SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 13, 1996
WEST PENN POWER COMPANY
(Exact name of registrant as specified in its charter)
Pennsylvania 1-255-2 13-5480882
(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification
incorporation) Number)
800 Cabin Hill Drive
Greensburg, Pennsylvania 15601
(Address of principal executive offices)
Registrant's telephone number,
including area code: (412) 837-3000
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Item 5. Other Events.
In March 1996, certain executive officers of West Penn Power
Company entered into change of control employment contracts with
Allegheny Power System, Inc.
On April 1, 1996, Champion Industries, Inc., North Branch Energy
Inc., and Air Products and Chemicals, Inc., entities claiming
involvement or potential involvement in the Burgettstown PURPA
project, filed suit in federal court in the Western District of
Pennsylvania against the Company, Allegheny Power System, Inc.,
and Allegheny Power Service Corporation alleging antitrust
violations, unfair competition, and intentional interference with
a contract. The lawsuit seeks recovery of lost profits and out-
of-pocket costs as well as treble and punitive damages. This case
is related to a suit filed on May 2, 1995, in federal court in the
same district by Washington Power, LP, the developer of the
Burgettstown PURPA project, against the same defendants alleging
essentially the same causes of action.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
(c) Exhibits
10.1 Form of Employment Contract with Certain Executive
Officers Under Age 55
10.2 Form of Employment Contract with Certain Executive
Officers Over Age 55
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this Report to be signed on its behalf by
the undersigned thereunto duly authorized.
WEST PENN POWER COMPANY
Dated: April 11, 1996 By: CAROL G. RUSS
Name: Carol G. Russ
Title: Counsel
<PAGE>
Exhibit Index
Item No. 1 10.1 Form of Employment Contract with Certain Executive
Officers Under Age 55
10.2 Form of Employment Contract with Certain Executive
Officers Over Age 55
L:\TENK\95\8-KWPP
Exhibit 10.1
[DATE]
[EMPLOYEE NAME]
Dear [EMPLOYEE NAME]:
Allegheny Power System Inc., a Maryland corporation (the
"Corporation"), considers the establishment and maintenance of a sound and
vital management to be essential to protecting and enhancing the best
interests of the Corporation and its shareholders. In this connection, the
Corporation recognizes that, as is the case with many publicly held
corporations, the possibility of a change in control may arise and that such
possibility, and the uncertainty and questions which it may raise among
management of the Corporation and its subsidiaries, Allegheny Power Service
Corporation, Monongahela Power Company, The Potomac Edison Company and West
Penn Power Company (collectively referred to hereinafter as the "Companies"),
may result in the departure or distraction of management personnel to the
detriment of the Corporation and its shareholders. Therefore, the Board of
Directors of the Corporation (the "Board") has determined that appropriate
steps should be taken to reinforce and encourage the continued attention and
dedication of members of the management of the Corporation and the Companies
to their assigned duties without distraction in circumstances arising from the
possibility of a change in control of the Corporation. In particular, the
Board believes it important, should the Corporation or its shareholders
receive a proposal for transfer of control of the Corporation, that you be
able to assess and advise the Board whether such proposal would be in the best
interests of the Corporation and its shareholders and to take such other
action regarding such proposal as the Board might determine to be appropriate,
without being influenced by the uncertainties of your own situation.
In order to induce you to remain in the employ of the Companies,
this letter agreement, which has been approved by the Board, sets forth the
severance benefits which the Corporation agrees will be provided to you in the
event your employment with the Companies or the Corporation is terminated
subsequent to a "change in control" of the Corporation under the circumstances
described below.
1. Agreement to Provide Services; Right to Terminate.
(i) Except as otherwise provided in paragraph (ii) below, the
Corporation, the Companies or you may terminate your employment at any time,
subject to the Corporation's providing the benefits hereinafter specified in
accordance with the terms hereof.
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(ii) In the event a tender offer or exchange offer is made by a
Person (as hereinafter defined) for more than 25% of the combined voting power
of the Corporation's outstanding securities ordinarily having the right to
vote at elections of directors ("Voting Securities"), including shares of the
common stock of the Corporation (the "Company Shares") you agree that you will
not leave the employ of the Corporation or the Companies (other than as a
result of Disability or upon Retirement, as such terms are hereinafter
defined) and will render the services contemplated in the recitals to this
Agreement until such tender offer or exchange offer has been abandoned or
terminated or a change in control of the Corporation, as defined in Section 3
hereof, has occurred. For purposes of this Agreement, the term "Person" shall
mean and include any individual, corporation, partnership, group, association
or other "person", as such term is defined in Section 3(a)(9) and as used in
Section 14(d) of the Securities Exchange Act of 1934 (the "Exchange Act"),
other than the Corporation, the Companies, any other subsidiary of the
Corporation or any employee benefit plan(s) sponsored by the Corporation, the
Companies or any other subsidiary of the Corporation.
2. Term of Agreement. This Agreement shall commence on the date
hereof and shall continue in effect until December 31, 1998; provided,
however, that commencing on January 1, 1999 and each January 1 thereafter, the
term of this Agreement shall automatically be extended for one additional year
unless at least 90 days prior to such January 1st date, the Corporation or you
shall have given notice that this Agreement shall not be extended; and
provided, further, that, notwithstanding the delivery of any such notice, this
Agreement shall continue in effect for a period of thirty-six (36) months
after a change in control of the Corporation, as defined in Section 3 hereof,
if such change in control shall have occurred during the term of this Agree-
ment, as it may be extended by the first proviso set forth above. Notwith-
standing anything in this Section 2 to the contrary, this Agreement shall
terminate if you, the Corporation or the Companies terminate your employment
prior to a change in control of the Corporation.
3. Change in Control. For purposes of this Agreement, a "change
in control" of the Corporation shall be deemed to have occurred at such time
as (a) any Person 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 Corporation's 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 Corporation
to effect a transaction described in clause (a) or (c) of this sentence) whose
election by the Board or nomination for election by the Corporation's share-
holders 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 Corporation
approve a merger or consolidation of the Corporation with any other
corporation, other than a merger or consolidation which would result in the
Voting Securities of the Corporation outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
<PAGE>
into Voting Securities of the surviving entity) at least 50% of the combined
voting power of the Voting Securities of the Corporation or such surviving
entity outstanding immediately after such merger or consolidation, or the
shareholders of the Corporation approve a plan of complete liquidation of the
Corporation or any agreement for the sale or disposition by the Corporation or
all or substantially all of the Corporation's assets.
