Exhibit 10.5
ALLEGHENY ENERGY, INC.
1998 LONG-TERM INCENTIVE PLAN
Effective May 14, 1998
Amended and Restated January 1, 2008
ARTICLE I
PURPOSE AND ADOPTION OF THE PLAN
Sec. 1.01 Purpose . The
purpose of the Allegheny Energy, Inc. 1998 Long-Term Incentive Plan
(as the same may be amended from time to time, the
“Plan”) is to assist Allegheny Energy, Inc., a Maryland
corporation (the “Company”), and its Subsidiaries (as
defined below) in attracting and retaining highly competent key
employees and directors and to act as an incentive in motivating
selected key employees and directors of the Company and its
Subsidiaries (as defined below) to achieve long-term corporate
objectives.
Sec. 1.02 Adoption and Term .
The Plan has been approved by the Board of Directors of the Company
(the “Board”) to be effective as of the date of
approval of the Plan by the shareholders of the Company (the
“Effective Date”). The Plan shall remain in effect
until the tenth anniversary of the Effective Date; provided,
however, that the provisions of Articles VII and VIII with respect
to performance-based awards to “covered employees”
under Section 162(m) of the Code (as defined below) shall expire as
of the fifth anniversary of the Effective Date. This Plan is hereby
amended and restated effective as of January 1, 2008 to update
it for changes in applicable law and to make certain other
clarifying changes.
ARTICLE II
DEFINITIONS
For the purposes of this Plan,
capitalized terms shall have the following meanings:
Sec. 2.01 “Acquiring
Corporation” shall have the meaning given to such term in
Section 9.08(b).
Sec. 2.02 “Award” means
any grant to a Participant of one or a combination of Non-Qualified
Stock Options or Incentive Stock Options described in
Article VI, Restricted Shares described in Article VII
and Performance Awards described in Article VIII.
Sec. 2.03 “Award
Agreement” means a written agreement between the Company and
a Participant or a written notice from the Company to a Participant
specifically setting forth the terms and conditions of an Award
granted under the Plan.
Sec. 2.04 “Award Period”
means, with respect to an Award, the period of time set forth in
the Award Agreement during which specified target performance goals
must be achieved or other conditions set forth in the Award
Agreement must be satisfied.
Sec. 2.05 “Beneficiary”
means an individual, trust or estate who or which, by a written
designation of the Participant filed with the Company or by
operation of law, succeeds to the rights and obligations of the
Participant under the Plan and an Award Agreement upon the
Participant’s death.
Sec. 2.06 “Board” shall
have the meaning given to such term in Section 1.02.
Sec. 2.07 “Change in
Control” shall be deemed to have occurred at such time as
(a) any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Exchange Act) is or
becomes the “beneficial owner” (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of
25% or more of the combined voting power of the Company Voting
Securities; or (b) during any period of not more than two
years, individuals who constitute the Board as of the beginning of
the period and any new director (other than a director designated
by a person who has entered into an agreement with the Company to
effect a transaction described in clause (a) or (c) of
this sentence) whose election by the Board or nomination for
election by the Company’s shareholders was approved by a vote
of at least two-thirds (2/3) of the directors then still in office
who either were directors at such time or whose election or
nomination for election was previously so approved, cease for any
reason to constitute a majority thereof; or (c) the
shareholders of the Company approve a merger or consolidation of
the Company with any other corporation, other than a merger or
consolidation which would result in the Company Voting Securities
outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity) at least 50% of the combined
voting power of the Company Voting Securities or the voting
securities of such surviving entity outstanding immediately after
such merger or consolidation, or the shareholders of the Company
approve a plan of complete liquidation of the Company or any
agreement for the sale or disposition by the Company of all or
substantially all of the Company’s assets.
Sec. 2.08 “Code” means
the Internal Revenue Code of 1986, as amended. References to a
section of the Code include that section and any comparable section
or sections of any future legislation that amends, supplements or
supersedes said section.
