SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c) of the Securities Exchange
Act of 1934
Check the appropriate box:
[ ] Preliminary Information Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14c-5(d)(2))
[X] Definitive Information Statement
OHIO POWER COMPANY
-------------------------
(Name of Registrant As Specified in Its Charter)
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2) Aggregate number of securities to which transaction
applies:______________________________________________
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
______________________________________________________
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paid previously. Identify the previous filing by registration statement
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OHIO POWER COMPANY
1 Riverside Plaza
Columbus, Ohio 43215
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO THE SHAREHOLDERS OF
OHIO POWER COMPANY:
The annual meeting of the shareholders of Ohio Power Company
will be held on Tuesday, May 7, 2002, at 2:30 p.m. at the
principal office of American Electric Power Service Corporation,
1 Riverside Plaza, Columbus, Ohio, for the following purposes:
1. To elect seven directors of the Company to hold office
for one year or until their successors are elected and
qualified; and
2. To consider and act upon an amendment to the Company's
Amended Articles of Incorporation which would change
the Company's principal place of business in Ohio; and
3. To transact such other business (none known as of the
date of this notice) as may legally come before the
meeting or any adjournment thereof.
Only holders of record of Common Stock and Cumulative
Preferred Stock, par value $100 per share, at the close of
business on March 11, 2002 are entitled to notice of and to vote
at the annual meeting.
THERE WILL BE NO SOLICITATION OF PROXIES BY THE BOARD OF
DIRECTORS OF THE COMPANY.
THOMAS S. ASHFORD,
Secretary
March 22, 2002
INFORMATION STATEMENT
This information statement is being furnished in connection
with the annual meeting of shareholders of Ohio Power Company
(the "Company"), to be held on Tuesday, May 7, 2002 at 2:30 p.m.
at the principal office of American Electric Power Service
Corporation, 1 Riverside Plaza, Columbus, Ohio.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT
TO SEND US A PROXY.
Voting at Meeting
On March 11, 2002, the date for determining shareholders
entitled to notice of and to vote at the meeting, there were
238,977 shares of Cumulative Preferred Stock, par value $100 per
share (voting), and 27,952,473 shares of Common Stock outstanding.
Each holder of Cumulative Preferred Stock, par value $100
per share (voting), and each holder of Common Stock has the right
to one vote for each share standing in such holder's name on the
books of the Company at the close of business on March 11, 2002
for the election of directors and on any other business which may
come before the meeting. Holders of Cumulative Preferred Stock,
par value $25 per share (non-voting), and Cumulative Preferred
Stock, par value $100 per share (non-voting), are not entitled to
notice of, or to vote at, the meeting.
If notice in writing is given by any shareholder to the
President, any Vice President, or the Secretary of the Company,
not less than 48 hours before the time fixed for the meeting,
that such shareholder desires that the voting at the meeting for
directors shall be cumulative, and if an announcement of the
giving of such notice is made upon the convening of the meeting
by the Chairman or Secretary or by or on behalf of the
shareholder giving such notice, each shareholder will have the
right to cumulate such voting power as he possesses and to give
one candidate as many votes as the number of directors to be
elected, multiplied by the number of his votes, or to distribute
his votes on the same principle among two or more candidates, as
he sees fit.
Principal Shareholders
American Electric Power Company, Inc. ("AEP"), 1 Riverside
Plaza, Columbus, Ohio 43215, a registered public utility holding
company under the Public Utility Holding Company Act of 1935,
owns all of the Company's outstanding Common Stock. The Common
Stock represents approximately 99% of the combined voting power
of the capital stock of the Company entitled to vote at the
meeting. Management of the Company does not know of any person
(including any "group" as that term is used in Section 13(d)(3)
of the Securities Exchange Act of 1934) who beneficially owns
more than 5% of the outstanding shares of Cumulative Preferred
Stock, par value $100 per share.
AEP also owns, directly or indirectly, all of the common
stock of the other companies which constitute the American
Electric Power System (the "AEP System"). The AEP System is an
integrated electric utility system and, as a result, the member
companies of the AEP System, including the Company, have
contractual, financial and other business relationships with the
other member companies, such as participation in the AEP System
savings and retirement plans and tax returns; sales of
electricity; sales, transportation and handling of fuel; sales or
rentals of property; and interest or dividend payments on the
securities held by the companies' respective parents. American
Electric Power Service Corporation (the "Service Corporation"), a
wholly-owned subsidiary of AEP, renders management, advisory,
engineering and other similar services at cost to the principal
operating companies of the AEP System, including the Company.
ELECTION OF DIRECTORS
Seven directors are to be elected to hold office for one
year or until their successors are elected and qualified. The
Company has been informed that AEP will nominate, and cast the
votes of all of the outstanding shares of Common Stock for, the
persons named below. In the event that any of such persons
should unexpectedly be unable to stand for election, AEP has
informed the Company that it will cast its votes for a substitute
chosen by the Board of Directors of the Company and approved by
AEP.
The following brief biographies of the nominees include
their ages as of March 15, 2002, an account of their business
experience and the names of certain publicly-held corporations of
which they are also directors.
Name Age Business Experience
E. LINN DRAPER, JR. 60 Chairman of the board and chief
executive officer of the Company,
chairman of the board, president
and chief executive officer of AEP
and the Service Corporation.
Joined the Service Corporation in
1992 as president and chief
operating officer and assumed his
present position in 1993.
President of AEP and vice
president and director of the
Company from 1992 until assuming
his present positions in 1993.
