EXHIBIT 10(o)
AMERICAN ELECTRIC POWER SERVICE CORPORATION
CHANGE IN CONTROL AGREEMENT
FOR THE OFFICE OF THE CHAIRMAN
Whereas, American Electric Power Service Corporation, a New York
corporation, including any of its subsidiary companies, divisions,
organizations, or affiliated entities (collectively referred to as "AEPSC")
considers it essential to its best interests and the best interests of the
shareholders of the American Electric Power Company, Inc., a New York
corporation, (hereinafter referred to as "Corporation") to foster the continued
employment of key management personnel; and
Whereas, the uncertainty attendant to a Change In Control of the
Corporation may result in the departure or distraction of management personnel
to the detriment of AEPSC and the shareholders of the Corporation; and
Whereas, the Board of the Corporation has determined that steps should be
taken to reinforce and encourage the continued attention and dedication of
members of AEPSC's management to their assigned duties in the event of a Change
In Control of the Corporation.
Now Therefore, AEPSC hereby establishes the American Electric Power Service
Corporation Change In Control Agreement (the "Agreement").
ARTICLE I
DEFINITIONS
As used herein the following words and phrases shall have the following
respective meanings unless the context clearly indicates otherwise.
(a) "Anniversary Date" means January 1 of each Calendar Year.
(b) "Annual Compensation" means the sum of the Executive's Annual Salary
and the Executive's Target Annual Incentive.
(c) "Annual Salary" means the Executive's regular annual base salary
immediately prior to the Executive's termination of employment, including
compensation converted to other benefits under a flexible pay arrangement
maintained by AEPSC or deferred pursuant to a written plan or agreement with
AEPSC, but excluding allowances and compensation paid or payable under any of
AEPSC's long-term or short-term incentive plans or any similar payments.
(d) "Board" means the Board of Directors of American Electric Power
Company, Inc.
(e) "Calendar Year" means the twelve (12) month period commencing each
January 1 and ending each December 31.
(f) "Cause" shall mean
(i) the willful and continued failure of the Executive to perform
substantially the Executive's duties with AEPSC (other than any such
failure resulting from incapacity due to physical or mental illness),
after a written demand for substantial performance is delivered to the
Executive by the Board or an elected officer of AEPSC which
specifically identifies the manner in which the Board or the elected
officer believes that the Executive has not substantially performed
the Executive's duties, or
(ii) the willful engaging by the Executive in illegal conduct or gross
misconduct which is materially and demonstrably injurious to AEPSC or
the Corporation, or a breach of the Executive's fiduciary duty to
AEPSC or the Corporation, as determined by the Board.
For purposes of this provision, no act or failure to act, on the part
of the Executive, shall be considered "willful" unless it is done, or
omitted to be done, by the Executive in bad faith or without reasonable
belief that the Executive's action or omission was in the best interests of
AEPSC or the Corporation. Any act, or failure to act, based upon authority
given pursuant to a resolution duly adopted by the Board or upon the advice
of counsel for AEPSC or the Corporation, shall be conclusively presumed to
be done, or omitted to be done, by the Executive in good faith and in the
best interests of AEPSC or the Corporation
(g) "Change In Control" of the Corporation shall be deemed to have occurred
if (i) any "person" or "group" (as such terms are used in Section 13(d) and
14(d) of the Securities Exchange Act of 1934 ("Exchange Act"), other than AEPSC,
any company owned, directly or indirectly, by the shareholders of the
Corporation in substantially the same proportions as their ownership of stock of
the Corporation or a trustee or other fiduciary holding securities under an
employee benefit plan of the Corporation, becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of more
than 25 percent of the then outstanding voting stock of the Corporation; (ii)
during any period of two consecutive years, individuals who at the beginning of
such period constitute the Board, together with any new directors (other than a
director nominated by a person (x) who has entered into an agreement with the
Corporation to effect a transaction described in this Article I (g)(i), (iii) or
(iv) hereof or (y) who publicly announces an intention to take or to consider
taking action (including, but not limited to, an actual or threatened proxy
contest) which if consummated would constitute a Change In Control) whose
election or nomination for election was approved by a vote of at least
two-thirds of the directors then still in office who were either directors at
the beginning of the period or whose election or nomination for election was
previously so approved, cease for any reason, except for death or disability, to
constitute at least a majority of the Board; or (iii) the consummation of a
merger or consolidation of the Corporation with any other entity, other than a
merger or consolidation which would result in the voting securities of the
Corporation outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting securities of
the surviving entity) at least 50 percent of the total voting power represented
by the voting securities of the Corporation or such surviving entity outstanding
immediately after such merger or consolidation; or (iv) the shareholders of the
Corporation approve a plan of complete liquidation of the Corporation, or an
agreement for the sale or disposition by the Corporation (in one transaction or
a series of transactions) of all or substantially all of the Corporation's
assets.
