-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QoKKTkZuRrt0O1zSSCN3wEnewCW7C7ZG5PZhqyr6nUoVvXv22tC/H43c0YO5C+Ey JX9UD72VXp7QkZnLeDi7Ig== 0000006879-96-000005.txt : 19960327 0000006879-96-000005.hdr.sgml : 19960327 ACCESSION NUMBER: 0000006879-96-000005 CONFORMED SUBMISSION TYPE: DEF 14C PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960326 SROS: NYSE SROS: PHLX FILER: COMPANY DATA: COMPANY CONFORMED NAME: APPALACHIAN POWER CO CENTRAL INDEX KEY: 0000006879 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 540124790 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DEF 14C SEC ACT: 1934 Act SEC FILE NUMBER: 001-03457 FILM NUMBER: 96538608 BUSINESS ADDRESS: STREET 1: 40 FRANKLIN RD SW CITY: ROANOKE STATE: VA ZIP: 24011 BUSINESS PHONE: 7039852300 MAIL ADDRESS: STREET 1: 1 RIVERSIDE PLAZA CITY: COLUMBUS STATE: OH ZIP: 43215 DEF 14C 1 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 APPALACHIAN POWER COMPANY (Name of Registrant As Specified in Charter) JOHN M. ADAMS, JR. (Name of Person(s) Filing the Information Statement) Payment of Filing Fee (Check the appropriate box): [X] $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14c-5(g). [ ] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11. 1) Title of each class of securities to which transaction applies:______________________________________________ 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): ______________________________________________________ 4) Proposed maximum aggregate value of transaction: ______________________________________________________ 5) Total fee paid: ______________________________________________________ [ ] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. 1) Amount Previously Paid:_______________________________ 2) Form, Schedule or Registration Statement No.:_________ 3) Filing Party:_________________________________________ 4) Date Filed:___________________________________________ APPALACHIAN POWER COMPANY 40 FRANKLIN ROAD, S.W. ROANOKE, VIRGINIA 24011 NOTICE OF ANNUAL MEETING OF STOCKHOLDERS TO THE STOCKHOLDERS OF APPALACHIAN POWER COMPANY: THE ANNUAL MEETING OF THE STOCKHOLDERS OF APPALACHIAN POWER COMPANY WILL BE HELD ON TUESDAY, APRIL 23, 1996, AT 11:00 A.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 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 CERTAIN ISSUES OF CUMULATIVE PREFERRED STOCK, NO PAR VALUE, AT THE CLOSE OF BUSINESS ON MARCH 8, 1996 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. JOHN F. DI LORENZO, JR., SECRETARY March 28, 1996 INFORMATION STATEMENT This information statement is being furnished in connection with the annual meeting of stockholders of Appalachian Power Company (the "Company"), to be held on Tuesday, April 23, 1996 at 11:00 a.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 8, 1996, the date for determining stockholders entitled to notice of and to vote at the meeting, there were 552,348 shares of Cumulative Preferred Stock and 13,499,500 shares of Common Stock outstanding. Each holder of Cumulative Preferred Stock (except holders of the 5.90%, 5.92%, 7.80% and 6.85% Cumulative Preferred Stock) 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 8, 1996 for the election of directors and on any other business which may come before the meeting. Holders of Cumulative Preferred Stock issued by the Company on or after June 1, 1977 are not entitled to notice of, or to vote at, the meeting. PRINCIPAL STOCKHOLDERS 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 96% of the combined voting power of the capital stock of the Company entitled to vote at the meeting. The Colonial Group, Colonial Management Associates, Inc. and John A. McNeice, Jr., One Financial Center, Boston, Massachusetts 02111, have reported that they jointly beneficially own 13,675 shares of the Company's 7.40% Cumulative Preferred Stock, which constitutes 5.5% of such series and 2.5% of the voting power of all Cumulative Preferred Stock. Other than such ownership, the 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 Cumulative Preferred Stock of the Company entitled to vote at the meeting. 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 qualify. 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, 1996, an account of their business experience and the names of certain publicly-held corporations of which they are also directors.