From 1987 until 1992 was chairman
of the board, president and chief
executive officer of Gulf States
Utilities Company, an unaffiliated
electric utility. A director of
the Company, AEP, certain other
AEP System companies and BCP
Management, Inc., which is the
general partner of Borden
Chemicals and Plastics L.P.
HENRY W. FAYNE 55 President of the Company, vice
president of AEP and executive
vice president and director of the
Service Corporation. Joined the
Service Corporation in 1974,
became assistant controller in
1978, controller in 1984, vice
president and controller in 1988,
senior vice president in 1993,
senior vice president-corporate
planning and budgeting in 1995,
executive vice president-financial
services in 1998, executive vice
president-finance and analysis in
2000 and assumed his present
position in 2001. A director of
the Company and president and
director of certain other AEP
System companies.
ARMANDO A. PENA 57 Vice president and treasurer of
the Company, treasurer of AEP and
senior vice president-finance,
treasurer and director of the
Service Corporation. Joined the
Service Corporation in 1971,
became assistant vice president in
1982, vice president-finance in
1989, senior vice president in
1996, senior vice
president-finance, treasurer and
chief financial officer in 1998
and assumed his present position
in 2000. Became treasurer of the
Company and AEP in 1996. A
director of the Company and vice
president, treasurer and director
of certain other AEP System
companies.
ROBERT P. POWERS 48 Vice president of the Company and
executive vice president-nuclear
generation and technical services
and director of the Service
Corporation. Joined the Service
Corporation in 1998 as senior vice
president-nuclear generation,
became senior vice
president-nuclear operations in
2000 and assumed his present
position in 2001. From 1996-1998
was vice president of Pacific Gas
& Electric and plant manager of
its Diablo Canyon Nuclear
Generating Station. A director of
the Company and vice president and
director of certain other AEP
System companies.
THOMAS V. SHOCKLEY, III 56 Vice president of the Company,
vice chairman of AEP and vice
chairman and chief operating
officer of the Service
Corporation. A director of the
Company, AEP and vice president
and director of certain other AEP
System companies. Joined the
Service Corporation in 2000 as
vice chairman and assumed his
present position in 2001. From
1997-2000 was president and chief
operating officer of Central and
South West Corporation ("CSW") and
from 1990-1997 was executive vice
president of CSW.
SUSAN TOMASKY 48 Vice president of the Company,
vice president, chief financial
officer and secretary of AEP, and
executive vice president-policy,
finance and strategic planning,
assistant secretary and director
of the Service Corporation. A
vice president and director of the
Company and of certain other AEP
System companies. Joined the
Service Corporation in 1998 as
senior vice president and general
counsel, became executive vice
president-legal, policy and
corporate communications and
general counsel in 2000 and
assumed her present position in
2001. From 1993-1997 was general
counsel of the Federal Energy
Regulatory Commission.
JOSEPH H. VIPPERMAN 61 Vice president of the Company and
executive vice president-shared
services and vice president of the
Service Corporation. Joined
Appalachian Power Company
("APCo"), a subsidiary of AEP, in
1962, transferred to the Service
Corporation and became controller
in 1978, vice president in 1980,
was executive vice
president-operations from 1984
until 1989, executive vice
president-energy delivery in 1996,
executive vice president-corporate
services in 1998 and assumed his
present position in 2000.
Transferred to APCo as executive
vice president in 1989, was
president from 1990 until 1995,
and became a vice president in
1996. A director of the Company
and vice president and director of
certain other AEP System companies.
Dr. Draper, Messrs. Fayne, Pena, Powers, Shockley and
Vipperman and Ms. Tomasky are directors of Appalachian Power
Company, Central Power and Light Company, Columbus Southern Power
Company, Kentucky Power Company, Public Service Company of
Oklahoma, Southwestern Electric Power Company and West Texas
Utilities Company, all of which are direct or indirect
subsidiaries of AEP and have one or more classes of publicly held
preferred stock or debt securities. Dr. Draper, Messrs. Fayne,
Powers, Shockley and Vipperman and Ms. Tomasky are directors of
Indiana Michigan Power Company. Dr. Draper, Messrs. Fayne, Pena,
Powers, Shockley and Vipperman and Ms. Tomasky are also directors
of AEP Generating Company, another subsidiary of AEP.
Subject to approval by the shareholders, the Company
proposes to amend and restate Article Second of the Amended
Articles of Incorporation in its entirety to read as follows:
"Second: The place in Ohio where the principal office of
the Corporation is to be located is 1 Riverside Plaza, Columbus,
Franklin County, Ohio."
The proposed amendment must be approved by the affirmative
vote of holders of more than two-thirds of the outstanding shares
of Common Stock and outstanding shares of $100 Voting Preferred,
voting together as a single class. AEP, the owner of all of the
Company's outstanding Common Stock, has indicated that it intends
to vote all of such shares in favor of the amendment. If
approved by the necessary vote of shareholders, the proposed
amendment will become effective when it is certified by the
appropriate officers of the Company and filed with the Secretary
of State of Ohio.
OTHER BUSINESS
Management does not intend to bring any matters before the
meeting other than the election of directors and the amendment to
the Amended and Restated Articles of Incorporation and does not know of
any matters that will be brought before the meeting by others.
EXECUTIVE COMPENSATION
Certain executive officers of the Company are employees of
the Service Corporation. The salaries of these executive
officers are paid by the Service Corporation and a portion of
their salaries has been allocated and charged to the Company.
The following table shows for 2001, 2000 and 1999 the
compensation earned from all AEP System companies by the chief
executive officer and the four other most highly compensated
executive officers (as defined by regulations of the Securities
and Exchange Commission) of the Company at December 31, 2001 and
Mr. Lhota, who resigned as an executive officer on December 12,
2001.
