DIRECTOR INDEMNIFICATION AGREEMENT
Exhibit 10.1
Execution
Copy
This Director
Indemnification Agreement, dated as of March ___, 2009 (this “Agreement”),
is made by and between FirstEnergy Corp., an Ohio corporation (the “Company”),
and_________________________ (“Indemnitee”),
who is a director of the Company.
RECITALS:
A. Section 1701.59
of the Ohio Revised Code (the “ORC”)
provides that the business and affairs of a corporation shall be managed by or
under the direction of its directors.
B. By
virtue of the managerial prerogatives vested in the directors of an Ohio
corporation, directors act as fiduciaries of the corporation and its
shareholders.
C. Thus,
it is critically important to the Company and its shareholders that the Company
be able to attract and retain the most capable persons reasonably available to
serve as directors of the Company.
D. In
recognition of the need for corporations to be able to induce capable and
responsible persons to accept positions in corporate management, ORC §1701.13(E)
authorizes (and in some instances requires) corporations to indemnify their
directors, authorizes (and sometimes requires) corporations to advance funds to
pay for expenses of its directors prior to the final disposition of an action,
suit or proceeding, and further authorizes corporations to purchase and maintain
insurance for the benefit of their directors.
E. Indemnification
by a corporation serves the policies of (1) allowing directors to resist
unjustified lawsuits, secure in the knowledge that, if vindicated, the
corporation will bear the expense of litigation; (2) encouraging capable women
and men to serve as corporate directors, secure in the knowledge that the
corporation will absorb the costs of defending their honesty and integrity; and
(3) allowing directors and corporations to dispose of vexatious and distracting
litigation through negotiation of settlements.
F. The
number of lawsuits challenging the judgment and actions of corporate directors,
the costs of defending those lawsuits, and the threat to directors’ personal
assets have all materially increased over the past several years, chilling the
willingness of capable women and men to undertake the responsibilities imposed
on corporate directors.
G. Federal
legislation and rules adopted by the Securities and Exchange Commission and the
national securities exchanges have imposed additional disclosure and corporate
governance obligations on directors of public companies and have exposed such
directors to additional and substantially broadened civil
liabilities.
H. These
legislative and regulatory initiatives have also exposed directors of public
companies to a significantly greater risk of criminal proceedings, with
attendant defense costs and potential criminal fines and penalties.
I. Under
Ohio law, a director’s right to be reimbursed for the costs of defense of
criminal actions, whether such claims are asserted under state or federal law,
does not depend upon the merits of the claims asserted against the director,
which are separate and distinct from any right to indemnification the director
may be able to establish, and indemnification of the director against criminal
fines and penalties is permitted if the director satisfies the applicable
standard of conduct as a director.
J. Indemnitee
is a director of the Company and Indemnitee’s willingness to continue to serve
in such capacity is predicated, in substantial part, upon the Company’s
willingness to indemnify Indemnitee in accordance with the principles reflected
above, to the fullest extent permitted by the laws of the state of Ohio, and
upon the other undertakings set forth in this Agreement.
K. Regulation
31 of the Company’s Amended Code of Regulations (the “Regulations”) require the
Company to indemnify each director and former director of the Company to the
full extent then permitted by law. However, recent court decisions in
Delaware, while not binding on the courts of Ohio interpreting Ohio law, have
raised questions as to the ability of directors generally to rely on such
provisions following their retirement or other departure from the board in the
event that there is a subsequent amendment to the Regulations that alters or
eliminates the indemnification provisions of those documents.
L. Regulation
33 of the Company’s Regulations provides that the Company, with the approval of
the Board of Directors may enter into agreements with any persons that the
Company may indemnify under the Regulations, and undertake thereby to indemnify
such persons and to pay the expenses incurred by them in defending any action,
suit or proceeding against them, whether or not the Company would have power
under the law or the Regulations to indemnify such person.
M. Therefore,
in recognition of the need to provide Indemnitee with contractual protection
against personal liability, in order to procure Indemnitee’s continued service
as a director of the Company and to enhance Indemnitee’s ability to serve the
Company in an effective manner, and in order to provide such protection pursuant
to express contract rights (intended to be enforceable irrespective of, among
other things, any amendment to the Company’s Amended Articles of Incorporation
or Regulations (collectively, the “Constituent
Documents”), any change in the composition of the Company’s Board of
Directors (the “Board”)
including, but not limited to, the retirement of a director, or any
change-in-control or business combination transaction relating to the Company),
the Company wishes to provide in this Agreement for the indemnification of and
the advancement of Expenses (as defined in Section 1(e)) to Indemnitee as set
forth in this Agreement and for the continued coverage of Indemnitee under the
Company’s directors’ and officers’ liability insurance policies.
N. In
light of the considerations referred to in the preceding recitals, it is the
Company’s intention and desire that the provisions of this Agreement be
construed liberally, subject to their express terms, to maximize the protections
to be provided to Indemnitee hereunder.
