Exhibit 10.3
ALLEGHENY POWER SYSTEM, INC.
RESTRICTED STOCK PLAN FOR OUTSIDE DIRECTORS
Amended and Restated as of January 1, 2008
1. Purpose. The purpose of this Restricted Stock Plan for Outside Directors (the
“Plan”) is to enable Allegheny Power System, Inc. (“APS”) and its controlled
subsidiaries (“Subsidiaries”) to attract and retain persons of outstanding
competence to serve on the Boards of Directors of APS and its Subsidiaries by
paying such persons a portion of their retainer fee in APS Common Stock pursuant
to the terms hereof. The Plan is hereby amended and restated effective
January 1, 2008 to update the Plan for certain changes in the applicable law and
to make certain other clarifying changes.
2. Definitions.
     (a) The term “Change in Control” shall be deemed to mean, and to occur at,
the time when either (i) any entity, person or group (other than APS, any
subsidiary, or any savings, pension or other benefit plan for the benefit of
employees of APS or its subsidiaries) which theretofore owned less than 20% of
Common Stock in a transaction or series of transactions that results in such
entity, person or group directly or indirectly owning beneficially 20% or more
of the outstanding Common Stock or (ii) the election or appointment, within a
twelve-month period, of persons to the APS Board of Directors who were not
directors of APS at the beginning of such twelve-month period, whose election or
appointment was not voted or approved in advance by a majority of those persons
who were directors at the beginning of such period, and which newly elected or
appointed directors shall constitute a majority of the APS Board of Directors.
     (b) The term “Outside Director” or “Participant” means a member of the
Boards of Directors of APS and its Subsidiaries who is not, at any time during
his service as a director, an employee (within the meaning of Section 3(6) of
the Employee Retirement Income Security Act of 1974) of APS or any of its
Subsidiaries.
     (c) The term “Subsidiary” means any corporation 50% or more of the
outstanding Common Stock of which is owned, directly or indirectly, by APS.
     (d) The term “Service” shall mean service as an Outside Director.
3. Eligibility. All who serve as Outside Directors of APS and any of its
Subsidiaries after calendar year 1994 shall be eligible to receive stock awards
hereunder.
4. Stock Awards.
     (a) A total of 25,000 shares of APS Common Stock shall be available for
awards under the Plan. Such shares shall be shares of APS Common Stock
previously unissued or previously issued and reacquired by APS. Any restricted
shares awarded under this Plan with respect to which the restrictions do not
lapse and which are forfeited

 

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as provided herein shall be transferred into the record name of APS and again be
available for other awards under the Plan.
     (b) Unless he or she chooses otherwise pursuant to Section 4(e), each
Outside Director shall receive an annual award of 200 shares of APS Common Stock
with respect to each calendar year or portion thereof during which he or she
serves as an Outside Director beginning with the calendar year 1995. Awards
shall be made in January of each year or as soon thereafter as all necessary
regulatory approvals have been received. However, for the calendar year in which
an Outside Director commences Service, the award of shares to such Outside
Director for such year shall be made in the month in which his or her Service
commences, if his or her Service commences after January 31 of such year. All
awards of shares made hereunder shall be subject to the restrictions set forth
in Section 5.
     (c) Subject to the provisions of Section 5, certificates representing
shares of APS Common Stock awarded hereunder shall be registered in the name of
the respective Participants. During the period of time such shares are subject
to the restrictions set forth in Section 5, such certificates shall be endorsed
with a legend to that effect, and shall be held by APS or an agent therefor. The
Participant shall, nevertheless, have all the other rights of a shareholder,
including the right to vote and the right to receive all cash dividends paid
with respect to such shares. Subject to the requirements of applicable law,
certificates representing such shares shall be delivered to the Participant
within 30 days after the lapse of the restrictions to which they are subject.
     (d) If as a result of a stock dividend, stock split, recapitalization (or
other adjustment in the stated capital of APS) or as the result of a merger,
consolidation, or other reorganization, the common shares of APS are increased,
reduced, or otherwise changed, the number of shares available and to be awarded
hereunder shall be appropriately adjusted, and if by virtue thereof a
Participant shall be entitled to new or additional or different shares, such
shares to which the Participant shall be entitled shall be subject to the terms,
conditions, and restrictions herein contained relating to the original shares.
In the event that warrants or rights are awarded with respect to shares awarded
hereunder, and the recipient exercises such rights or warrants, the shares or
securities issuable upon such exercise shall be likewise subject to the terms,
conditions, and restriction herein contained relating to the original shares.
     (e) (i) Each Outside Director may choose prior to the effective date of the
Plan or prior to his/her initial election as a Director and annually thereafter
to receive Alternate Shares in lieu of the annual award of shares subject to the
restrictions set forth in Section 5. If the Director chooses to receive
Alternate Shares, he/she shall receive certificates representing 200 shares of
APS Common Stock free of the restrictions set forth in Section 5(a) and (b) but
subject to the restriction set forth in Section 5(c).
          (ii) Any such choice will be effective only if made in a writing
delivered to the Secretary of APS prior to the effective date of the Plan or,
with respect to awards for years subsequent to 1995, prior to the date of the
APS stockholders meeting