SUMMARY COMPENSATION TABLE
Annual Long-Term
Compensation Compensation
Awards Payouts
Name and Securities LTIP All Other
Principal Salary Bonus Underlying Payouts Compensation
Position Year ($) ($)(1) Options(#) ($)(1) ($)(2)
- -------- ---- --- ------ ---------- ------- ------------
E. Linn Draper, Jr. - 2001 910,000 682,090 -0- 311,253 122,395
Chairman of the board 2000 850,000 485,775 700,000 -0- 106,699
and chief executive 1999 820,000 208,280 -0- -0- 103,218
officer the Company;
chairman of the board,
president and chief
executive officer of
AEP and the Service
Corporation; chairman
of the board and chief
executive officer of
other AEP System
companies
Thomas V. Shockley, III - 2001 590,000 353,788 -0- 79,781 100,678
Vice president and 2000 304,417 140,500 250,000 824,399 9,170,069
director of the Company;
vice chairman and chief
operating officer of the
Service Corporation;
vice chairman of AEP;
president and director
of AEP Energy Services,
Inc.; vice president
and director of other
other AEP System companies
(3)
Henry W. Fayne - President 2001 420,000 305,861 -0- 83,697 75,576
and director of the 2000 365,000 152,972 200,000 -0- 47,074
Company; executive vice 1999 315,000 56,007 -0- -0- 34,885
president and director of
the Service Corporation;
vice president of AEP,
president and director of
other AEP System companies
Susan Tomasky - Vice 2001 410,000 300,365 -0- 54,455 73,483
president and director 2000 355,000 148,780 200,000 -0- 47,946
of the Company,
executive vice
president-policy, finance
and strategic planning,
assistant secretary and
director of the Service
Corporation; vice
president, secretary and
chief financial officer
of AEP, vice president
and director of other AEP
System companies (4)
William J. Lhota - 2001 435,000 239,250 -0- 106,271 2,165,742
President, chief 2000 415,000 173,927 200,000 -0- 62,394
operating officer and 1999 400,000 71,120 -0- -0- 55,690
director of the
Company; executive vice
president-energy delivery
and director of the Service
Corporation; president,
chief operating officer and
director of other AEP
System companies (5)
Joseph H. Vipperman - 2001 370,000 203,378 -0- 87,692 82,209
Vice president and 2000 350,000 146,688 200,000 -0- 70,112
director of the Company; 1999 330,000 58,674 -0- -0- 63,006
executive vice president-
shared services and director
of the Service Corporation;
vice president and
director of other AEP
System companies
___________
(1)Amounts in the "Bonus" column reflect awards under the Senior
Officer Annual Incentive Compensation Plan (SOIP), except for
Mr. Shockley as disclosed in footnote 3, and, in the case of
Mr. Fayne and Ms. Tomasky, lump sum payments of $75,000 each in
2001 in lieu of immediate salary increases in connection with
their promotions during the year. Payments pursuant to the
SOIP are made in the first quarter of the succeeding fiscal
year for performance in the year indicated.
Amounts in the "Long-Term Compensation-Payouts" column reflect
performance share unit targets earned under the AEP 2000
Long-Term Incentive Plan for three-year performance periods,
except for Mr. Shockley as disclosed in footnote 3. See below
under "Long-Term Incentive Plans - Awards in 2001".
(2)Amounts in the "All Other Compensation" column, except for the
additional compensation to Messrs. Shockley and Lhota as
disclosed in footnotes (3) and (5), respectively, include (i)
AEP's matching contributions under the AEP Employees Savings
Plan and the AEP Supplemental Savings Plan, a non-qualified
plan designed to supplement the AEP Savings Plan, (ii)
subsidiary companies director fees, (iii) vehicle allowance,
and (iv) split-dollar insurance. Split-dollar insurance
represents the present value of the interest projected to
accrue for the employee's benefit on the current year's
insurance premium paid by AEP. Cumulative net life insurance
premiums paid are recovered by AEP at the later of retirement
or 15 years. Detail of the 2001 amounts in the "All Other
Compensation" column is shown below.
Dr. Mr. Mr. Ms. Mr. Mr.
Item Draper Shockley Fayne Tomasky Lhota Vipperman
- ---- ------ -------- ----- ------- ----- ---------
Savings Plan
Matching Contributions $ 5,119 $ 7,650 $ 5,775 $ 5,825 $ 7,650 $ 6,950
Supplemental
Savings Plan
Matching Contributions 35,831 18,876 20,009 19,320 19,752 16,301
Subsidiaries
Directors Fees 16,550 14,650 16,300 16,300 13,450 10,450
Vehicle Allowance 14,400 12,000 12,000 12,000 12,000 12,000
Split-Dollar Insurance 50,495 47,502 21,492 20,038 24,055 36,508
(3)Mr. Shockley joined AEP from Central and South West
Corporation and became an executive officer when the merger
with CSW was consummated on June 15, 2000. The "Salary" column
for Mr. Shockley shows the amount earned for his AEP service
after the date of the merger. The amounts in the "Bonus" and
"LTIP Payouts" columns for 2000 represent his prorated payment
under the CSW Annual Incentive Plan and the value of Common
Stock awarded under the CSW Annual Incentive Plan and the value
of Common Stock awarded under the CSW 1992 Long-Term Incentive
Plan, respectively. He also received a payment of $9,154,924
under his change in control agreement with CSW that is included
in the "All Other Compensation" column.
(4)No 1999 compensation information is reported for Ms. Tomasky
because she was not an executive officer in that year.