4. Termination Following Change in Control. If any of the events
described in Section 3 hereof constituting a change in control of the
Corporation shall have occurred, you shall be entitled to the benefits
provided in Section 5 hereof upon the termination of your employment with the
Corporation or the Companies within thirty-six (36) months after such event,
unless such termination is (a) because of your death or Retirement, (b) by the
Corporation or the Companies for Cause or Disability or (c) by you other than
for Good Reason (as all such capitalized terms are hereinafter defined).
(i) Disability. Termination by the Corporation or the Companies
of your employment based on "Disability" shall mean termination because of
your absence from your duties with the Corporation and the Companies on a full
time basis for one hundred eighty (180) consecutive days as a result of your
incapacity due to physical or mental illness, unless within thirty (30) days
after Notice of Termination (as hereinafter defined) is given to you following
such absence you shall have returned to the full time performance of your
duties.
(ii) Retirement. Termination by you or by the Corporation or the
Companies of your employment based on "Retirement" shall mean termination on
or after your attainment of age 62.
(iii) Cause. Termination by the Corporation or the Companies of
your employment for "Cause" shall mean termination upon (a) the willful and
continued failure by you to perform substantially your duties with the
Corporation or the Corporation (other than any such failure resulting from
your incapacity due to physical or mental illness) after a demand for
substantial performance is delivered to you by the Chairman of the Board or
President of the Corporation which specifically identifies the manner in which
such executive believes that you have not substantially performed your duties,
or (b) the willful engaging by you in illegal conduct which is materially and
demonstrably injurious to the Corporation or the Companies. For purposes of
this paragraph (iii), no act, or failure to act, on your part shall be
considered "willful" unless done, or omitted to be done, by you in bad faith
and without reasonable belief that your action or omission was in, or not
opposed to, the best interests of the Corporation or the Companies. Any act,
or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or based upon the advice of counsel for the Corporation
or the Companies shall be conclusively presumed to be done, or omitted to be
done, by you in good faith and in the best interests of the Corporation and
the Companies. It is also expressly understood that your attention to matters
not directly related to the business of the Corporation or the Companies shall
not provide a basis for termination for Cause so long as the Board has
approved your engagement in such activities. Notwithstanding the foregoing,
<PAGE>
you shall not be deemed to have been terminated for Cause unless and until
there shall have been delivered to you a copy of a resolution duly adopted by
the affirmative vote of not less than three-quarters of the entire membership
of the Board at a meeting of the Board called and held for the purpose (after
reasonable notice to you and an opportunity for you, together with your
counsel, to be heard before the Board), finding that in the good faith opinion
of the Board you were guilty of the conduct set forth above in (a) or (b) of
this paragraph (iii) and specifying the particulars thereof in detail.
(iv) Good Reason. Termination by you of your employment for "Good
Reason" shall mean termination based on:
(A) a determination by you, in your reasonable judgment, that
there has been an adverse change in your status or position(s) as an
executive officer of the Corporation or the Companies as in effect
immediately prior to the change in control, including, without
limitation, any adverse change in your status or position as a result of
a diminution in your duties or responsibilities (other than, if
applicable, any such change directly attributable to the fact that the
Corporation is no longer publicly owned) or the assignment to you of any
duties or responsibilities which are inconsistent with such status or
position(s), or any removal of you from or any failure to reappoint or
reelect you to such position(s) (except in connection with the
termination of your employment for Cause, Disability or Retirement or as
a result of your death or by you other than for Good Reason);
(B) a reduction by the Corporation or the Companies in your base
salary as in effect immediately prior to the change in control;
(C) the failure by the Corporation or the Companies to continue
in effect any Plan (as hereinafter defined) in which you are
participating at the time of the change in control of the Corporation
(or Plans providing you with at least substantially similar benefits)
other than as a result of the normal expiration of any such Plan in
accordance with its terms as in effect at the time of the change in
control, or the taking of any action, or the failure to act, by the
Corporation or the Companies which would adversely affect your continued
participation in any of such Plans on at least as favorable a basis to
you as is the case on the date of the change in control or which would
materially reduce your benefits in the future under any of such Plans or
deprive you of any material benefit enjoyed by you at the time of the
change in control;
(D) the failure by the Corporation or the Companies to provide
and credit you with the number of paid vacation days to which you are
then entitled in accordance with the applicable normal vacation policy
of the Corporation or the Companies as in effect immediately prior to
the change in control;
(E) the requirement by the Corporation or the Companies that you
be based anywhere other than where your office is located immediately
<PAGE>
prior to the change in control or in the service territory of the
Corporation immediately prior to the change in control, except for
required travel on the business of the Corporation or the Companies to
an extent substantially consistent with the business travel obligations
which you undertook on behalf of the Corporation or the Companies prior
to the change in control;
(F) the failure by the Corporation to obtain from any Successor
(as hereinafter defined) the assent to this Agreement contemplated by
Section 6 hereof; or
(G) any purported termination by the Corporation or the Companies
of your employment which is not effected pursuant to a Notice of
Termination satisfying the requirements of paragraph (v) below (and, if
applicable, paragraph (iii) above); and for purposes of this Agreement,
no such purported termination shall be effective; or
(H) any refusal by the Corporation or the Companies to continue
to allow you to attend to matters or engage in activities not directly
related to the business of the Corporation or the Companies which, prior
to the change in control, you were permitted by the Board to attend to
or engage in.
For purposes of this Agreement, "Plan" shall mean any compensation plan such
as an incentive, stock option or restricted stock plan or any employee benefit
plan such as a thrift, pension, profit sharing, medical, disability, accident,
life insurance plan or a relocation plan or policy or any other plan, program
or policy of the Corporation or the Companies intended to benefit employees.
(v) Notice of Termination. Any purported termination by the
Corporation or the Companies or by you following a change in control shall be
communicated by written Notice of Termination to the other party hereto. For
purposes of this Agreement, a "Notice of Termination" shall mean a notice
which shall indicate the specific termination provision in this Agreement
relied upon.