Sec. 2.09 “Committee”
means the committee established in accordance with
Section 3.01.
Sec. 2.10 “Company” shall
have the meaning given to such term in Section 1.01.
Sec. 2.11 “Common Stock”
means Common Stock of the Company.
Sec. 2.12 “Company Voting
Securities” means the combined voting power of all
outstanding securities of the Company entitled to vote generally in
the election of directors of the Company.
Sec. 2.13 “Date of Grant”
means the date as of which the Committee grants an Award. If the
Committee contemplates an immediate grant to a Participant, the
Date of Grant shall be the date of the Committee’s action. If
the Committee contemplates a date on which the grant is to be made
other than the date of the Committee’s action, the Date of
Grant shall be the date so contemplated and set forth in or
determinable from the records of action of the Committee; provided,
however, that the Date of Grant shall not precede the date of the
Committee’s action.
Sec. 2.14 “Dividend Equivalent
Account” shall have the meaning given to such term in Section
6.03(a).
Sec. 2.15 “Effective
Date” shall have the meaning given to such term in
Section 1.02.
Sec. 2.16 “Exchange Act”
means the Securities Exchange Act of 1934, as amended.
Sec. 2.17 “Exercise
Price” shall have the meaning given to such term in
Section 6.01(b).
Sec. 2.18 “Fair Market
Value” means, as of any applicable date, the closing price
per share of the Common Stock as quoted in the NYSE-Composite
Transactions listing in The Wall Street Journal (or such other
reliable publication as the Committee, in its discretion, may
determine to rely upon) for the date as of which Fair Market Value
is to be determined. If there are no sales on such date, then Fair
Market Value shall be the closing price per share of the Common
Stock as so quoted on the nearest date before the date as of which
Fair Market Value is to be determined on which there are sales. If
the Common Stock is not listed on the New York Stock Exchange on
the date as of which Fair Market Value is to be determined, the
Committee shall in good faith determine the Fair Market Value of
the Common Stock on such date. Fair Market Value shall be
determined without regard to any restriction other than a
restriction which, by its terms, will never lapse. Notwithstanding
the foregoing, in the case of Options granted in connection with
the assumption by the Company of stock options of acquired
companies, as described in Section 9.08(c) the Committee may
determine that the term “Fair Market Value” shall have
the same meaning as is given to such term under the provisions of
such assumed stock option. All determinations regarding the Fair
Market Value of the Company’s Common Stock shall be
consistent with the requirements of Section 409A of the Code and
its corresponding regulations and related guidance.
Sec. 2.19 “Incentive Stock
Option” means a stock option within the meaning of
Section 422 of the Code.
Sec. 2.20 “Merger” means
any merger, reorganization, consolidation, share exchange, transfer
of assets or other transaction having similar effect involving the
Company.
Sec. 2.21 “Non-Qualified Stock
Option” means a stock option which is not an Incentive Stock
Option.
Sec. 2.22 “Options” means
all Non-Qualified Stock Options and Incentive Stock Options granted
at any time under the Plan.
Sec. 2.23 “Original
Option” shall have the meaning given to such term in
Section 6.04.
Sec. 2.24 “Participant”
means a person designated to receive an Award under the Plan in
accordance with Section 5.01.
Sec. 2.25 “Performance
Awards” means Awards granted in accordance with
Article VIII.
Sec. 2.26 “Plan” shall
have the meaning given to such term in Section 1.01.
Sec. 2.27 “Reload Option”
shall have the meaning given to such term in
Section 6.04.
Sec. 2.28 “Restricted
Shares” means Common Stock subject to restrictions imposed in
connection with Awards granted under Article VII.
Sec. 2.29 “Retirement”
means early or normal retirement under a pension plan or
arrangement of the Company or one of its Subsidiaries in which the
Participant participates.
Sec. 2.30 “Subsidiary”
means a subsidiary of the Company within the meaning of Section
424(f) of the Code.