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AGREEMENT:
NOW, THEREFORE, the
parties hereby agree as follows:
1. Certain
Definitions. In addition to terms defined elsewhere herein,
the following terms have the following meanings when used in this Agreement with
initial capital letters:
(a) “Change in
Control”
means the occurrence after the date of this Agreement of any of the following
events:
(i) the acquisition by
any individual, entity or group (within the meaning of Section 13(d)(3) or
14(d)(2) of the Exchange Act) (a “Person”)
of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of the combined voting power of the
then-outstanding Voting Stock of the Company; provided, however, that:
(A) for purposes of this
Section 1(a)(i), the following acquisitions will not constitute a Change in
Control: (1) any acquisition of Voting Stock of the Company directly from
the Company that is approved by a majority of the Incumbent Directors,
(2) any acquisition of Voting Stock of the Company by the Company or any
Subsidiary, (3) any acquisition of Voting Stock of the Company by any
employee benefit plan (or related trust) sponsored or maintained by the Company
or any Subsidiary, and (4) any acquisition of Voting Stock of the Company by any
Person pursuant to a Business Combination that complies with clauses (A), (B)
and (C) of Section 1(a)(iii) below;
(B) if any Person
acquires beneficial ownership of 20% or more of combined voting power of the
then-outstanding Voting Stock of the Company as a result of a transaction
described in clause (A)(1) of Section 1(a)(i) and such Person thereafter
becomes the beneficial owner of any additional shares of Voting Stock of the
Company representing 1% or more of the then-outstanding Voting Stock of the
Company, other than in an acquisition directly from the Company that is approved
by a majority of the Incumbent Directors or other than as a result of a stock
dividend, stock split or similar transaction effected by the Company in which
all holders of Voting Stock are treated equally, such subsequent acquisition
will be deemed to constitute a Change in Control;
(C) a Change in Control
will not be deemed to have occurred if a Person acquires beneficial ownership of
20% or more of the Voting Stock of the Company as a result of a reduction in the
number of shares of Voting Stock of the Company outstanding unless and until
such Person thereafter becomes the beneficial owner of any additional shares of
Voting Stock of the Company representing 1% or more of the then-outstanding
Voting Stock of the Company, other than in an acquisition directly from the
Company that is approved by a majority of the Incumbent Directors or other than
as a result of a stock dividend, stock split or similar transaction effected by
the Company in which all holders of Voting Stock are treated equally;
and
(D) if at least a
majority of the Incumbent Directors determine in good faith that a Person has
acquired beneficial ownership of 20% or more of the Voting Stock of the Company
inadvertently, and such Person divests as promptly as practicable a sufficient
number of shares so that such Person beneficially owns less than 20% of the
Voting
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Stock of the
Company, then no Change in Control will have occurred as a result of such
Person’s acquisition; or
(ii) a majority of the
Directors are not Incumbent Directors; or
(iii) the consummation of
a reorganization, merger or consolidation, or sale or other disposition of all
or substantially all of the assets of the Company or the acquisition of assets
of another corporation, or other transaction (each, a “Business
Combination”), unless, in each case, immediately following such Business
Combination (A) all or substantially all of the individuals and entities
who were the beneficial owners of Voting Stock of the Company immediately prior
to such Business Combination beneficially own, directly or indirectly, more than
60% of the combined voting power of the then outstanding shares of Voting Stock
of the entity resulting from such Business Combination (including, without
limitation, an entity which as a result of such transaction owns the Company or
all or substantially all of the Company’s assets either directly or through one
or more subsidiaries), (B) no Person (other than the Company, such entity
resulting from such Business Combination, or any employee benefit plan (or
related trust) sponsored or maintained by the Company, any Subsidiary or such
entity resulting from such Business Combination or a holding company as
described in ORC §1701.802(A)) beneficially owns, directly or indirectly, 20% or
more of the combined voting power of the then outstanding shares of Voting Stock
of the entity resulting from such Business Combination, and (C) at least a
majority of the members of the Board of Directors of the entity resulting from
such Business Combination were Incumbent Directors at the time of the execution
of the initial agreement or of the action of the Board providing for such
Business Combination; or
(iv) approval by the
shareholders of the Company of a complete liquidation or dissolution of the
Company, except pursuant to a Business Combination that complies with clauses
(A), (B) and (C) of Section 1(a)(iii).
For
purposes of this Section 1(a) and as used elsewhere in this Agreement, the
following terms have the following meanings:
(A) “Exchange
Act” means the Securities Exchange Act of 1934, as amended.
(B) “Incumbent
Directors” means the individuals who, as of the date hereof, are
Directors of the Company and any individual becoming a Director subsequent to
the date hereof whose election, nomination for election by the Company’s
shareholders, or appointment, was approved by a vote of at least two-thirds of
the then Incumbent Directors (either by a specific vote or by approval of the
proxy statement of the Company in which such person is named as a nominee for
director, without objection to such nomination); provided, however, that an individual
will not be an Incumbent Director if such individual’s election or appointment
to the Board occurs as a result of an actual or threatened election contest (as
described in Rule 14a-12(c) of the Exchange Act) with respect to the
election or removal of Directors or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the
Board.
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(C) “Subsidiary”
means an entity in which the Company or any holding company as described in ORC
§1701.802(A) directly or indirectly beneficially owns 50% or more of the
outstanding Voting Stock.
(D) “Voting
Stock” means securities entitled to vote generally in the election of
directors (or similar governing bodies).
(b) “Claim” means (i) any
threatened, asserted, pending or completed claim, demand, action, suit or
proceeding, whether civil, criminal, administrative, arbitrative, investigative
or other, and whether made pursuant to federal, state or other law; and
(ii) any threatened, pending or completed inquiry or investigation, whether
made, instituted or conducted by the Company or any other person, including
without limitation any federal, state or other governmental entity, that
Indemnitee determines might lead to the institution of any such claim, demand,
action, suit or proceeding.