(vi) Date of Termination. "Date of Termination" following a change
in control shall mean (a) if your employment is to be terminated for
Disability, thirty (30) days after Notice of Termination is given (provided
that you shall not have returned to the performance of your duties on a full-
time basis during such thirty (30) day period), (b) if your employment is to
be terminated by the Corporation or the Companies for Cause or by you pursuant
to Sections 4(iv)(F) and 6 hereof or for any other Good Reason, the date
specified in the Notice of Termination, or (c) if your employment is to be
terminated by the Corporation or the Companies for any reason other than
Cause, the date specified in the Notice of Termination, which in no event
shall be a date earlier than ninety (90) days after the date on which a Notice
of Termination is given, unless an earlier date has been expressly agreed to
by you in writing either in advance of, or after, receiving such Notice of
Termination. In the case of termination by the Corporation or the Companies
of your employment for Cause, if you have not previously expressly agreed in
<PAGE>
writing to the termination, then within thirty (30) days after receipt by you
of the Notice of Termination with respect thereto, you may notify the
Corporation that a dispute exists concerning the termination, in which event
the Date of Termination shall be the date set either by mutual written
agreement of the parties or by the arbitrators in a proceeding as provided in
Section 13 hereof. During the pendency of any such dispute, the Corporation
or the Companies will continue to pay you your full compensation in effect
just prior to the time the Notice of Termination is given and until the
dispute is resolved in accordance with Section 13.
5. Compensation Upon Termination or During Disability; Other
Agreements.
(i) During any period following a change in control of the
Corporation that you fail to perform your duties as a result of incapacity due
to physical or mental illness, you shall continue to receive your salary at
the rate then in effect and any benefits or awards under any Plans shall
continue to accrue during such period, to the extent not inconsistent with
such Plans, until your employment is terminated pursuant to and in accordance
with paragraphs 4(i) and 4(vi) hereof. Thereafter, your benefits shall be
determined in accordance with the Plans then in effect.
(ii) If your employment shall be terminated for Cause following a
change in control of the Corporation, the Corporation or the Companies shall
pay you your salary through the Date of Termination at the rate in effect just
prior to the time a Notice of Termination is given plus any benefits or awards
(including both the cash and stock components) which pursuant to the terms of
any Plans have been earned or become payable, but which have not yet been paid
to you. Thereupon the Corporation and the Companies shall have no further
obligations to you under this Agreement.
(iii) Subject to Section 8 hereof, if, within thirty-six (36) months
after a change in control of the Corporation, as defined in Section 3 above,
shall have occurred, your employment by the Corporation or the Companies shall
be terminated (a) by the Corporation or the Companies other than for Cause,
Disability or Retirement or (b) by you for Good Reason, then the Corporation
shall pay or cause the Companies to pay to you, no later than the fifth day
following the Date of Termination, without regard to any contrary provisions
of any Plan, the following:
(A) your salary through the Date of Termination at the rate in
effect just prior to the time a Notice of Termination is given plus any
benefits or awards (including both the cash and stock components) which
pursuant to the terms of any Plans have been earned or become payable,
but which have not yet been paid to you (including amounts which
previously had been deferred at your request); and
(B) as severance pay and in lieu of any further salary for
periods subsequent to the Date of Termination, an amount in cash equal
to 2.99 times your "annualized includible compensation for the base
<PAGE>
period" (as defined in Section 280G(d)(1) of the Internal Revenue Code
of 1986 (the "Code")).
(iv) If, within thirty-six (36) months after a change in control of
the Corporation, as defined in Section 3 above, shall have occurred, your
employment by the Corporation or the Companies shall be terminated (a) by the
Corporation or the Companies other than for Cause, Disability or Retirement or
(b) by you for Good Reason, then the Corporation shall maintain or cause the
Companies to maintain in full force and effect, for the continued benefit of
you and your dependents for a period terminating on the earliest of (a) three
years after the Date of Termination, (b) the commencement date of equivalent
benefits from a new employer or (c) your attainment of age 65, all insured and
self-insured employee welfare benefit Plans in which you were entitled to
participate immediately prior to the Date of Termination, provided that your
continued participation is possible under the general terms and provisions of
such Plans (and any applicable funding media) and you continue to pay an
amount equal to your regular contribution under such plans for such
participation. If, at the end of three years after the Termination Date, you
have not reached your sixty-fifth birthday and you have not previously
received or are not then receiving equivalent benefits from a new employer,
the Corporation shall arrange, or cause the Companies to arrange, at its sole
cost and expense, to enable you to convert your and your dependents' coverage
under such Plans to individual policies or programs upon the same terms as
employees of the Corporation and the Companies may apply for such conversions.
In the event that your participation in any such Plan is barred, the
Corporation shall arrange, or cause the Companies to arrange, at its sole cost
and expense, to have issued for the benefit of you and your dependents
individual policies of insurance providing benefits substantially similar (on
an after-tax basis) to those which you otherwise would have been entitled to
receive under such Plans pursuant to this paragraph (iv) or, if such insurance
is not available at a reasonable cost to the Corporation or the Companies, the
Corporation shall provide, or cause the Companies to otherwise provide, you
and your dependents with equivalent benefits (on an after-tax basis). You
shall not be required to pay any premiums or other charges in an amount
greater than that which you would have paid in order to participate in such
Plans.
(v) In addition, if within thirty-six (36) months after a change
in control of the Corporation, as defined in Section 3 above, shall have
occurred, your employment by the Corporation or the Companies shall be
terminated (a) by the Corporation or the Companies other than for Cause,
Disability or Retirement or (b) by you for Good Reason, then, if you have
completed 15 "Years of Service", as defined in the Allegheny Power System
Supplemental Executive Retirement Plan (the "SERP"), the Corporation shall pay
you the benefits you would have been entitled to under the SERP. Such
payments shall (1) be in the amount that would have been paid under the SERP,
(2) commence at the same time as the retirement benefits payable to you under
the Allegheny Power System Retirement Plan (the "Retirement Plan"), and (3) be
paid in such form as you shall elect from those available under the Retirement
Plan (subject to adjustment, if paid in a form other than a life annuity, by
using the actuarial equivalence factors of the Retirement Plan).
<PAGE>
(vi) Except as specifically provided in paragraph (iv) above, the
amount of any payment provided for in this Section 5 shall not be reduced,
offset or subject to recovery by the Corporation or the Companies by reason of
any compensation earned by you as the result of employment by another employer
after the Date of Termination, or otherwise.
(vii) In the event that you become entitled to the payments provided
by Section 5(iii) hereof (the "Agreement Payments"), if any of the Agreement
Payments will be subject to the excise tax imposed by Section 4999 of the Code
(the "Excise Tax"), the Company shall pay to you at the time specified in
Subsection (viii) below an additional amount (the "Gross-up Payment") such
that the net amount retained by you, after deduction of any Excise Tax on the
Total Payments (as hereinafter defined) and any federal, state and local
income and employment taxes and Excise Tax upon the Gross-up Payment provided
for by this subsection (vii), but before deduction for any federal, state or
local income and employment taxes on the Agreement Payments, shall be equal to
the sum of (a) the Total Payments and (b) an amount equal to the product of
any deductions disallowed because of the inclusion of the Gross-up Payment in
your adjusted gross income and the highest applicable marginal rate of federal
income taxation for the calendar year in which the Gross-up Payment is to be
made.
