SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) April 26, 2005
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AMERICAN ELECTRIC POWER COMPANY, INC.
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(Exact Name of Registrant as Specified in Its Charter)
New York
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(State or Other Jurisdiction of Incorporation)
1-3525 13-4922640
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(Commission File Number) (IRS Employer Identification No.)
APPALACHIAN POWER COMPANY
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(Exact Name of Registrant as Specified in Its Charter)
Virginia
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(State or Other Jurisdiction of Incorporation)
1-3457 54-0124790
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(Commission File Number) (IRS Employer
Identification No.)
OHIO POWER COMPANY
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(Exact Name of Registrant as Specified in Its Charter)
Ohio
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(State or Other Jurisdiction of Incorporation)
1-6543 31-4271000
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(Commission File Number) (IRS Employer
Identification No.)
1 Riverside Plaza, Columbus, OH 43215
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(Address of Principal Executive Offices) (Zip Code)
614-716-1000
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(Registrant's Telephone Number, Including Area Code)
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(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 1.01 Entry into a Material Definitive Agreement
On April 26, 2005, the shareholders of the Registrant approved the Registrant's
Amended and Restated American Electric Power System 2000 Long-Term Incentive
Plan at the Registrant's annual meeting of shareholders. The terms of the Plan
are set forth in the proxy statement dated March 15, 2005 for the Registrant's
annual meeting and the description of the Plan in the section of the proxy
statement titled "Approval of Amended and Restated AEP System 2000 Long-Term
Incentive Plan" is incorporated herein by reference.
Item 9.01 Financial Statements and Exhibits
(c) Exhibits
Exhibit 10.1 Amended and Restated American Electric Power System 2000
Long-Term Incentive Plan
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrants have duly caused this report to be signed on their behalf by the
undersigned, thereunto duly authorized.
AMERICAN ELECTRIC POWER COMPANY, INC.
APPALACHIAN POWER COMPANY
OHIO POWER COMPANY
By: /s/ Thomas G. Berkemeyer
Name: Thomas G. Berkemeyer
Title: Assistant Secretary
April 28, 2005
EXHIBIT INDEX
Exhibit No. Description
10.1 Amended and Restated American Electric Power System 2000
Long-Term Incentive Plan
Exhibit 10.1
AMENDED AND RESTATED
AMERICAN ELECTRIC POWER SYSTEM LONG-TERM INCENTIVE PLAN
April 26, 2005
Table of Contents
Section Page
1. Purpose of the Plan............. A-1
2. Definitions..................... A-1
3. Shares of Common Stock Subject
to the Plan..................... A-3
4. Administration of the Plan...... A-4
5. Eligibility and Awards.......... A-5
6. Stock Options................... A-5
7. Stock Appreciation Rights....... A-6
8. Restricted Stock................ A-6
9. Performance Awards.............. A-7
10. Phantom Stock................... A-8
11. Dividend Equivalents............ A-9
12. Change in Control............... A-9
13. Award Agreements................ A-10
14. General Provisions.............. A-10
15. Effective Date, Termination and A-12
Amendment...........................
Amended and Restated American Electric Power System Long-Term Incentive Plan
1. Purpose of the Plan
The purpose of the Amended and Restated American Electric Power System
Long-Term Incentive Plan, dated April 26, 2005, is to promote the interests of
AEP and its shareholders by strengthening AEP's ability to attract, motivate and
retain employees and directors of AEP and its Subsidiaries upon whose judgment,
initiative and efforts the financial success and growth of the business of AEP
largely depend, to align further the interests of AEP's management with the
shareholders, and to provide an additional incentive for employees and directors
through stock ownership and other rights that promote and recognize the
financial success and growth of AEP.
2. Definitions
Wherever the following capitalized terms are used in this Plan they shall
have the meanings specified below:
(a) "AEP" means American Electric Power Company, Inc., a New York corporation,
and any successor thereto.
(b) "Award" means an award of an Option, Restricted Stock, Stock Appreciation
Right, Performance Award, Phantom Stock or Dividend Equivalent granted under
the Plan.
(c) "Award Agreement" means an agreement entered into between AEP and a
Participant setting forth the terms and conditions of an Award granted to a
Participant.
(d) "Board" means the Board of Directors of AEP.
(e) "Change in Control" shall have the meaning specified in Section 12 hereof.
(f) "Code" means the Internal Revenue Code of 1986, as amended.
(g) "Committee" means the Human Resources Committee of the Board consisting of
not less than a sufficient number of Non-Employee Directors so as to qualify
the Committee to administer the Plan under Rule 16b-3 and each of whom is an
"independent" director as defined in the rules of the New York Stock
Exchange. If any member of the Committee does not qualify as an "outside
director" for purposes of Section 162(m) of the Code or a Non-Employee
Director under Rule 16b-3, the Committee with respect to Awards under the
Plan for the chief executive officer and the four most highly compensated
officers of AEP (other than the chief executive officer), as such "covered
persons" may change from time to time for purposes of Section 162(m), shall
consist solely of those Committee members who qualify as "outside directors"
and Non-Employee Directors. If fewer than two Committee members qualify as
both an "outside director" and a Non-Employee Director, the Board shall
appoint one or more other members who do qualify as both "outside directors"
and Non-Employee Directors.