(5)Mr. Lhota resigned from his executive positions with AEP on
December 12, 2001, and left active employment on December 31,
2001. He is receiving severance of $2,022,750, equal to three
times base salary and annual incentive at target, with
$1,152,750 paid upon his termination of active employment and
the remainder as a continuation of his annual salary of
$435,000 through December 2003. As a result, Mr. Lhota retains
his eligibility for the upcoming two-year period under AEP's
savings and retirement plans. Mr. Lhota also received a lump
sum payment of accrued vacation pay of $66,085.
AGGREGATED OPTION EXERCISES IN 2001 AND YEAR-END OPTION VALUES
Shares
Acquired
on Value Number of Securities Value of Unexercised
Exercise Realized Underlying Unexercised In-The-Money
Name (#) ($) Options at 12-31-01(#) Options at 12-31-01($)
- ---- -------- -------- ---------------------- ----------------------
Exercisable Unexercisable Exercisable Unexercisable
E. L.
Draper, Jr. -- -- -0- 700,000 -0- 5,533,500
T. V.
Shockley, III 38,821 379,703 11,117 250,000 -0- 1,976,250
H. W. Fayne -- -- -0- 200,000 -0- 1,581,000
S. Tomasky -- -- -0- 200,000 -0- 1,581,000
W. J. Lhota -- -- -0- 200,000 -0- 1,581,000
J. H.
Vipperman -- -- -0- 200,000 -0- 1,581,000
___________
* Based on the difference between the closing price of AEP Common
Stock on the New York Stock Exchange Composite Transactions Tape
on December 31, 2001 ($43.53) and the option exercise price.
"In-the-money" means the market price of the stock is greater
than the exercise price of the option on the date indicated.
LONG-TERM INCENTIVE PLANS - AWARDS IN 2001
Each of the awards set forth below establishes performance
share unit targets, which represent units equivalent to shares of
Common Stock, pursuant to AEP's 2000 Long-Term Incentive Plan.
Since it is not possible to predict future dividends and the
price of AEP Common Stock, credits of performance share units in
amounts equal to the dividends that would have been paid if the
performance share unit targets were established in the form of
shares of Common Stock are not included in the table.
The ability to earn performance share unit targets is tied
to achieving specified levels of total shareholder return ("TSR")
relative to the S&P Electric Utility Index. The AEP Board Human
Resources Committee may, at its discretion, reduce the number of
performance share unit targets otherwise earned. In accordance
with the performance goals established for the periods set forth
below, the threshold, target and maximum awards are equal to 20%,
100% and 200%, respectively, of the performance share unit
targets. No payment will be made for performance below the
threshold.
Payments of earned awards are deferred in the form of
phantom stock units (equivalent to shares of AEP Common Stock)
until officers have met the equivalent stock ownership target.
Once officers meet and maintain their respective targets, they
may elect either to continue to defer or to receive further
earned awards in cash and/or Common Stock.
Estimated Future Payouts of
Performance Share Units Under
Non-Stock Price-Based Plan
--------------------------------------
Performance
Number of Period Until
Performance Maturation Threshold Target Maximum
Name Share Units or Payout (#) (#) (#)
---- ----------- ----------- --- --- ---
E.L. Draper, Jr. 14,919 2001-2003 2,984 14,919 29,838
T.V. Shockley, III 7,738 2001-2003 1,548 7,738 15,476
H. W. Fayne 5,049 2001-2003 1,010 5,049 10,098
S. Tomasky 4,929 2001-2003 986 4,929 9,858
W. J. Lhota 5,230 2001-2003 1,046 5,230 10,460
J. H. Vipperman 4,448 2001-2003 890 4,448 8,896
RETIREMENT BENEFITS
The American Electric Power System Retirement Plan provides
pensions for all employees of AEP System companies (except for
employees covered by certain collective bargaining agreements or
by the Central and South West Corporation Cash Balance Retirement
Plan), including the executive officers of the Company. The
Retirement Plan is a noncontributory defined benefit plan.
The Retirement Plan was amended effective January 1, 2001.
The amendment provides that the final average pay benefit accrual
formula currently in effect terminates on December 31, 2010 and,
effective January 1, 2001, a cash balance accrual formula is
added to the Retirement Plan. Employees participating in the
Retirement Plan on December 31, 2000 accrue retirement benefits
under both formulas and employees hired after December 31, 2000
accrue retirement benefits solely under the cash balance
formula. Employees accruing benefits under both formulas may
choose either the final average pay formula or the cash balance
formula for their accrued benefit at the time employment is
terminated. The accrued benefit earned by an employee under the
final average pay formula as of December 31, 2010, the date the
final average pay formula will be discontinued, is the minimum
benefit an employee can receive from the Retirement Plan after
that time.
The following table shows the approximate annual annuities
that would be payable to employees in certain higher salary
classifications, under the final average pay formula, assuming
retirement at age 65 after various periods of service.
PENSION PLAN TABLE
Years of Accredited Service
------------------------------------------------------
------------------------------------------------------
Highest Average
Annual Earnings 15 20 25 30 35 40
- --------------- -------------------------------------------------------
400,000 93,210 124,280 155,350 186,420 217,490 244,090
500,000 117,210 156,280 195,350 234,420 273,490 306,740
600,000 141,210 188,280 235,350 282,420 329,490 369,390
700,000 165,210 220,280 275,350 330,420 385,490 432,040
1,000,000 237,210 316,280 395,350 474,420 553,490 619,990
1,200,000 285,210 380,280 475,350 570,420 665,490 745,290
2,000,000 447,210 636,280 795,350 954,420 1,113,490 1,246,490
The amounts shown in the table are the straight life
annuities payable under the Retirement Plan final average pay
formula without reduction for the joint and survivor annuity.