For purposes of determining whether any of the Agreement Payments
will be subject to the Excise Tax and the amount of such Excise Tax, (a) any
other payments or benefits received or to be received by you in connection
with a change in control of the Company or your termination of employment
(whether pursuant to the terms of this Agreement or any other plan,
arrangement or agreement with the Company, any person whose actions result in
a change of control of the Company or any person affiliated with the Company
or such person) (which, together with the Agreement Payments, shall constitute
the "Total Payments") shall be treated as "parachute payments" within the
meaning of section 280G(b)(2) of the Code, and all "excess parachute payments"
within the meaning of Section 280G(b)(1) of the Code shall be treated as
subject to the Excise Tax, unless in the opinion of tax counsel selected by
the Company's independent auditors such other payments or benefits (in whole
or in part) do not constitute parachute payments, or such excess parachute
payments (in whole or in part) represent reasonable compensation for services
actually rendered within the meaning of Section 280G(b)(4) of the Code in
excess of the base amount within the meaning of Section 280G(b)(3) of the Code
or are otherwise not subject to the Excise Tax, (b) the amount of the Total
Payments which shall be treated as subject to the Excise Tax shall be equal to
the lesser of (1) the total amount of the Total Payments or (2) the amount of
excess parachute payments within the meaning of Section 280G(b)(1) of the Code
(after applying clause (a), above), and (c) the value of any non-cash benefits
or any deferred payment or benefit shall be determined by the Company's
independent auditors in accordance with the principles of Sections
280(G)(d)(3) and (4) of the Code.
For purposes of determining the amount of the Gross-up Payment,
you shall be deemed to (x) pay federal income taxes at the highest marginal
rate of federal income taxation for the calendar year in which the Gross-up
<PAGE>
Payment is to be made, (y) pay the applicable state and local income taxes at
the highest marginal rate of taxation for the calendar year in which the
Gross-up Payment is to be made, net of the maximum reduction in federal income
taxes which could be obtained from deduction of such state and local taxes
(determined without regard to limitations on deductions based upon the amount
of your adjusted gross income), and (z) have otherwise allowable deductions
for federal income tax purposes at least equal to those disallowed because of
the inclusion of the Gross-up Payment in your adjusted gross income. In the
event that the Excise Tax is subsequently determined to be less than the
amount taken into account hereunder at the time the Gross-up Payment is made,
you shall repay to the Company at the time that the amount of such reduction
in Excise Tax is finally determined the portion of the Gross-up Payment
attributable to such reduction (plus the portion of the Gross-up Payment
attributable to the Excise Tax and federal and state and local income and
excise taxes imposed on the portion of the Gross-up Payment being repaid by
you if such repayment results in a reduction in Excise Tax and/or a federal
and state and local income tax deduction), plus interest on the amount of such
repayment at the rate provided in Section 1274(b)(2)(B) of the Code. In the
event that the Excise Tax is determined to exceed the amount taken into
account hereunder at the time the Gross-up Payment is made (including by
reason of any payment the existence or amount of which cannot be determined at
the time of the Gross-up Payment), the Company shall make an additional gross-
up payment in respect of such excess (plus any interest payable with respect
to such excess at the rate provided in Section 1274(b)(2)(B) of the Code) at
the time that the amount of such excess is finally determined. You agree to
cooperate, to the extent your expenses are reimbursed by the Company, with any
reasonable requests by the Company in connection with any contests or disputes
with the Internal Revenue Service in connection with the Excise Tax.
(viii) The Gross-up Payment or portion thereof provided for in
Subsection (vii) above shall be paid not later than the thirtieth day
following payment of any amounts under section 5(iii); provided, however, that
if the amount of such Gross-up Payment or portion thereof cannot be finally
determined on or before such day, the Company shall pay to you on such day an
estimate, as determined in good faith by the Company, of the minimum amount of
such payments and shall pay the remainder of such payments (together with
interest at the rate provided in Section 1274(b)(2)(B) of the Code) as soon as
the amount thereof can be determined, but in no event later than the forty-
fifth day after payment of any amounts under section 5(iii). In the event
that the amount of the estimated payments exceeds the amount subsequently
determined to have been due, such excess shall constitute a loan by the
Company to you, payable on the fifth day after demand by the Company (together
with interest at the rate provided in Section 1274(b)(2)(B) of the Code).
6. Successors; Binding Agreement.
(i) The Corporation will seek, by written request at least five
business days prior to the time a Person becomes a Successor (as hereinafter
defined), to have such Person by agreement in form and substance satisfactory
to you, assent to the fulfillment of the Corporation's obligations under this
Agreement. Failure of such Person to furnish such assent by the later of (A)
<PAGE>
three business days prior to the time such Person becomes a Successor or (B)
two business days after such Person receives a written request to so assent
shall constitute Good Reason for termination by you of your employment if a
change in control of the Corporation occurs or has occurred. For purposes of
this Agreement, "Successor" shall mean any Person that succeeds to, or has the
practical ability to control (either immediately or with the passage of time),
the Corporation's business directly, by merger or consolidation, or
indirectly, by purchase of the Corporation's Voting Securities or otherwise.
(ii) This Agreement shall inure to the benefit of and be
enforceable by your personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If
you should die while any amount would still be payable to you hereunder if you
had continued to live, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this Agreement to your devisee,
legatee or other designee or, if there be no such designee, to your estate.
(iii) For purposes of this Agreement, the "Corporation" shall
include any corporation or other entity which is the surviving or continuing
entity in respect of any merger, consolidation or form of business combination
in which the Corporation ceases to exist.
7. Fees and Expenses; Mitigation. (i) The Corporation shall
reimburse, or cause the Companies to reimburse, you, on a current basis, for
all reasonable legal fees and related expenses incurred by you in connection
with the Agreement following a change in control of the Corporation,
including, without limitation, (a) all such fees and expenses, if any,
incurred in contesting or disputing any termination or your employment or
incurred by you in seeking advice with respect to the matters set forth in
Section 8 hereof or (b) your seeking to obtain or enforce any right or benefit
provided by this Agreement, in each case, regardless of whether or not your
claim is upheld by a court of competent jurisdiction; provided, however, you
shall be required to repay any such amounts to the Corporation to the extent
that a court issues a final and non-appealable order setting forth the deter-
mination that the position taken by you was frivolous or advanced by you in
bad faith.