Sec. 2.31 “Termination of
Employment” means the voluntary or involuntary termination of
a Participant’s employment with the Company or a Subsidiary
for any reason, including death, disability, retirement or as the
result of the divestiture of the Participant’s employer or
any similar transaction in which the Participant’s employer
ceases to be the Company or one of its Subsidiaries. A leave of
absence approved in accordance with Company policy shall not be
deemed a Termination of Employment. Whether entering military or
other government service shall constitute Termination of
Employment, or whether a Termination of Employment shall occur as a
result of disability, shall be determined in each case by the
Committee in its sole discretion. In the case of a director who is
not an employee of the Company or a Subsidiary, Termination of
Employment shall mean voluntary or involuntary cessation of Board
service for any reason. Notwithstanding the foregoing, Termination
of Employment for purposes of determining whether an Award that is
“deferred compensation” and subject to
Section 409A of the Code is payable from the Plan means a
“separation from service” as determined under
Section 409A of the Code and its corresponding regulations and
related guidance.
ARTICLE III
ADMINISTRATION
Sec. 3.01 Committee . The Plan
shall be administered by a committee of the Board (the
“Committee”) comprised of at least two directors of the
Company. The Committee shall have exclusive and final authority in
each determination, interpretation or other action affecting the
Plan and its Participants. The Committee shall have the sole
discretionary authority to interpret the Plan, to establish and
modify administrative rules for the Plan, to impose such conditions
and restrictions on Awards as it determines appropriate, and to
take such steps in connection with the Plan and Awards granted
hereunder as it may deem necessary or advisable. The Committee may,
subject to compliance with applicable legal requirements, delegate
to any designated executive officer of the Company the power to
determine the employees (other than himself or herself or any
employee to whom such designated executive officer reports) to
receive Awards under the Plan and the types and amounts of such
Awards, subject in each case to the terms and conditions of the
Plan. In addition, the Board may exercise any of the authority
conferred upon the Committee hereunder. In the event of any such
delegation of authority or exercise of authority by the Board,
references in the Plan to the Committee shall be deemed to refer to
the delegate of the Committee or the Board, as the case may
be.
ARTICLE IV
SHARES
Sec. 4.01 Number of Shares
Issuable . The total number of shares initially authorized to
be issued under the Plan shall be 10,000,000 shares of Common
Stock. The number of shares available for issuance under the Plan
shall be subject to adjustment in accordance with Section 9.08. The
shares to be offered under the Plan shall be authorized and
unissued shares of Common Stock, or issued shares of Common Stock
which will have been reacquired by the Company.
Sec. 4.02 Shares Subject to
Terminated Awards . Shares of Common Stock covered by any
unexercised portions of terminated Options (including canceled
Options) granted under Article VI, shares of Common Stock
forfeited as provided in Section 7.02(a) and shares of Common
Stock subject to any Award that are otherwise surrendered by a
Participant or terminated may be subject to new Awards under the
Plan. If any shares of Common Stock are withheld from those
otherwise issuable or are tendered to the Company, by attestation
or otherwise, in connection with the exercise of an Option, only
the net number of shares of Common Stock issued as a result of such
exercise shall be deemed delivered for purposes of determining the
maximum number of shares available for delivery under the
Plan.
ARTICLE V
PARTICIPATION
Sec. 5.01 Eligible
Participants . Participants in the Plan shall be such key
employees and directors of the Company and its Subsidiaries as the
Committee, in its sole discretion, may designate from time to time.