(h) "Code" means the Internal Revenue Code of 1986, as amended from time to
time.
(i) "Commencement Date" means January 1, 2002, which shall be the beginning
date of the term of this Agreement.
(j) "Disability" means the Executive's total and permanent disability
as defined in AEPSC's long-term disability plan covering the Executive
immediately prior to the Change In Control.
(k) "Executive" means an employee of AEPSC who is designated by AEPSC as an
employee entitled to benefits, if any, under the terms of this Agreement.
(l) "Good Reason" means;
(1) an adverse change in the Executive's status, duties or
responsibilities as an executive of AEPSC as in effect immediately
prior to the Change In Control, provided that the Executive shall have
given AEPSC written notice of the alleged adverse change and AEPSC
shall have failed to cure such change within thirty (30) days after
its receipt of such notice;
(2) failure of AEPSC to pay or provide the Executive in a timely
fashion the salary or benefits to which the Executive is entitled
under any employment agreement between AEPSC and the Executive in
effect on the date of the Change In Control, or under any benefit
plans or policies in which the Executive was participating at the time
of the Change In Control, provided that such failure was other than an
isolated, insubstantial and inadvertent action not taken in bad faith
and which is remedied by the Corporation within eight days following
notice from the Executive;
(3) the reduction of the Executive's salary as in effect on the date
of the Change In Control;
(4) the taking of any action by AEPSC (including the elimination of a
plan without providing substitutes therefore, the reduction of the
Executive's awards thereunder or failure to continue the Executive's
participation therein) that would substantially diminish the aggregate
projected value of the Executive's awards or benefits under AEPSC's
benefit plans or policies in which the Executive was participating at
the time of the Change In Control;
(5) a failure by AEPSC or the Corporation to obtain from any successor
the assent to this Agreement contemplated by Article IV hereof; or
(6) the relocation, without the Executive's prior approval, of the
office at which the Executive is to perform services on behalf of
AEPSC to a location more than fifty (50) miles from its location
immediately prior to the Change In Control or a change, without the
Executive's prior approval, in the Executive's business travel
obligation subsequent to the Change In Control that requires the
Executive to travel on a regular and continuous basis in an amount
that represents a significant increase, from immediately prior to the
Change In Control, in the portion of the Executive's working time
routinely devoted to business travel.
Any circumstance described in this Article I (l) shall constitute Good
Reason even if such circumstance would not constitute a breach by AEPSC of
the terms of an employment agreement between AEPSC and the Executive in
effect on the date of the Change In Control. The Executive shall be deemed
to have terminated employment for Good Reason effective upon the effective
date stated in a written notice of such termination given by the Executive
to AEPSC (which notice shall not be given, in circumstances described in
Article I (1), before the end of the thirty (30) day period described
therein, or in circumstances described in Article I (l)(2), before the end
of the eight day period described therein), setting forth in reasonable
detail the facts and circumstances claimed to provide the basis for
termination, provided that the effective date may not precede, nor be more
than sixty (60) days from, the date such notice is given. The Executive's
continued employment shall not constitute consent to, or a waiver of rights
with respect to, any circumstances constituting Good Reason hereunder.
