EXHIBIT 10(o)
AMERICAN ELECTRIC POWER SYSTEM
SENIOR EXECUTIVE SEVERANCE PLAN
FOR MERGER WITH
CENTRAL AND SOUTH WEST CORPORATION
Introduction
American Electric Power Company, Inc. ("AEP"), a New York corporation, and
Central and South West Corporation ("CSW"), a Delaware corporation, have entered
into an Agreement and Plan of Merger dated as of December 21, 1997 (the "Merger
Agreement"), whereby AEP and CSW will be parties to a merger (the "Combination")
with AEP as the parent of CSW. AEP recognizes that the uncertainty during the
pendency of the Combination, and the inevitable adjustments that will occur
during the transition period following the Combination, may result in the loss
or distraction of employees of its subsidiaries to the detriment of AEP and its
shareholders.
AEP considers the avoidance of such loss and distraction to be essential
to protecting and enhancing the best interests of AEP and its shareholders. AEP
also believes that during the pendency of the Combination and the transition
period thereafter, AEP should be able to receive and rely on dedicated service
from employees of its subsidiaries without concern that those employees might be
distracted or concerned by personal uncertainties and risks.
In addition, AEP believes that it is consistent with the employment
practices and policies of its subsidiaries and in the best interests of AEP and
its shareholders to treat fairly those employees whose employment terminates as
a result of the Combination.
Accordingly, AEP has determined that appropriate steps should be taken by
its subsidiaries to assure AEP of the continued employment and attention and
dedication to duty of the employees of its subsidiaries and to seek to ensure
the availability of their continued service, notwithstanding the Combination.
Therefore, in order to fulfill the above purposes, the following plan has
been developed and is hereby adopted by American Electric Power Service
Corporation, a subsidiary of AEP.
ARTICLE I
ESTABLISHMENT OF PLAN
As of March 1, 1999, American Electric Power Service Corporation hereby
establishes a separation compensation plan known as the American Electric Power
System Senior Executive Severance Plan For Merger With Central And South West
Corporation, as set forth in this document.
ARTICLE II
DEFINITIONS
As used herein the following words and phrases shall have the following
respective meanings unless the context clearly indicates otherwise.
(a) "Annual Compensation" means the sum of a Participant's
Annual Salary and the Participant's Target Annual Incentive.
(b) "Annual Salary" means the Participant's regular annual base salary
immediately prior to the Participant's termination of employment, including
compensation converted to other benefits under a flexible pay arrangement
maintained by the Corporation or deferred pursuant to a written plan or
agreement with the Corporation, but excluding overtime pay, allowances, premium
pay, compensation paid or payable under any of the Corporation's long-term or
short-term incentive plans or any similar payments.
(c) "Board" means the Board of Directors of American Electric Power
Company, Inc., a New York corporation.
(d) "Code" means the Internal Revenue Code of 1986, as amended from time
to time.
(e) "Corporation" means American Electric Power Service Corporation, a New
York corporation, and any of its subsidiary companies, divisions, organizations
or affiliates.
(f) "Date of Termination" means the date on which a Participant ceases to
be employed by the Corporation.
(g) "Effective Time" means the Effective Time, as defined in the Merger
Agreement.
(h) "Participant" means an individual who is designated as such pursuant
to Section 3.1.
(i) "Plan" means the American Electric Power System Senior Executive
Severance Plan For Merger With Central And South West Corporation.
(j) "Separation Benefits" means the benefits described in Section 4.3 that
are provided to qualifying Participants under the Plan.
(k) "Separation Period" means the period beginning on a Participant's Date
of Termination and ending on the earlier of (i) the third anniversary thereof,
or (ii) the first day of the month coincident with or next following the
Participant's 65th birthday.
(l) "Target Annual Incentive" means the award that the Participant would
have received under the Senior Officer Annual Incentive Compensation Plan or the
AEP Energy Services, Inc. Incentive Compensation Plan for the year in which the
Participant's Date of Termination occurs, if 100% of the annual target award had
been earned.
ARTICLE III
ELIGIBILITY
3.1 Participation. Each of the individuals named on Schedule 1 hereto
shall be a Participant in the Plan. With the approval of the Board, Schedule 1
may be amended by the Corporation from time to time to add individuals as
Participants; provided, however, the Corporation shall not have the right to
amend Schedule 1 to remove any individual, except that a Participant shall be
removed from Schedule 1 if the Participant's salary, duties or responsibilities
are materially altered for reasons other than the Combination, or the
Participant's employment is terminated for cause.