Retirement benefits listed in the table are not subject to any
deduction for Social Security or other offset amounts. The
retirement annuity is reduced 3% per year in the case of a
termination of employment and commencement of benefits between
ages 55 and 62. If an employee terminates employment and
commences benefits at or after age 62, there is no reduction in
the retirement annuity.
Compensation upon which retirement benefits under the final
average pay formula are based, for the executive officers named
in the Summary Compensation Table above, consists of the average
of the 36 consecutive months of the officer's highest aggregate
salary and Senior Officer Annual Incentive Compensation Plan
awards, shown in the "Salary" and "Bonus" columns, respectively,
of the Summary Compensation Table, out of the officer's most
recent 10 years of service.
Under the cash balance formula, each employee has an account
to which dollar amount credits are allocated annually based on a
percentage of the employee's compensation. Compensation for the
cash balance formula includes annual salary and annual incentive
compensation plan awards up to a maximum total compensation of
$1,000,000. The applicable percentage is determined by age and
years of service with AEP as of December 31 of each year (or as
of the employee's termination date, if earlier). The following
table shows the percentage used to determine dollar amount
credits at the age and years of service indicated:
Sum of Age Plus Applicable
Years of Service Percentage
- ---------------- ----------
<30 3.0%
30-39 3.5%
40-49 4.5%
50-59 5.5%
60-69 7.0%
70 or more 8.5%
To transition from the final average pay formula to the cash balance
formula, the employee's account under the cash balance formula was credited with
an opening balance using a number of factors.
The estimated annual annuities at age 65 under the cash
balance formula payable to the executive officers named in the
Summary Compensation Table (except for Mr. Shockley, who
participates in the Central and South West Corporation retirement
plan discussed below) are:
Annual
Name Benefit
---- -------
E. L. Draper,Jr. $685,000
H. W. Fayne 254,000
S. Tomasky 280,000
W. J. Lhota 343,000
J. H. Vipperman 305,000
These amounts are based on the following assumptions:
o Salary amounts shown in the "Salary" column for calendar
year 2001 are used with no subsequent adjustments in future
years plus annual incentive awards at the 2001 target level.
o Conversion of the lump-sum cash balance to a single life
annuity at age 65, based on an interest rate of 5.12% and
the 1983 Group Annuity Mortality Table.
AEP maintains a supplemental retirement plan which provides
for the payment of:
o Retirement benefits that are not payable due to limitations
imposed by Federal tax law on benefits paid by qualified
plans.
o Supplemental retirement benefits provided by individual
agreements with certain AEP employees.
The supplemental retirement plan provides for supplemental
benefits under both the final average pay formula and the cash
balance formula. Retirement Plan benefits shown above include
all supplemental retirement benefits.
Dr. Draper and Ms. Tomasky have individual agreements with
AEP which provide them with supplemental retirement benefits that
credit them with years of service in addition to their years of
service with AEP as follows: Dr. Draper, 24 years and Ms.
Tomasky, 20 years. The agreements each provide that these
supplemental retirement benefits are reduced by pension
entitlements from plans sponsored by prior employers.
As of December 31, 2001, for the executive officers named in
the Summary Compensation Table (except for Mr. Shockley as
discussed in the following two paragraphs), the number of years
of service applicable for retirement benefit calculation purposes
under either the final average pay formula or the cash balance
formula were as follows: Dr. Draper, 33 years; Mr. Fayne, 26
years; Ms. Tomasky, 23 years; Mr. Lhota, 36 years; and Mr.
Vipperman, 39 years. The years of service for Dr. Draper and Ms.
Tomasky include years of service provided by their respective
agreements with AEP described in the preceding paragraph.
Under the terms of the merger agreement between AEP and
Central and South West Corporation, the CSW Cash Balance
Retirement Plan continues as a separate plan through at least
July 1, 2002, for those AEP System employees who were
participants in the CSW Cash Balance Plan as of December 31,
2000. Employees of CSW who had attained age 50 and completed 10
years of service with a CSW company as of July 1, 1997, accrue
retirement benefits under the CSW Cash Balance Plan under both
the final average pay and cash balance formulas. Employees
accruing benefits under both formulas may choose the benefit
accrued under either formula at the time employment is terminated.
As an employee of CSW before the merger, Mr. Shockley
participates in the CSW Cash Balance Plan. Under the CSW plan,
at age 65 the estimated annual annuities payable to Mr. Shockley
under the final average pay and cash balance formulas are
$201,000 and $216,000, respectively. Mr. Shockley's estimated
annual annuity under (i) the final average pay formula is
computed as of January 1, 2002 and (ii) the cash balance formula
is based on the same assumptions described above for the AEP cash
balance formula. Mr. Shockley has an agreement with CSW entered
into prior to the merger under which he is entitled to a
retirement benefit that credits him with 30 years of service if
he remains employed with AEP until age 60 or thereafter.
Four AEP System employees (including Messrs. Fayne, Lhota
and Vipperman) whose pensions may be adversely affected by
amendments to the Retirement Plan made as a result of the Tax
Reform Act of 1986 are eligible for certain supplemental
retirement benefits. Such payments, if any, will be equal to any
reduction occurring because of such amendments. Assuming
retirement in 2002 of the executive officers named in the Summary
Compensation Table, only Mr. Vipperman would be affected and his
annual supplemental benefit would be $4,000.