(h) "Commission" means the Securities and Exchange Commission.
(i) "Common Stock" means the common stock of AEP, $6.50 par value.
(j) "Date of Grant" means the date on which the Committee makes an Award under
the Plan, or such later date as the Committee may specify that the Award
becomes effective.
(k) "Effective Date" means the Effective Date of this Plan, as defined in
Section 15.1 hereof.
(l) "Dividend Equivalent" means an Award under Section 11 hereof entitling the
Participant to receive payments with respect to dividends declared on the
Common Stock.
(m) "Eligible Person" means any person who is an Employee or a Non-Employee
Director.
(n) "Employee" means any person who is an employee of AEP or any Subsidiary;
provided, however, that with respect to Incentive Stock Options, "Employee"
means any person who is considered an employee of AEP or any Subsidiary for
purposes of Section 421 of the Code and the applicable regulations issued
thereunder.
(o) "Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, or any successor statute.
(p) "Fair Market Value" means, as of any applicable date, the closing price per
share of the Common Stock as quoted in the New York Stock
Exchange--Composite Transactions listing in The Wall Street Journal (or such
other reliable publication as the Committee, in its discretion, may
determine to rely upon) for the date as of which Fair Market Value is to be
determined. If there are no sales on such date, then Fair Market Value shall
be the closing price per share of the Common Stock as so quoted on the
nearest date before the date as of which Fair Market Value is to be
determined on which there are sales. If the Common Stock is not listed on
the New York Stock Exchange on the date as of which Fair Market Value is to
be determined, the Committee shall determine in good faith the Fair Market
Value in whatever manner it considers appropriate. Fair Market Value shall
be determined without regard to any restriction other than a restriction
that, by its terms, will never lapse.
(q) "Full Value Share Award" means an award of Restricted Stock, a Performance
Award denominated in shares or units of Common Stock, Phantom Stock,
Dividend Equivalents, or Stock Appreciation Rights settled or paid in shares
of Common Stock.
(r) "Incentive Stock Option" means an option to purchase Common Stock that is
intended to qualify as an incentive stock option under Section 422 of the
Code, or any successor provision thereto.
(s) "Non-Employee Director" means a member of the Board who is a "non-employee
director" as defined in Rule 16b-3 promulgated by the Commission pursuant to
the Exchange Act.
(t) "Nonqualified Stock Option" means an option to purchase Common Stock that is
not an Incentive Stock Option.
(u) "Option" means an Incentive Stock Option or a Nonqualified Stock Option
granted under Section 6 hereof.
(v) "Participant" means any Eligible Person who holds an outstanding Award under
the Plan.
(w) "Performance Award" means an Award made under Section 9 hereof entitling a
Participant to a payment based on the Fair Market Value of Common Stock (a
"Performance Unit") at the end of a performance period if certain conditions
established by the Committee are satisfied.
(x) "Phantom Stock" means an Award under Section 10 hereof entitling a
Participant to a payment based on a measure of value expressed as a share of
Common Stock ("Phantom Stock Unit"). No stock certificates shall be issued
with respect to such Phantom Stock Units, but AEP shall maintain a
bookkeeping account in the name of the Participant to which the Phantom
Stock Units shall relate.
(y) "Plan" means the Amended and Restated American Electric Power System
Long-Term Incentive Plan, dated April 26, 2005, as set forth herein, as it
may be amended from time to time.
(z) "Plan Year" means AEP's fiscal year, which at the date hereof is the
calendar year.
(aa) "Restricted Stock" means an Award under Section 8 hereof entitling a
Participant to shares of Common Stock that are nontransferable and subject
to forfeiture until specific conditions established by the Committee are
satisfied.
(bb) "Rule 16b-3" means Rule 16b-3 promulgated by the Commission pursuant to the
Exchange Act, or any successor or replacement rule adopted by the Commission
(cc) "Section 162(m)" means Section 162(m) of the Code and the Treasury
Regulations thereunder.
(dd) "Section 162(m) Participant" means any Participant who, in the sole
judgment of the Committee, could be treated as a "covered employee" under
Section 162(m) at the time income may be recognized by such Participant in
connection with an Award that is intended to qualify for exemption under
Section 162(m).
(ee) "Stock Appreciation Right" or "SAR" means an Award under Section 7 hereof
entitling a Participant to receive an amount, representing the difference
between the base price per share of the right and the Fair Market Value of a
share of Common Stock on the date of exercise.
(ff) "Subsidiary" means any corporation (other than AEP) in an unbroken chain of
corporations beginning with AEP if, at the time of granting an Award, each
of the corporations, other than the last corporation in the unbroken chain,
owns stock possessing 50 percent or more of the total combined voting power
of all classes of stock in one of the other corporations in such chain.
3. Shares of Common Stock Subject to the Plan
3.1. Calculation of Number of Shares Available. Subject to the following
provisions of this Section 3, the aggregate number of shares of Common Stock
that may be issued pursuant to all Awards under the Plan is 19,200,000 shares of
Common Stock; provided, however, that the maximum number of shares of Common
Stock issued in connection with Full Value Share Awards which may be issued
under the Plan shall be limited to 9,000,000.