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held prior to the calendar year of the award. An Outside Director elected other
than at an annual meeting who desires to choose not to receive shares restricted
by Section 5 shall do so in a writing delivered to the APS Secretary prior to
his/her election. Any choice so made shall continue in effect until the Outside
Director shall timely deliver to the Secretary a writing revoking the prior
choice.
          (iii) For the sake of clarity, no such elections shall be made or
permitted for periods after 1999.
5. Restrictions.
     (a) Shares are awarded to a Participant on the condition that he or she
serves as an Outside Director until:
          (i) the Participant’s death or disability; or
          (ii) the Participant’s failure to stand for re-election at the end of
the term during which the Participant reaches age 65; or
          (iii) the Participant’s resignation or failure to stand for
re-election prior to the end of the term during which the Participant reaches
age 65 with the consent of the Board, i.e., approval thereof by at least 80% of
the Directors voting thereon, with the affected Director abstaining; or
          (iv) the Participant’s failure to be re-elected after being duly
nominated.
     For purposes of this Plan, “disability” shall mean a Participant’s complete
and permanent inability, by reason of illness or accident, to perform his or her
duties as a member of the Board, as determined by the Administration Committee
based on medical evidence acceptable to it.
     Termination of Service of a Participant for any other reason, including,
without limitation, any involuntary termination effected by Board action, shall
result in forfeiture of all shares awarded. Notwithstanding the foregoing, upon
the occurrence of a Change in Control, the restrictions set forth in this
Section 5 to which any shares awarded to a Participant are then still subject
shall lapse, and termination of the Participant’s Service for any reason at any
time after the occurrence of such Change in Control shall not result in the
forfeiture of any such shares.
     Notwithstanding the foregoing provisions of this Section 5 and any other
provision of the Plan to the contrary, to the extent the payment of any award of
shares under the Plan constitutes the payment of “deferred compensation” that is
subject to Section 409A of the Internal Revenue Code of 1986, as amended (the
“Code”), a Participant shall only receive such award of shares under the Plan
upon the occurrence of an event set forth in Code Section 409A(2)(A) and only
upon a termination of Service

