EXHIBIT 10(i)(1)
EMPLOYMENT AGREEMENT
This AGREEMENT is made as of this December 15, 2003, by and among
AMERICAN ELECTRIC POWER COMPANY, INC., a New York corporation ("AEP"), and
AMERICAN ELECTRIC POWER SERVICE CORPORATION, a New York corporation and a
wholly-owned subsidiary of AEP ("Service Corporation") (AEP and Service
Corporation hereinafter referred to collectively as the "Companies"), and
Michael G. Morris ("Executive").
RECITALS
In order to induce Executive to serve as the President and Chief
Executive Officer of AEP and Service Corporation, as well as Chief Executive
Officer of other major subsidiaries of AEP, the Companies desire to provide
Executive with compensation and other benefits on the terms and conditions set
forth in this Agreement.
Executive is willing to accept such employment and perform services
for the Companies, on the terms and conditions hereinafter set forth.
It is therefore hereby agreed by and between the parties as follows:
1. Employment.
1.1 Positions and Reporting. Subject to the terms and conditions of this
Agreement, effective as of the Commencement Date (as defined in Section 2
below), the Companies agree to engage Executive during the term hereof as
President and Chief Executive Officer of each of AEP and Service Corporation, as
well as such major subsidiaries of AEP as the board of directors of AEP (the
"Board") shall designate. In such capacities, Executive shall have the customary
powers, responsibilities and authorities of such offices for corporations of the
size, type and nature of the Companies (and such major subsidiaries of AEP, as
applicable), as they exist from time to time. During the term of this Agreement,
Executive, in carrying out his duties under this Agreement, shall report
directly to the Board.
1.2 Boards of Directors. AEP shall, during the term of this Agreement, cause the
election and retention of Executive as a member of the board of directors of
each subsidiary of AEP as selected by the Board. Executive agrees to serve, if
elected, as Chairman of the Board (and on any committees of the Board), in
addition to serving on the board of directors (and any committees thereof) of
each subsidiary of AEP.
1.3 Executive Agreements and Representations.
(a) Subject to the terms and conditions of this Agreement, effective as of the
Commencement Date, Executive hereby agrees to be employed as President and Chief
Executive Officer of each of AEP and Service Corporation and agrees to devote
his full working time and efforts, to the best of his ability, experience and
talent, to the performance of services, duties and responsibilities in
connection therewith. Executive shall perform such duties and exercise such
powers commensurate with his positions and shall accept such other positions or
titles of other corporations affiliated with the Companies (including, without
limitation, Chief Executive Officer of other subsidiaries of AEP), in each
instance as the Board shall from time to time delegate to him on such terms and
conditions and subject to such restrictions as may reasonably from time to time
be imposed.
(b) Executive hereby represents that the execution and delivery of this
Agreement by Executive and the performance by Executive of Executive's duties
hereunder do not constitute a breach of, or otherwise contravene, the terms of
any employment agreement or other noncompetition agreement or policy (including
any agreement with Executive's prior employment, Northeast Utilities ("Prior
Employer")) to which Executive is a party or otherwise bound. Executive also
hereby represents that in no event shall any of the Companies or their
subsidiaries become subject to any liability that may arise in connection with
that certain litigation between Con Edison and the Prior Employer that is
ongoing as of the date hereof, and further agrees to indemnify and hold harmless
the Companies and their subsidiaries from any liability that they may incur with
respect thereto.
1.4 Other Boards and Activities. Notwithstanding anything set forth in this
Agreement, during the term of this Agreement, subject to the prior express
written consent of the Directors and Corporate Governance Committee of the
Board, Executive shall be permitted to serve on the boards of directors (or
advisory committees) of a reasonable number of other corporations or entities
and of a reasonable number of trade associations and/or charitable
organizations. During the term of this Agreement, Executive shall also otherwise
be permitted to engage in a reasonable number of charitable activities and
community affairs and manage his personal investments and affairs, provided that
such activities set forth in this Section 1.4 do not conflict or materially
interfere with the effective discharge of his duties and responsibilities under
this Agreement.
2. Term of Employment. The term of this Agreement shall begin on January 1, 2004
(the "Commencement Date"), and shall extend until the third anniversary of the
Commencement Date, with automatic one-year renewals commencing on such third
anniversary and on each anniversary thereafter, unless and until either party
hereto notifies the other at least six (6) months before the scheduled renewal
date that the term of this Agreement is not to be renewed. Notwithstanding the
foregoing, the term of this Agreement (and Executive's employment hereunder) may
be earlier terminated by either party in accordance with the provisions of
Section 4 of this Agreement.
3. Compensation; Benefits.
3.1 Base Salary. During the term of this Agreement, Service Corporation shall
pay Executive a base salary ("Base Salary") at the rate of $1,115,000 per annum,
payable in accordance with the ordinary payroll practices of the Companies.
After December 31, 2004, Executive's rate of Base Salary shall be reviewed
annually by the Human Resources Committee of the Board and, if increased, such
increased amount shall constitute Executive's Base Salary.
3.2 Compensation Plans and Programs.
(a) Annual Bonus. During the term of this Agreement, Executive shall
be eligible to earn an annual bonus (the "Annual Bonus") in respect of each
calendar year of AEP occurring during the term of employment pursuant to the
Senior Officer Annual Incentive Compensation Plan or such other annual incentive
program maintained by the Companies from time to time in which other senior
executives of the Companies participate, on terms comparable to those applicable
to such other senior executives (the "Annual Bonus Plan"). During the term of
the Agreement, under the Annual Bonus Plan, the amount of Executive's Annual
Bonus shall be based upon a percentage of Executive's Base Salary (or such other
metric as the Board may establish pursuant to the Annual Bonus Plan); provided
that the target Annual Bonus percentage under the Annual Bonus Plan for each
calendar year occurring during the term of the Agreement shall be equal to at
least one hundred percent (100%) of the amount of Base Salary Executive actually
earned in the calendar year in respect of which the Annual Bonus, if any, is
payable (the "Target Bonus"). Any Annual Bonus shall only be payable upon the
achievement by the Companies as a whole of certain performance goals to be
established in respect of each calendar year by the Board; provided, however,
that Executive shall receive an Annual Bonus in respect of the first calendar
year occurring during the term of the Agreement that shall in no event be less
than the Target Bonus. Notwithstanding any of the foregoing, and subject to the
provisions of Section 4 of this Agreement, in the event that the term of this
Agreement is scheduled to terminate prior to the end of any given calendar year
of the Companies, Executive shall only be eligible to earn a pro rata portion of
his Annual Bonus in respect of such calendar year, based on the number of days
during such calendar year in which Executive is employed hereunder.
(b) Deferred Compensation Plan. During the term of this Agreement, Executive
shall be eligible to participate in any deferred compensation plan or program
maintained by the Companies from time to time in which other senior executives
of the Companies participate, on terms comparable to those applicable to such
other senior executives.