(ii) You shall not be required to mitigate the amount of any
payment the Corporation or the Companies becomes obligated to make to you in
connection with this Agreement, by seeking other employment or otherwise.
8. Taxes. All payments to be made to you under this Agreement
will be subject to required withholding of federal, state and local income and
employment taxes.
9. Survival. The respective obligations of, and benefits
afforded to, the Corporation and you as provided in Sections 5, 6(ii), 7, 8,
13 and 14 of this Agreement shall survive termination of this Agreement.
10. Notice. For the purposes of this Agreement, notices and all
other communications provided for in the Agreement shall be in writing and
<PAGE>
shall be deemed to have been duly given when delivered or mailed by United
States registered mail, return receipt requested, postage prepaid and
addressed, in the case of the Corporation, to the address set forth on the
first page of this Agreement or, in the case of the undersigned employee, to
the address set forth below his signature, provided that all notices to the
Corporation shall be directed to the attention of the Chairman of the Board or
President of the Corporation, with a copy to the Secretary of the Corporation,
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notice of change of address shall
be effective only upon receipt.
11. Miscellaneous. No provision of this Agreement may be modified,
waived or discharged unless such modification, waiver or discharge is agreed
to in a writing signed by you and the Chairman of the Board or President of
the Corporation. No waiver by either party hereto at any time of any breach
by the other party hereto of, or of compliance with, any condition or
provision of this Agreement to be performed by such other party shall be
deemed a waiver of similar or dissimilar provisions or conditions at the same
or at any prior or subsequent time. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not expressly set forth in this Agreement.
The validity, interpretation, construction and performance of this Agreement
shall be governed by the laws of the State of Maryland.
12. Validity. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
13. Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
Hagerstown, Maryland by three arbitrators in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be entered on
the arbitrators' award in any court having jurisdiction; provided, however,
that you shall be entitled to seek specific performance of your right to be
paid until the Date of Termination during the pendency of any dispute or
controversy arising under or in connection with this Agreement. The
Corporation shall bear all costs and expenses arising in connection with any
arbitration proceeding pursuant to this Section 13.
14. Employee's Commitment. You agree that subsequent to your
period of employment with the Corporation and the Companies, you will not at
any time communicate or disclose to any unauthorized person, without the
written consent of the Corporation, any proprietary processes of the
Corporation, the Companies or any other subsidiary of the Corporation or other
confidential information concerning their business, affairs, products,
suppliers or customers which, if disclosed, would have a material adverse
effect upon the business or operations of the Corporation, the Companies and
its subsidiaries, taken as a whole; it being understood, however, that the
obligations of this Section 14 shall not apply to the extent that the afore-
said matters (a) are disclosed in circumstances where you are legally required
<PAGE>
to do so or (b) become generally known to and available for use by the public
otherwise than by your wrongful act or omission.
15. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
If this letter correctly sets forth our agreement on the subject
matter hereof, kindly sign and return to the Corporation the enclosed copy of
this letter which will then constitute our agreement on this subject.
Sincerely,
ALLEGHENY POWER SYSTEM, INC.
By
Name: Klaus Bergman
Title: Chairman of the Board
Agreed to this day
of , 1996.
[EMPLOYEE NAME]
[ADDRESS]
Exhibit 10.2
[DATE]
[EMPLOYEE NAME]
Dear [EMPLOYEE NAME]:
Allegheny Power System Inc., a Maryland corporation (the
"Corporation"), considers the establishment and maintenance of a sound
and vital management to be essential to protecting and enhancing the best
interests of the Corporation and its shareholders. In this connection,
the Corporation recognizes that, as is the case with many publicly held
corporations, the possibility of a change in control may arise and that
such possibility, and the uncertainty and questions which it may raise
among management of the Corporation and its subsidiaries, Allegheny Power
Service Corporation, Monongahela Power Company, The Potomac Edison
Company and West Penn Power Company (collectively referred to hereinafter
as the "Companies"), may result in the departure or distraction of
management personnel to the detriment of the Corporation and its
shareholders. Therefore, the Board of Directors of the Corporation (the
"Board") has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members
of the management of the Corporation and the Companies to their assigned
duties without distraction in circumstances arising from the possibility
of a change in control of the Corporation. In particular, the Board
believes it important, should the Corporation or its shareholders receive
a proposal for transfer of control of the Corporation, that you be able
to assess and advise the Board whether such proposal would be in the best
interests of the Corporation and its shareholders and to take such other
action regarding such proposal as the Board might determine to be
appropriate, without being influenced by the uncertainties of your own
situation.
In order to induce you to remain in the employ of the
Companies, this letter agreement, which has been approved by the Board,
sets forth the severance benefits which the Corporation agrees will be
provided to you in the event your employment with the Companies or the
Corporation is terminated subsequent to a "change in control" of the
Corporation under the circumstances described below.
1. Agreement to Provide Services; Right to Terminate.
(i) Except as otherwise provided in paragraph (ii) below,
the Corporation, the Companies or you may terminate your employment at
<PAGE>
any time, subject to the Corporation's providing the benefits hereinafter
specified in accordance with the terms hereof.
(ii) In the event a tender offer or exchange offer is made by
a Person (as hereinafter defined) for more than 25% of the combined
voting power of the Corporation's outstanding securities ordinarily
having the right to vote at elections of directors ("Voting Securities"),
including shares of the common stock of the Corporation (the "Company
Shares") you agree that you will not leave the employ of the Corporation
or the Companies (other than as a result of Disability or upon
Retirement, as such terms are hereinafter defined) and will render the
services contemplated in the recitals to this Agreement until such tender
offer or exchange offer has been abandoned or terminated or a change in
control of the Corporation, as defined in Section 3 hereof, has occurred.
For purposes of this Agreement, the term "Person" shall mean and include
any individual, corporation, partnership, group, association or other
"person", as such term is defined in Section 3(a)(9) and as used in Sec-
tion 14(d) of the Securities Exchange Act of 1934 (the "Exchange Act"),
other than the Corporation, the Companies, any other subsidiary of the
Corporation or any employee benefit plan(s) sponsored by the Corporation,
the Companies or any other subsidiary of the Corporation.