If any share of Common Stock that is the subject of an Award is not issued
and ceases to be issuable for any reason, or is forfeited, cancelled or returned
to AEP for failure to satisfy vesting requirements or upon the occurrence of
other forfeiture events, such share of Common Stock will no longer be charged
against the foregoing maximum share limitations and may again be made subject to
Awards under the Plan pursuant to such limitations.
3.2. Accounting for Awards. For purposes of this Section 3, if an Award is
denominated in shares of Common Stock, the number of shares covered by such
Award, or to which such Award relates, shall be counted on the Date of Grant of
such Award against the aggregate number of shares available for granting Awards
under the Plan; provided, however, that Awards that operate in tandem with
(whether granted simultaneously with or at a different time from) other Awards
may be counted or not counted under procedures adopted by the Committee in order
to avoid double counting.
3.3. Source of Shares of Common Stock Deliverable Under Awards. The shares
of Common Stock to be delivered under the Plan may be authorized but unissued
shares, reacquired shares, shares acquired on the open market specifically for
distribution under the Plan, or any combination thereof.
3.4. Adjustments. If there shall occur any recapitalization,
reclassification, stock dividend, stock split, reverse stock split or other
distribution with respect to the shares of Common Stock, or any similar
corporate transaction or event in respect of the Common Stock, then the
Committee shall, in the manner and to the extent that it deems appropriate and
equitable to the Participants and consistent with the terms of this Plan, cause
a proportionate adjustment to be made in (a) the maximum numbers and kind of
shares provided in Section 3.1 hereof, (b) the maximum numbers and kind of
shares set forth in Sections 6.1, 7.1, 8.2 and 9.4 hereof, (c) the number and
kind of shares of Common Stock, share units, or other rights subject to the
then-outstanding Awards, (d) the price for each share or unit or other right
subject to then outstanding Awards without change in the aggregate purchase
price or value as to which such Awards remain exercisable or subject to
restrictions, (e) the performance targets or goals appropriate to any
outstanding Performance Awards (subject to such limitations as appropriate for
Awards intended to qualify for exemption under Section 162(m)) or (f) any other
terms of an Award that are affected by the event. Notwithstanding the foregoing,
in the case of Incentive Stock Options, any such adjustments shall be made in a
manner consistent with the requirements of Section 424(a) of the Code.
4. Administration of the Plan
4.1. Committee Members. Except as provided in Section 4.4 hereof, the
Committee will administer the Plan. The Committee may exercise such powers and
authority as may be necessary or appropriate for the Committee to carry out its
functions as described in the Plan. No member of the Committee will be liable
for any action or determination made in good faith by the Committee with respect
to the Plan or any Award under it.
4.2. Discretionary Authority. Subject to the express limitations of the
Plan, the Committee has authority in its discretion to determine the Eligible
Persons to whom, and the time or times at which, Awards may be granted, the
number of shares, units or other rights subject to each Award, the exercise,
base or purchase price of an Award (if any), the time or times at which an Award
will become vested, exercisable or payable, the performance criteria,
performance goals and other conditions of an Award, and the duration of the
Award. The Committee also has discretionary authority to interpret the Plan, to
make all factual determinations under the Plan, and to determine the terms and
provisions of the respective Award Agreements and to make all other
determinations necessary or advisable for Plan administration. The Committee has
authority to prescribe, amend, and rescind rules and regulations relating to the
Plan. All interpretations, determinations, and actions by the Committee will be
final, conclusive, and binding upon all parties.
4.3. Changes to Awards. The Committee shall have the authority to effect, at
any time and from time to time, with the consent of the affected Participants,
(a) the cancellation of any or all outstanding Awards and the grant in
substitution therefor of new Awards covering the same or different numbers of
shares of Common Stock and having an exercise or base price which may be the
same as or different than the exercise or base price of the cancelled Awards or
(b) the amendment of the terms of any and all outstanding Awards; provided,
however, that the Committee shall not have the authority to reduce the exercise
or base price of an Award by amendment or cancellation and substitution of an
existing Award without the approval of AEP's shareholders. The Committee may in
its discretion accelerate the vesting or exercisability of an Award at any time
or on the basis of any specified event.
4.4. Delegation of Authority. As permitted by law, the Committee may
delegate its authority as identified hereunder; provided, however, that the
Committee may not delegate certain of its responsibilities hereunder if such
delegation may jeopardize compliance with the "outside directors" provision of
Section 162(m).
4.5 Awards to Non-Employee Directors. The Board shall approve an Award to a
Non-Employee Director under the Plan. With respect to Awards to Non-Employee
Directors, all rights, powers and authorities vested in the Committee under the
Plan shall instead be exercised by the Board, and all provisions of the Plan
relating to the Committee shall be interpreted in a manner consistent with the
foregoing by treating any such reference as a reference to the Board for such
purpose.
5. Eligibility and Awards
All Eligible Persons are eligible to be designated by the Committee to
receive an Award under the Plan. The Committee has authority, in its sole
discretion, to determine and designate from time to time those Eligible Persons
who are to be granted Awards, the types of Awards to be granted and the number
of shares or units subject to the Awards that are granted under the Plan. Each
Award will be evidenced by an Award Agreement as described in Section 13 hereof
between AEP and the Participant that shall include the terms and conditions
consistent with the Plan as the Committee may determine.