3.3 Benefit Plans and Perquisites.
(a) Generally. The Companies shall provide Executive, during the term of his
employment hereunder, with coverage under all employee benefit programs, plans
and practices (commensurate with his positions in the Companies and to the
extent permitted under any employee benefit plan) in accordance with the terms
thereof, which the Companies make available to its senior executives and other
employees including, without limitation, retiree medical insurance program as in
effect as of the date of Executive's retirement from employment hereunder;
provided, however, that at the Companies' discretion, Service Corporation may
pay Executive an amount in cash sufficient, in the good faith determination of
the Companies, for Executive to purchase a retiree medical insurance policy for
Executive (and his eligible dependents) that provides retiree medical insurance
benefits that are equivalent to such benefits as provided under the Companies'
retiree medical insurance program to their senior executives as in effect at
such time.
(b) Perquisites. Executive shall be entitled to the perquisites and other fringe
benefits generally made available to senior executives of the Companies,
commensurate with his position with the Companies, including, without
limitation: (1) use of memberships sponsored by the Companies for their senior
executives at local country clubs and/or local luncheon clubs; (2) use of any
aircraft owned or leased by the Companies for transportation of their
executives, for both business and personal use, in accordance with the
Companies' policies in effect from time to time for senior executives; (3)
gross-up payments to cover applicable federal, state and local income taxes on
such portion of any imputed income associated with Executive's personal use of
aircraft owned or leased by the Companies and in accordance with such
calculation methodology as may be determined from time to time by the Human
Resources Committee of the Board; and (4) participation in the Companies'
financial counseling program as in effect for senior executives from time to
time.
(c) Life Insurance. During the term of this Agreement, Service Corporation will
use its reasonable best efforts to purchase and maintain, for the benefit of
Executive and his designated beneficiaries, a universal life insurance policy
that provides at least a $3,000,000 death benefit.
(d) Credit for Service; Pension Benefit. The Companies and Executive hereby
agree that the opening balance of Executive's cash balance account under the AEP
Excess Benefit Plan shall be $2,100,000, in which account Executive shall become
vested, subject to his continued employment hereunder, in increments of twenty
percent (20%) on each of the first five anniversaries of the Commencement Date.
In recognition of his prior experience, the Companies and Executive also agree
that Executive's cash balance account under the AEP Excess Benefit Plan shall,
effective as of the Commencement Date, be credited with an amount such that the
total credit under the AEP Retirement Plan and the AEP excess Benefit Plan shall
be the maximum rate permitted under such plans as amended from time to time
(currently 8.5%) on all eligible earnings thereunder (which eligible earnings
may not exceed $1,000,000 annually). Subject to the foregoing in this Section
3.3(d), all other provisions of the AEP Retirement Plan and AEP Excess Benefit
Plan as in effect from time to time shall apply to Executive's participation
therein.
(e) Vacation. During the term of this Agreement, Executive shall be entitled to
five weeks of paid vacation (and such paid holidays as provided to senior
executives of the Companies under the applicable vacation policy in effect from
time to time), to be taken at such time(s) as Executive and the Board reasonably
agrees is appropriate.
(f) Reimbursement of Business Expenses. Executive is authorized to incur
reasonable expenses in carrying out his duties and responsibilities under this
Agreement, including reimbursement for any reasonable automobile expenses
(including mileage) incurred in connection with travel (other than for any
commute between Executive's principal office location and primary residence) by
Executive in performance of his duties. Service Corporation shall promptly
reimburse Executive for all reasonable business expenses incurred in connection
with the performance of his duties hereunder, subject to Executive's provision
of reasonable documentation of such expenses in accordance with the Companies'
business expense reimbursement policy for senior executives.
(g) Payment of Relocation Expenses. To assist Executive in relocating from his
principal residence (as of the date hereof) to Columbus, Ohio, Executive shall
participate in the Relocation Expense Policy for Newly Hired Exempt Employees (a
copy of which is attached as Exhibit A hereto).
3.4 Long-Term Incentive Awards. During the term of this Agreement, AEP shall
provide Executive with the opportunity to participate in the American Electric
Power System 2000 Long-Term Incentive Plan, as amended from time to time (the
"LTIP"), under which AEP shall grant to Executive the following equity-based
compensation awards, which shall, as of the Commencement Date, have an aggregate
target value equal to 360% of Executive's Base Salary: (a) Stock Options. On the
Commencement Date, AEP shall grant to Executive options to purchase not less
than 149,000 shares of common stock of AEP ("AEP Stock") pursuant to the LTIP
(the "Options"). Subject to Executive's continued employment hereunder, the
Options shall vest as to one-third of the shares subject to the Options on the
January 1 following each of the first three anniversaries of the grant date of
the Options, and otherwise shall be granted on such terms and pursuant to such
award agreements as provided to senior executives of the Companies generally
under the LTIP.
(b) Performance Shares. On the Commencement Date, Executive will be
awarded 119,000 performance share units pursuant to the LTIP. The actual number
of performance share units that may be earned will be subject to the
satisfaction of the performance metrics to be established by the Human Resources
Committee of the Board. Executive shall vest in any such earned performance
share units, subject to the Executive's continued employment, on December 31,
2006 and otherwise shall be granted such units on such terms and pursuant to
such award agreements as provided to senior executives of the Companies
generally for AEP performance share units. As a performance share unit
participant, Executive will be subject to a stock ownership requirement
determined and periodically adjusted by the Human Resources Committee of the
Board.
3.5 Payments and Provisions in Respect of Employment.
(a) Bonus Restricted Stock. On the Commencement Date, AEP shall
grant to Executive 100,000 shares of AEP Stock ("Bonus Stock") pursuant to the
LTIP. Subject to Executive's continued employment hereunder, fifty percent (50%)
of the Bonus Stock shall vest on January 1, 2005 and the remaining fifty percent
(50%) of the Bonus Stock shall vest on January 1, 2006 and otherwise the Bonus
Stock shall be granted on such terms and pursuant to such award agreement as
provided to senior executives of the Companies generally under the LTIP.
(b) Replacement of Long-Term Incentive Awards. In consideration for Executive's
forfeiture of certain long-term incentive compensation awards, on the
Commencement Date, AEP shall grant to Executive 200,000 shares of AEP Stock
("Restricted Stock") pursuant to the LTIP. Subject to Executive's continued
employment hereunder, the Restricted Stock shall vest as to one-third of the
shares on each of November 30, 2009, November 30, 2010 and November 30, 2011,
and otherwise the Restricted Stock shall be granted on such terms and pursuant
to such award agreement as provided to senior executives of the Companies
generally under the LTIP.
4. Termination of Employment.
4.1 Termination Not for Cause. Either of the Companies may terminate Executive's
employment hereunder at any time other than for Cause (as defined in Section 4.4
hereof).