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that constitutes a “separation from service” as that term is defined in Code
Section 409A and its corresponding regulations and related guidance.
     (b) Shares awarded hereunder may not be sold, assigned, exchanged,
transferred, pledged, hypothecated, made subject to gift, or otherwise disposed
of (herein, “Transferred”) other than to APS pursuant to Section 4(a) during the
period commencing on the date of the award of such shares and ending on the date
of termination of the Outside Director’s Service; provided, however, that in no
event, may any shares awarded hereunder be Transferred for a period of six
months following the date of the award thereof, except in the case of the
recipient’s death or disability, other than to APS pursuant to Section 4(a)
hereof.
     (c) Each Participant shall represent and warrant to and agree with APS that
he or she (i) takes any shares awarded under the Plan for investment only and
not for purposes of sale or other disposition and will also take for investment
only and not for purposes of sale or other disposition any rights, warrants,
shares or securities which may be issued on account of ownership of such shares,
and (ii) will not sell or transfer any shares awarded or any shares received
upon exercise of any such rights or warrants except in accordance with (A) an
opinion of counsel for APS (or other counsel acceptable of APS) that such
shares, rights, warrants or other securities may be disposed of without
registration under the Securities Act of 1933, or (B) an applicable “no action”
letter issued by the Staff of the Securities and Exchange Commission.
6. Administration Committee. An Administration Committee (the “Committee”) shall
have full power and authority to construe and administer the Plan. Any action
taken under the provisions of the Plan by the Committee arising out of or in
connection with the administration, construction, or effect of the Plan or any
rules adopted thereunder shall, in each case, lie within the discretion of the
Committee and shall be conclusive and binding upon APS and upon all
Participants, and all persons claiming under or through any of them.
Notwithstanding the foregoing, any determination made by the Committee after the
occurrence of a Change in Control that denies in whole or in part any claim made
by any individual for benefits under the Plan shall be subject to judicial
review, under a “de novo”, rather than a deferential, standard. The Committee
shall have as members the Chief Executive Officer of APS and two officers of APS
or its Subsidiaries designated by the Chief Executive Officer. In the absence of
such designation, the other members of the Committee shall be, in order of
automatic designation, the Vice President Administration and the Secretary of
APS.
7. Successor Corporation. The obligations under this Plan shall be binding upon
any successor corporation or organization resulting from the merger,
consolidation or other reorganization of APS, or upon any successor corporation
or organization succeeding to substantially all of the assets and business of
APS. APS agrees that it will make appropriate provision for the preservation of
Participants’ rights under this Plan in any agreement or plan which it may enter
into or adopt to effect any such merger, consolidation, reorganization or
transfer of assets.

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8. Right to Continued Service. Neither this Plan nor any action taken hereunder
shall be construed as giving any employee any right to continued service as a
Director of APS.
9. No Liability of Committee Members. No member of the Committee shall be
personally liable by reason of any contract or other instrument executed by such
member or on his or her behalf in his or her capacity as a member of the
Committee nor for any mistake of judgment made in good faith, and APS shall
indemnify and hold harmless each member of the Committee, and each employee,
officer, director or trustee of APS or any of its Subsidiaries to whom any duty
or power relating to the administration or interpretation of this Plan may be
allocated or delegated, against any cost or expense (including counsel fees) or
liability (including any sum paid in settlement of a claim with the approval of
the Board of Directors) arising out of any act or omission to act in connection
with this Plan unless arising out of such person’s own fraud or bad faith.
10. Governing Law. This Plan shall be governed by and construed in accordance
with the laws of the state of incorporation of APS, without reference to the
principles of conflicts of law thereof.
11. Approval: Effective Date. The Plan is subject to the approval of the
Securities and Exchange Commission under the Public Utility Holding Company Act
of 1935. Upon receipt of such approval, the Plan shall be effective January 1,
1995.
12. Amendment and Termination. The Plan may be amended or terminated by the
Board of Directors of APS, provided that, if any such amendment requires
shareholder approval to meet the requirements of the then applicable rules under
Section 16(b) of the Securities Exchange Act of 1934, such amendment shall
require the approval of a majority of the holders of APS’s Common Stock present
and entitled to vote at a meeting of shareholders, and provided that such action
shall not adversely affect any Participant’s rights under the Plan with respect
to awards which were made prior to such action. Notwithstanding the foregoing,
Section 4(b) of the Plan may not be amended more often than once every six
months other than to comport with changes in the Internal Revenue Code or the
Employee Retirement Income Security Act, or the rules thereunder.
13. Compliance with Law. This Plan is intended to comply with applicable law.
Without limiting the foregoing, the Plan is intended to comply with the
applicable requirements of Code Section 409A, and shall be administered in
accordance with Code Section 409A and its corresponding regulations and related
guidance to the extent that Code Section 409A applies to the Plan.
Notwithstanding anything in the Plan to the contrary, distributions from the
Plan may only be made in a manner, and upon an event, permitted by Code
Section 409A and its corresponding regulations and related guidance. If any
payment or benefit cannot be provided or made at the time specified herein
without incurring penalties under Code Section 409A, then such benefit or
payment shall be provided in full at the earliest time thereafter when such
penalties will not be imposed. To the extent that any provision of the Plan
would cause a conflict with the applicable requirements of Code Section 409A, or
would cause the administration of the Plan to fail to satisfy the applicable
requirements of Code Section 409A, such provision shall be deemed null and void
to the extent permitted by applicable law.

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