6. Stock Options
6.1. Grant of Option. An Option may be granted to any Eligible Person
selected by the Committee; provided, however, that only Employees shall be
eligible for Awards of Incentive Stock Options. Each Option shall be designated,
at the discretion of the Committee, as an Incentive Stock Option (if applicable)
or a Nonqualified Stock Option. The maximum number of shares of Common Stock
that may be granted under Options to any one Participant during any three
calendar year period shall be limited to 2,000,000 shares (subject to adjustment
as provided in Section 3.4 hereof).
6.2. Exercise Price. The exercise price of the Option shall be determined by
the Committee; provided, however, that the exercise price per share of an Option
shall not be less than 100 percent of the Fair Market Value per share of the
Common Stock on the Date of Grant.
6.3. Vesting; Term of Option. The Committee, in its sole discretion, shall
prescribe in the Award Agreement the time or times at which, or the conditions
upon which, an Option or portion thereof shall become vested and exercisable,
and may accelerate the exercisability of any Option at any time.
6.4. Option Exercise; Withholding. Subject to such terms and conditions as
shall be specified in an Award Agreement and to all applicable legal
requirements, an Option may be exercised in whole or in part at any time during
the term thereof by written notice to AEP together with payment of the aggregate
exercise price therefor. Payment of the exercise price shall be made (a) in cash
or by cash equivalent, (b) at the discretion of the Committee, in shares of
Common Stock acceptable to the Committee, valued at the Fair Market Value of
such shares on the date of exercise or such lower price as the Committee may
determine, (c) at the discretion of the Committee, by a delivery of a notice
that the Participant has placed a market sell order (or similar instruction)
with a third party with respect to shares of Common Stock then issuable upon
exercise of the Option, and that the third party has been directed to pay a
sufficient portion of the net proceeds of the sale to AEP in satisfaction of the
Option exercise price or (d) at the discretion of the Committee, by a
combination of the methods described above or such other method as may be
approved by the Committee. In addition to and at the time of payment of the
exercise price, the Participant shall pay to AEP the full amount of any and all
applicable income tax and employment tax amounts required to be withheld in
connection with such exercise.
6.5. Additional Rules for Incentive Stock Options. The terms of any
Incentive Stock Option granted under the Plan shall comply in all respects with
the provisions of Section 422 of the Code, or any successor provision thereto,
and any regulations promulgated thereunder.
7. Stock Appreciation Rights
7.1. Grant of SARs. A Stock Appreciation Right granted to a Participant is
an Award in the form of a right to receive, upon surrender of the right, but
without other payment, an amount based on appreciation in the Fair Market Value
of the Common Stock over a base price established for the Award, exercisable at
such time or times and upon conditions as may be approved by the Committee. The
maximum number of shares of Common Stock that may be subject to SARs granted to
any one Participant during any three calendar year period shall be limited to
2,000,000 shares (subject to adjustment as provided in Section 3.4 hereof).
7.2. Tandem SARs. A Stock Appreciation Right may be granted in connection
with an Option, either at the time of grant or at any time thereafter during the
term of the Option. A SAR granted in connection with an Option will entitle the
holder, upon exercise, to surrender such Option or any portion thereof to the
extent unexercised, with respect to the number of shares as to which such SAR is
exercised, and to receive payment of an amount computed as described in Section
7.4 hereof. Such Option will, to the extent and when surrendered, cease to be
exercisable. A SAR granted in connection with an Option hereunder will have a
base price per share equal to the per share exercise price of the Option, will
be exercisable at such time or times, and only to the extent, that a related
Option is exercisable, and will expire no later than the related Option expires.
7.3. Freestanding SARs. A Stock Appreciation Right may be granted without
relationship to an Option and, in such case, will be exercisable as determined
by the Committee. The base price of a SAR granted without relationship to an
Option shall be determined by the Committee in its sole discretion; provided,
however, that the base price per share of a freestanding SAR shall not be less
than 100 percent of the Fair Market Value of the Common Stock on the Date of
Grant.
7.4. Payment of SARs. A SAR will entitle the holder, upon exercise of the
SAR, to receive payment of an amount determined by multiplying: (i) the excess
of the Fair Market Value of a share of Common Stock on the date of exercise of
the SAR over the base price of such SAR, by (ii) the number of shares as to
which such SAR will have been exercised. Payment of the amount determined under
the foregoing may be made, in the discretion of the Committee, in cash, in
Restricted Stock or shares of unrestricted Common Stock (both valued at their
Fair Market Value on the date of exercise or such lower price as the Committee
may determine), or a combination thereof; provided, however, that any shares of
Common Stock used to settle or pay SARs will be counted as Full Value Share
Awards.
8. Restricted Stock
8.1. Grants of Restricted Stock. An Award of Restricted Stock to a
Participant represents shares of Common Stock that are issued subject to such
restrictions on transfer and other incidents of ownership and such forfeiture
conditions as the Committee may determine. The Committee may grant and designate
Awards of Restricted Stock that are intended to qualify for exemption under
Section 162(m), as well as Awards of Restricted Stock that are not intended to
so qualify.