NAME AGE BUSINESS EXPERIENCE PETER J. DEMARIA 61 Vice president and controller of the Company, controller of AEP and executive vice president- administration and chief accounting officer of the Service Corporation. Joined the Service Corporation in 1959, became an assistant treasurer in 1969, assistant vice president in 1971, vice president in 1974, treasurer and senior vice president in 1978 and assumed his present position with the Service Corporation in 1984. Became treasurer of the Company in 1978 and assumed his present position in 1995. Has been a director of the Company since 1988 and a vice president since 1991. Became treasurer of AEP in 1978 and assumed his present position in 1995. A director of AEP and certain other AEP System companies. E. LINN DRAPER, JR. 54 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 VECTRA Technologies, Inc. HENRY W. FAYNE 49 Senior vice president-corporate planning and budgeting 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 and assumed his present position in 1995. A director of certain other AEP System companies. WILLIAM J. LHOTA 56 President and chief operating officer of the Company and executive vice president of the Service Corporation. Joined Ohio Power Company, a subsidiary of AEP, in 1965, was president of Columbus Southern Power Company, a subsidiary of AEP, from 1987 until 1989, when he became executive vice president- operations of the Service Corporation. Assumed his present position with the Service Corporation in 1993. Became a vice president of the Company in 1989 and assumed his present position in January, 1996. Has been a director of the Company since 1990. A director of certain other AEP System companies and Huntington Bancshares Incorporated. G. P. MALONEY 63 Vice president of the Company, vice president and secretary of AEP and executive vice president-chief financial officer of the Service Corporation. Joined the Service Corporation in 1955, became controller in 1965, vice president-finance in 1970, senior vice president-finance in 1974 and assumed his present position with the Service Corporation in 1991. Has been a vice president and director of the Company since 1970. Became a vice president of AEP in 1974 and secretary of AEP in 1994. A director of AEP and certain other AEP System companies. JAMES J. MARKOWSKY 51 Vice president of the Company and executive vice president-power generation of the Service Corporation. Joined the Service Corporation in 1971 as a senior engineer, became assistant vice president-mechanical engineering in 1984, senior vice president and chief engineer in 1988, executive vice president-engineering and construction in 1993 and assumed his present position in February, 1996. Became a director of the Company in 1993 and a vice president of the Company in 1995. A director of certain other AEP System companies. JOSEPH H. VIPPERMAN 55 Vice president of the Company and executive vice president-energy delivery of the Service Corporation. Joined the Company 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 and assumed his present position with the Service Corporation in January, 1996. Became a vice president of the Company in 1985, executive vice president in 1989, was president from 1990 until 1995 and assumed his present position in January, 1996. Has been a director since 1985.
Messrs. DeMaria, Draper, Lhota, Maloney, Markowsky and Vipperman are directors of Columbus Southern Power Company ("CSPCo"), Indiana Michigan Power Company ("I&M"), Kentucky Power Company ("Kentucky") and Ohio Power Company ("Ohio"), all of which are subsidiaries of AEP and have one or more classes of publicly held preferred stock or debt securities. Mr. Fayne is a director of CSPCo and Ohio. Messrs. DeMaria, Draper, Fayne, Lhota, Maloney, Markowsky and Vipperman are also directors of AEP Generating Company, another subsidiary of AEP. OTHER BUSINESS Management does not intend to bring any matters before the meeting other than the election of directors 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 1995, 1994 and 1993 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, 1995. SUMMARY COMPENSATION TABLE