2. Term of Agreement. This Agreement shall commence on the
date hereof and shall continue in effect until December 31, 1998;
provided, however, that commencing on January 1, 1999 and each January 1
thereafter, the term of this Agreement shall automatically be extended
for one additional year unless at least 90 days prior to such January 1st
date, the Corporation or you shall have given notice that this Agreement
shall not be extended; and provided, further, that, notwithstanding the
delivery of any such notice, this Agreement shall continue in effect for
a period of thirty-six (36) months after a change in control of the
Corporation, as defined in Section 3 hereof, if such change in control
shall have occurred during the term of this Agreement, as it may be
extended by the first proviso set forth above. Notwithstanding anything
in this Section 2 to the contrary, this Agreement shall terminate if you,
the Corporation or the Companies terminate your employment prior to a
change in control of the Corporation.
3. Change in Control. For purposes of this Agreement, a
"change in control" of the Corporation shall be deemed to have occurred
at such time as (a) any Person 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 Corporation's 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 Corporation to effect a
transaction described in clause (a) or (c) of this sentence) whose
election by the Board or nomination for election by the Corporation'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,
<PAGE>
cease for any reason to constitute a majority thereof; or (c) the
shareholders of the Corporation approve a merger or consolidation of the
Corporation with any other corporation, other than a merger or
consolidation which would result in the Voting Securities of the
Corporation 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 Voting Securities of the Corporation or such surviving
entity outstanding immediately after such merger or consolidation, or the
shareholders of the Corporation approve a plan of complete liquidation of
the Corporation or any agreement for the sale or disposition by the
Corporation or all or substantially all of the Corporation's assets.
4. Termination Following Change in Control. If any of the
events described in Section 3 hereof constituting a change in control of
the Corporation shall have occurred, you shall be entitled to the
benefits provided in Section 5 hereof upon the termination of your
employment with the Corporation or the Companies within thirty-six (36)
months after such event, unless such termination is (a) because of your
death or Retirement, (b) by the Corporation or the Companies for Cause or
Disability or (c) by you other than for Good Reason (as all such capital-
ized terms are hereinafter defined).
(i) Disability. Termination by the Corporation or the
Companies of your employment based on "Disability" shall mean termination
because of your absence from your duties with the Corporation and the
Companies on a full time basis for one hundred eighty (180) consecutive
days as a result of your incapacity due to physical or mental illness,
unless within thirty (30) days after Notice of Termination (as
hereinafter defined) is given to you following such absence you shall
have returned to the full time performance of your duties.
(ii) Retirement. Termination by you or by the Corporation or
the Companies of your employment based on "Retirement" shall mean
termination on or after your attainment of age 62.
(iii) Cause. Termination by the Corporation or the Companies
of your employment for "Cause" shall mean termination upon (a) the
willful and continued failure by you to perform substantially your duties
with the Corporation or the Corporation (other than any such failure
resulting from your incapacity due to physical or mental illness) after a
demand for substantial performance is delivered to you by the Chairman of
the Board or President of the Corporation which specifically identifies
the manner in which such executive believes that you have not
substantially performed your duties, or (b) the willful engaging by you
in illegal conduct which is materially and demonstrably injurious to the
Corporation or the Companies. For purposes of this paragraph (iii), no
act, or failure to act, on your part shall be considered "willful" unless
done, or omitted to be done, by you in bad faith and without reasonable
belief that your action or omission was in, or not opposed to, the best
interests of the Corporation or the Companies. Any act, or failure to
act, based upon authority given pursuant to a resolution duly adopted by
<PAGE>
the Board or based upon the advice of counsel for the Corporation or the
Companies shall be conclusively presumed to be done, or omitted to be
done, by you in good faith and in the best interests of the Corporation
and the Companies. It is also expressly understood that your attention
to matters not directly related to the business of the Corporation or the
Companies shall not provide a basis for termination for Cause so long as
the Board has approved your engagement in such activities.
Notwithstanding the foregoing, you shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to
you a copy of a resolution duly adopted by the affirmative vote of not
less than three-quarters of the entire membership of the Board at a meet-
ing of the Board called and held for the purpose (after reasonable notice
to you and an opportunity for you, together with your counsel, to be
heard before the Board), finding that in the good faith opinion of the
Board you were guilty of the conduct set forth above in (a) or (b) of
this paragraph (iii) and specifying the particulars thereof in detail.
(iv) Good Reason. Termination by you of your employment for
"Good Reason" shall mean termination based on:
(A) a determination by you, in your reasonable judgment,
that there has been an adverse change in your status or position(s)
as an executive officer of the Corporation or the Companies as in
effect immediately prior to the change in control, including,
without limitation, any adverse change in your status or position
as a result of a diminution in your duties or responsibilities
(other than, if applicable, any such change directly attributable
to the fact that the Corporation is no longer publicly owned) or
the assignment to you of any duties or responsibilities which are
inconsistent with such status or position(s), or any removal of you
from or any failure to reappoint or reelect you to such position(s)
(except in connection with the termination of your employment for
Cause, Disability or Retirement or as a result of your death or by
you other than for Good Reason);
(B) a reduction by the Corporation or the Companies in your
base salary as in effect immediately prior to the change in
control;
(C) the failure by the Corporation or the Companies to
continue in effect any Plan (as hereinafter defined) in which you
are participating at the time of the change in control of the
Corporation (or Plans providing you with at least substantially
similar benefits) other than as a result of the normal expiration
of any such Plan in accordance with its terms as in effect at the
time of the change in control, or the taking of any action, or the
failure to act, by the Corporation or the Companies which would
adversely affect your continued participation in any of such Plans
on at least as favorable a basis to you as is the case on the date
of the change in control or which would materially reduce your
benefits in the future under any of such Plans or deprive you of
<PAGE>
any material benefit enjoyed by you at the time of the change in
control;
(D) the failure by the Corporation or the Companies to
provide and credit you with the number of paid vacation days to
which you are then entitled in accordance with the applicable
normal vacation policy of the Corporation or the Companies as in
effect immediately prior to the change in control;
(E) the requirement by the Corporation or the Companies that
you be based anywhere other than where your office is located
immediately prior to the change in control or in the service
territory of the Corporation immediately prior to the change in
control, except for required travel on the business of the
Corporation or the Companies to an extent substantially consistent
with the business travel obligations which you undertook on behalf
of the Corporation or the Companies prior to the change in control;
(F) the failure by the Corporation to obtain from any
Successor (as hereinafter defined) the assent to this Agreement
contemplated by Section 6 hereof; or
(G) any purported termination by the Corporation or the
Companies of your employment which is not effected pursuant to a
Notice of Termination satisfying the requirements of paragraph (v)
below (and, if applicable, paragraph (iii) above); and for purposes
of this Agreement, no such purported termination shall be
effective; or
(H) any refusal by the Corporation or the Companies to
continue to allow you to attend to matters or engage in activities
not directly related to the business of the Corporation or the
Companies which, prior to the change in control, you were permitted
by the Board to attend to or engage in.