(m) "Retirement" shall mean an Executive's termination of employment after
attainment of age 55 with five or more years of service with AEPSC.
(n) "Target Annual Incentive" shall mean the award that the Executive would
have received under the Senior Officer Annual Incentive Compensation Plan
("SOIP") or the Management Incentive Compensation Plan ("MICP") for the year in
which the Executive's termination occurs, if one hundred percent (100%) of the
annual target award has been earned. Executives participating in annual
incentive compensation plans that do not have predefined target levels will be
treated as though they were participants in either the SOIP or MICP and will be
assigned the same annual target percent as their participating peers in a
comparable salary grade.
(o) "Qualifying Termination" shall mean following a Change In Control and
during the term of this Agreement the Executive's employment is terminated for
any reason excluding (i) the Executive's death, (ii) the Executive's Disability,
(iii) the Executive's Retirement, (iv) by AEPSC for Cause or (v) by the
Executive without Good Reason. In addition, a Qualifying Termination shall be
deemed to have occurred if, prior to a Change In Control, the Executive's
employment was terminated during the term of this Agreement by AEPSC without
Cause, or by the Executive for Good Reason based on events or circumstances that
occurred, (i) at the request of a person who has entered into an agreement with
AEPSC or the Corporation, the consummation of which would constitute a Change In
Control or (ii) otherwise in connection with, as a result of or in anticipation
of a Change In Control. The mere act of approving a Change In Control agreement
shall not in and of itself be deemed to constitute an event or circumstance in
anticipation of a Change In Control for purposes of this Article I (o).
ARTICLE II
TERM OF AGREEMENT
2.1 The initial term of this Agreement shall be for the period beginning on
the Commencement Date and ending on the December 31 immediately following the
Commencement Date. The term of this Agreement shall automatically be extended
for an additional Calendar Year on the first Anniversary Date immediately
following the initial term of this Agreement without further action by AEPSC,
and shall be automatically extended for an additional Calendar Year on each
succeeding Anniversary Date, unless AEPSC shall have served notice upon the
Executive at least sixty (60) days prior to such Anniversary Date of AEPSC's
intention that this Agreement shall not be extended, provided, however, that if
a Change In Control of the Corporation shall occur during the term of this
Agreement, this Agreement shall terminate two years after the date the Change In
Control is completed.
2.2 If an employee is designated as an Executive after the Commencement
Date or after an Anniversary Date, the initial term of this Agreement shall be
for the period beginning on the date the employee is designated as an Executive
and ending on the December 31 immediately following.
2.3 Notwithstanding Section 2.1, the term of this Agreement shall end upon
any termination of the Executive's employment prior to a Change In Control of
the Corporation. This Agreement shall also terminate if the Executive's position
is eliminated due to a downsizing, consolidation or restructuring of AEPSC other
than by reason of a Change In Control.
ARTICLE III
COMPENSATION UPON A CHANGE IN CONTROL FOLLOWED BY A TERMINATION
3.1 Upon a Qualifying Termination, the Executive shall be under no further
obligation to perform services for AEPSC and shall be entitled to receive the
following payments and benefits:
(a) As soon as practicable following the Executive's date of termination,
AEPSC shall make a lump sum cash payment to the Executive in an amount
equal to the sum of (1) the Executive's Annual Salary through the date
of termination to the extent not theretofore paid, (2) the product of
(x) the current plan year's Target Annual Incentive and (y) a
fraction, the numerator of which is the number of days in such
calendar year through the date of termination, and the denominator of
which is 365, except that annual incentive plans which do not have
predetermined annual target awards for participants shall have their
pro-rated incentive compensation award for the current plan year paid
as soon as practicable, and (3) any accrued vacation pay, in each case
the extent not theretofore paid and in full satisfaction of the rights
of the Executive thereto;
(b) Within sixty (60) days of the Executive's return of the signed release
form, AEPSC shall make a lump sum cash payment to the Executive in an
amount equal to three times the Executive's Annual Compensation; and
(c) For purposes of the American Electric Power System Excess Benefit
Plan, or any successor thereto, provided that the Executive is a
participant thereunder, the Executive shall be credited with three (3)
additional years of service; provided that if the Executive is older
than age 62 as of the Executive's date of termination the additional
years of service shall be limited to the difference between the
Executive's age as of the date of termination and the date the
Executive would attain age 65, and assuming that the Executive's
compensation for the additional period of service would have been
equal to the Executive's compensation in effect as of the Executive's
date of termination.