LONG-TERM ANNUAL COMPENSATION COMPENSATION PAYOUTS All Other Salary Bonus LTIP PAYOUTS($)(1) Compensation NAME AND PRINCIPAL POSITION YEAR ($) ($)(1) ($)(2) E. LINN DRAPER, JR. - Chairman of the board 1995 685,000 236,325 334,851 30,790 and chief executive officer of the Company; 1994 620,000 209,436 137,362 29,385 chairman of the board, president and chief 1993 538,333 148,742 18,180 executive officer of AEP and the Service Corporation; chairman of the board and chief executive officer of other AEP System companies PETER J. DEMARIA - Vice president, controller 1995 330,000 113,850 143,829 20,050 and director of the Company; controller and 1994 305,000 103,029 59,032 18,750 director of AEP; executive vice president- 1993 280,000 77,364 17,811 administration and chief accounting officer and director of the Service Corporation; vice president, controller and director of other AEP System companies G. P. MALONEY - Vice president and director of 1995 330,000 113,850 141,582 20,060 the Company; vice president, secretary and 1994 300,000 101,340 58,094 19,745 director of AEP; executive vice president- 1993 269,000 74,325 18,000 chief financial officer and director of the Service Corporation; vice president and director of other AEP System companies WILLIAM J. LHOTA - President, chief operating 1995 300,000 103,500 132,592 19,140 officer and director of the Company; 1994 280,000 94,584 54,409 19,185 executive vice president and director of the 1993 249,000 68,799 17,160 Service Corporation; president, chief operating officer and director of other AEP System companies JAMES J. MARKOWSKY - Vice president and 1995 285,000 98,325 126,599 17,515 director of the Company; executive vice 1994 267,000 90,193 51,930 14,755 president-power generation and director of 1993 247,000 65,259 11,165 the Service Corporation; vice president and director of other AEP System companies
___________ (1) Amounts in the "Bonus" column reflect payments under the Management Incentive Compensation Plan for performance measured for each of the years ended December 31, 1993, 1994 and 1995. Payments are made in March of the subsequent year. Amounts for 1995 are estimates but should not change significantly. Amounts in the "Long-Term Compensation" column reflect performance share units earned under the Performance Share Incentive Plan (which became effective January 1, 1994) for the one-year and two-year transition performance periods ending December 31, 1994 and 1995, respectively. For 1995, their value was calculated by multiplying the $40.50 closing price of AEP's Common Stock as reported on the New York Stock Exchange on December 29, 1995, the last trading day of fiscal year 1995, by the number of units earned. See below under "Long-Term Incentive Plans - Awards in 1995" and page 10 for additional information. (2) For 1995, includes (i) employer matching contributions under the AEP System Employees Savings Plan: $4,500 for each of the named executive officers; (ii) employer matching contributions under the AEP System Supplemental Savings Plan (which became effective January 1, 1994), a non-qualified plan designed to supplement the AEP Savings Plan: Dr. Draper, $16,050; Mr. DeMaria, $5,400; Mr. Maloney, $5,400; Mr. Lhota, $4,500; and Dr. Markowsky, $4,050; and (iii) subsidiary companies director fees: Dr. Draper, $10,240; Mr. DeMaria, $10,150; Mr. Maloney, $10,160; Mr. Lhota, $10,140; and Dr. Markowsky, $8,965. LONG-TERM INCENTIVE PLANS - AWARDS IN 1995 Each of the awards set forth below constitutes a grant of performance share units, which represent units equivalent to shares of AEP Common Stock, pursuant to AEP's Performance Share 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 units were granted in the form of shares of AEP Common Stock are not included in the table. The ability to earn performance share units is tied to achieving specified levels of total shareowner return ("TSR") relative to the S&P Electric Utility Index. Notwithstanding AEP's TSR ranking, no performance share units are earned unless AEP shareowners realize a positive TSR over the relevant three-year performance period. The Human Resources Committee may, at its discretion, reduce the number of performance share units otherwise earned. In accordance with the performance goals established for the periods set forth below, the threshold, target and maximum awards are equal to 25%, 100% and 200%, respectively, of the performance share units held. No payment will be made for performance below the threshold. Payments of earned awards are deferred in the form of restricted stock units (equivalent to shares of AEP Common Stock) until the officer has met the equivalent stock ownership target discussed in the Human Resources Committee Report. 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 AEP Common Stock.