(a) If Executive's employment hereunder is terminated by the Companies other
than for Cause (as defined in Section 4.4 hereof) (and other than as a result of
Executive's death or Permanent Disability (as defined in Section 4.2 hereof))
during the term of this Agreement, Executive shall receive from Service
Corporation the following:
(1) all "Accrued Benefits", which term is defined as the following: (x) any
accrued but unpaid Base Salary through the date of termination, payable in
a lump sum promptly after such termination of employment; (y) any earned
but unpaid Annual Bonus in respect of any previously completed calendar
year of the Companies, payable in a lump sum promptly after such
termination of employment; and (z) such payments under applicable plans,
policies and programs, including but not limited to those referred to in
Section 3.3 hereof, to which he is entitled upon such termination of
employment pursuant to the terms of such plans, policies or programs; and
(2) continued payment of Base Salary, at the rate in effect immediately prior
to the date of Executive's termination of employment, for the two year
period immediately following the date of such termination of employment,
paid in substantially equal installments in accordance with the ordinary
payroll practices of the Companies; and
(3) subject to Executive's election to receive group health coverage from
Service Corporation under the Consolidated Omnibus Reconciliation Act of
1985, as amended, continued participation, at the same level of expense
paid by Executive prior to such termination, in all medical, dental, vision
and hospitalization insurance programs (collectively, the "Welfare Plans")
in which Executive (and his eligible dependents) were participating on the
date of his termination until the earlier of: (x) the first anniversary of
the date of termination of Executive's employment or (y) the date, or
dates, Executive becomes eligible for coverage and benefits under similar
plans and programs of a subsequent employer. Executive shall promptly
advise the Companies of any such subsequent employment and the benefits he
receives in connection therewith.
(b) Effect of Change in Control. Notwithstanding the foregoing, upon a
termination of Executive's employment that would entitle Executive to receive
payments and benefits under that certain Service Corporation Change in Control
Agreement for the Office of the Chairman that Service Corporation and Executive
agree to enter into on the date hereof, which agreement shall be substantially
in the form attached hereto as Exhibit B (the "Change in Control Agreement"),
Executive shall be entitled to the payments and benefits provided under the
Change in Control Agreement in lieu of the payments and benefits otherwise
provided under Section 4.1(a) to the extent applicable.
4.2 Permanent Disability. If Executive becomes totally and permanently disabled
(as defined in any long-term disability benefit plan of the Companies applicable
to senior executive officers as in effect on the date thereof) ("Permanent
Disability"), the Companies or Executive may cause Executive to be removed from
the positions held hereunder upon written notice thereof, and Executive shall
receive or commence receiving as soon as practicable: (a) amounts payable
pursuant to the terms of any disability insurance policy or similar arrangement
which the Companies maintain during the term hereof; and (b) the Accrued
Benefits, if any. In the event of a judicial determination of Executive's
incompetence, reference in this Agreement to Executive shall be deemed, where
appropriate, to refer to his legal representative.
4.3 Death. In the event of Executive's death during the term of this Agreement
hereunder, Executive's estate or designated beneficiaries shall receive or
commence receiving, as soon as practicable (a) any death benefits provided under
the employee benefit programs, plans and practices, including those referred to
in Section 3.3 hereof, in accordance with their terms and (b) any other Accrued
Benefits. In the event of Executive's death, reference in this Agreement to
Executive shall be deemed, where appropriate, to refer to his beneficiary,
estate or other legal representative, as applicable.
4.4 Discharge for Cause; Voluntary Termination by Executive. During the term of
this Agreement, (i) either of the Companies shall have the right to terminate
the employment of Executive hereunder for Cause (as defined in and in accordance
with Section 4.4(b) below) at any time and [(ii) Executive shall have the right
to terminate his employment hereunder, other than as a result of Executive's
Permanent Disability or death, at any time following at least sixty (60) days
advance written notice to the Companies of such termination.
(a) Effect of Termination. During the term of this Agreement, in the event that
Executive's employment is terminated hereunder by the Companies for Cause, or by
Executive other than as a result of Executive's Permanent Disability or death,
Executive shall only be entitled to receive any amounts to which he has a
nonforfeitable right under any employee benefit programs or plans referred to in
3.3 hereof, in accordance with their terms, and any other Accrued Benefits.
After the termination of Executive's employment under this Section 4.4(a), the
obligations of the Companies under this Agreement to make any further payments,
or provide any benefits specified herein, to Executive shall thereupon cease and
terminate.
(b) Definition of Cause. As used herein, the term "Cause" shall be limited to
(1) willful malfeasance or willful misconduct by Executive in connection with
his employment, (2) continuing refusal by Executive to perform his duties
hereunder or any direction of the Board, after notice and a reasonable
opportunity to perform such duties or direction was given to Executive by the
Board, (3) any breach of the provisions of Section 7 of this Agreement by
Executive or any other material breach of this Agreement by Executive or (4) the
commission by Executive of any misdemeanor involving moral turpitude or a
felony. Termination of Executive pursuant to this Section 4.4 shall be made by
delivery to Executive of a copy of a resolution duly adopted by the affirmative
vote of not less than a majority of the directors at a meeting of the Board
called and held for the purpose (after 30 days prior written notice to Executive
and reasonable opportunity for Executive to be heard before the Board prior to
such vote), finding that in the good faith business judgment of such Board,
Executive was guilty of conduct sat forth in any of clauses (1) through (4)
above and specifying the particulars thereof.
5. Mitigation of Damages; Offset. Executive shall not be required to mitigate
damages or the amount of any payment provided for under this Agreement by
seeking other employment or otherwise after the termination of his employment
hereunder. Notwithstanding the foregoing, any payments received by Executive
from other employment after any termination of Executive's employment hereunder
shall reduce any payments to which he would otherwise be entitled from the
Companies hereunder.
6. Notices. All notices or communications hereunder shall be in writing,
addressed as follows:
To the Companies:
c/o American Electric Power Company, Inc.
1 Riverside Plaza
Columbus, Ohio 43215
(attn: General Counsel)
To Executive:
Mr. Michael G. Morris c/o American Electric Power Company,
Inc. 1 Riverside Plaza
Columbus, Ohio 43215
Any such notice or communication shall be delivered by hand or by courier or
sent certified or registered mail, return receipt requested, postage prepaid,
addressed as above (or to such other address as such party may designate in a
notice duly delivered as described above), and the third business day after the
actual date of mailing shall constitute the time at which notice was given.
7. Nondisclosure of Confidential Information.
7.1 Nondisclosure of Confidential Information. Executive shall not, at any time
during the term of this Agreement or thereafter, without the prior written
consent of the Companies, use, divulge, disclose or make accessible to any other
person, firm, partnership, corporation or other entity any Confidential
Information (as defined below) pertaining to the business of the Companies or
any of their affiliates, except (a) while employed by the Companies, in the
business of and for the benefit of the Companies, or (b) when required to do so
by a court of competent jurisdiction, by any governmental agency having
supervisory authority over the business of the Companies, or by any
administrative body or legislative body (including a committee thereof) with
jurisdiction to order Executive to divulge, disclose or make accessible such
information. Notwithstanding anything herein to the contrary, any party to this
Agreement (and any employee, representative, or other agent of any party to this
Agreement) may disclose to any and all persons, without limitation of any kind,
the tax treatment and tax structure of the transactions contemplated by this
Agreement and all materials of any kind (including opinions or other tax
analyses) that are provided to it relating to such tax treatment and tax
structure. However, any such information relating to the tax treatment or tax
structure is required to be kept confidential to the extent necessary to comply
with any applicable federal or state securities laws. For purposes of this
Section 7, "Confidential Information" shall mean non-public information
concerning the finances, strategic business plans, product development (or other
proprietary product data), marketing plans and other non-public, proprietary and
confidential information of the Companies, their affiliates or their customers.