(c) “Controlled
Affiliate” means any corporation, limited liability company, partnership,
joint venture, trust or other entity or enterprise, whether or not for profit,
that is directly or indirectly controlled by the Company. For
purposes of this definition, “control” means the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of an entity or enterprise, whether through the ownership of voting
securities, through other voting rights, by contract or otherwise; provided that direct or
indirect beneficial ownership of capital stock or other interests in an entity
or enterprise entitling the holder to cast 20% or more of the total number of
votes generally entitled to be cast in the election of directors (or persons
performing comparable functions) of such entity or enterprise will be deemed to
constitute control for purposes of this definition.
(d) “Disinterested
Director” means a director of the Company who is not and was not a party
to the Claim in respect of which indemnification is sought by
Indemnitee.
(e) “Expenses” means attorneys’ and
experts’ fees and expenses and all other costs and expenses paid or payable in
connection with investigating, defending, being a witness in or otherwise
participating in (including on appeal), or preparing to investigate, defend, be
a witness in or otherwise participate in (including on appeal), any Claim, and
any amounts paid in settlement prior to a final, nonappealable judgment or
conviction.
(f) “Indemnifiable
Claim” means any
Claim based upon, arising out of or resulting from (i) any actual, alleged
or suspected act or failure to act by Indemnitee in his or her capacity as a
director, officer, employee or agent of the Company or as a director, officer,
employee, member, manager, trustee or agent of any other corporation, limited
liability company, partnership, joint venture, trust or other entity or
enterprise, whether or not for profit, as to which Indemnitee is or was serving
at the request of the Company as a director, officer, employee, member, manager,
trustee or agent, (ii) any actual, alleged or suspected act or failure to
act by Indemnitee in respect of any business, transaction, communication,
filing, disclosure or other activity of the Company or any other entity or
enterprise referred to in clause (i) of this sentence, or
(iii) Indemnitee’s status as a current or former director, officer,
employee or agent of the Company or as a current or former director, officer,
employee, member, manager, trustee or agent of the Company or any other entity
or enterprise referred to in clause (i) of this sentence or any actual,
alleged or suspected act or failure to act by Indemnitee in connection with any
obligation or restriction imposed upon Indemnitee by reason of such
status. In addition to any
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service at the
actual request of the Company, for purposes of this Agreement, Indemnitee will
be deemed to be serving or to have served at the request of the Company as a
director, officer, employee, member, manager, trustee or agent of another entity
or enterprise if Indemnitee is or was serving as a director, officer, employee,
member, manager, trustee or agent of such entity or enterprise and (i) such
entity or enterprise is or at the time of such service was a Controlled
Affiliate, (ii) such entity or enterprise is or at the time of such service
was an employee benefit plan (or related trust) sponsored or maintained by the
Company or a Controlled Affiliate, or (iii) the Company or a Controlled
Affiliate directly or indirectly caused or authorized Indemnitee to be
nominated, elected, appointed, designated, employed, engaged or selected to
serve in such capacity.
(g) “Indemnifiable
Losses” means any and all Losses relating to, arising out of or resulting
from any Indemnifiable Claim.
(h) “Independent
Counsel” means a law firm, or a member of a law firm, that is experienced
in matters of corporation law and neither presently is, nor in the past five
years has been, retained to represent: (i) the Company (or any
Subsidiary) or Indemnitee in any matter material to either such party (other
than with respect to matters concerning the Indemnitee under this Agreement, or
of other indemnitees under similar indemnification agreements), or (ii) any
other named (or, as to a threatened matter, reasonably likely to be named) party
to the Indemnifiable Claim giving rise to a claim for indemnification
hereunder. Notwithstanding the foregoing, the term “Independent
Counsel” will not include any person who, under the applicable standards of
professional conduct then prevailing, would have a conflict of interest in
representing either the Company or Indemnitee in an action to determine
Indemnitee’s rights under this Agreement.
(i)
“Losses” means any and all Expenses,
damages, losses, liabilities, judgments, fines, penalties (whether civil,
criminal or other) and amounts paid in settlement following a final,
nonappealable judgment or conviction, including without limitation all interest,
assessments and other charges paid or payable in connection with or in respect
of any of the foregoing.
2. Indemnification
Obligation. Subject to Section 7, the Company shall
indemnify, defend and hold harmless Indemnitee, to the fullest extent permitted
or required by the laws of the State of Ohio in effect on the date hereof or as
such laws may from time to time hereafter be amended to increase the scope of
such permitted indemnification, against any and all Indemnifiable Claims and
Indemnifiable Losses; provided, however, that, except as
provided in Sections 4 and 20, Indemnitee will not be entitled to
indemnification pursuant to this Agreement in connection with any Claim
initiated by Indemnitee against the Company or any director or officer of the
Company unless the Company has joined in or consented to the initiation of such
Claim.