3.2 Duration of Participation. A Participant shall only cease to be a
Participant in the Plan as a result of an amendment or termination of the Plan
complying with Article VI of the Plan, or when the Participant ceases to be
employed by the Corporation, unless, at the time the Participant ceases to be
employed, such Participant is entitled to payment of a Separation Benefit as
provided in the Plan or there has been an event or occurrence described in
Section 4.2(a) which would enable the Participant to terminate employment and
receive a Separation Benefit. A Participant entitled to payment of a Separation
Benefit or any other amount under the Plan shall remain a Participant in the
Plan until the full amount of the Separation Benefit and any other amounts
payable under the Plan have been paid to the Participant.
ARTICLE IV
SEPARATION BENEFITS
4.1 Right to Separation Benefit. A Participant shall be entitled to
receive Separation Benefits in accordance with Section 4.3 if the Participant
ceases to be employed by the Corporation for any reason specified in Section
4.2(a).
4.2 Termination of Employment.
(a) Terminations Which Give Rise to Separation Benefits Under This Plan.
Except as set forth in subsection (b) below, a Participant shall be entitled to
Separation Benefits if at any time before the second anniversary of the
Effective Time (or, if the Combination has not occurred, before the expiration
of the Plan as set forth in Section 6.1 hereof):
(i) the Participant is involuntarily terminated by the
Corporation; or
(ii) the Participant's Annual Salary is reduced below the higher of
(x) the amount in effect on March 1, 1999 and (y) the highest amount in
effect at any time thereafter, excluding situations where the salary
reduction is due to the reassignment of a Participant returning to active
employment after a period of disability, and the Participant ceases to be
employed by the Corporation or by the Participant's own action within 90
days after the occurrence of such reduction; or
(iii) the Chief Executive Officer of the Corporation, in his or her
sole discretion, determines that the Participant's duties and
responsibilities or the program of incentive compensation and retirement
and welfare benefits offered to the Participant are materially and
adversely diminished in comparison to the duties and responsibilities or
the program of benefits enjoyed by the Participant on March 1, 1999, and
the Participant ceases to be employed by the Participant's own action
within 90 days after the occurrence after such reduction.
(b) Terminations Which Do Not Give Rise to Separation Benefits Under This
Plan. If a Participant's employment is terminated for cause, disability,
retirement, or voluntarily by the Participant in the absence of an event
described in subsection (a)(ii) or (iii) of this Section 4.2, the Participant
shall not be entitled to Separation Benefits under the Plan.
(i) A termination for disability shall have occurred where a
participant is terminated because illness or injury has prevented the
Participant from performing the Participant's duties (as they existed
immediately prior to the illness or injury) on a full time basis for 180
consecutive business days; provided, however, a termination for Disability
shall not have occurred if such termination is coincident with or
subsequent to a termination which otherwise gives rise to Separation
Benefits under this Plan as set forth in this Section 4.2.
(ii) A termination by retirement shall have occurred where a
Participant's termination is due to the Participant's voluntary late,
normal or early retirement under a pension plan sponsored by the
Corporation, as defined in such plan; provided, however, a termination by
Retirement shall not have occurred if such termination is coincident with
or subsequent to a termination which otherwise gives rise to Separation
Benefits under this Plan as set forth in this Section 4.2.
(iii) A termination for cause shall have occurred where a
Participant is terminated because of:
(A) the willful and continued failure of the Participant to perform
substantially the Participant's duties with the Corporation (other
than any such failure resulting from incapacity due to physical or
mental illness), after a written demand for substantial performance
is delivered to the Participant by the Board or an elected officer of
the Corporation which specifically identifies the manner in which the
Board or the elected officer believes that the Participant has not
substantially performed the Participant's duties, or
(B) the willful engaging by the Participant in illegal conduct or
gross misconduct which is materially and demonstrably injurious to
AEP and the Corporation, as determined by the Chief Executive Officer
of the Corporation.
For purposes of this provision, no act or failure to act, on the part of the
Participant, shall be considered "willful" unless it is done, or omitted to be
done, by the Participant in bad faith or without reasonable belief that the
Participant's action or omission was in the best interests of AEP or the
Corporation. Any act, or failure to act, based upon authority given pursuant to
a resolution duly adopted by the Board or upon the advice of counsel for AEP or
the Corporation, shall be conclusively presumed to be done, or omitted to be
done, by the Participant in good faith and in the best interests of AEP or the
Corporation.
4.3 Separation Benefits.
(a) If a Participant's employment is terminated in circumstances entitling
the Participant to a Separation Benefit as provided in Section 4.2(a), and
subject to the provisions of Section 4.5, the Corporation shall pay such
Participant, within ten days of the Date of Termination, a cash lump sum as set
forth in subsection (b) below and continuing benefits as set forth in subsection
(c) below. For purposes of determining the benefits set forth in subsections (b)
and (c), if the termination of the Participant's employment is based upon a
reduction of the Participant's Annual Salary or benefits as described in
subsection (a)(ii) or (a)(iii) of Section 4.2, such reduction shall be ignored.