For purposes of this Agreement, "Plan" shall mean any compensation plan
such as an incentive, stock option or restricted stock plan or any
employee benefit plan such as a thrift, pension, profit sharing, medical,
disability, accident, life insurance plan or a relocation plan or policy
or any other plan, program or policy of the Corporation or the Companies
intended to benefit employees.
(v) Notice of Termination. Any purported termination by the
Corporation or the Companies or by you following a change in control
shall be communicated by written Notice of Termination to the other party
hereto. For purposes of this Agreement, a "Notice of Termination" shall
mean a notice which shall indicate the specific termination provision in
this Agreement relied upon.
(vi) Date of Termination. "Date of Termination" following a
change in control shall mean (a) if your employment is to be terminated
for Disability, thirty (30) days after Notice of Termination is given
<PAGE>
(provided that you shall not have returned to the performance of your
duties on a full-time basis during such thirty (30) day period), (b) if
your employment is to be terminated by the Corporation or the Companies
for Cause or by you pursuant to Sections 4(iv)(F) and 6 hereof or for any
other Good Reason, the date specified in the Notice of Termination, or
(c) if your employment is to be terminated by the Corporation or the
Companies for any reason other than Cause, the date specified in the
Notice of Termination, which in no event shall be a date earlier than
ninety (90) days after the date on which a Notice of Termination is
given, unless an earlier date has been expressly agreed to by you in
writing either in advance of, or after, receiving such Notice of
Termination. In the case of termination by the Corporation or the
Companies of your employment for Cause, if you have not previously
expressly agreed in writing to the termination, then within thirty (30)
days after receipt by you of the Notice of Termination with respect
thereto, you may notify the Corporation that a dispute exists concerning
the termination, in which event the Date of Termination shall be the date
set either by mutual written agreement of the parties or by the
arbitrators in a proceeding as provided in Section 13 hereof. During the
pendency of any such dispute, the Corporation or the Companies will
continue to pay you your full compensation in effect just prior to the
time the Notice of Termination is given and until the dispute is resolved
in accordance with Section 13.
5. Compensation Upon Termination or During
Disability; Other Agreements.
(i) During any period following a change in control of the
Corporation that you fail to perform your duties as a result of
incapacity due to physical or mental illness, you shall continue to
receive your salary at the rate then in effect and any benefits or awards
under any Plans shall continue to accrue during such period, to the
extent not inconsistent with such Plans, until your employment is ter-
minated pursuant to and in accordance with paragraphs 4(i) and 4(vi)
hereof. Thereafter, your benefits shall be determined in accordance with
the Plans then in effect.
(ii) If your employment shall be terminated for Cause
following a change in control of the Corporation, the Corporation or the
Companies shall pay you your salary through the Date of Termination at
the rate in effect just prior to the time a Notice of Termination is
given plus any benefits or awards (including both the cash and stock
components) which pursuant to the terms of any Plans have been earned or
become payable, but which have not yet been paid to you. Thereupon the
Corporation and the Companies shall have no further obligations to you
under this Agreement.
(iii) Subject to Section 8 hereof, if, within thirty-six (36)
months after a change in control of the Corporation, as defined in
Section 3 above, shall have occurred, your employment by the Corporation
or the Companies shall be terminated (a) by the Corporation or the
Companies other than for Cause, Disability or Retirement or (b) by you
<PAGE>
for Good Reason, then the Corporation shall pay or cause the Companies to
pay to you, no later than the fifth day following the Date of
Termination, without regard to any contrary provisions of any Plan, the
following:
(A) your salary through the Date of Termination at the rate
in effect just prior to the time a Notice of Termination is given
plus any benefits or awards (including both the cash and stock
components) which pursuant to the terms of any Plans have been
earned or become payable, but which have not yet been paid to you
(including amounts which previously had been deferred at your
request); and
(B) as severance pay and in lieu of any further salary for
periods subsequent to the Date of Termination, an amount in cash
equal to 2.99 times your "annualized includible compensation for
the base period" (as defined in Section 280G(d)(1) of the Internal
Revenue Code of 1986 (the "Code")).
(iv) If, within thirty-six (36) months after a change in
control of the Corporation, as defined in Section 3 above, shall have
occurred, your employment by the Corporation or the Companies shall be
terminated (a) by the Corporation or the Companies other than for Cause,
Disability or Retirement or (b) by you for Good Reason, then the
Corporation shall maintain or cause the Companies to maintain in full
force and effect, for the continued benefit of you and your dependents
for a period terminating on the earliest of (a) three years after the
Date of Termination, (b) the commencement date of equivalent benefits
from a new employer or (c) your attainment of age 65, all insured and
self-insured employee welfare benefit Plans in which you were entitled to
participate immediately prior to the Date of Termination, provided that
your continued participation is possible under the general terms and
provisions of such Plans (and any applicable funding media) and you
continue to pay an amount equal to your regular contribution under such
plans for such participation. If, at the end of three years after the
Termination Date, you have not reached your sixty-fifth birthday and you
have not previously received or are not then receiving equivalent
benefits from a new employer, the Corporation shall arrange, or cause the
Companies to arrange, at its sole cost and expense, to enable you to
convert your and your dependents' coverage under such Plans to individual
policies or programs upon the same terms as employees of the Corporation
and the Companies may apply for such conversions. In the event that your
participation in any such Plan is barred, the Corporation shall arrange,
or cause the Companies to arrange, at its sole cost and expense, to have
issued for the benefit of you and your dependents individual policies of
insurance providing benefits substantially similar (on an after-tax
basis) to those which you otherwise would have been entitled to receive
under such Plans pursuant to this paragraph (iv) or, if such insurance is
not available at a reasonable cost to the Corporation or the Companies,
the Corporation shall provide, or cause the Companies to otherwise
provide, you and your dependents with equivalent benefits (on an after-
tax basis). You shall not be required to pay any premiums or other
<PAGE>
charges in an amount greater than that which you would have paid in order
to participate in such Plans.