3.2 The Executive shall be entitled to the continuing benefits as follows:
(a) For the three (3) year period following the Executive's date of
termination, the Executive and the Executive's family shall be
provided with medical and dental insurance benefits as if the
Executive's employment had not been terminated; provided, however,
that if the Executive becomes reemployed with another employer and is
eligible to receive medical or other welfare benefits under another
employer-provided plan, the medical and other welfare benefits
described herein shall be secondary to those provided under such other
plan during such applicable period of eligibility. For purposes of
determining eligibility (but not the time of commencement of benefits)
of the Executive for retiree medical and dental insurance benefits
under AEPSC's plans, practices, programs and policies, the Executive
shall be considered to have remained employed during the three (3)
year period and to have retired on the last day of the three (3) year
period;
(b) AEPSC shall, at its sole expense as incurred, provide the Executive
with outplacement services the scope and provider of which shall be
selected by the Executive at the Executive's sole discretion (but at a
cost to AEPSC of not more than $30,000) or, at the Executive's option,
the use of comparable and accessible office space, office supplies and
equipment and secretarial services for a period not to exceed one
year, which in the aggregate are of comparable cost to the Corporation
or AEPSC as the outplacement services;
(c) To the extent any benefits described in this Article III, Section 3.2
cannot be provided pursuant to the appropriate plan or program
maintained by AEPSC, AEPSC shall provide such benefits outside such
plan or program at no additional cost (including without limitation
tax cost) to the Executive.
3.3 Notwithstanding the foregoing;
(a) The severance payments and benefits provided under Sections 3.1(b),
3.1(c) and 3.2 hereof shall be conditioned upon the Executive
executing a release at the time the Executive's employment is
terminated, in the form established by the Corporation or by AEPSC,
releasing the Corporation, AEPSC and their shareholders, partners,
officers, directors, employees and agents from any and all claims and
from any and all causes of action of kind or character, including but
not limited to all claims or causes of action arising out of
Executive's employment with the Corporation or AEPSC or the
termination of such employment.
(b) The severance payments and benefits provided under Sections 3.1 and
3.2 hereof shall be subject to, and conditioned upon, the waiver of
any other cash severance payment or other benefits provided by AEPSC
pursuant to any other severance agreement between AEPSC and the
Executive. No amount shall be payable under this Agreement to, or on
behalf of the Executive, if the Executive elects benefits under any
other cash severance plan or program, or any other special pay
arrangement with respect to the termination of the Executive's
employment.
(c) The Executive agrees that at all times following termination, the
Executive will not, without the prior written consent of AEPSC or the
Corporation, disclose to any person, firm or corporation any
"confidential information," of AEPSC or the Corporation which is now
known to the Executive or which hereafter may become known to the
Executive as a result of the Executive's employment or association
with AEPSC or the Corporation, unless such disclosure is required
under the terms of a valid and effective subpoena or order issued by a
court or governmental body; provided, however, that the foregoing
shall not apply to confidential information which becomes publicly
disseminated by means other than a breach of this provision. It is
recognized that damages in the event of breach of this Section 3.3(c)
by the Executive would be difficult, if not impossible, to ascertain,
and it is therefore agreed that AEPSC and the Corporation, in addition
to and without limiting any other remedy or right that AEPSC or the
Corporation may have, shall have the right to an injunction or other
equitable relief in any court of competent jurisdiction, enjoining any
such breach, and the Executive hereby waives any and all defenses the
Executive may have on the ground of lack of jurisdiction or competence
of the court to grant such an injunction or other equitable relief.