AEP made available a voluntary deferred-compensation program
in 1982 and 1986, which permitted certain members of AEP System
management to defer receipt of a portion of their salaries.
Under this program, a participant was able to defer up to 10%
annually, over a four-year period, of his or her salary, and
receive supplemental retirement or survivor benefit payments over
a 15-year period. The amount of supplemental retirement payments
received is dependent upon the amount deferred, age at the time
the deferral election was made, and number of years until the
participant retires. The following table sets forth, for the
executive officers named in the Summary Compensation Table, the
amounts of annual deferrals and, assuming retirement at age 65,
annual supplemental retirement payments under the 1982 and 1986
programs.
1982 Program
--------------------------------
Annual Annual Amount of
Amount Supplemental
Deferred Retirement
(4-Year Payment
Name Period) (15-Year Period)
- ---- ------- ----------------
J. H. Vipperman.. $11,000 $90,750
1986 Program
--------------------------------
Annual Annual Amount of
Amount Supplemental
Deferred Retirement
(4-Year Payment
Name Period) (15-Year Period)
- ---- ------- ----------------
J. H. Vipperman.. $ 9,000 $95,400
H. W. Fayne...... 10,000 67,500
SEVERANCE PLAN
In connection with the merger with CSW, AEP's Board of
Directors adopted a severance plan on February 24, 1999,
effective March 1, 1999, that includes Messrs. Vipperman and
Fayne and Ms. Tomasky. The severance plan provides for payments
and other benefits if, at any time before June 15, 2002 (the
second anniversary of the merger consummation date), the
officer's employment is terminated (i) by AEP without "cause" or
(ii) by the officer because of a detrimental change in
responsibilities or a reduction in salary or benefits. Under the
severance plan, the officer will receive:
o A lump sum payment equal to three times the officer's annual
base salary plus target annual incentive under the Senior
Officer Annual Incentive Compensation Plan.
o Maintenance for a period of three additional years of all
medical and dental insurance benefits substantially similar
to those benefits to which the officer was entitled
immediately prior to termination, reduced to the extent
comparable benefits are otherwise received.
o Outplacement services not to exceed a cost of $30,000 or use
of an office and secretarial services for up to one year.
AEP's obligation for the payments and benefits under the
severance plan is subject to the waiver by the officer of any
other severance benefits that may be provided by AEP. In
addition, the officer agrees to refrain from the disclosure of
confidential information relating to AEP.
CHANGE-IN-CONTROL AGREEMENTS
AEP has change-in-control agreements with Dr. Draper and
Messrs. Shockley, Fayne and Vipperman and Ms. Tomasky. If there
is a "change-in-control" of AEP and the employee's employment is
terminated by AEP or by the employee for reasons substantially
similar to those in the severance plan, these agreements provide
for substantially the same payments and benefits as the severance
plan with the following additions:
o Three years of service credited for purposes of determining
non-qualified retirement benefits, with such credited
service proportionately reduced to zero if termination
occurs between ages 62 and 65.
o Payment, if required, to make the employee whole for any
excise tax imposed by Section 4999 of the Internal Revenue
Code.
"Change-in-control" means:
o The acquisition by any person of the beneficial ownership of
securities representing 25% or more of AEP's voting stock.
o A change in the composition of a majority of the Board of
Directors under certain circumstances within any two-year
period.
o Approval by the shareholders of the liquidation of AEP,
disposition of all or substantially all of the assets of AEP
or, under certain circumstances, a merger of AEP with
another corporation.
AEP BOARD HUMAN RESOURCES COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
The Human Resources Committee of AEP the Board of Directors
regularly reviews executive compensation policies and practices
and evaluates the performance of management in the context of
AEP's performance. None of the members of the Committee is or
has been an officer or employee of any AEP System company or
receives remuneration from any AEP System company in any capacity
other than as a director.
The Human Resources Committee recognizes that the executive
officers are charged with managing over $50 billion in assets,
multi-state electric utility with trading operations and
international investments during challenging times and with
addressing many difficult and complex issues.
AEP's executive compensation program is designed to maximize
shareholder value, to support the implementation of AEP's
business strategy and to improve both corporate and personal
performance. The Committee's compensation policies supporting
this program are:
o To pay in a manner that motivates both short and long term
performance, focuses on meeting specified corporate goals
and promotes the long term interests of shareholders.
o To place a significant amount of compensation for senior
executives at risk, in the form of variable incentive
compensation instead of fixed or base pay with much of this
risk similar to the risk experienced by other AEP
shareholders.
o To establish compensation opportunities that enhance AEP's
ability to attract, retain, reward, motivate and encourage
the development of exceptionally knowledgeable, highly
qualified and experienced executives.
o To target compensation levels that are reflective of current
market practices in order to maintain a stable, successful
management team.
In carrying out its responsibilities, the Committee utilizes
a nationally recognized independent compensation consultant to
obtain information and provide recommendations relating to
changing industry compensation practices and programs.
The Committee also considers management's initiatives in
response to the impact of increased competition and other
significant changes in the rapid restructuring of the electric
utility industry. It is the Committee's opinion that, in this
constantly changing environment, Dr. Draper, Chairman and CEO,
and the senior management team continue to develop and implement
strategies effectively to position AEP for the future. This
includes AEP's:
o Establishment and operation of a major energy trading
organization.
o Proposals and actions taken in connection with the
industry's transition to competition, including the
implementation of AEP's corporate separation into regulated
and unregulated businesses.
o Development of unregulated business activities.
The success of these efforts and their benefits to AEP cannot be
precisely measured in advance, but the Committee is convinced
they are vital to AEP's long-term success.