3. Advancement of
Expenses. Indemnitee will have the right to advancement by the
Company prior to the final disposition of any Indemnifiable Claim of any and all
Expenses relating to, arising out of or resulting from any Indemnifiable Claim
paid or incurred by Indemnitee or which Indemnitee determines are reasonably
likely to be paid or incurred by Indemnitee. Indemnitee’s right to
such advancement is not subject to the satisfaction of any standard of
conduct. Without limiting the generality or effect of the foregoing,
within five
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business days after
any request by Indemnitee, the Company shall, in accordance with such request
(but without duplication), (a) pay such Expenses on behalf of Indemnitee,
(b) advance to Indemnitee funds in an amount sufficient to pay such
Expenses, or (c) reimburse Indemnitee for such Expenses; provided that Indemnitee
shall repay, without interest any amounts actually advanced to Indemnitee that,
at the final disposition of the Indemnifiable Claim to which the advance
related, were in excess of amounts paid or payable by Indemnitee in respect of
Expenses relating to, arising out of or resulting from such Indemnifiable
Claim. For purposes of obtaining payments of Expenses in advance of
final disposition, the Indemnitee shall submit to the Company a sworn request
for advancement of Expenses substantially in the form of Exhibit A attached
hereto and made a part hereof (subject to Indemnitee filling in the blanks
therein and selecting from among the bracketed alternatives therein, the “Undertaking”),
averring that the Indemnitee has reasonably incurred or will reasonably incur
actual Expenses in defending an Indemnifiable Claim. The Undertaking
need not be secured and the Company must accept the Undertaking without
reference to Indemnitee’s ability to repay the Expenses. Unless at
the time of the Indemnitee’s act or omission at issue, the Constituent Documents
prohibit such advances by specific reference to ORC Section l701.13(E)(5)(a) or
unless the only liability asserted against the Indemnitee in the subject action,
suit or proceeding is pursuant to ORC Section 1701.95, the Indemnitee will be
eligible to execute Part A of the Undertaking by which the Indemnitee undertakes
to: (i) repay such amount if it is proved by clear and convincing
evidence in a court of competent jurisdiction that the Indemnitee’s action or
failure to act involved an act or omission undertaken with deliberate intent to
cause injury to the Company or undertaken with reckless disregard for the best
interests of the Company; and (ii) reasonably cooperate with the Company
concerning the action, suit, proceeding or claim. In all cases, the
Indemnitee will be eligible to execute Part B of the Undertaking by which the
Indemnitee undertakes to repay such amount if it ultimately is determined that
the Indemnitee is not entitled to be indemnified by the Company under this
Agreement or otherwise. In the event that the Indemnitee is eligible
to and does execute both Part A and Part B of the Undertaking, the Expenses
which are paid by the Company pursuant thereto will be required to be repaid by
the Indemnitee only if the Indemnitee is required to do so under the terms of
both Part A and Part B of the Undertaking. In no event will
Indemnitee’s right to the payment, advancement or reimbursement of Expenses
pursuant to this Section 3 be conditioned upon any undertaking that is less
favorable to Indemnitee than, or that is in addition to, the undertakings set
forth in Exhibit
A.
4. Indemnification for Additional
Expenses. Without limiting the generality or effect of the
foregoing, the Company shall indemnify and hold harmless Indemnitee against and,
if requested by Indemnitee, shall reimburse Indemnitee for, or advance to
Indemnitee, within five business days of such request, any and all Expenses paid
or incurred by Indemnitee or which Indemnitee determines are reasonably likely
to be paid or incurred by Indemnitee in connection with any Claim made,
instituted or conducted by Indemnitee for (a) indemnification or payment,
advancement or reimbursement of Expenses by the Company under any provision of
this Agreement, or under any other agreement or provision of the Constituent
Documents now or hereafter in effect relating to Indemnifiable Claims, and/or
(b) recovery under any directors’ and officers’ liability insurance
policies maintained by the Company, regardless in each case of whether
Indemnitee ultimately is determined to be entitled to such indemnification,
reimbursement, advance or insurance recovery, as the case may be; provided, however, that Indemnitee
shall return, without interest, any such advance of Expenses (or portion
thereof) which remains unspent at the final disposition of the Claim to which
the advance related.
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5. Partial
Indemnity. If Indemnitee is entitled under any provision of
this Agreement to indemnification by the Company for some or a portion of any
Indemnifiable Loss, but not for all of the total amount thereof, the Company
shall nevertheless indemnify Indemnitee for the portion thereof to which
Indemnitee is entitled.
6. Procedure for
Notification. To obtain indemnification under this Agreement
in respect of an Indemnifiable Claim or Indemnifiable Loss, Indemnitee shall
submit to the Company a written request, including a brief description (based
upon information then available to Indemnitee) of such Indemnifiable Claim or
Indemnifiable Loss. If, at the time of the receipt of such request,
the Company has directors’ and officers’ liability insurance in effect under
which coverage for such Indemnifiable Claim or Indemnifiable Loss is potentially
available, the Company shall give prompt written notice of such Indemnifiable
Claim or Indemnifiable Loss to the applicable insurers in accordance with the
procedures set forth in the applicable policies. The Company shall
provide to Indemnitee a copy of such notice delivered to the applicable
insurers, and copies of all subsequent correspondence between the Company and
such insurers regarding the Indemnifiable Claim or Indemnifiable Loss, in each
case substantially concurrently with the delivery or receipt thereof by the
Company. The failure by Indemnitee to timely notify the Company of
any Indemnifiable Claim or Indemnifiable Loss will not relieve the Company from
any liability hereunder unless, and only to the extent that, the Company did not
otherwise learn of such Indemnifiable Claim or Indemnifiable Loss and such
failure results in forfeiture by the Company of substantial defenses, rights or
insurance coverage.
7. Determination of Right to
Indemnification.
(a) To the extent that
Indemnitee shall have been successful on the merits or otherwise in defense of
any Indemnifiable Claim or any portion thereof or in defense of any issue or
matter therein, including without limitation through a dismissal without
prejudice, Indemnitee shall be indemnified against all Indemnifiable Losses
relating to, arising out of or resulting from such Indemnifiable Claim in
accordance with Section 2 and no Standard of Conduct Determination (as
defined in Section 7(b)) will be required. In the event that a
matter as to which there has been a dismissal without prejudice is later revived
in the same or similar form, that matter will be treated as a new Claim for all
purposes of this Agreement.