The existence of this right shall not preclude AEPSC or the
Corporation from pursuing any other rights or remedies at law or in
equity which AEPSC or the Corporation may have.
"Confidential information" shall mean any confidential, propriety and
or trade secret information, including, but not limited to, concepts,
ideas, information and materials relating to AEPSC or the Corporation,
client records, client lists, economic and financial analysis,
financial data, customer contracts, marketing plans, notes, memoranda,
lists, books, correspondence, manuals, reports or research, whether
developed by AEPSC or the Corporation or developed by the Executive
acting alone or jointly with AEPSC or the Corporation while the
Executive was employed by AEPSC.
3.4 Notwithstanding anything to the contrary in this Agreement, in the
event that any payment or distribution by AEPSC to or for the benefit of the
Executive, whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement or otherwise (a "Payment"), would be subject to the
excise tax imposed by Section 4999 of the Code or any interest or penalties with
respect to such excise tax (such excise tax, together with any such interest or
penalties, are hereinafter collectively referred to as the "Excise Tax"), AEPSC
shall pay to the Executive an additional payment (a "Gross-up Payment") in an
amount such that after payment by the Executive of all taxes (including any
interest or penalties imposed with respect to such taxes), including any Excise
Tax imposed on any Gross-up Payment, the Executive retains an amount of the
Gross-up Payment equal to the Excise Tax imposed upon the Payments. AEPSC and
the Executive shall make an initial determination as to whether a Gross-up
Payment is required and the amount of any such Gross-up Payment. Executive shall
notify AEPSC immediately in writing of any claim by the Internal Revenue Service
which, if successful, would require AEPSC to make a Gross-up Payment (or a
Gross-up Payment in excess of that, if any, initially determined by AEPSC and
the Executive) within five days of the receipt of such claim. AEPSC shall notify
the Executive in writing at least five days prior to the due date of any
response required with respect to such claim, or such shorter time period
following AEPSC's receipt of the notice, if it plans to contest the claim. If
AEPSC decides to contest such claim, the Executive shall cooperate fully with
AEPSC in such action; provided, however, AEPSC shall bear and pay directly or
indirectly all costs and expenses (including additional interest and penalties)
incurred in connection with such action and shall indemnify and hold the
Executive harmless, on an after-tax basis, for any Excise Tax or income tax,
including interest and penalties with respect thereto, imposed as a result of
AEPSC's action. If, as a result of AEPSC's action with respect to a claim, the
Executive receives a refund of any amount paid by AEPSC with respect to such
claim, the Executive shall promptly pay such refund to AEPSC. If AEPSC fails to
timely notify the Executive whether it will contest such claim or AEPSC
determines not to contest such claim, then AEPSC shall immediately pay to the
Executive the portion of such claim, if any, which it has not previously paid to
the Executive.
3.5 The obligations of AEPSC to pay the benefits described in Sections 3.1
and 3.2 shall be absolute and unconditional and shall not be affected by any
circumstances, including, without limitation, any set-off, counterclaim,
recoupment, defense or other right which AEPSC may have against the Executive.
In no event shall the Executive be obligated to seek other employment or take
any other action by way of mitigation of the amounts payable to the Executive
under any of the provisions of this Agreement, nor shall the amount of any
payment hereunder be reduced by any compensation earned by the Executive as a
result of employment by another employer, except as specifically provided in
Section 3.2.
ARTICLE IV
SUCCESSOR TO CORPORATION
4.1 This Agreement shall bind any successor of AEPSC or the Corporation,
its assets or its businesses (whether direct or indirect, by purchase, merger,
consolidation or otherwise) in the same manner and to the same extent that AEPSC
or the Corporation would be obligated under this Agreement if no succession had
taken place.