(b) The cash lump sum referred to in Section 4.3(a) shall equal the
aggregate of the following amounts:
(i) an amount equal to the sum of (1) the portion of the
Participant's Annual Salary through the Date of Termination to the extent
not theretofore paid, (2) the product of (x) the Target Annual Incentive
and (y) a fraction, the numerator of which is the number of days in such
calendar year through the Date of Termination, and the denominator of
which is 365, and (3) any accrued vacation pay, in each case to the extent
not theretofore paid and in full satisfaction of the rights of the
Participant thereto; and
(ii) an amount equal to three times the Participant's Annual
Compensation.
(c) The continuing benefits referred to above shall be as follows:
(i) During the Separation Period, the Participant and the
Participant's family shall be provided with medical and dental insurance
benefits as if the Participant's employment had not been terminated;
provided, however, that if the Participant becomes reemployed with another
employer and is eligible to receive medical or other welfare benefits
under another employer-provided plan, the medical and other welfare
benefits described herein shall be secondary to those provided under such
other plan during such applicable period of eligibility. For purposes of
determining eligibility (but not the time of commencement of benefits) of
the Participant for retiree medical and dental insurance benefits under
the Corporation's plans, practices, programs and policies, the Participant
shall be considered to have remained employed during the Separation Period
and to have retired on the last day of such Separation Period; and
(ii) The Corporation shall, at its sole expense as incurred, provide
the Participant with outplacement services the scope and provider of which
shall be selected by the Participant in the Participant's sole discretion
(but at a cost to the Employer of not more than $30,000) or, at the
Participant's option, the use of comparable and accessible office space,
office supplies and equipment and secretarial services for a period not to
exceed one year.
To the extent any benefits described in this Section 4.3(c) cannot be provided
pursuant to the appropriate plan or program maintained by the Corporation, the
Corporation shall provide such benefits outside such plan or program at no
additional cost (including without limitation tax cost) to the Participant.
4.4 Other Benefits Payable.
(a) The cash lump sum and continuing benefits described in Section 4.3
above shall be payable in addition to, and not in lieu of, all other accrued or
vested or earned but deferred compensation (including voluntary deferrals of
regular salary and deferrals of long-term or short-term incentive compensation),
rights, options or other benefits which may be owed to a Participant upon or
following termination, including but not limited to sick pay, amounts or
benefits payable under any bonus or other compensation plans, stock option plan,
stock ownership plan, stock purchase plan, life insurance plan, health plan,
disability plan or similar or successor plan but excluding any severance pay or
pay in lieu of notice required to be paid to such Participant under applicable
law.
(b) Notwithstanding the foregoing;
(i) The Severance payments and benefits provided under Section 4.3
hereof shall be subject to, and conditioned upon, the waiver of any other
cash severance payment provided by the Corporation. No amount shall be
payable under this Plan to, or on behalf of the Participant, if the
Participant elects benefits under any other cash severance plan or
program, or any other special pay arrangement with respect to the
termination of the Participant's employment.
(ii) The Participant agrees that at all times following termination,
the Participant will not, without the prior written consent of AEP or the
Corporation, disclose to any person, firm or corporation any confidential
information of AEP or the Corporation which is now known to the
Participant or which hereafter may become known to the Participant as a
result of the Participant's employment or association with AEP or the
Corporation and which could be helpful to a competitor, unless such
disclosure is required under the terms of a valid and effective subpoena
or order issued by a court or governmental body; provided, however, that
the foregoing shall not apply to confidential information which becomes
publicly disseminated by means other than a breach of this provision. It
is recognized that damages in the event of breach of this Section 4.4
(b)(ii) by the Participant would be difficult, if not impossible, to
ascertain, and it is therefore agreed that AEP or the Corporation, in
addition to and without limiting any other remedy or right AEP or the
Corporation may have, shall have the right to an injunction or other
equitable relief in any court of competent jurisdiction, enjoining any
such breach, and the Participant hereby waives any and all defenses the
Participant may have on the ground of lack of jurisdiction or competence
of the court to grant such an injunction or other equitable relief. The
existence of this right shall not preclude AEP or the Corporation from
pursuing any other rights or remedies at law or in equity which AEP or the
Corporation may have.
4.5 Payment Obligations Absolute. The obligations of the Corporation to
pay the Separation Benefits described in Section 4.3 and the other benefits
described in Section 4.4 shall be absolute and unconditional and shall not be
affected by any circumstances, including, without limitation, any set-off,
counterclaim, defense or other right which the Corporation may have against any
Participant. In no event shall a Participant be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to a Participant under any of the provisions of this Plan, nor shall the amount
of any payment hereunder be reduced by any compensation earned by a Participant
as a result of employment by another employer, except as specifically provided
in Section 4.3(c)(i).