(b) To the extent that
the provisions of Section 7(a) are inapplicable to an Indemnifiable Claim
that will have been finally disposed of, any determination of whether Indemnitee
has satisfied any applicable standard of conduct under Ohio law that is a
legally required condition precedent to indemnification of Indemnitee hereunder
against Indemnifiable Losses relating to, arising out of or resulting from such
Indemnifiable Claim (a “Standard of
Conduct Determination”) will be made as follows: (i) if a
Change in Control shall not have occurred, or if a Change in Control shall have
occurred but Indemnitee shall have requested that the Standard of Conduct
Determination be made pursuant to this clause (i), (A) by a majority vote
of a quorum consisting of the Disinterested Directors, (B) if such
Disinterested Directors so direct, by a majority vote of a committee of
Disinterested Directors designated by a majority vote of all Disinterested
Directors, or (C) if such quorum of Disinterested Directors is not
available or if a majority of such a quorum so direct, by Independent Counsel in
a written opinion addressed to the Board, a copy of which shall be delivered to
Indemnitee; and (ii) if a Change in Control shall have occurred and
Indemnitee shall not have requested that the Standard of Conduct Determination
be made pursuant to clause (i), by Independent Counsel in a written
opinion
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addressed to the
Board, a copy of which shall be delivered to Indemnitee. Indemnitee
will cooperate with the person or persons making such Standard of Conduct
Determination, including providing to such person or persons, upon reasonable
advance request, any documentation or information which is not privileged or
otherwise protected from disclosure and which is reasonably available to
Indemnitee and reasonably necessary to such determination. The
Company shall indemnify and hold harmless Indemnitee against and, if requested
by Indemnitee, shall reimburse Indemnitee for, or advance to Indemnitee, within
five business days of such request, any and all costs and expenses (including
attorneys’ and experts’ fees and expenses) incurred by Indemnitee in so
cooperating with the person or persons making such Standard of Conduct
Determination.
(c) The Company shall
use its reasonable best efforts to cause any Standard of Conduct Determination
required under Section 7(b) to be made as promptly as
practicable. If (i) the person or persons empowered or selected
under Section 7 to make the Standard of Conduct Determination shall not
have made a determination within 30 days after the later of
(A) receipt by the Company of written notice from Indemnitee advising the
Company of the final disposition of the applicable Indemnifiable Claim (the date
of such receipt being the “Notification
Date”) and (B) the selection of an Independent Counsel, if such
determination is to be made by Independent Counsel, that is permitted under the
provisions of Section 7(e) to make such determination and
(ii) Indemnitee shall have fulfilled his/her obligations set forth in the
second sentence of Section 7(b), then Indemnitee shall be deemed to have
satisfied the applicable standard of conduct; provided that such 30-day
period may be extended for a reasonable time, not to exceed an additional
30 days, if the person or persons making such determination in good faith
requires such additional time for the obtaining or evaluation or documentation
and/or information relating thereto.
(d) If
(i) Indemnitee shall be entitled to indemnification hereunder against any
Indemnifiable Losses pursuant to Section 7(a), (ii) no determination
of whether Indemnitee has satisfied any applicable standard of conduct under
Ohio law is a legally required condition precedent to indemnification of
Indemnitee hereunder against any Indemnifiable Losses, or (iii) Indemnitee
has been determined or deemed pursuant to Section 7(b) or (c) to have
satisfied any applicable standard of conduct under Ohio law which is a legally
required condition precedent to indemnification of Indemnitee hereunder against
any Indemnifiable Losses, then the Company shall pay to Indemnitee, within five
business days after the later of (x) the Notification Date in respect of
the Indemnifiable Claim or portion thereof to which such Indemnifiable Losses
are related, out of which such Indemnifiable Losses arose or from which such
Indemnifiable Losses resulted and (y) the earliest date on which the
applicable criterion specified in clause (i), (ii) or (iii) above shall have
been satisfied, an amount equal to the amount of such Indemnifiable
Losses.
(e) If a Standard of
Conduct Determination is to be made by Independent Counsel pursuant to
Section 7(b)(i), the Independent Counsel shall be selected by the Board of
Directors, and the Company shall give written notice to Indemnitee advising him
or her of the identity of the Independent Counsel so selected. If a
Standard of Conduct Determination is to be made by Independent Counsel pursuant
to Section 7(b)(ii), the Independent Counsel shall be selected by
Indemnitee, and Indemnitee shall give written notice to the Company advising it
of the identity of the Independent Counsel so selected. In either
case, Indemnitee or the Company, as applicable, may, within five business days
after receiving written notice of selection from the
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other, deliver to
the other a written objection to such selection; provided, however, that such objection
may be asserted only on the ground that the Independent Counsel so selected does
not satisfy the criteria set forth in the definition of “Independent Counsel” in
Section 1(h), and the objection shall set forth with particularity the
factual basis of such assertion. Absent a proper and timely
objection, the person or firm so selected will act as Independent
Counsel. If such written objection is properly and timely made and
substantiated, (i) the Independent Counsel so selected may not serve as
Independent Counsel unless and until such objection is withdrawn or a court has
determined that such objection is without merit and (ii) the non-objecting
party may, at its option, select an alternative Independent Counsel and give
written notice to the other party advising such other party of the identity of
the alternative Independent Counsel so selected, in which case the provisions of
the two immediately preceding sentences and clause (i) of this sentence
shall apply to such subsequent selection and notice. If applicable,
the provisions of clause (ii) of the immediately preceding sentence shall
apply to successive alternative selections. If no Independent Counsel
that is permitted under the foregoing provisions of this Section 7(e) to
make the Standard of Conduct Determination shall have been selected within
30 days after the Company gives its initial notice pursuant to the first
sentence of this Section 7(e) or Indemnitee gives its initial notice
pursuant to the second sentence of this Section 7(e), as the case may be,
either the Company or Indemnitee may petition the Federal or state courts of
Ohio for resolution of any objection which shall have been made by the Company
or Indemnitee to the other’s selection of Independent Counsel and/or for the
appointment as Independent Counsel of a person or firm selected by the court or
by such other person as the court shall designate, and the person or firm with
respect to whom all objections are so resolved or the person or firm so
appointed will act as Independent Counsel. In all events, the Company
shall pay all of the reasonable fees and expenses of the Independent Counsel
incurred in connection with the Independent Counsel’s determination pursuant to
Section 7(b).