8.2. Vesting Requirements. The restrictions imposed on an Award of
Restricted Stock shall lapse in accordance with the vesting requirements
specified by the Committee in the Award Agreement. Such vesting requirements may
be based on the continued employment of the Participant with AEP or its
Subsidiaries for a specified time period or periods. Such vesting requirements
may also be based on the attainment of specified business goals or measures
established by the Committee in its sole discretion. In the case of any Award of
Restricted Stock that is intended to qualify for exemption under Section 162(m),
the vesting requirements shall be limited to the performance criteria identified
in Section 9.3 below, and the terms of the Award shall otherwise comply with the
Section 162(m) requirements described in Section 9.4 hereof; provided, however,
that the maximum number of shares of Common Stock that may be subject to an
Award of Restricted Stock granted to a Section 162(m) Participant during any one
calendar year shall be separately limited to 400,000 shares (subject to
adjustment as provided in Section 3.4 hereof).
8.3. Restrictions. Shares of Restricted Stock may not be transferred,
assigned or subject to any encumbrance, pledge or charge until all applicable
restrictions are removed or expire or unless otherwise allowed by the Committee.
The Committee may require the Participant to enter into an escrow agreement
providing that the certificates representing Restricted Stock granted pursuant
to the Plan will remain in the physical custody of an escrow holder until all
restrictions are removed or expire. Failure to satisfy any applicable
restrictions shall result in the subject shares of Restricted Stock being
forfeited and returned to AEP, unless otherwise provided by the Committee. The
Committee may require that certificates representing Restricted Stock granted
under the Plan bear a legend making appropriate reference to the restrictions
imposed.
8.4. Rights as Shareholder. Subject to the foregoing provisions of this
Section 8 and the applicable Award Agreement, the Participant will have all
rights of a shareholder with respect to shares of Restricted Stock granted to
the Participant, including the right to vote the shares and receive all
dividends and other distributions paid or made with respect thereto, unless the
Committee determines otherwise at the time the Restricted Stock is granted, as
set forth in the Award Agreement.
8.5. Section 83(b) Election. The Committee may provide in an Award Agreement
that the Award of Restricted Stock is conditioned upon the Participant
refraining from making an election with respect to the Award under Section 83(b)
of the Code. Irrespective of whether an Award is so conditioned, if a
Participant makes an election pursuant to Section 83(b) of the Code with respect
to an Award of Restricted Stock, the Participant shall be required to promptly
provide a copy of such election to AEP as directed by the Award Agreement or the
Committee.
9. Performance Awards
9.1. Grant of Performance Awards. The Committee may grant Performance Awards
under the Plan, which shall be represented by units denominated on the Date of
Grant either in shares of Common Stock (Performance Shares) or in specified
dollar amounts (Performance Units). The Committee may grant and designate
Performance Awards that are intended to qualify for exemption under Section
162(m), as well as Performance Awards that are not intended to so qualify. At
the time a Performance Award is granted, the Committee shall determine, in its
sole discretion, one or more performance periods and performance goals to be
achieved during the applicable performance periods, as well as such other
restrictions and conditions as the Committee deems appropriate. In the case of
Performance Units, the Committee shall also determine a target unit value or a
range of unit values for each Award. The performance goals applicable to a
Performance Award grant may be subject to such later revisions as the Committee
shall deem appropriate to reflect significant unforeseen events such as changes
in law, accounting practices or unusual or nonrecurring items or occurrences.
Any such adjustments shall be subject to such limitations as the Committee deems
appropriate in the case of a Performance Award granted to a Section 162(m)
Participant that is intended to qualify for exemption under Section 162(m).
9.2. Payment of Performance Awards. At the end of the performance period,
the Committee shall determine the extent to which performance goals have been
attained or a degree of achievement between minimum and maximum levels in order
to establish the level of payment to be made, if any. The Committee shall
determine if payment is to be made in cash, Restricted Stock, shares of
unrestricted Common Stock, Options or Phantom Stock, or a combination thereof.
For any cash conversion to or from Performance Shares or Units, Phantom Stock
units or shares of Common Stock, payment shall be calculated on the basis of the
average of the Fair Market Value of the Common Stock for the last 20 trading
days prior to the date such award becomes payable.
9.3. Performance Criteria. The performance criteria upon which the payment
or vesting of a Performance Award intended to qualify for exemption under
Section 162(m) may be based shall be limited to the following business measures,
which may be applied with respect to AEP, any Subsidiary or any business unit,
and which may be measured on an absolute or relative-to-peer-group basis:
earnings measures (including, for example, primary earnings per share, fully
diluted earnings per share, net income, pre-tax income, operating income,
earnings before interest, taxes, depreciation and amortization or any
combination thereof, and net operating profits after taxes); expense control
(including, for example, operations & maintenance expense, total expenditures,
expense ratios, and expense reduction); customer measures (including, for
example, customer satisfaction, service cost, service levels, responsiveness,
bad debt collections or losses, and reliability - such as outage frequency,
outage duration, and frequency of momentary outages); safety measures
(including, for example, recordable case rate, severity rate, and vehicle
accident rate); diversity measures (including, for example, minority placement
rate and utilization); environmental measures (including, for example,
emissions, project completion milestones, regulatory/legislative/cost recovery
goals, and notices of violation), revenue measures (including, for example,
revenue and direct margin); stakeholder return measures (including, for example,
total shareholder return, economic value added, cumulative shareholder value
added, return on equity, return on capital, return on assets, dividend payout
ratio and cash flow(s) - such as operating cash flows, free cash flow,
discounted cash flow return on investment and cash flow in excess of cost of
capital or any combination thereof); valuation measures (including, for example,
stock price increase, price to book value ratio, and price to earnings ratio);
capital and risk measures (including, for example, debt to equity ratio,
dividend payout as percentage of net income and diversification of business
opportunities); employee satisfaction; project measures (including, for example,
completion of key milestones); production measures (including, for example,
generating capacity factor, performance against the INPO index, generating
equivalent availability, heat rates and production cost); and such other
individual performance objective that is measured solely in terms of
quantitative targets related to the Company, any Subsidiary or the Company's or
Subsidiary's business. In any event, the Committee may, at its discretion and at
any time prior to payment, reduce the number of Performance Awards earned by any
Participant for a performance period. In the case of Performance Awards that are
not intended to qualify for exemption under Section 162(m), the Committee shall
designate performance criteria from among the foregoing or such other business
criteria as it shall determine in its sole discretion.