Stock Ownership Guidelines. The Board of Directors, upon the
Committee's recommendation, underscored the importance of
aligning executive and shareholder interests by adopting in
December 1994 stock ownership guidelines for senior management
participants receiving performance share awards. The Committee
and senior management believe that linking a significant portion
of an executive's current and potential future net worth to AEP's
success, as reflected in the stock price and dividends paid,
gives the executive a stake similar to that of AEP's owners and
further encourages long term management for the benefit of those
owners.
Under the guidelines, the target ownership of AEP Common
Stock is directly related to the officer's corporate position
with the greatest ownership target for the chief executive
officer. The targets for the current officers named in the
Summary Compensation Table are as follows: CEO, 45,000 shares;
COO, 20,000 shares; and the other three current officers, 15,000
shares each. Each officer is expected to achieve the ownership
target within a five-year period. Common Stock equivalents
earned through the Senior Officer Annual Incentive Compensation
Plan and AEP 2000 Long-Term Incentive Compensation Plan, both
described below, are included in determining compliance with the
ownership targets. As of January 1, 2002, Dr. Draper has met his
ownership requirement and all of the other current officers named
in the Summary Compensation Table have either met, or are on
target to meet, their ownership requirements within the specified
time period. See the table on page 13 for actual ownership
amounts.
Components of Executive Compensation
Base Salary. When reviewing base salaries, the Committee
considers pay practices used by other electric utilities and
industry in general. In addition, the Committee considers the
respective positions held by the executive officers, their levels
of responsibility, performance and experience, and the
relationship of their base salaries to the base salaries of other
AEP managers and employees.
For compensation comparison purposes, the Human Resources
Committee uses certain comparably sized and complex electric
utility companies in the S&P Electric Utility Index, which is the
peer group used in the Comparison of Five Year Cumulative Total
Return graph in this proxy statement. The size of AEP places it
above the median of its comparative group. Base salary levels in
2001 for the CEO and the other executive officers of AEP named in
the Summary Compensation Table approximated the median of AEP's
compensation peer group consistent with our policy to target
these salaries at that level and to place more emphasis on
incentive compensation. In establishing base salary levels in
that range, the Human Resources Committee considers the
competitiveness of AEP's entire compensation package.
Base salaries are adjusted, as appropriate, and reviewed
annually to reflect individual and corporate performance and
consistency with compensation changes within AEP and the
compensation peer group of other electric utilities.
The Committee meets without the presence of Dr. Draper,
chairman, president and chief executive officer, to evaluate his
performance and compensation and reports on that evaluation to
all outside directors of the Board. After full discussion, the
outside directors then determine Dr. Draper's base salary.
Annual Incentive. The primary purpose of annual incentive
compensation is to motivate senior managers to meet and exceed
annual objectives which are part of the long term strategic plan
in order to maximize shareholder value.
The Senior Officer Annual Incentive Compensation Plan (SOIP)
provides a variable, performance-based portion of the executive
officers' total compensation. Each officer's annual incentive
compensation is set forth in the Bonus column of the Summary
Compensation Table.
SOIP participants are assigned an annual target award
expressed as a percentage of their base salary for the period.
In January 2001, the Committee established targets as follows:
Dr. Draper, 75%; Mr. Shockley, 60%; and the other executive
officers named in the compensation table, 55%. Actual awards can
vary from 0-200% of the target award based on performance.
SOIP awards are based on the following preestablished
performance criteria:
o Earnings per share.
o Return on stockholder equity.
o Annual strategic objectives.
For 2001, AEP performance merited an award of 99.94% (except in
the case of Mr. Lhota who was paid at 100% as part of his
severance benefit).
Long-Term Incentive. The primary purpose of longer term,
equity based, incentive compensation is to motivate senior
managers to maximize shareholder value by linking a portion of
their compensation directly to shareholder return.
Long-term incentive awards are made under the AEP 2000
Long-Term Incentive Plan. The plan provides a list of
measurements and incentives from which the Committee may select
those which provide the most effective incentives at any given
time as AEP pursues its strategies and plans. In 2001, AEP's
long-term incentive compensation program consisted of grants of
stock options previously made and performance share units.
Stock Options
In September 2000, the Committee granted stock options to
executive officers and other AEP employees intended to be
sufficient for a two- to three-year period. This initial grant
was structured to provide a special incentive to achieve the
benefits upon which the merger between AEP and Central and South
West Corporation was based.
Stock options granted to the executive officers, when
combined with base salaries plus annual incentive payments and
the value of performance shares that these officers may
potentially earn at target, are set by the Committee so that
total compensation is intended to fall at the median range paid
by AEP's compensation peer group for median performance.
Performance Shares
The Committee has annually established performance share
targets which are earned based on AEP's subsequent three-year
total shareholder returns measured relative to the S&P peer
utilities. In January 2001, the Committee established targets
based on the same percentages of then base salaries as those for
the SOIP described above. The performance share awards which
will ultimately be paid to participants for a performance period
can range from 0-200% of the target plus accumulated dividends.
AEP's total shareholder return for 1999-2001 ranked
fifteenth relative to the S&P peer utilities and, as a result,
70% of the performance share targets originally established for
that period (and dividend credits) were earned. The associated
awards are listed in the Summary Compensation Table.
Payments of earned performance share awards are initially
deferred in the form of phantom stock units (equivalent to shares
of AEP Common Stock). Such deferrals continue until termination
of employment or, if so elected by the recipient, with payments
commencing not later than five years thereafter. Once the
officers meet and maintain their respective equivalent stock
ownership targets discussed above, they may then elect either to
continue to defer and select among various investment options,
including AEP stock equivalents, or to receive further earned
performance share awards in cash and/or Common Stock. The
performance share targets and a further description of
performance share awards are shown under Long-Term Incentive
Plans--Awards in 2001.