7.2 Restrictive Covenants. The Executive acknowledges and recognizes the highly
competitive nature of the businesses of the Companies and their affiliates and
accordingly agrees as follows:
(a) Covenant Not to Compete. During the Term of Employment and the Restricted
Period (as defined below), Executive will not directly or indirectly:
(1) engage in any business that is a Competing Business (as defined
below);
(2) enter the employ of, or render any services to, any person or entity
(or any division of any person or entity) which is a Competing
Business;
(3) acquire a financial interest in, or otherwise become actively involved
with or in, any Competing Business, directly or indirectly, as an
individual, partner, shareholder, officer, director, principal, agent,
trustee or consultant; or
(4) interfere with, or attempt to interfere with, business relationships
(whether formed before, on or after the date of this Agreement)
between the Companies and any of its affiliates and their respective
material customers, clients or suppliers.
(b) Permitted Activities. Notwithstanding anything to the contrary in this
Agreement, during the term of this Agreement and thereafter, Executive may: (x)
directly or indirectly own, solely as an investment, securities of any person
engaged in a Competing Business which are publicly traded on a national or
regional stock exchange or on the over-the-counter market if Executive (1) is
not a controlling person of, or a member of a group which controls, such person
and (2) does not, directly or indirectly, own one percent (1%) or more of any
class of securities of such person (excluding any interest Executive owns
through a mutual fund, private equity fund or other pooled account).
(c) Covenant Not to Solicit Employees. During the term of this Agreement and the
Restricted Period, Executive will not, whether on Executive's own behalf or on
behalf of or in conjunction with any person, company, business entity or other
organization whatsoever, directly or indirectly hire any executive or employee
who was employed by either of the Companies (or any of their major subsidiaries)
as of the date of Executive's termination of employment with the Companies or
who left the employment of the Companies coincident with, or within twelve (12)
months prior to or after, the termination of Executive's employment with the
Companies (provided that nothing herein shall prevent Executive from the general
advertising for employees or from serving as a reference for an employee of the
Companies).
(d) Definitions. For purpose of this Section 7, (1) the term "Competing
Business" shall mean any business in a geographic area in which the Companies or
any of their major subsidiaries engage, in any such case at the relevant time
during the term of employment or on the date of any termination of Executive's
employment hereunder, as applicable, and (2) the term "Restricted Period" shall
mean the period beginning on the date on which Executive's employment hereunder
terminates, for any reason, through the second anniversary of such date.
7.3 Reasonableness of Covenants; Remedies.
(a) Reasonableness of Covenants. Executive and the Companies agree that the
foregoing nondisclosure and other restrictive covenants are reasonable covenants
under the circumstances, and further agree that if in the opinion of any court
of competent jurisdiction any such restraints are not reasonable in any respect,
such court shall have the right, power and authority to excise or modify such
provision or provisions of these covenants as to the court shall appear
reasonable and to enforce the remainder of the covenants as so amended.
(b) Remedies. Executive agrees that any breach of the covenants contained in
this Section 7 would irreparably injure the Companies. Accordingly, Executive
agrees that (1) Service Corporation may cease any payments being made under
Section 4 of this Agreement and/or (2) either of the Companies may, in addition
to pursuing any other remedies it may have in law or in equity, obtain an
injunction against Executive from any court having jurisdiction over the matter
restraining any further violation of this Agreement by Executive.
8. Withholding Taxes. The Companies may withhold from any amounts payable under
this Agreement to Executive such Federal, state, local and other taxes as may be
required to be withheld pursuant to any applicable law or regulations.
9. Governing Law; Resolution of Disputes.
9.1 Governing Law. This Agreement shall be construed, interpreted and governed
in accordance with the laws of the State of Ohio, without reference to rules
relating to conflicts of law.
9.2 Resolution of Disputes. Subject to the provisions of Section 7.3, any
disputes arising under or in connection with this Agreement shall be resolved by
binding arbitration, to be held in Columbus, Ohio, in accordance with the rules
and procedures of the American Arbitration Association. Judgment upon the award
rendered by the arbitrator(s) may be entered in any court having jurisdiction
thereof. Each party to this Agreement shall bear his or its own costs of the
arbitration.
10. Entire Agreement; Amendments.
10.1 Entire Agreement and Effect on Prior Agreements. This Agreement contains
the entire understanding between the parties hereto and supersedes in all
respects any prior or other agreement or understanding between the Companies or
any affiliate of the Companies and Executive.
10.2 Amendments and Waivers. No provision in this Agreement may be amended
unless such amendment is agreed to in writing and signed by Executive and an
authorized officer of either of the Companies. No waiver by any party hereto of
any breach by another party of any condition or provision contained in this
Agreement to be performed by such other party shall be deemed a waiver of a
similar or dissimilar condition or provision at the same or any prior or
subsequent time. Any waiver must be in writing and signed by Executive or an
authorized officer of either of the Companies, as the case may be.
11. Severability; Survivorship.
11.1 Severability. In the event that any provision or portion of this Agreement
shall be determined to be invalid or unenforceable for any reason, in whole or
in part, the remaining provisions of this Agreement shall be unaffected thereby
and shall remain in full force and effect to the fullest extent permitted by law
so as to achieve the purposes of this Agreement.
12. Survivorship. Except as otherwise expressly set forth in this Agreement, the
respective rights and obligations of the parties hereunder shall survive any
termination of Executive's employment. Upon the expiration of the term of the
Agreement, the respective rights and obligations of the parties shall survive
such expiration to the extent necessary to carry out the intentions of the
parties as embodied in the rights (such as vested rights) and obligations of the
parties under this Agreement.
13. Assignment. This contract shall be binding upon and inure to the benefit of
the heirs and representatives of Executive and the assigns and successors of the
Companies, but neither this Agreement nor any rights or obligations hereunder
shall be assignable or otherwise subject to hypothecation by Executive (except
by will or by operation of the laws of intestate succession) or by either of the
Companies, except that either of the Companies may assign this Agreement to any
successor (whether by merger, purchase or otherwise) to all or substantially all
of the stock, assets or businesses of the Companies, if such successor expressly
agrees to assume the obligations of the Companies hereunder.
14. Counterparts. This Agreement may be executed in two or more counterparts,
each of which will be deemed an original.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first written above.
AMERICAN ELECTRIC POWER COMPANY INC.
By /s/ John P. DesBarres
Name: John P. DesBarres
Title: Chairman, Human Resources
Committee of American Electric
Power Company
AMERICAN ELECTRIC POWER SERVICE CORPORATION
By /s/ John P. DesBarres
Name: John P. DesBarres
Title: Chairman, Human Resources
Committee of American Electric
Power Company
EXECUTIVE
/s/ Michael G. Morris
Michael G. Morris
EXHIBIT A
AMERICAN ELECTRIC POWER
RELOCATION
EXPENSE POLICY
GUIDELINES
FOR
**EXEMPT EMPLOYEES**
and
**NON-EXEMPT SUPERVISORS**
and
**NEWLY HIRED EXEMPT EMPLOYEES**
SALARY GRADES 26 AND ABOVE
EFFECTIVE MAY 1, 2002
(Revised March 1, 2003)
AMERICAN ELECTRIC POWER
RELOCATION EXPENSE POLICY GUIDELINES
FOR EXEMPT EMPLOYEES & NON-EXEMPT SUPERVISORS
AND NEWLY HIRED EXEMPT EMPLOYEES -SALARY GRADES 26 AND ABOVE
Effective May 1, 2002 (Revised March 1, 2003)
THIS RELOCATION POLICY AND OTHER USEFUL INFORMATION ON YOUR RELOCATION IS
AVAILABLE ON-LINE AT WWW.SIRVARELOCATION.COM. THIS IS THE WEBSITE OF SIRVA
Relocation (SIRVA), AEP'S RELOCATION VENDOR. YOU WILL BE EMAILED A USER LOGIN ID
AND PASSWORD AT THE ONSET OF YOUR RELOCATION. PLEASE VISIT THIS SITE FOR ANSWERS
TO YOUR QUESTIONS AND OTHER HELPFUL MOVING TIPS.