9.4. Section 162(m) Requirements. In the case of a Performance Award granted
to a Section 162(m) Participant that is intended to comply with the requirements
for exemption under Section 162(m), the Committee shall make all determinations
necessary to establish a Performance Award within 90 days of the beginning of
the performance period (or such other time period required under Section
162(m)), including, without limitation, the designation of the Section 162(m)
Participants to whom Performance Awards are made, the performance criteria or
criterion applicable to the Award and the performance goals that relate to such
criteria, and the dollar amounts or number of shares of Common Stock, Restricted
Stock or Phantom Stock units payable upon achieving the applicable performance
goals. As and to the extent required by Section 162(m), the terms of a
Performance Award granted to a Section 162(m) Participant must include objective
formula(s) or standard(s) for computing the amount of compensation payable to
the Section 162(m) Participant, and must preclude discretion to increase the
amount of compensation payable that would otherwise be due under the terms of
the Award. The maximum amount of compensation that may be payable to a Section
162(m) Participant during any one calendar year under a Performance Unit Award
shall be $15,000,000. The maximum number of Performance Share units that may be
earned by a Section 162(m) Participant during any one calendar year shall be
400,000 (subject to adjustment as provided in Section 3.4 hereof).
10. Phantom Stock
10.1. Grant of Phantom Stock. Phantom Stock is an Award to a Participant of
a number of hypothetical share units with respect to shares of Common Stock.
Phantom Stock shall be subject to such restrictions and conditions as the
Committee shall determine. Sections 8.1 and 8.2 shall apply to Awards of Phantom
Stock units in similar manner as they apply to shares of Restricted Stock, as
interpreted by the Committee, with the limitation in Section 8.2 on the number
of shares of Restricted Stock that may be granted applicable separately to
Phantom Stock units. An Award of Phantom Stock may be granted, at the discretion
of the Committee, together with an Award of Dividend Equivalent rights for the
same number of shares covered thereby.
10.2. Payment of Phantom Stock. Upon the vesting date applicable to Phantom
Stock granted to a Participant, an amount equal to one share of Common Stock
upon such date shall be paid with respect to such Phantom Stock unit granted to
the Participant. Payment may be made, at the discretion of the Committee, in
cash, Restricted Stock, shares of unrestricted Common Stock, Options, or a
combination thereof. Cash payments of Phantom Stock units shall be calculated on
the basis of the average of the Fair Market Value of the Common Stock for the
last 20 trading days prior to the date such award becomes payable.
11. Dividend Equivalents
A Dividend Equivalent granted to a Participant is an Award in the form of a
right to receive cash, shares of Common Stock, or other property equal in value
to dividends paid with respect to a specific number of shares of Common Stock.
Dividend Equivalents may be awarded on a free-standing basis or in connection
with another Award, and may be paid currently or on a deferred basis. The
Committee may provide at the Date of Grant or thereafter that the Dividend
Equivalent shall be paid or distributed when accrued or shall be deemed to have
been reinvested in additional shares of Common Stock or such other investment
vehicles as the Committee may specify; provided, however, that Dividend
Equivalents (other than free-standing Dividend Equivalents) shall be subject to
all conditions and restrictions of the underlying Awards to which they relate.
12. Change in Control
12.1. Effect of Change in Control. The Committee may, in an Award Agreement,
provide for the effect of a Change in Control on an Award. Such provisions may
include any one or more of the following: (a) the acceleration or extension of
time periods for purposes of exercising, vesting in, or realizing gain from any
Award, (b) the waiver or modification of performance or other conditions related
to the payment or other rights under an Award; (c) provision for the cash
settlement of an Award for an equivalent cash value, as determined by the
Committee, or (d) such other modification or adjustment to an Award as the
Committee deems appropriate to maintain and protect the rights and interests of
Participants upon or following a Change in Control.