Performance Number of Period Until Estimated Future Payouts of Performance Maturation Performance Share Units Under NAME SHARE UNITS OR PAYOUT NON-STOCK PRICE-BASED PLAN Threshold Target Maximum (#) (#) (#) E. L. Draper, Jr. 8,302 1995-1997 2,075 8,302 16,604 P. J. DeMaria 3,499 1995-1997 875 3,499 6,998 G. P. Maloney 3,499 1995-1997 875 3,499 6,998 W. J. Lhota 3,181 1995-1997 795 3,181 6,362 J. J. Markowsky 3,022 1995-1997 755 3,022 6,044
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), including the executive officers of the Company. The Retirement Plan is a noncontributory defined benefit plan. The following table shows the approximate annual annuities under the Retirement Plan that would be payable to employees in certain higher salary classifications, 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 45 $ 300,000 $ 69,930 $ 93,240 $116,550 $139,860 $163,170 $183,120 $203,070 400,000 93,930 125,240 156,550 187,860 219,170 245,770 272,370 500,000 117,930 157,240 196,550 235,860 275,170 308,420 341,670 700,000 165,930 221,240 276,550 331,860 387,170 433,720 480,270 900,000 213,930 285,240 356,550 427,860 499,170 559,020 618,870 1,100,000 261,930 349,240 436,550 523,860 611,170 684,320 757,470
The amounts shown in the table are the straight life annuities payable under the Retirement Plan 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 retirement between ages 60 and 62 and further reduced 6% per year in the case of retirement between ages 55 and 60. If an employee retires after age 62, there is no reduction in the retirement annuity. AEP maintains a supplemental retirement plan which provides for the payment of benefits that are not payable under the Retirement Plan due primarily to limitations imposed by Federal tax law on benefits paid by qualified plans. The table includes supplemental retirement benefits. Compensation upon which retirement benefits 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 Management 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. As of December 31, 1995, the number of full years of service applicable for retirement benefit calculation purposes for such officers were as follows: Dr. Draper, three years; Mr. DeMaria, 36 years; Mr. Maloney, 40 years; Mr. Lhota, 31 years; and Dr. Markowsky, 24 years. Dr. Draper's employment agreement described below provides him with a supplemental retirement annuity that credits him with 24 years of service in addition to his years of service credited under the Retirement Plan less his actual pension entitlement under the Retirement Plan and any pension entitlement from the Gulf States Utilities Company Trusteed Retirement Plan, a plan sponsored by his prior employer. AEP will pay supplemental retirement benefits to 19 AEP System employees (including Messrs. DeMaria, Maloney and Lhota and Dr. Markowsky) whose pensions may be adversely affected by amendments to the Retirement Plan made as a result of the Tax Reform Act of 1986. Such payments, if any, will be equal to any reduction occurring because of such amendments. Assuming retirement in 1996 of the executive officers named in the Summary Compensation Table, only Mr. Maloney would be affected and his annual supplemental benefit would be $972. 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% or 15% annually (depending on the terms of the program offered), 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 1986 Program Annual Amount of Annual Amount of Annual Supplemental Annual Supplemental Amount Retirement Amount Retirement Deferred Payment Deferred Payment NAME (4-YEAR PERIOD) (15-YEAR PERIOD) (4-YEAR PERIOD) (15-YEAR PERIOD) P. J. DeMaria $10,000 $52,000 $13,000 $53,300 G. P. Maloney 15,000 67,500 16,000 56,400
EMPLOYMENT AGREEMENT Dr. Draper has a contract with AEP and the Service Corporation which provides for his employment for an initial term from no later than March 15, 1992 until March 15, 1997. Dr. Draper commenced his employment with AEP and the Service Corporation on March 1, 1992. AEP or the Service Corporation may terminate the contract at any time and, if this is done for reasons other than cause and other than as a result of Dr. Draper's death or permanent disability, the Service Corporation must pay Dr. Draper's then base salary through March 15, 1997, less any amounts received by Dr. Draper from other employment. AEP BOARD HUMAN RESOURCES COMMITTEE REPORT ON EXECUTIVE COMPENSATION The Human Resources Committee of the AEP 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 a $16 billion, multi-state electric utility during challenging times and with addressing many difficult and complex issues. AEP's executive compensation program is designed to enhance shareholder value, to support the implementation of AEP's business strategy and to improve both corporate and personal performance. The Committee believes that compensation must be competitive in order to attract, retain, reward and motivate the highly qualified individuals needed to manage AEP to meet corporate objectives and that compensation should be closely tied to performance in order to provide incentives that will maximize shareholder value. AEP's Management Incentive Compensation Plan and Performance Share Incentive Plan, both described below, reflect the intention of the Committee to place a significant portion of the total compensation of senior officers at risk similar to the risk experienced by other AEP shareholders. The Committee also has taken into account management's ability to respond to the impact of increased competition and other significant changes in the rapidly evolving electric utility