4.2 In the case of any transaction in which a successor would not by the
foregoing provision or by operation of law be bound by this Agreement, AEPSC and
the Corporation shall require such successor expressly and unconditionally to
assume and agree to perform AEPSC's and the Corporation's obligations under this
Agreement, in the same manner and to the same extent that AEPSC and the
Corporation would be required to perform if no such succession had taken place.
The term "Corporation," as used in this Agreement, shall mean the Corporation as
hereinbefore defined and any successor or assignee to the business assets which
by reason hereof becomes bound by this Agreement.
ARTICLE V
MISCELLANEOUS
5.1 Any notices and all other communications provided for herein shall be
in writing and shall be deemed to have been duly given when delivered or mailed,
by certified or registered mail, return receipt requested, postage prepaid
addressed to AEPSC at its principal office and to the Executive at the
Executive's residence or at such other addresses as AEPSC or the Executive shall
designate in writing.
Section 5.2 No provision of this Agreement may be modified, waived or
discharged except in a writing specifically referring to such provision and
signed by either AEPSC or the Executive against whom enforcement of such
modification, waiver or discharge is sought. No waiver by either AEPSC or the
Executive of the breach of any condition or provision of this Agreement shall be
deemed a waiver of any other condition or provision at the same or any other
time.
5.3 The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Ohio.
5.4 The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect.
5.5 This Agreement does not constitute a contract of employment or impose
on the Executive, AEPSC or the Corporation any obligation to retain the
Executive as an employee, to change the status of the Executive's employment, or
to change AEPSC's policies regarding the termination of employment.
5.6 If the Executive institutes any legal action in seeking to obtain or
enforce or is required to defend in any legal action the validity or
enforceability of, any right or benefit provided by this Agreement, AEPSC will
pay for all actual and reasonable legal fees and expenses incurred (as incurred)
by the Executive, regardless of the outcome of such action; provided, however,
that if such action instituted by the Executive is found by a court of competent
jurisdiction to be frivolous, the Executive shall not be entitled to legal fees
and expenses and shall be liable to AEPSC for amounts already paid for this
purpose.
5.7 If the Executive makes a written request alleging a right to receive
benefits under this Agreement or alleging a right to receive an adjustment in
benefits being paid under the Agreement, AEPSC shall treat it as a claim for
benefit. All claims for benefit under the Agreement shall be sent to the Human
Resources Department of AEPSC and must be received within 30 days after the
Executive's termination of employment. If AEPSC determines that the Executive
who has claimed a right to receive benefits, or different benefits, under the
Agreement is not entitled to receive all or any part of the benefits claimed, it
will inform the Executive in writing of its determination and the reasons
therefore in terms calculated to be understood by the Executive. The notice will
be sent within 90 days of the claim unless AEPSC determines additional time, not
exceeding 90 days, is needed. The notice shall make specific reference to the
pertinent Agreement provisions on which the denial is based, and describe any
additional material or information, if any, necessary for the Executive to
perfect the claim and the reason any such addition material or information is
necessary. Such notice shall, in addition, inform the Executive what procedure
the Executive should follow to take advantage of the review procedures set forth
below in the event the Executive desires to contest the denial of the claim. The
Executive may within 90 days thereafter submit in writing to AEPSC a notice that
the Executive contests the denial of the claim by AEPSC and desires a further
review. AEPSC shall within 60 days thereafter review the claim and authorize the
Executive to appear personally and review pertinent documents and submit issues
and comments relating to the claim to the persons responsible for making the
determination on behalf of AEPSC. AEPSC will render its final decision with
specific reasons therefore in writing and will transmit it to the Executive
within 60 days of the written request for review, unless AEPSC determines
additional time, not exceeding 60 days, is needed, and so notifies the
Executive. If AEPSC fails to respond to a claim filed in accordance with the
foregoing within 60 days or any such extended period, AEPSC shall be deemed to
have denied the claim.