(v) Except as specifically provided in paragraph (iv) above,
the amount of any payment provided for in this Section 5 shall not be
reduced, offset or subject to recovery by the Corporation or the
Companies by reason of any compensation earned by you as the result of
employment by another employer after the Date of Termination, or other-
wise.
6. Successors; Binding Agreement.
(i) The Corporation will seek, by written request at least
five business days prior to the time a Person becomes a Successor (as
hereinafter defined), to have such Person by agreement in form and sub-
stance satisfactory to you, assent to the fulfillment of the
Corporation's obligations under this Agreement. Failure of such Person
to furnish such assent by the later of (A) three business days prior to
the time such Person becomes a Successor or (B) two business days after
such Person receives a written request to so assent shall constitute Good
Reason for termination by you of your employment if a change in control
of the Corporation occurs or has occurred. For purposes of this
Agreement, "Successor" shall mean any Person that succeeds to, or has the
practical ability to control (either immediately or with the passage of
time), the Corporation's business directly, by merger or consolidation,
or indirectly, by purchase of the Corporation's Voting Securities or
otherwise.
(ii) This Agreement shall inure to the benefit of and be
enforceable by your personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.
If you should die while any amount would still be payable to you
hereunder if you had continued to live, all such amounts, unless other-
wise provided herein, shall be paid in accordance with the terms of this
Agreement to your devisee, legatee or other designee or, if there be no
such designee, to your estate.
(iii) For purposes of this Agreement, the "Corporation" shall
include any corporation or other entity which is the surviving or
continuing entity in respect of any merger, consolidation or form of
business combination in which the Corporation ceases to exist.
7. Fees and Expenses; Mitigation. (i) The Corporation shall
reimburse, or cause the Companies to reimburse, you, on a current basis,
for all reasonable legal fees and related expenses incurred by you in
connection with the Agreement following a change in control of the
Corporation, including, without limitation, (a) all such fees and
expenses, if any, incurred in contesting or disputing any termination or
your employment or incurred by you in seeking advice with respect to the
matters set forth in Section 8 hereof or (b) your seeking to obtain or
enforce any right or benefit provided by this Agreement, in each case,
regardless of whether or not your claim is upheld by a court of competent
<PAGE>
jurisdiction; provided, however, you shall be required to repay any such
amounts to the Corporation to the extent that a court issues a final and
non-appealable order setting forth the determination that the position
taken by you was frivolous or advanced by you in bad faith.
(ii) You shall not be required to mitigate the amount of any
payment the Corporation or the Companies becomes obligated to make to you
in connection with this Agreement, by seeking other employment or
otherwise.
8. Taxes.
(i) All payments to be made to you under this Agreement will
be subject to required withholding of federal, state and local income and
employment taxes.
(ii) Notwithstanding anything in the foregoing to the
contrary, if any of the payments provided for in this Agreement, together
with any other payments which you have the right to receive from the
Corporation, the Companies or any other corporation which is a member of
an "affiliated group" (as defined in Section 1504(a) of the Code without
regard to Section 1504(b) of the Code) of which the Corporation is a
member, would constitute a "parachute payment" (as defined in Section
280G(b)(2) of the Code), the payments pursuant to this Agreement shall be
reduced (reducing first the payments under Section 5(iii)(B)) to the
largest amount as will result in no portion of such payments being
subject to the excise tax imposed by Section 4999 of the Code; provided,
however, that the determination as to whether any reduction in the pay-
ments under this Agreement pursuant to this proviso is necessary shall be
made by you in good faith, and such determination shall be conclusive and
binding on the Corporation with respect to its treatment of the payment
for tax reporting purposes.
9. Survival. The respective obligations of, and benefits
afforded to, the Corporation and you as provided in Sections 5, 6(ii), 7,
8, 13 and 14 of this Agreement shall survive termination of this
Agreement.
10. Notice. For the purposes of this Agreement, notices and
all other communications provided for in the Agreement shall be in
writing and shall be deemed to have been duly given when delivered or
mailed by United States registered mail, return receipt requested,
postage prepaid and addressed, in the case of the Corporation, to the
address set forth on the first page of this Agreement or, in the case of
the undersigned employee, to the address set forth below his signature,
provided that all notices to the Corporation shall be directed to the
attention of the Chairman of the Board or President of the Corporation,
with a copy to the Secretary of the Corporation, or to such other address
as either party may have furnished to the other in writing in accordance
herewith, except that notice of change of address shall be effective only
upon receipt.
<PAGE>
11. Miscellaneous. No provision of this Agreement may be
modified, waived or discharged unless such modification, waiver or
discharge is agreed to in a writing signed by you and the Chairman of the
Board or President of the Corporation. No waiver by either party hereto
at any time of any breach by the other party hereto of, or of compliance
with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time.
No agreements or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof have been made by either party
which are not expressly set forth in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be
governed by the laws of the State of Maryland.
12. Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which shall
remain in full force and effect.
13. Arbitration. Any dispute or controversy arising under or
in connection with this Agreement shall be settled exclusively by
arbitration in Hagerstown, Maryland by three arbitrators in accordance
with the rules of the American Arbitration Association then in effect.
Judgment may be entered on the arbitrators' award in any court having
jurisdiction; provided, however, that you shall be entitled to seek
specific performance of your right to be paid until the Date of
Termination during the pendency of any dispute or controversy arising
under or in connection with this Agreement. The Corporation shall bear
all costs and expenses arising in connection with any arbitration
proceeding pursuant to this Section 13.
14. Employee's Commitment. You agree that subsequent to your
period of employment with the Corporation and the Companies, you will not
at any time communicate or disclose to any unauthorized person, without
the written consent of the Corporation, any proprietary processes of the
Corporation, the Companies or any other subsidiary of the Corporation or
other confidential information concerning their business, affairs,
products, suppliers or customers which, if disclosed, would have a
material adverse effect upon the business or operations of the
Corporation, the Companies and its subsidiaries, taken as a whole; it
being understood, however, that the obligations of this Section 14 shall
not apply to the extent that the aforesaid matters (a) are disclosed in
circumstances where you are legally required to do so or (b) become
generally known to and available for use by the public otherwise than by
your wrongful act or omission.
15. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.
<PAGE>
If this letter correctly sets forth our agreement on the
subject matter hereof, kindly sign and return to the Corporation the
enclosed copy of this letter which will then constitute our agreement on
this subject.
Sincerely,
ALLEGHENY POWER SYSTEM, INC.
By
Name: Klaus Bergman
Title: Chairman of the Board
Agreed to this day
of , 1996.
[EMPLOYEE NAME]
[ADDRESS]