12.2. Definition of Change in Control. For purposes hereof, a "Change in
Control" shall be deemed to have occurred if:
(a) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d)
of the Securities Exchange Act of 1934 ("Exchange Act")), other than any
company owned, directly or indirectly, by the shareholders of AEP in
substantially the same proportions as their ownership of shares of Common
Stock or a trustee or other fiduciary holding securities under an employee
benefit plan of AEP, 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 AEP;
(b) 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 (i) who has entered into an agreement
with AEP to effect a transaction described in Section 12.2(a), (c) or (d)
hereof or (ii) who publicly announces an intention to take or consider
taking actions (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,
disability or voluntary retirement) to constitute at least a majority of the
Board;
(c) AEP consummates a merger or consolidation with any other entity, other than
a merger or consolidation which would result in the voting securities of AEP
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 AEP or such surviving entity outstanding
immediately after such merger or consolidation; or
(d) the shareholders of AEP approve a plan of complete liquidation of AEP, or an
agreement for the sale or disposition by AEP (in one transaction or a series
of transactions) of all or substantially all of AEP's assets.
Notwithstanding the foregoing, a Change in Control shall not be deemed to
occur as a result of any event in (a) or (c) above, if directors who were
members of the Board prior to such event continue to constitute a majority of
the Board after such event.
13. Award Agreements
13.1. Form of Agreement. Each Award under this Plan shall be evidenced by an
Award Agreement in a form approved by the Committee setting forth the number of
shares of Common Stock, units or other rights (as applicable) subject to the
Award, the exercise, base or purchase price (if any) of the Award, the time or
times at which an Award will become vested, exercisable or payable, the duration
of the Award and, in the case of Performance Awards, the applicable performance
criteria and goals. The Award Agreement shall also set forth other material
terms and conditions applicable to the Award as determined by the Committee
consistent with the limitations of this Plan. Award Agreements evidencing Awards
intended to qualify for exemption under Section 162(m) may be designated as such
and shall contain such terms and conditions as may be necessary to meet the
applicable requirements of Section 162(m). Award Agreements evidencing Incentive
Stock Options shall contain such terms and conditions as may be necessary to
meet the applicable provisions of Section 422 of the Code.
13.2. Contract Rights; Amendment. Any obligation of AEP to any Participant
with respect to an Award shall be based solely upon contractual obligations
created by an Award Agreement. No Award shall be enforceable until the Award
Agreement has been signed on behalf of AEP by its authorized representative and
signed by the Participant and returned to AEP as directed by the Award Agreement
or the Committee. By executing the Award Agreement, a Participant shall be
deemed to have accepted and consented to the terms of this Plan and any action
taken in good faith under this Plan by and within the discretion of the
Committee, the Board or their delegates. Award Agreements covering outstanding
Awards may be amended or modified by the Committee in any manner that may be
permitted for the grant of Awards under the Plan, subject to the consent of the
Participant to the extent provided in the Award Agreement. However, the offer of
an Award Agreement to a particular Eligible Person shall not infer any
obligation to offer any other Award Agreements at that or any other time.
14. General Provisions
14.1. Limits on Transfer of Awards; Beneficiaries. Except to the extent
specifically provided by the terms of an Award Agreement, Awards shall be
nontransferable. During the lifetime of a Participant, Awards shall be exercised
only by such Participant or by his guardian or legal representative.
Notwithstanding the foregoing, the Committee may provide in the terms of an
Award Agreement that the Participant shall have the right to designate a
beneficiary or beneficiaries who shall be entitled to any rights, payments or
other benefits specified under an Award Agreement following the Participant's
death.
14.2. Deferrals of Payment. In an Award Agreement or under a separate policy
or program adopted by the Committee, a Participant may be permitted or required
to defer the receipt of payment of cash or delivery of shares of Common Stock
that would otherwise be due to the Participant by virtue of the exercise of a
right or the satisfaction of vesting or other conditions with respect to an
Award. Any such policy or program shall establish the rules and procedures
relating to such deferral, including, without limitation, the period of time in
advance of payment when an election to defer may be made, the time period of the
deferral and the events that would result in payment of the deferred amount, the
interest or other earnings attributable to the deferral and the method of
funding, if any, attributable to the deferred amount.
14.3. Rights as Shareholder. A Participant shall have no rights as a holder
of Common Stock with respect to any unissued securities covered by an Award
until the date the Participant becomes the holder of record of these securities.
Except as provided in Section 3.4 hereof, no adjustment or other provision shall
be made for dividends or other shareholder rights, except to the extent that the
Award Agreement provides for Dividend Equivalents, dividend payments or similar
economic benefits.
14.4. Employment or Service. Nothing in the Plan, in the grant of any Award
or in any Award Agreement shall confer upon any Eligible Person the right to
continue in the capacity in which he is employed by or otherwise serves AEP or
any Subsidiary.
14.5. Securities Laws. No shares of Common Stock will be issued or
transferred pursuant to an Award unless and until all then applicable
requirements imposed by federal and state securities and other laws, rules and
regulations and by any regulatory agencies having jurisdiction, and by any stock
exchanges upon which the Common Stock may be listed, have been fully met. As a
condition precedent to the issuance of shares pursuant to the grant or exercise
of an Award, AEP may require the Participant to take any reasonable action to
meet such requirements. The Committee may impose such conditions on any shares
of Common Stock issuable under the Plan as it may deem advisable, including,
without limitation, restrictions under the Securities Act of 1933, as amended,
under the requirements of any stock exchange upon which such shares of the same
class are then listed, and under any blue sky or other securities laws
applicable to such shares.