Tax Policy on Deductibility of Compensation
The Committee has considered the impact of Section 162(m) of
the Internal Revenue Code, which provides a limit on the
deductibility of compensation in excess of $1,000,000 paid in any
year to AEP's chief executive officer or any of its other four
executive officers named in the Summary Compensation Table who
are serving as such at the end of the year. It is the
Committee's expectation, when consistent with sound executive
compensation principles and the needs of AEP, that compensation
would be qualified for deductibility where appropriate.
Award payments under the AEP 2000 Long-Term Incentive Plan
have been structured to be exempt from the deduction limit
because they are made pursuant to a shareholder approved,
performance driven plan.
Award payments under the SOIP are not eligible for the
performance-based exemption and the deduction limit does apply to
such awards. Since Dr. Draper has deferred his 2001 SOIP award
to dates past his retirement from the Company (providing an
exemption from the deduction limit), the Committee has not deemed
it necessary at this time to qualify compensation paid pursuant
to the SOIP for deductibility under Section 162(m). The
Committee may decide to do so in the future.
No named officer in the Summary Compensation Table had
taxable compensation paid in 2001 in excess of the deduction
limit and all such compensation was fully deductible. The
Committee intends to continue to evaluate the impact of this Code
restriction.
Human Resources
Committee Members
John P. DesBarres, Chair William R. Howell
Robert W. Fri Donald G. Smith
SHARE OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the beneficial ownership of
AEP Common Stock and stock-based units as of January 1, 2002 for
all directors as of the date of this Information Statement, each
of the persons named in the Summary Compensation Table and all
directors and executive officers as a group. Unless otherwise
noted, each person had sole voting and investment power over the
number of shares of AEP Common Stock and stock-based units of AEP
set forth across from his or her name. Fractions of shares have
been rounded to the nearest whole share. No executive officer,
director or nominee owns any shares of any series of the
Cumulative Preferred Stock of the Company.
Stock
Name Shares Units(a) Total
---- ------ -------- -----
E. L. Draper, Jr................ 238,274(b)(d)(f) 119,218 357,492
H. W. Fayne..................... 72,685(b)(c)(f) 13,735 86,420
W. J. Lhota..................... 86,807(b)(d)(f) 17,117 103,924
R. P. Powers.................... 21,269(b)(f) 1,209 22,478
T. V. Shockley, III............. 138,822(b)(c)(e)(f) -0- 138,822
S. Tomasky...................... 67,322(b)(f) 4,329 71,651
J. H. Vipperman................. 78,043(b)(c)(d)(f) 7,201 85,244
A. A. Pena...................... 27,051(b)(f) 7,030 34,081
All directors and
executive officers
as a group (8 persons)......... 730,273(g) 169,839 900,112
___________
(a)This column includes amounts deferred in stock units and
held under AEP's various officer benefit plans.
(b)Includes the following numbers of share equivalents held in
the AEP Retirement Savings Plan and, for Mr. Shockley, the CSW
Retirement Savings Plan (in the case of the AEP Retirement
Savings Plan such persons have sole voting power, but the
investment/disposition power is subject to the terms of the
Savings Plan): Dr. Draper, 4,280; Mr. Fayne, 5,412; Mr. Lhota,
17,961; Mr. Powers, 436; Mr. Shockley, 6,579; Ms. Tomasky, 656;
Mr. Vipperman, 10,498; Mr. Pena, 4,510; and all executive
officers, 50,332.
(c)Does not include, for Messrs. Fayne, Shockley and Vipperman,
85,231 shares in the American Electric Power System Educational
Trust Fund over which Messrs. Fayne, Shockley and Vipperman
share voting and investment power as trustees (they disclaim
beneficial ownership). The amount of shares shown for all
directors and executive officers as a group includes these
shares.
(d)Includes the following numbers of shares held in joint
tenancy with a family member: Dr. Draper, 661; Mr. Lhota,
2,180; and Mr. Vipperman, 80.
(e)Includes the following numbers of shares held by family
members over which beneficial ownership is disclaimed: Mr.
Shockley, 496.
(f)Includes the following numbers of shares attributable to
options exercisable within 60 days: Dr. Draper, 233,333; Mr.
Fayne, 66,666; Mr. Lhota, 66,666; Mr. Powers, 20,833; Mr.
Shockley, 94,450; Ms. Tomasky, 66,666; Mr. Vipperman, 66,666;
and Mr. Pena, 20,833.
(g)Represents less than 1% of the total number of shares
outstanding.
MEETINGS OF THE BOARD OF DIRECTORS
Regular meetings of the Board of Directors were held once
each month during the year. In addition, the Board of Directors
holds special meetings from time to time as required. During
2001, the Board held twelve regular meetings.
Directors of the Company receive a fee of $50 for each
meeting of the Board of Directors attended in addition to their
salaries.
The Board of Directors of the Company has no committees.
INDEPENDENT AUDITORS
The public accounting firm of Deloitte & Touche LLP has been
selected as the independent auditors of the Company for the year
2002.
A representative of Deloitte & Touche LLP will not be
present at the meeting unless prior to the day of the meeting the
Secretary of the Company has received written notice from a
stockholder addressed to the Secretary at 1 Riverside Plaza,
Columbus, Ohio 43215, that such stockholder will attend the
meeting and wishes to ask questions of a representative of the
firm.
THOMAS S. ASHFORD,
Secretary
March 22, 2002