PLEASE DO NOT CONTACT ANY REAL ESTATE AGENTS OR SIGN ANY LISTING AGREEMENTS,
CONTRACTS OR OTHER DOCUMENTS PRIOR TO SPEAKING WITH YOUR DESIGNATED SIRVA
RELOCATION COUNSELOR.
TABLE OF CONTENTS
ARTICLE I. ELIGIBILITY
A. Current Employees (Exempt Employees & Non-Exempt Supervisors)
B. Newly Hired Exempt Employees in Salary Grades 26 & Above
ARTICLE II. MARKETING AND DISPOSAL OF PRESENT RESIDENCE
A. Home Defined
B. Home Sale Assistance
1. Marketing Assistance Program
2. Marketing Assistance Program Bonus
3. Safety-Net
4. Guaranteed Purchase Offer
5. Vacate Date
6. Negative Equity
7. Cost of the Home Sale Program
8. Selling Home Outside the Home Sale Assistance Program
C. Loss on Sale Protection
D. Lease Agreements
E. Land Contracts
F. Mobile Homes
ARTICLE III. NEW RESIDENCE
A. Lump Sum Payment - House Hunting/Temporary Living/Return Trips
B. Final Move Expenses
C. Miscellaneous Expense Allowance (Current AEP Employees Only)
D. Duplicate Housing Expenses
E. Equity Loan
F. Movement of Household Goods
ARTICLE IV. MORTGAGE ASSISTANCE
A. Point Reimbursement Payments
B. Mortgage Companies
ARTICLE V. TAXABILITY OF REIMBURSED EXPENSES
A. IRS 50-Mile Test
B. Tax Allowance/Gross Up
ARTICLE VI. ADMINISTRATION OF POLICY
ATTACHMENT I - EQUITY LOAN AGREEMENT and PROMISSORY NOTE
ATTACHMENT II - RELOCATION SERVICES EMPLOYMENT CONTRACT
(Newly Hired Exempt Employees Only)
The AEP relocation policy provides for reimbursement of certain, designated
expenses which are directly related to the domestic relocation of an eligible
employee who is requested by the Company to relocate to a new work location. The
policy is designed to help relieve employees of the financial and physical
burdens which normally accompany a relocation. Through close adherence to the
policy, efficiency and consistency of all employee relocations can be assured.
ARTICLE I. ELIGIBILITY
A. Current Employees
Regular, full time exempt employees and non-exempt supervisors are
eligible for full coverage and all benefits under the relocation policy.
Employees are eligible for benefits under this policy provided:
1. The relocation is considered permanent or indefinite (i.e., there is
no predetermined intention to return or transfer the employee back
to the previous location or to another location within a one-year
period), and
2. The Company requests the employee to relocate.
B. Newly Hired Exempt Employees in Salary Grades 26 and Above
Newly hired exempt employees in salary grades 26 and above are eligible
for full coverage and all benefits under the relocation policy except the
Miscellaneous Expense Allowance. The new employee will be required to
enter into a RELOCATION SERVICES - EMPLOYMENT CONTRACT (Attachment II)
with the Company whereby he/she agrees that upon voluntary termination
from the Company within one year of employment he/she will upon request
from the Company be required to reimburse the Company for all payments
made to him/her or in his/her behalf except those made pursuant to article
III, sections A and E.
ARTICLE II. MARKETING AND DISPOSAL OF PRESENT RESIDENCE
The Company has contracted with SIRVA Relocation (SIRVA) an international
relocation services firm, to assist relocating employees in finding potential
buyers for their homes. If these efforts prove unsuccessful, SIRVA will also
offer to purchase the homes of employees, subject to the property meeting
SIRVA's minimum requirements, as described on page 6. In addition, SIRVA will
assist the employee in locating a home for purchase at the new work location
area (Destination Services). SIRVA will also provide assistance in the movement
of the household goods through its Moving Services unit (see Article III-E).
The home marketing and disposal benefit assists a transferring employee in
finding a suitable buyer who is willing to pay at or near the most
probable sales price for the home, and disposing of his/her home in the
most efficient possible manner. An eligible employee has the option of:
(1) selling the home under the Home Sale Assistance Program as described
in Section B below; or (2) attempting to sell the home on his/her own
outside the Home Sale Assistance Program.
In order to maximize your relocation benefits do not contact any real
estate agents prior to your initial contact with your individual
Relocation Counselor at SIRVA Relocation (SIRVA). SIRVA will provide you
with a list of qualified agents who specialize in relocation moves in your
area. From this list, you may choose the agent with whom you would like to
list the property. If you choose an agent that is not on SIRVA's approved
list, the agent must be qualified in advance and agree to pay a referral
fee to SIRVA.
A. Home Defined
Home shall mean improved real estate:
1. which is, at the issuance by the Company of the SIRVA relocation
assistance authorization, employee-owned and occupied primary,
single-family residence, townhouse; two-family (duplex) provided the
employee resides in one unit, or condominium unit provided said unit
meets FNMA (Fannie Mae) / FHLMC (Freddie Mac) approval. Excluded are:
any income producing properties; resort properties; mobile homes not
permanently affixed to the property (See Article II, Section F);
cooperative units; farms; homes with acreage that does not conform to
the immediate area; properties on which clear title cannot be
delivered; properties which do not qualify for conventional mortgage
financing; properties that have black mold; properties that have an
unresolved EIFS exterior finishing problem; properties in which
inspections conducted disclose defects which rendered the property
unmarketable and/or the employee does not repair to the satisfaction
of Supplier.
2. which shall include only the items of personal property set forth in
the Contract of Sale;
3. with respect to which all mortgages can be prepaid. If a prepayment
penalty is required, it must not exceed the greater of:
o one percent (1%) of the original loan, or
o six months interest on the principal balance prepaid
4. with respect to which insurance is available at standard rates for
normal hazards of fire and extended coverage;
5. with respect to which all leases can be terminated by SIRVA with no
more than a (60) sixty-day notice to the lessor;
6. which is not situated on or near and does not contain any hazardous or
toxic materials or gases, including but not limited to black mold,
asbestos, lead paint, radon gas, urea formaldehyde foal insulation
(UFFI), or an unresolved exterior insulating and finishing system
problem (EIFS);
7. which contains acreage (lot size) within the norm and specific zoning
limits for that particular locale or neighborhood. If there is excess
acreage, SIRVA will not purchase more than is considered to be
necessary to make the residence salable;
8. in which the employee has clear and marketable title;
9. which has all the normal characteristics of a home such as potable
running water, sewage or septic system, electricity, etc., and
10. which has been repaired by the employee or where repairs are necessary
as a result of inspections or appraisals.