14.6. Taxes and Withholding. The Participant shall be responsible for
payment of any taxes or similar charges required by law with respect to each
Award or an amount paid in satisfaction of an Award. AEP and its Subsidiaries,
as applicable, shall comply with the terms of a deduction election made by a
Participant with any payment made under the terms of an Award Agreement, but
only if and to the extent applicable thereto. AEP and its Subsidiaries, as
applicable, may withhold and disburse such amount or amounts it determines to be
required for purposes of complying with obligations for tax withholding or such
other obligations under applicable federal, state and local law. The Committee
in its sole discretion may direct AEP to satisfy all or part of applicable tax
withholding obligations incident to a Participant's exercise of a Stock Option
or to the vesting of Stock Appreciation Rights, Restricted Stock, Performance
Shares, Performance Units or Phantom Stock by AEP's withholding of a portion of
the Common Stock that otherwise would have been issued to such Participant.
14.7. Unfunded Plan. The adoption of this Plan and any setting aside of cash
amounts or shares of Common Stock by AEP with which to discharge its obligations
hereunder shall not be deemed to create a trust or other funded arrangement. The
benefits provided under this Plan shall be a general, unsecured obligation of
AEP payable solely from the general assets of AEP, and neither a Participant nor
the Participant's permitted transferees or estate shall have any interest in any
assets of AEP by virtue of this Plan, except as a general unsecured creditor of
AEP. Notwithstanding the foregoing, AEP shall have the right to implement or set
aside funds in a grantor trust subject to the claims of AEP's creditors to
discharge its obligations under the Plan.
14.8. Other Compensation and Benefit Plans. The adoption of the Plan shall
not affect any other stock incentive or other compensation plans in effect for
AEP or any Subsidiary, nor shall the Plan preclude AEP from establishing any
other forms of stock incentive or other compensation for employees of AEP or any
Subsidiary. The amount of any compensation deemed to be received by the
Participant pursuant to an Award shall not constitute compensation with respect
to which any other employee benefits of such Participant are determined,
including, without limitation, benefits under any bonus, pension, profit
sharing, life insurance or salary continuation plan, except as otherwise
specifically provided by the terms of such plan.
14.9. Plan Binding on Successors. The Plan shall be binding upon AEP, its
successors and assigns, and the Participant, his executor, administrator and
permitted transferees and beneficiaries.
14.10. Construction and Interpretation. Whenever used herein, nouns in the
singular shall include the plural, and the masculine pronoun shall include the
feminine gender. Headings of Sections hereof are inserted for convenience and
reference and constitute no part of the Plan.
14.11. Severability. If any provision of the Plan or any Award Agreement
shall be determined to be illegal or unenforceable by any court of law in any
jurisdiction, the remaining provisions hereof and thereof shall be severable and
enforceable in accordance with their terms, and all provisions shall remain
enforceable in any other jurisdiction.
14.12. Governing Law. The laws of the State of Ohio shall govern the
validity and construction of this Plan and of the Award Agreements, without
giving effect to principles relating to conflict of laws, except to the extent
that such laws may be preempted by Federal law.
14.13. Compliance with Rule 16b-3. It is the intent of AEP that this Plan
comply in all respects with Rule 16b-3 in connection with any Award granted to a
person who is subject to Section 16 of the Exchange Act. Accordingly, if any
provision of this Plan or any Award Agreement does not comply with the
requirements of Rule 6b-3 as then applicable to any such person, such provision
shall be construed or deemed amended to the extent necessary to conform to such
requirements with respect to such person.
15. Effective Date, Termination and Amendment
15.1. Effective Date; Shareholder Approval. Subject to approval by the
Securities and Exchange Commission, the Effective Date of the Plan shall be the
date following adoption of the Plan by the Board on which the Plan is approved
by the shareholders of AEP. Grants of Awards under the Plan may be made prior to
the Effective Date (but after adoption of the Plan by the Board), subject to
approval of the Plan by the Securities and Exchange Commission and the
shareholders. At the sole discretion of the Board, in order to comply with the
requirements of Section 162(m) for certain types of Awards under the Plan, the
performance criteria set forth in Section 9.3 shall be reapproved by the
shareholders no later than the first shareholder meeting that occurs in the
fifth calendar year following the calendar year of the initial shareholder
approval of such performance criteria.
15.2. Termination. The Plan shall remain in effect until terminated by
action of the Board; provided, however, that no Award may be granted hereunder
after April 26, 2015.
Notwithstanding the foregoing, no termination of the Plan shall in any
manner affect any Award theretofore granted without the consent of the
Participant or the permitted transferee of the Award.
15.3. Amendment. The Board may at any time and from time to time and in any
respect, amend or modify the Plan; provided, however, that no amendment or
modification of the Plan shall be effective without the consent of AEP's
shareholders that would (a) increase the number of shares of Common Stock
reserved for issuance or (b) allow the grant of Options at an exercise price
below Fair Market Value, or allow the repricing of Options without AEP
shareholder approval. In addition, the Board may seek the approval of any
amendment or modification by AEP's shareholders to the extent it deems necessary
or advisable in its sole discretion for purposes of compliance with Section
162(m) or Section 422 of the Code, the listing requirements of the New York
Stock Exchange or for any other purpose. No amendment or modification of the
Plan shall in any manner affect any Award theretofore granted without the
consent of the Participant or the permitted transferee of the Award.