The Committee’s designation of a Participant in any year
shall not require the Committee to designate such person to receive
Awards in any other year. The designation of a Participant to
receive an Award under one portion of the Plan does not require the
Committee to include such Participant under other portions of the
Plan. The Committee shall consider such factors as it deems
pertinent in selecting Participants and in determining the types
and amounts of their respective Awards. Subject to adjustment in
accordance with Section 9.08, during any calendar year no
Participant shall be granted Awards in respect of more than 600,000
shares of Common Stock (whether through grants of Options or other
Awards of Common Stock or rights with respect thereto); provided,
however, that if it is the Committee’s intention as of the
Date of Grant of an Award, as evidenced by the applicable Award
Agreement, that such Award shall be earned by the Participant over
a period of more than one calendar year, then for purposes of
applying the foregoing per calendar year share limitation, the
shares of Common Stock subject to such Award shall be allocated to
the first calendar year in which such shares may be earned
(determined without regard to possible vesting as a result of a
Change in Control or pursuant to any provision of this Plan
authorizing the Committee to accelerate the vesting of an
Award).
ARTICLE VI
STOCK OPTIONS
Sec. 6.01 Option Awards
.
(a)
Grant of Options . The Committee may grant, to such
Participants as the Committee may select, Options entitling the
Participants to purchase shares of Common Stock from the Company in
such numbers, at such prices, and on such terms and subject to such
conditions, not inconsistent with the terms of the Plan, as may be
established by the Committee. The terms of any Option granted under
the Plan shall be set forth in an Award Agreement.
(b)
Exercise Price of Options . The exercise price of each share
of Common Stock which may be purchased upon exercise of any Option
granted under the Plan (the “Exercise Price”) shall be
determined by the Committee; provided, however, that, except in the
case of any substituted Options described in Section 9.08(c),
the Exercise Price shall in all cases be equal to or greater than
the Fair Market Value on the Date of Grant.
(c)
Designation of Options . Except as otherwise expressly
provided in the Plan, the Committee may designate, at the time of
the grant of an Option, such Option as an Incentive Stock Option or
a Non-Qualified Stock Option; provided, however, that an Option may
be designated as an Incentive Stock Option only if the applicable
Participant is an employee of the Company or a Subsidiary on the
Date of Grant.
(d)
Special Incentive Stock Option Rules . No Participant may be
granted Incentive Stock Options under the Plan (or any other plans
of the Company and its Subsidiaries) that would result in Incentive
Stock Options to purchase shares of Common Stock with an aggregate
Fair Market Value (measured on the Date of Grant) of more than
$100,000 first becoming exercisable by such Participant in any one
calendar year. Notwithstanding any other provision of the Plan to
the contrary, no Incentive Stock Option shall be granted to any
person who, at the time the Option is granted, owns stock
(including stock owned by application of the constructive ownership
rules in Section 424(d) of the Code) possessing more than 10% of
the total combined voting power of all classes of stock of the
Company or any Subsidiary, unless at the time the Incentive Stock
Option is granted the Exercise Price is at least 110% of the Fair
Market Value on the Date of Grant of the Common Stock subject to
the Incentive Stock Option and the Incentive Stock Option by its
terms is not exercisable for more than five (5) years from the
Date of Grant.
(e)
Rights as a Shareholder . A Participant or a transferee of
an Option pursuant to Section 9.04 shall have no rights as a
shareholder with respect to the shares of Common Stock covered by
an Option until that Participant or transferee shall have become
the holder of record of any such shares, and, except to the extent
that Dividend Equivalent Accounts are granted in accordance with
Section 6.03, no adjustment shall be made with respect to any
such shares of Common Stock for dividends in cash or other property
or distributions of other rights on the Common Stock for which the
record date is prior to the date on which that Participant or
transferee shall have become the holder of record of any shares
covered by such Option; provided, however, that Participants are
entitled to the adjustments set forth in section 9.08.
Sec. 6.02 Terms of Stock
Options.
(a)
Conditions on Exercise . An Award Agreement with respect to
Options may contain such waiting periods, exercise dates and
restrictions on exercise (including, but not limited to, periodic
installments) as may be determined by the Committee at the time of
grant.