ARTICLE V
SUCCESSOR TO CORPORATION
This Plan shall bind any successor of AEP or the Corporation, their assets
or their businesses (whether direct or indirect, by purchase, merger,
consolidation or otherwise) in the same manner and to the same extent that AEP
or the Corporation would be obligated under this Plan if no succession had taken
place.
In the case of any transaction in which a successor would not by the
foregoing provision or by operation of law be bound by this Plan, AEP or the
Corporation shall require such successor expressly and unconditionally to assume
and agree to perform AEP's or the Corporation's obligations under this Plan, in
the same manner and to the same extent that AEP or the Corporation would be
required to perform if no such succession had taken place. The term
"Corporation," as used in this Plan, shall mean the Corporation as hereinbefore
defined and any successor or assignee to the business of assets which by reason
hereof becomes bound by this Plan.
ARTICLE VI
DURATION, AMENDMENT AND TERMINATION
6.1 Duration. This Plan shall terminate on the date the closing conditions
set forth in Article VII of the Merger Agreement are not met or the date the
Merger Agreement is terminated pursuant to Article IX of the Merger Agreement,
unless it is extended for an additional period or periods by resolution adopted
by the Board. If the Combination occurs, this Plan shall terminate two years
after the closing date of the Combination.
6.2 Amendment. Except as provided in Section 6.1, the Plan shall not be
subject to amendment, change, substitution, deletion, revocation or termination
in any respect which adversely affects the rights of Participants.
6.3 Form of Amendment. The form of any amendment of the Plan shall be a
written instrument signed by a duly authorized officer of the Corporation,
certifying that the amendment has been approved by the Board.
ARTICLE VII
MISCELLANEOUS
7.1 Indemnification. If a Participant institutes any reasonable legal
action in seeking to obtain or enforce or is required to defend in any
reasonable legal action the validity or enforceability of, any right or benefit
provided by this Plan, the Corporation will pay for all actual and reasonable
legal fees and expenses incurred (as incurred) by such Participant, regardless
of the outcome of such action.
7.2 Employment Status. This Plan does not constitute a contract of
employment or impose on the Participant or the Corporation any obligation to
retain the Participant as an employee, to change the status of the Participant's
employment, or to change the Corporation's policies regarding the termination of
employment.
7.3 Claim Procedure. If a Participant makes a written request alleging a
right to receive benefits under this Plan or alleging a right to receive an
adjustment in benefits being paid under the Plan, the Corporation shall treat it
as a claim for benefit. All claims for benefit under the Plan shall be sent to
the Human Resources Department of the Corporation and must be received within 30
days after the Date of Termination. If the Corporation determines that any
individual who has claimed a right to receive benefits, or different benefits,
under the Plan is not entitled to receive all or any part of the benefits
claimed, it will inform the claimant in writing of its determination and the
reasons therefor in terms calculated to be understood by the claimant. The
notice will be sent within 90 days of the claim unless the Corporation
determines additional time, not exceeding 90 days, is needed. The notice shall
make specific reference to the pertinent Plan provisions on which the denial is
based, and describe any additional material or information, if any, necessary
for the claimant to perfect the claim and the reason any such addition material
or information is necessary. Such notice shall, in addition, inform the claimant
what procedure the claimant should follow to take advantage of the review
procedures set forth below in the event the claimant desires to contest the
denial of the claim. The claimant may within 90 days thereafter submit in
writing to the Corporation a notice that the claimant contests the denial of the
claim by the Corporation and desires a further review. The Corporation shall
within 60 days thereafter review the claim and authorize the claimant to appear
personally and review pertinent documents and submit issues and comments
relating to the claim to the persons responsible for making the determination on
behalf of the Corporation. The Corporation will render its final decision with
specific reasons therefore in writing and will transmit it to the claimant
within 60 days of the written request for review, unless the Corporation
determines additional time, not exceeding 60 days, is needed, and so notifies
the claimant. If the Corporation fails to respond to a claim filed in accordance
with the foregoing within 60 days or any such extended period, the Corporation
shall be deemed to have denied the claim.
7.4 Validity and Severability. The invalidity or unenforceability of any
provision of the Plan shall not affect the validity or enforceability of any
other provision of the Plan, which shall remain in full force and effect, and
any prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
7.5 Governing Law. The validity, interpretation, construction and
performance of the Plan shall in all respects be governed by the law of Ohio,
without reference to principles of conflicts of laws, except to the extent
pre-empted by federal law.
SCHEDULE 1
PARTICIPANTS IN THE AMERICAN ELECTRIC POWER SYSTEM
SENIOR EXECUTIVE SEVERANCE PLAN