8. Presumption of
Entitlement. In making any Standard of Conduct Determination,
the person or persons making such determination shall presume that Indemnitee
has satisfied the applicable standard of conduct, and the Company may overcome
such presumption only by its adducing clear and convincing evidence to the
contrary. Any Standard of Conduct Determination that is adverse to
Indemnitee may be challenged by the Indemnitee in the state or Federal courts in
Ohio. No determination by the Company (including by its directors or
any Independent Counsel) that Indemnitee has not satisfied any applicable
standard of conduct shall be a defense to any Claim by Indemnitee for
indemnification or reimbursement or advance payment of Expenses by the Company
hereunder or create a presumption that Indemnitee has not met any applicable
standard of conduct.
9. No Other
Presumption. For purposes of this Agreement, the termination
of any Claim by judgment, order, settlement (whether with or without court
approval) or conviction, or upon a plea of nolo contendere or its
equivalent, will not create a presumption that Indemnitee did not meet any
applicable standard of conduct or that indemnification hereunder is otherwise
not permitted.
10. Non-Exclusivity. The
rights of Indemnitee hereunder will be in addition to any other rights
Indemnitee may have under the Constituent Documents, or the substantive laws of
the Company’s jurisdiction of incorporation, any other contract or otherwise
(collectively, “Other Indemnity
Provisions”); provided, however, that (a) to the
extent that Indemnitee otherwise would have any greater right to indemnification
under any Other Indemnity Provision,
10
Indemnitee will be
deemed to have such greater right hereunder and (b) to the extent that any
change is made to any Other Indemnity Provision which permits any greater right
to indemnification than that provided under this Agreement as of the date
hereof, Indemnitee will be deemed to have such greater right
hereunder. The Company will not adopt any amendment to any of the
Constituent Documents the effect of which would be to deny, diminish or encumber
Indemnitee’s right to indemnification under this Agreement or any Other
Indemnity Provision.
11. Liability Insurance and
Funding. For the duration of Indemnitee’s service as a
director of the Company, and thereafter for so long as Indemnitee shall be
subject to any pending or possible Indemnifiable Claim, the Company shall use
commercially reasonable efforts (taking into account the scope and amount of
coverage available relative to the cost thereof) to cause to be maintained in
effect policies of directors’ and officers’ liability insurance providing
coverage for directors and/or officers of the Company that is at least
substantially comparable in scope and amount to that provided by the Company’s
current policies of directors’ and officers’ liability
insurance. Upon request, the Company shall provide Indemnitee with a
copy of all directors’ and officers’ liability insurance applications, binders,
policies, declarations, endorsements and other related materials, and shall
provide Indemnitee with a reasonable opportunity to review and comment on the
same. Without limiting the generality or effect of the two
immediately preceding sentences, the Company shall not discontinue or
significantly reduce the scope or amount of coverage from one policy period to
the next (i) without the prior approval thereof by a majority vote of the
Incumbent Directors, even if less than a quorum, or (ii) if at the time
that any such discontinuation or significant reduction in the scope or amount of
coverage is proposed there are no Incumbent Directors, without the prior written
consent of Indemnitee (which consent shall not be unreasonably withheld or
delayed). As long as commercially available, in all policies of
directors’ and officers’ liability insurance obtained by the Company, Indemnitee
shall be named as an insured in such a manner as to provide Indemnitee the same
rights and benefits, subject to the same limitations, as are accorded to the
Company’s directors and officers most favorably insured by such
policy. The Company may, but shall not be required to, create a trust
fund, grant a security interest or use other means, including without limitation
a letter of credit, to ensure the payment of such amounts as may be necessary to
satisfy its obligations to indemnify and advance expenses pursuant to this
Agreement.
12. Subrogation. In the
event of payment under this Agreement, the Company shall be subrogated to the
extent of such payment to all of the related rights of recovery of Indemnitee
against other persons or entities (other than Indemnitee’s successors),
including any entity or enterprise referred to in clause (i) of the definition
of “Indemnifiable Claim” in Section 1(f). Indemnitee shall
execute all papers reasonably required to evidence such rights (all of
Indemnitee’s reasonable Expenses, including attorneys’ fees and charges, related
thereto to be reimbursed by or, at the option of Indemnitee, advanced by the
Company).