B. Home Sale Assistance
An eligible employee who owns a home at the former location, which meets
the above definition, may elect to sell the home through the Home Sale
Assistance Program offered by SIRVA. SIRVA will be authorized to contact
the employee by the Company at the onset of the move to start the Home
Sale Program as well as other relocation benefits.
1. Marketing Assistance Program
All qualified relocating employees are eligible to participate in the
Marketing Assistance Program offered by SIRVA. The Marketing Assistance
Program is designed specifically to assist employees in finding potential
buyers for their homes. Employees are required to market their home for a
ninety (90) day marketing period before they may accept the Guaranteed
Purchase Offer described below.
SIRVA's assistance includes the selection of relocation specific Realtors,
assistance in effectively pricing the employee's home for sale, the
development of an effective marketing plan and the tax-efficient purchase
of the employee's home by SIRVA, at acceptable price, terms and conditions
to the employee. With SIRVA's help:
-- The employee should sell their home quickly at the highest attainable
market price (The best opportunity to maximize the asking price of a
home is during the first 30 days of listing, when market excitement
about the home is highest and buyer traffic is at its greatest.)
-- The employee will not incur any costs of sale such as commissions
and/or statutory closing costs. These costs will be incurred by SIRVA.
-- The employee is not required to attend the ultimate closing on their
old home.
-- The employee is protected from contracts or buyers that "fall-through"
once SIRVA has committed to buy the home. If the ultimate market buyer
fails to close on the purchase of the employee's home, SIRVA is solely
responsible for the disposal of the property.
IMPORTANT: In order to preserve their relocation benefits, employees
should not make any agreement or sign any document or accept any money
before speaking with their Relocation Counselor at SIRVA to discuss the
home sale process.
To be eligible for the benefits described above, the employee must fully
comply with the guidelines set forth below:
-- The employee agrees to execute the SIRVA Option Agreement, which
details the terms and conditions under which SIRVA will purchase their
home.
-- The employee agrees to work with SIRVA recommended real estate agents
for home listing and at the employee's option, for home finding in the
new location.
-- The employee agrees to allow SIRVA to market the home at a price no
greater than 105% of the most probable selling price as indicated by
the average of at least two Broker Price Opinions (BPO's) rendered by
two independent realty agents approved by SIRVA.
-- The employee agrees to cooperate with their chosen listing agent in
showing the property to prospective buyers and with any inspectors
authorized by SIRVA and/or a prospective buyer.
Additionally, an employee's property must qualify for the home sale
program. The employee must also disclose any known defects to the property
that may affect its marketability. The SIRVA Relocation Counselor will
help evaluate a property's eligibility, provide more detail, and answer
all questions that may arise.
Once the employee executes the Option Agreement and agrees to a suitable
list price for their home, SIRVA will handle all the administrative
details of marketing the home during the 90 day marketing period. The
SIRVA Relocation Counselor will discuss with the employee all market
offers and will negotiate the highest attainable price for the home, which
will represent the fair market value at which SIRVA will exercise its
option to purchase the employee's home. Once the employee agrees to the
fair market value, the employee will enter into a binding contract with
SIRVA and a date at which the employee will receive the proceeds of the
sale will be established.
The employee's equity will be computed and expenses prorated as of the
date SIRVA accepts the contract of sale or vacating date, whichever is
later. SIRVA will then complete the sale with the buyer. The homesale
process is considered final once it is determined that the buyer has been
financially qualified to purchase the employee's home, inspections by the
buyer have been completed and addressed, and all contracts have been
approved by SIRVA, regardless of whether SIRVA is able to complete the
sale to the buyer.
2. Marketing Assistance Program Bonus
Employees in the Marketing Assistance Program will receive a bonus of the
greater of two percent (2%) of the selling price, or $1,000, if the
outside offer is determined to be acceptable by SIRVA. Employees who do
not use the Marketing Assistance Program are not eligible for this
benefit.
The 2% Bonus payment will be made to the employee by The Company when the
homesale process between the employee and SIRVA is considered final, and
will not be contingent on whether SIRVA is able to complete the sale with
the buyer. The payment will be considered ordinary income and will NOT be
grossed up for tax purposes.
3. Safety Net
In the possible event the employee is unable to find a buyer for his/her
home, the Company will also authorize SIRVA to prepare a back-up home
purchase offer as described in the Guaranteed Purchase Offer section
below.
4. Guaranteed Purchase Offer
After discussing the Marketing Assistance Program with the employee, a
SIRVA Relocation Counselor will provide a list of up to four (4)
qualified, licensed independent real estate appraisers from their
nationwide network to perform an ERC Relocation Appraisal on their home.
Upon receipt, the employee will need to select two (2) appraisers from the
list and notify their SIRVA counselor who will work with the employee to
arrange an appointment for the evaluation of their home. After the two
appraisers inspect the employee's home, they will prepare their
independent appraisal reports and determine an appraised value price for
the home. The appraisal process documents the price an educated and
knowledgeable buyer would pay for a home and the price at which an
educated and knowledgeable seller agrees to sell the home. Research,
comparable listings and sales, and a normal ninety-day (90) marketing
period are used in this determination.
The appraisals will be submitted to SIRVA for review. If the appraisal
values are found to be accurate by SIRVA, the two appraisals will be
averaged together and the resulting amount will become the employee's
"Guaranteed Purchase Offer." SIRVA will offer to purchase the employee's
home at this value after 90 days of mandatory home marketing, if the home
has not already sold. SIRVA will notify the employee by telephone of the
offer and confirm the offer in writing. The employee has sixty (60) days
from the 90th day of initial home listing to accept SIRVA's offer.
If the two appraisals are not within a 5% variance of each other, a third
appraisal will be ordered and the closest two shall be averaged to come up
with the employee's "Guaranteed Purchase Offer."
At day 60 of the home marketing time, reasonable and necessary
inspections, including but not limited to, a home inspection, structural,
roof, pest and radon inspections will also be obtained by SIRVA at this
time. The employee is solely responsible for rectifying or repairing any
adverse items that appear on any of the inspections obtained by SIRVA,
before SIRVA will be obligated to purchase the employee's home.
5. Vacate Date
The employee remains responsible for mortgage, taxes, insurance,
maintenance, utility payments and other homeowner expenses until either
the date the property is vacated or the date a new residence is purchased.
(See Article II.D - Duplicate Housing) The vacating date normally will not
be later than sixty (60) days from the date the employee accepts the offer
by SIRVA; however, in unusual cases, extensions may be granted with prior
approval from Human Resources.
6. Negative Equity
In those cases where there is a Negative Equity situation (i.e. employee
mortgage balance is greater than SIRVA's purchase offer/Guaranteed
Purchase Offer), the employee must pay the difference between the mortgage
balance and the Guaranteed Purchase Offer to SIRVA at the time of closing
and sale of the property to SIRVA, should he/she accept SIRVA's purchase
offer. Failure to make this payment to SIRVA will result in the withdrawal
of SIRVA's Guaranteed Purchase Offer. Please see Article II, Section C for
Loss on Sale Protection.