(b)
Duration of Options . Options shall terminate after the
first to occur of the following events:
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(i) |
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Expiration of the Option as provided in the related Award
Agreement; or |
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(ii) |
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Termination of the Award as provided in Section 6.02(e)
following the Participant’s Termination of Employment;
or |
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(iii) |
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Ten years from the Date of Grant. |
(c)
Acceleration of Exercise Time . The Committee, in its sole
discretion, shall have the right (but shall not in any case be
obligated), exercisable at any time after the Date of Grant, to
permit the exercise of any Option prior to the time such Option
would otherwise become exercisable under the terms of the related
Award Agreement.
(d)
Extension of Exercise Time . In addition to the extensions
permitted under Section 6.02(e) in the event of Termination of
Employment, the Committee, in its sole discretion, shall have the
right (but shall not in any case be obligated), exercisable on or
at any time after the Date of Grant, to permit the exercise of any
Option after its expiration date described in Section 6.02(e),
subject, however, to the limitations described in
Sections 6.02(b)(i) and (iii).
(e)
Exercise of Options Upon Termination of Employment .
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(i) |
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Termination . In the event of Termination of Employment
of a Participant other than by reason of death, disability or
Retirement, all Options which were not exercisable as of the date
of the Termination of Employment shall expire as of such date and
the right of the Participant to exercise any Options which were
exercisable as of the date of Termination of Employment shall
expire ninety (90) days after the date of such Termination of
Employment, unless the exercise period is extended by the Committee
in accordance with Section 6.02(d). In no event, however, may the
Option be exercised later than the date of expiration of the Option
determined pursuant to Section 6.02(b)(i) or (iii). |
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(ii) |
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Disability or Retirement . In the event of a
Participant’s Termination of Employment on or after
January 1, 2004 by reason of disability or Retirement, the
right of the Participant to exercise all Options which were not
exercisable as of the date of the Termination of Employment shall
expire as of such date and all Options which he or she was entitled
to exercise upon Termination of Employment shall expire three years
after the date of such Termination of Employment, unless the
exercise period is extended by the Committee in accordance with
Section 6.02(d). In the event of a Participant’s
Termination of Employment prior to January 1, 2004 by reason
of disability or Retirement, the right of the Participant to
exercise all Options which were not exercisable as of the date of
the Termination of Employment shall expire as of such date and all
Options which he or she was entitled to exercise upon Termination
of Employment shall expire one year after the date of such
Termination of Employment, unless the exercise period is extended
by the Committee in accordance with Section 6.02(d). In no event,
however, may any Option be exercised later than the date of
expiration of the Option determined pursuant to Section 6.02(b)(i)
or (iii). |
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(iii) |
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Death . In the event of the death of a Participant while
employed by the Company or a Subsidiary and prior to the expiration
of any Option |
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as provided pursuant to Section 6.02(e)(i) or
Section 6.02(d) above, all Options which were not exercisable
as of the date of death shall expire as of such date and to the
extent the right to exercise the Option was accrued as of the date
of death, the right of the Participant’s Beneficiary to
exercise the Option shall expire one year after the date of the
Participant’s death. In the event of the death of a
Participant which occurs within any additional period of time from
the date of the Participant’s Termination of Employment, for
Terminations of Employment which occur prior to January 1,
2004, and prior to the expiration of any Option as provided
pursuant to Section 6.02(e)(i) or (ii) or Section 6.02(d)
above, all Options which were not exercisable as of the date of
death shall expire as of such date and to the extent the right to
exercise the Option was accrued as of the date of such Termination
of Employment and had not expired during such additional period,
the right of the Participant’s Beneficiary to exercise the
Option shall expire one year after the date of the
Participant’s death (but in no event more than one year from
the date of the Participant’s Termination of Employment by
reason of disability or Retirement). In the event of the death of a
Participant which occurs within any additional period of time from
the date of the Participant’s Termination of Employment, for
Terminations of Employment which occur on or after January 1,
2004, and prior to the expiration of any Option as provided
pursuant to Section 6.02(e)(i) or (ii) or Section 6.02(d)
above, a |
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