13. No Duplication of
Payments. The Company shall not be liable under this Agreement
to make any payment to Indemnitee in respect of any Indemnifiable Losses to the
extent Indemnitee has otherwise actually received payment (net of Expenses
incurred in connection therewith) under any insurance policy, the Constituent
Documents and Other Indemnity Provisions or otherwise (including from any entity
or enterprise referred to in clause (i) of the definition of “Indemnifiable
Claim” in Section 1(f)) in respect of such Indemnifiable Losses otherwise
indemnifiable hereunder.
11
14. Defense of
Claims. The Company shall be entitled to participate in the
defense of any Indemnifiable Claim or to assume the defense thereof, with
counsel reasonably satisfactory to the Indemnitee (which may include counsel for
the carrier); provided
that if Indemnitee believes, after consultation with counsel selected by
Indemnitee, that (a) the use of counsel chosen by the Company to represent
Indemnitee would present such counsel with an actual or potential conflict,
(b) the named parties in any such Indemnifiable Claim (including any
impleaded parties) include both the Company and Indemnitee and Indemnitee shall
conclude that there may be one or more legal defenses available to Indemnitee
that are different from or in addition to those available to the Company, or
(c) any such representation by such counsel would be precluded under the
applicable standards of professional conduct then prevailing, then Indemnitee
shall be entitled to retain separate counsel (but not more than one law firm
plus, if applicable, local counsel in respect of any particular Indemnifiable
Claim) at the Company’s expense. The Company shall not be liable to
Indemnitee under this Agreement for any amounts paid in settlement of any
threatened or pending Indemnifiable Claim effected without the Company’s prior
written consent. The Company shall not, without the prior written
consent of the Indemnitee, effect any settlement of any threatened or
pending Indemnifiable Claim to which the Indemnitee is, or could have been,
a party unless such settlement solely involves the payment of money and includes
a complete and unconditional release of the Indemnitee from all liability on any
claims that are the subject matter of such Indemnifiable
Claim. Neither the Company nor Indemnitee shall unreasonably withhold
its consent to any proposed settlement; provided that Indemnitee may
withhold consent to any settlement that does not provide a complete and
unconditional release of Indemnitee.
15. Successors and Binding
Agreement. (a) The Company shall require any
successor (whether direct or indirect, by purchase, merger, consolidation,
reorganization or otherwise, and including any holding company as described in
ORC 1701.802(A)) to all or substantially all of the business or assets of the
Company, by agreement in form and substance satisfactory to Indemnitee and his
or her counsel, expressly to assume and agree to perform this Agreement in the
same manner and to the same extent the Company would be required to perform if
no such succession had taken place. This Agreement shall be binding
upon and inure to the benefit of the Company and any successor to the Company,
including without limitation any person acquiring directly or indirectly all or
substantially all of the business or assets of the Company whether by purchase,
merger, consolidation, reorganization or otherwise, and including any holding
company as described in ORC 1701.802(A) (and such successor will thereafter be
deemed the “Company”
for purposes of this Agreement), but shall not otherwise be assignable or
delegatable by the Company.
(b) This Agreement shall
inure to the benefit of and be enforceable by the Indemnitee’s personal or legal
representatives, executors, administrators, heirs, distributees, legatees and
other successors.
(c) This Agreement is
personal in nature and neither of the parties hereto shall, without the consent
of the other, assign or delegate this Agreement or any rights or obligations
hereunder except as expressly provided in Sections 15(a) and
15(b). Without limiting the generality or effect of the foregoing,
Indemnitee’s right to receive payments hereunder shall not be assignable,
whether by pledge, creation of a security interest or otherwise, other than by a
transfer by the Indemnitee’s will or by the laws of descent and distribution,
and, in the event of
12
any
attempted assignment or transfer contrary to this Section 15(c), the
Company will have no liability to pay any amount so attempted to be assigned or
transferred.
16. Notices. For all
purposes of this Agreement, all communications, including without limitation
notices, consents, requests or approvals, required or permitted to be given
hereunder shall be in writing and shall be deemed to have been duly given when
hand delivered or dispatched by electronic facsimile or electronic mail
transmission (with receipt thereof confirmed orally or electronically), or five
business days after having been mailed by United States registered or certified
mail, return receipt requested, postage prepaid or one business day after having
been sent for next-day delivery by a nationally recognized overnight courier
service, addressed to the Company (to the attention of the Secretary of the
Company) and to Indemnitee at the applicable address shown on the signature page
hereto, or to such other address as any party may have furnished to the other in
writing and in accordance herewith, except that notices of changes of address
will be effective only upon receipt.
17. Governing Law. The
validity, interpretation, construction and performance of this Agreement shall
be governed by and construed in accordance with the substantive laws of the
State of Ohio, without giving effect to the principles of conflict of laws of
such State. The Company and Indemnitee each hereby irrevocably
consent to the jurisdiction of the state and Federal courts in Ohio for all
purposes in connection with any action or proceeding which arises out of or
relates to this Agreement and agree that any action instituted under this
Agreement shall be brought only in the state or Federal courts in
Ohio.
18. Validity. If any
provision of this Agreement or the application of any provision hereof to any
person or circumstance is held invalid, unenforceable or otherwise illegal, the
remainder of this Agreement and the application of such provision to any other
person or circumstance shall not be affected, and the provision so held to be
invalid, unenforceable or otherwise illegal shall be reformed to the extent, and
only to the extent, necessary to make it enforceable, valid or
legal. In the event that any court or other adjudicative body shall
decline to reform any provision of this Agreement held to be invalid,
unenforceable or otherwise illegal as contemplated by the immediately preceding
sentence, the parties thereto shall take all such action as may be necessary or
appropriate to replace the provision so held to be invalid, unenforceable or
otherwise illegal with one or more alternative provisions that effectuate the
purpose and intent of the original provisions of this Agreement as fully as
possible without being invalid, unenforceable or otherwise illegal.