industry. It is the Committee's opinion that, in this ever-changing environment, Dr. Draper and the senior management team continue to develop effectively and implement strategies to position AEP for the future. AEP's recent and continuing restructuring and organizational realignment and its proposal for the industry's transition to retail competition are two major steps. Some of the benefits of these efforts to AEP cannot, of course, be quantifiably measured but the Committee believes these efforts are vital to AEP's continuing success. INTERNAL REVENUE CODE SECTION 162(M). The Committee has considered the impact of Section 162(m) of the Internal Revenue Code, which provides a limit on the deductibility of compensation for certain executive officers in excess of $1,000,000 per year. Award payments under the Performance Share Incentive Plan have been structured to be exempt from the deduction limit because they are made pursuant to a shareholder-approved performance-driven plan. No named officer in the Summary Compensation Table had taxable compensation for 1995 in excess of the deduction limit. The Committee intends to continue to evaluate the impact of this Code provision. STOCK OWNERSHIP GUIDELINES. The AEP Board of Directors, upon the Committee's recommendation, underscored the importance of linking executive and shareholder interests by adopting in December 1994 stock ownership guidelines for senior management participants in the Performance Share Incentive Plan. 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 target for the CEO is 45,000 shares, which was equivalent to approximately three times his then annual base salary. The targets for the other four officers named in the Summary Compensation Table are 15,000 shares each, equivalent to approximately 1.5 times their then annual base salary. Each officer is expected to achieve the ownership target within a period of five years commencing on January 1, 1995. Common Stock equivalents earned through the Management Incentive Compensation Plan and the Performance Share Incentive Plan are included in determining compliance with the ownership targets. Substantial progress has been made in complying with the stock ownership guidelines and, as of January 1, 1996, the executive officers named in the Summary Compensation Table had achieved their respective ownership targets to the following extent (see the table on page 11 for actual ownership amounts): Dr. Draper, 40%; Mr. DeMaria, 69%; Mr. Maloney, 70%; Mr. Lhota, 120%; and Dr. Markowsky, 75%. COMPONENTS OF EXECUTIVE COMPENSATION BASE SALARY. When reviewing salaries, the Committee considers pay practices used by other electric utilities and by 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 salaries to the salaries of other AEP managers and employees. For compensation comparison purposes, the Human Resources Committee uses the electric utility companies in the S&P Electric Utility Index. In recognition of AEP's relatively large size and operational complexity, executive officer salary levels are targeted to the third quartile (between the 50th and 75th percentiles) of the range of compensation paid by the other electric utilities in this compensation peer group. Base salary levels in 1995 for the five most highly compensated executive officers of AEP named in the Summary Compensation Table were within this third quartile. In establishing salary levels against that range, the Human Resources Committee considers the competitiveness of AEP's entire compensation package. Salaries are reviewed and adjusted 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 of AEP, to evaluate his performance and compensation and reports on that evaluation to the outside directors of the AEP Board. These directors then act on the Committee's recommendation. ANNUAL INCENTIVE. A variable, performance-based portion of the executive officers' total compensation is paid through the Management Incentive Compensation Plan ("MICP"), which is included in the "Bonus" column in the Summary Compensation Table. The MICP was established (effective January 1, 1990) to motivate and reward superior management performance in serving customer needs and creating shareholder value. Each participant is assigned an annual target award expressed as a percentage of annual salary. The target award is 30% for the executive officers named in the compensation table. Actual awards can vary from 0-150% of the target award based on performance. The MICP awards for the executive officers named in the compensation table are based entirely on preestablished AEP corporate performance criteria specified in the MICP, which include return on stockholder equity (weighted at 25%) and total investor return reflecting changes in stock price and payment of dividends (weighted at 25%), both measured relative to the performance of utilities in the S&P Electric Utility Index, and the extent to which the average price of power sold to retail customers (weighted at 50%) is lower as compared with other utilities in the states which AEP serves. For 1995, AEP corporate performance target was achieved to the extent of 115%. This percentage is an estimate but should not change significantly. To more closely align the financial interests of the executive officers with AEP's shareholders, 20% of an MICP award is deferred for three years and treated as if invested in Common Stock of AEP, although no stock is actually purchased. Dividend equivalents are credited during the three-year period. Effective for 1996 and subsequent years, MICP participants may elect to defer further the 20%, and to defer