not all of the requirements to receive an employer severance benefit, including any requirement to execute and submit an agreement to release the Company, are satisfied and completed by the earliest to occur of March 15 following the year in which such involuntary termination occurs, the end of the 90-day period commencing on the date of the involuntary termination or March 15, 2017, this Award will be forfeited. For purposes of this Award, the term "Change in Control" means a change in control that satisfies both a Change in Control as defined in the Plan for Awards granted on or after January 1, 2011 and a "change in control event" as defined in Treasury Regulation Section 1.409A-3(i)(5) and the term “involuntary termination” (or forms or derivations thereof) means “involuntary separation from service” as defined in Treasury Regulation Section 1.409A-1(n). An award upon involuntary termination in connection with and resulting from a Change in Control within the two-year period following the date of the Change in Control is subject to such other terms as determined by the Committee.
Recoupment
With respect to a Participant who is or has been deemed to be at any time, or becomes, an “insider” for purposes of Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), this Award Agreement will be administered in compliance with Section 10D of the Exchange Act, any applicable rules or regulations promulgated by the Securities and Exchange Commission or any national securities exchange or national securities association on which the Shares may be traded, and subject to any Company policy adopted pursuant to such law, rules, or regulations and may be amended to further such purpose without the consent of the Participant.
Withholding Tax
The Company shall withhold cash or Shares, if applicable, in an amount sufficient to satisfy all federal, state, and local taxes required by law to be withheld in connection with the payment of cash or delivery of Shares, if applicable, granted under this Award Agreement, but in no event shall such amount exceed the minimum statutory withholding requirements.
Shareholder Rights
The Participant shall have no rights as a shareholder of the Company, including voting rights, with respect to the Award.
Effect on the Employment Relationship
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This grant of Performance Shares is voluntary and made on a one-time basis and does not constitute a commitment to make any future awards. Nothing by this Award or in this Award Agreement guarantees employment with the Company, nor does this Award or Award Agreement confer any special rights or privileges to the Participant as to the terms of employment.
Adjustments
In the event of any merger, reorganization, consolidation, recapitalization, separation, liquidation, stock dividend, stock split, combination, distribution, or other change in corporate structure of the Company affecting the common stock, the Committee will adjust the number and class of securities granted under this Award Agreement in a manner determined by the Committee, in its sole discretion, to be appropriate to prevent dilution or enlargement of the Performance Shares granted under this Award Agreement.
Administration
1. | This Award is governed by the laws of the State of Ohio without giving effect to the principles of the conflicts of laws. By accepting this Award, the Participant agrees to the exclusive jurisdiction of the courts of the United States District Court for the Northern District of Ohio to adjudicate any and all claims brought with respect to the Award. |
2. | The administration of this Award and the Plan will be performed in accordance with Article 3 of the Plan. |
3. | All interpretations, determinations and decisions made by the Committee, the Board, or any delegate of the Committee as to the provisions of the Plan shall be final, conclusive, and binding on all persons and the Participant agrees to be bound by such interpretations, determinations and decisions. |
4. | The terms of this Award Agreement are governed at all times by the official text of the Plan and in no way alter or modify the Plan. |
5. | If a term is capitalized but not defined in this Award Agreement, it has the meaning given to it in the Plan or on the Award Detail Page (which is a part of this Award Agreement) as the context so requires. |
6. | To the extent a conflict exists between the terms of this Award Agreement and the provisions of the Plan or the Company’s Executive Deferred Compensation Plan, the provisions of the Plan or the Company’s Executive Deferred Compensation Plan, as applicable, shall govern. |
7. | The terms and conditions of this Award Agreement may be modified by the Committee: |
(a) | in any case permitted by the terms of the Plan or this Award Agreement; |
(b) | with the written consent of the Participant; or |
(c) | without the consent of the Participant, if the amendment is either not materially adverse to the interests of the Participant or is necessary or appropriate in the view of the Committee to conform with, or to take into account, applicable law, including either exemption from or compliance with any applicable tax law. |
409A
It is intended that this Award and the compensation and benefits hereunder be exempt from Section 409A, and this Award shall be so construed and administered. In the event that the Committee reasonably determines that any compensation or benefits payable under this Award Agreement may be subject to
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taxation under Section 409A, the Committee shall have the authority to adopt, prospectively or retroactively, such amendments to this Award Agreement or to take any other actions it determines necessary or appropriate to (a) exempt the compensation and benefits payable under this Award from Section 409A or (b) comply with the requirements of Section 409A. The Committee, in its sole discretion, shall determine to what extent, if any, this Award Agreement must be amended, modified, or reformed. In no event, however, shall any provision of this Award Agreement be construed to require the Company to provide any gross-up for the tax consequences of any provisions of, or payments under, this Award and the Company shall have no responsibility for tax consequences to Participant (or the Participant’s beneficiary) resulting from the terms or operation of this Award.
Notwithstanding any other provision in this Award Agreement to the contrary, if the Award is deemed to be subject to the requirements of Section 409A and not exempt from such coverage:
1. | A Participant shall not be treated as having a termination of employment unless the Participant has a “separation from service” as defined in regulations under, and for purposes of, Section 409A. |
2. | If a Participant is a “specified employee,” as determined under the Company’s policy for determining specified employees on the date of a “separation from service,” all payments under this Award Agreement that would otherwise be paid or provided during the first six (6) months following such separation from service (other than payments, benefits, or reimbursements that are treated as separation pay under Section 1.409A-1(b)(9)(v) of the Treasury Regulations, short-term deferrals under Section 1.409A-1(b)(4) of the Treasury Regulations or other payments exempted under the Treasury Regulations for Section 409A) shall be accumulated through and paid or provided as soon as practicable following the six (6) month anniversary of such separation from service but not later than the end of the taxable year in which the six (6) month anniversary occurs. Notwithstanding the foregoing, payments delayed pursuant to this paragraph shall commence as soon as practicable following the date of death of the Participant prior to the end of the 6 month period but in no event later than ninety (90) days following the date of death. |
3. | Unless otherwise provided for in an arrangement or plan providing an employer severance benefit and notwithstanding any other provision of this Award Agreement, if the Participant is required to execute, submit and not revoke a release of claims against the Company in order to receive the payment of benefits hereunder as a result of the terms of an arrangement or plan providing an employer severance benefit and the period in which to execute, submit and not revoke the release begins in a first taxable year and ends in a second taxable year, any payment to which the Participant would be entitled hereunder will be paid in the second taxable year, but no later than the end of the payment period specified in this Award Agreement. |
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SECTION THREE - TRANSFER OF AWARD
The Performance Shares are not transferable during the life of the Participant. Only the Participant shall have the right to receive payout of the Award, unless the Participant is deceased, at which time the payout may be paid to the Participant's beneficiary (as designated under Article 15 of the Plan), or pursuant to the Participant’s will or the laws of descent and distribution.
I acknowledge receipt of this Performance Share Award and I accept and agree with the terms and conditions stated above.
________________________________
(Signature of Participant)
________________________________
(Date)
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