19. Miscellaneous. No
provision of this Agreement may be waived, modified or discharged unless such
waiver, modification or discharge is agreed to in writing signed by Indemnitee
and the Company. No waiver by either party hereto at any time of any
breach by the other party hereto or compliance with any condition or provision
of this Agreement to be performed by such other party shall be deemed a waiver
of similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise,
expressed or implied with respect to the subject matter hereof have been made by
either party that are not set forth expressly in this
Agreement. References to Sections are to references to Sections of
this Agreement.
20. Legal Fees and
Expenses. It is the intent of the Company that Indemnitee not
be required to incur legal fees and or other Expenses associated with the
interpretation, enforcement
13
or
defense of Indemnitee’s rights under this Agreement by litigation or otherwise
because the cost and expense thereof would substantially detract from the
benefits intended to be extended to Indemnitee
hereunder. Accordingly, without limiting the generality or effect of
any other provision hereof, if it should appear to Indemnitee that the Company
has failed to comply with any of its obligations under this Agreement (including
its obligations under Section 3) or in the event that the Company or any other
person takes or threatens to take any action to declare this Agreement void or
unenforceable, or institutes any litigation or other action or proceeding
designed to deny, or to recover from, Indemnitee the benefits provided or
intended to be provided to Indemnitee hereunder, the Company irrevocably
authorizes the Indemnitee from time to time to retain counsel of Indemnitee’s
choice, at the expense of the Company as hereafter provided, to advise and
represent Indemnitee in connection with any such interpretation, enforcement or
defense, including without limitation the initiation or defense of any
litigation or other legal action, whether by or against the Company or any
director, officer, shareholder or other person affiliated with the Company, in
any jurisdiction. Without respect to whether Indemnitee prevails, in
whole or in part, in connection with any of the foregoing, the Company will pay
and be solely financially responsible for any and all attorneys’ and related
fees and expenses incurred by Indemnitee in connection with any of the
foregoing.
21. Certain Interpretive
Matters. Unless the context of this Agreement otherwise
requires, (a) “it” or “its” or words of any gender include each other
gender, (b) words using the singular or plural number also include the
plural or singular number, respectively, (c) the terms “hereof,” “herein,”
“hereby” and derivative or similar words refer to this entire Agreement,
(d) the terms “Article,” “Section,” “Annex” or “Exhibit” refer to the
specified Article, Section, Annex or Exhibit of or to this Agreement,
(e) the terms “include,” “includes” and “including” will be deemed to be
followed by the words “without limitation” (whether or not so expressed), and
(f) the word “or” is disjunctive but not exclusive. Whenever
this Agreement refers to a number of days, such number will refer to calendar
days unless business days are specified and whenever action must be taken
(including the giving of notice or the delivery of documents) under this
Agreement during a certain period of time or by a particular date that ends or
occurs on a non-business day, then such period or date will be extended until
the immediately following business day. As used herein, “business
day” means any day other than Saturday, Sunday or a United States federal
holiday.
22. Counterparts. This
Agreement may be executed in one or more counterparts, each of which will be
deemed to be an original but all of which together shall constitute one and the
same agreement.
[Signatures
Appear On Following Page]
14
IN
WITNESS WHEREOF, Indemnitee has executed and the Company has caused its duly
authorized representative to execute this Agreement as of the date first above
written.
FirstEnergy
Corp.
00
Xxxxx Xxxx Xxxxxx
Xxxxx, Xxxx
00000
By:
Name: ________________________
Title: _________________________
“Indemnitee”
15
EXHIBIT
A
UNDERTAKING
STATE
OF )
) SS
COUNTY
OF
)
I,
_________________________________, being first duly sworn, do depose and say as
follows:
1. This Undertaking is
submitted pursuant to the Director Indemnification Agreement, dated
____________, 2___, between First Energy Corp., an Ohio corporation (the “Company”)
and the undersigned.
2. I am requesting
payment of Expenses that I have reasonably incurred or will reasonably incur in
defending an Indemnifiable Claim referred to in the aforesaid Director
Indemnification Agreement.
3. The Expenses for
which payment is requested are, in general, all expenses related to
__________________________________________________________________________________________________________________________________________
__________________________________________________________________________________________________________________________________________
_________________________________________________________________________________________________________________________________________.
4. Part A1
I
hereby undertake to (a) repay all amounts paid pursuant hereto if it is proved
by clear and convincing evidence in a court of competent jurisdiction that my
action or failure to act which is the subject of the matter described herein
involved an act or omission undertaken with deliberate intent to cause injury to
the Company or undertaken with reckless disregard for the best interests of the
Company and (b) reasonably cooperate with the Company concerning the action,
suit, proceeding or claim.
__________________________________________
[INDEMNITEE NAME]
5. Part B
I
hereby undertake to repay all amounts paid pursuant hereto if it ultimately is
determined that I am not entitled to be indemnified by the Company under the
aforesaid Director Indemnification Agreement or otherwise.
____________________________________
[Signature of Indemnitee]
16
Subscribed and sworn
to before me, a Notary Public in and for said County and State, this _____ day
of _________, 2___.
[Seal]
____________________________________
My
commission expires the ____ day of ___________, 2___.
17