7. Cost of the Home Sale Program
The cost of the Home Sale Program will be paid by the Company.
8. Selling the Home Outside the Home Sale Assistance Program
An employee who otherwise qualified for the Home Sale Assistance Program
and elects to sell his/her home without the aid of SIRVA will be
reimbursed by the Company for the following closing expenses:
o Broker's commission
o Reasonable and customary seller closing costs and legal fees o
Transfer charges and transfer taxes
o Mortgage prepayment penalties as per Article II, Section B.3 (but
not points)
o Taxes other then those incurred due to gain on sale or pro-rated
property taxes
No Guaranteed Purchase Offer will be available to employees who elect to
sell their home outside the Home Sale Assistance Program.
C. Loss on Sale Protection (Grossed-Up)
Employees may occasionally find that real estate conditions force them to
sell their residence for less than it cost them. This feature is designed
to lessen the impact of such a financial loss. Under these circumstances,
the Company will pay the difference between the sales' price to an outside
buyer or the Guaranteed Price Offer (whichever is applicable), and the
original property purchase price (plus documented expenditures for labor
and material used in IRS eligible capital improvements). This payment is
limited to no more than 10% of the Guaranteed Purchase Price.
In order to be eligible for this benefit, the following conditions and
limitations apply:
o The employee must have owned and occupied their single-family home,
townhouse, or condominium located in the United States as their
primary place of residence on the date first notified of their
transfer.
o If the home is on large acreage or is partially an investment
property, loss on sale will be prorated on the basis of the percent of
total value the residence portion represents.
o If the employee shares ownership in the home with anyone other than a
spouse, they must own at least 50% or more of the residence to receive
any assistance. The assistance will be prorated based on their
percentage of ownership.
o Mobile, modular and certain manufactured homes are not eligible except
as noted in Article II, Section F.
o Capital improvements are limited to those deemed allowable by the
Internal Revenue Service (IRS).
o Charges for interest on loans, labor performed by the employee or
his/her family members are not eligible.
o Repairs are not eligible.
The Original purchase price documents plus all documentation for allowable
capital improvements must be presented by the employee to their SIRVA
Relocation Counselor. After the SIRVA review, a final review by AEP's tax
department will be made before authorization. Under no circumstances will
payment be made before the home is sold or acquired by SIRVA. This amount
will be grossed up for income taxes.
D. Lease Agreement
An eligible employee renting his/her primary residence at the time of
relocating who cannot cancel a lease arrangement without being assessed a
penalty, shall be reimbursed by the Company for up to a two-month lease
penalty and loss of deposit for canceling the lease. A copy of the lease
agreement, indicating the penalty, and a paid receipt are required for
reimbursement.
E. Land Contracts
For those eligible employees who have entered into a Land Contract
agreement, the Home Sale Assistance Program is not available unless the
employee is able to provide a clear title to the property or acceptable
termination procedures are included with the Land Contract agreement.
F. Mobile Homes
When a mobile or pre-manufactured home is on property owned by the
employee, is affixed to the property by being on a permanent concrete
footer and poured concrete blocks (wheels, axle, and tongue removed), has
all required utilities connected, meets FNMA/FHLMC financing criteria and
meets criteria for conventional mortgage financing (such as having a
perimeter block foundation), the Home Sale Assistance portion of the
Relocation Policy will apply. If a mobile or pre-manufactured home does
not meet the criteria described above, special arrangements may be made to
assist the employee with the sale of their home.
If a mobile or pre-manufactured home has not become affixed to property
owned by the employee as described above, the Company will pay for the
tear down, transportation and set up of the mobile home. In this type of
situation, the Company does not buy the mobile home, but will reimburse
the employee for sales commission and selling expenses if the employee
sells the mobile home. Under no circumstances, will the Company purchase
vacant land.
ARTICLE III. NEW RESIDENCE
The employee will receive professional assistance from SIRVA in locating homes
in the destination location that meet the employee's needs. The Relocation
Counselor will help the employee assess preferences, describe the assistance
available and arrange for a free mortgage financing pre-qualification and
consultation prior to the first home finding trip. The employee's Relocation
Counselor will arrange appointments with one or more SIRVA designated Realtors
to personally assist with area orientation and home shopping.
In an effort to improve the quality of real estate agent selection and control
costs, AEP is using a "Broker Registration" program with SIRVA. If the employee
wants to use an agent outside of SIRVA's recommendation, the employee must
register their agent choice with the SIRVA Relocation Counselor. All brokers
selected will be responsible for paying a referral fee to SIRVA.
A. The Lump Sum Payment (Grossed-Up)
The Company will provide a Lump Sum Payment to cover expenses related to
House Hunting, Return Trips Home and Temporary Living, (e.g. travel,
mileage, rental car, lodging, meals, telephone, parking, tolls,
babysitting, and other miscellaneous expenses). Payment of this Lump Sum
will generally be made within one month of the payroll transfer date to
the new work location. The amount of the payment will vary depending on
the distance from the employee's former home to the new work location as
follow:
Long Move (50 or more miles) $ 6,000 (less FICA taxes)
Short Move (less than 50 miles) $ 2,500 (less FICA taxes)
Note: For those transferees too far away to drive (normally 350 miles),
the reasonable cost of air-fare will be reimbursed in addition to the Lump
Sum Payment allowance, with prior approval.
The employee's FICA expense on this payment will be withheld providing the
employee does not exceed the FICA income base in the year of the move.
Employees are also eligible for up to 5 days off with pay for house
hunting trips and up to 3 days off with pay for the final move trip to the
new work location, as needed. Additional time off with pay may be
available at the discretion of the supervisor.
The SIRVA Relocation Counselor will explain all the details of the expense
reimbursement process for the following benefit areas including Selling
The Home Outside the Home Sale Assistance Program, Loss on Sale
Protection, Lease Break Assistance, The Lump Sum Payment, Final Move
Expenses, The Equity Loan, Home Purchase Expense (where applicable),
Duplicate Housing Expenses, Miscellaneous Expense Allowance and other
potential expenses.
B. Final Move Expenses
The employee will be reimbursed for transportation expenses related to
their final move to the new location. Mileage will be paid at the current
Company mileage rate. Expense coverage for the final move consists of
reasonable meals and lodging for the employee and their family for one day
prior to the departure to the new location, number of days en route (no
vacation or sight-seeing) and arrival day. The employee should submit ALL
receipts on the appropriate Relocation Expense form supplied by the
Company.
Note: Reimbursement for local mileage prior to departure day at the former
location and after arrival day at the new location is NOT reimbursable.
Meals and mileage reimbursement in excess of 12 cents per mile are
included in the employee's earnings for income tax purposes and will be
included in amounts reported as income on the employee's W-2 form. The
Company will gross-up these expenses.
Other travel expenses, including transportation and lodging are excluded
from taxable income and, therefore, will not be tax assisted.