all or any part of the remaining 80% of an award, for payment up to five years past termination of employment, with the same treatment. LONG-TERM INCENTIVE. The Performance Share Incentive Plan (the "Plan") provides longer-term, performance-driven, equity incentive award opportunities directly related to shareholder value. The AEP Board of Directors approved the Plan in December 1993 and, at the 1994 annual meeting, the AEP shareholders also approved it. The Plan grants performance share units annually which are paid based on AEP's subsequent three-year total shareholder returns measured relative to the S&P peer utilities. In 1995, the Committee granted Dr. Draper and the other executive officers named in the Summary Compensation Table performance share units equivalent to 40% and 35%, respectively, of their base salaries. The number of performance share units granted has been determined after an evaluation of long-term incentive opportunities provided by the S&P peer companies, again targeting the third quartile of competitive practice. However, the awards which will ultimately be paid to participants under the Plan for a performance period are not determinable in advance and, in fact, could be zero. The Plan ended a two-year transition performance period at year end 1995. AEP's total shareholder return for 1993-1995 ranked sixth relative to the S&P 24 peer utilities and, as a result, 160% of the performance share units granted (and dividend credits) were earned. The associated award payments are listed in the Summary Compensation Table. Similar to that portion of the MICP awards which are deferred, payments of earned awards under the Plan, commencing with the performance period ending in 1995, are also deferred in the form of restricted stock units (equivalent to shares of AEP Common Stock). Such Plan deferrals continue until termination of employment or, if so elected by the recipient, up to 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 or to receive further earned Plan awards in cash and/or Common Stock. Dividend equivalents are credited as though reinvested in additional restricted stock units. The Plan is further described above. HUMAN RESOURCES COMMITTEE MEMBERS Toy F. Reid, Chairman Arthur G. Hansen Donald G. Smith Morris Tanenbaum SHARE OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS The following table sets forth the beneficial ownership of AEP Common Stock as of January 1, 1996 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 P. J. DeMaria 7,356(b)(c)(d)(e)(f) 5,391 12,747 E. L. Draper, Jr. 6,119(c)(e) 11,984 18,103 H. W. Fayne 3,653(c)(e) 2,405 6,058 W. J. Lhota 13,064(c)(d)(e) 4,944 18,008 G. P. Maloney 5,227(c)(d)(e) 5,306 10,533 J. J. Markowsky 6,631(c)(f) 4,714 11,345 J. H. Vipperman 5,092(c)(e) 3,365 8,457 All directors and executive officers as a group (7 persons) 132,373(g) 38,109 170,482
___________ (a) This column includes amounts deferred in stock units and held under the Management Incentive Compensation Plan and Performance Share Incentive Plan. (b) Mr. DeMaria owns 100 shares of Cumulative Preferred Shares 9.50% Series, $100 par value, of Columbus Southern Power Company. (c) Includes shares and share equivalents held in the following plans in the amounts listed below:
AEP EMPLOYEE STOCK AEP PERFORMANCE OWNERSHIP PLAN SHARE INCENTIVE PLAN AEP EMPLOYEES SAVINGS PLAN (SHARES) (SHARES) (SHARE EQUIVALENTS) Mr. DeMaria 83 944 2,705 Dr. Draper -- 2,196 1,958 Mr. Fayne 63 398 3,162 Mr. Lhota 60 812 10,824 Mr. Maloney 85 867 2,775 Dr. Markowsky 66 830 5,718 Mr. Vipperman 80 564 4,391 All Directors and Executive Officers 437 6,611 31,533
With respect to the shares and share equivalents held in these plans, such persons have sole voting power, but the investment/disposition power is subject to the terms of such plans. (d) Does not include, for Messrs. DeMaria, Lhota and Maloney, 85,231 shares in the American Electric Power System Educational Trust Fund over which Messrs. DeMaria, Lhota and Maloney 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. (e) Includes the following numbers of shares held in joint tenancy with a family member: Mr. DeMaria, 1,232; Dr. Draper, 1,965; Mr. Fayne, 30; Mr. Lhota, 1,368; Mr. Maloney, 1,500 and Mr. Vipperman, 57. (f) Includes the following numbers of shares held by family members over which beneficial ownership is disclaimed: Mr. DeMaria, 2,392 and Dr. Markowsky, 17. (g) Represents less than 1% of the total number of shares outstanding. ___________ Section 16(a) of the Securities Exchange Act of 1934 requires the Company's executive officers and directors to file initial reports of ownership and reports of changes in ownership of Preferred Stock of the Company with the Securities and Exchange Commission. Executive officers and directors are required by SEC regulations to furnish the Company with copies of all reports they file. Based solely on a review of the copies of such reports furnished to the Company and written representations from the Company's executive officers and directors during the fiscal year ended December 31, 1995, the Company notes that Henry W. Fayne, a director of the Company, did not timely file a Form 3 when he became a director, although he filed it shortly thereafter. 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 1995, the Board held twelve regular meetings and no special meetings. Directors of the Company receive a fee of $100 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 1996. 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. JOHN F. DI LORENZO, JR., SECRETARY March 28, 1996 -----END PRIVACY-ENHANCED MESSAGE-----