C. Miscellaneous Expense Allowance (Current AEP Employees Only)
A payment to current AEP employees of an amount equal to 100% of one
month's salary (based on the salary at the new location), up to a maximum
of $5,000, will be made by the Company. This payment is intended to help
cover expenses the employee incurs in moving to the new location beyond
the expenses specifically covered in this policy. This payment will be
grossed-up for income taxes and the employee's FICA expense on this
payment will be withheld providing the employee will not exceed the FICA
income base in the year of the move.
D. Duplicate Housing Expenses
Homeowners - After an employee closes on his/her new residence, and if the
employee has not sold his/her former home and is still paying a mortgage
on his/her former home, the Company will reimburse the employee for the
interest portion of the monthly mortgage payments of the former home for a
period of up to sixty (60) calendar days from the date of closing on
his/her new home.
Whether or not the employee had a mortgage on his/her home, the Company
will also reimburse the employee for real estate taxes, property
insurance, utility expenses, and a reasonable amount for lawn care and/or
snow removal. This reimbursement for duplicate residence expenses is
available for a period up to sixty (60) calendar days from the date of
closing on his/her home at the new location.
Employee must be actively marketing former residence in order to be
eligible for duplicate housing expense reimbursement.
E. Equity Loan
Upon entering into a purchase contract on a new residence, the employee
can apply for an equity loan, interest free for 90 days, in an amount
equal to SIRVA's Guaranteed Purchase Offer less any remaining mortgage
balances, less four percent (4%) of the Guaranteed Purchase Offer held
back for contingencies. An equity loan is available for the sole purpose
of purchasing a home or initiating construction at the new location. This
loan is available whether the employee sells his/her home to SIRVA or
whether he/she tries to sell it himself/herself. If the employee
eventually sells the property to SIRVA, the loan amount is deducted from
the final equity due the employee from SIRVA. Any remaining balance of the
four percent (4%) holdback not used for contingencies (taxes, interest,
liens, etc.), is also paid to the employee when the property is sold.
The employee is required to sign the SIRVA Mortgage Equity Loan Agreement
and a Promissory Note to secure an equity loan. (See Attachment I)
The equity loan, which is secured by the Promissory Note, will require
repayment by the employee of the principal, as well as any costs incurred
by SIRVA in collecting the Promissory Note, should the employee default
(i.e., legal costs, collection, termination).
Executive Officers and Directors of American Electric Power Company, Inc.
(AEP) or any AEP subsidiary with publicly registered securities are not
eligible to participate in this program.
F. Movement of Household Goods
The Company has contracted with SIRVA to provide experienced, efficient
moving of all furniture and household effects to the residence at the new
work location. The employee will be contacted by SIRVA's Moving
Coordinator once authorization has been given by the Company. The Move
Coordinator will assign a designated relocation van line to personally
assist the employee with their move.
1. The services provided by the SIRVA designated van line are:
a. Shipment, packing and unpacking of all furniture and household
goods. (One extra pickup and delivery en route to the new
location will also be provided if needed.) Within one week of the
move-in date, the van line will return to pick up packing boxes,
if necessary. Shipment from temporary residence to permanent
residence would be considered as a local move and would require
management approval.
b. All insurance premiums to cover loss or damage to furniture and
household goods caused by fire, theft, collision, or water while
in transit and/or storage on a replacement value basis or less
based on the weight of the shipment. The limit of coverage is
$100k, without a declaration by the employee of greater value,
which will require an added premium.
c. Storage of furniture and household goods for up to sixty (60)
calendar days and delivery out of storage. Extensions of this
60-day limitation must be approved by Human Resources. Storage
means at the moving company's facility only and delivery out of
storage means one movement only.
d. Major appliance disconnection and reconnection. The van line will
transport items such as waterbeds, pool tables, satellite discs
and swing sets, but will not disassemble or reassemble these
items.
e. Shipping of personal vehicles (one car if move is over 500
miles), boats 14 feet and less (including trailer), motorcycles,
riding mowers/garden tractors and snowmobiles, with the number of
each within reason for the size of the family. A second personal
vehicle may be shipped if approved by management.
2. The van line is not authorized to ship:
a. Any animals (including house pets)
b. Trailers, campers or boats longer than 14 feet in length
c. Farm or heavy machinery
d. Furnishings from a second home
e. Firewood, building materials, paint, chemicals, toxic or
flammable materials.
ARTICLE IV. MORTGAGE ASSISTANCE
A. Point Reimbursement Payments
The Company will reimburse an employee for discount point(s) paid to
reduce the interest rate on a mortgage obtained at the new location as
follows:
If 30-year rates are: -REIMBURSE:
8.0% or lower 0 POINTS
8.01% - 9.0% 1 POINT
9.01% - 10.0% 2 POINTS
Over 10.01% 3 POINTS
The 30-year rate for a given month will be the Federal National Mortgage
Association (Fannie Mae) posted yield on 30-year mortgage commitments for
delivery within 30 days as indicated in the Wall Street Journal on the
first working day of each month. The 30-year rate and related point
reimbursement amount will be determined as of the date the employee locks
in a mortgage rate with the new lender.
B. Mortgage Companies
As part of the relocation program, AEP has contracted with SIRVA Mortgage
and Huntington National Bank, to provide mortgage programs to help
employees purchase homes in an efficient and economical manner. Although
AEP is contracted with SIRVA Mortgage and Huntington National Bank,
employee is under no obligation to use either lender. Employee may utilize
a lender of their choice and receive reimbursement of normal and customary
closing costs.
SIRVA Mortgage offers a variety of loan products from prominent national
lenders. SIRVA Mortgage will shop these lenders for you to find the best
rate, product and program for your budget.
A SIRVA Mortgage loan counselor will contact the employee to discuss loan
options and the various lenders within this program. SIRVA Mortgage can be
reached at 1-800-531-3837 or their website at www.sirva.com. Although the
employee is under no obligation to utilize SIRVA Mortgage, it should prove
more beneficial to the employee to do so.
SIRVA's No Closing Cost Loan Program - Non-recurring closing costs
normally paid by the employee are eliminated through a no-closing cost
loan program provided to the Company by SIRVA in conjunction with SIRVA
Mortgage. SIRVA's mortgage program eliminates the need for the employee to
turn in a HUD-1 Settlement Statement for reimbursement and saves the
company valuable tax gross-up dollars.
Under SIRVA's program, the employee will be responsible for non-recurring
costs such as prepaid interest, real estate taxes, and private mortgage
insurance (PMI).
o Purchase must occur within 12 months of the effective date of
relocation
o Purchase must be permanent residence of the associate and his family
o Does not apply to mobile homes or boats
Executive Officers and Directors of American Electric Power Company, Inc.
(AEP) or any AEP subsidiary with publicly registered securities are not
eligible to participate in this program.
Huntington National Bank's Loan Program - AEP has also contracted with
Huntington National Bank to provide alternative mortgage options.
Huntington's loan program will cover normal and customary closing costs
normally incurred by the employee. These costs are generally appraisal
fees, credit report fees, title search, buyer paid title costs, required
attorney's fees, statutory taxes/stamps and reasonable inspection costs.
Should the employee choose Huntington for their mortgage, Huntington will
advance to closing all of the reimbursable costs listed above. This
service eliminates the need for the employee to have or to seek extra
funds to have on hand in order to close. Nor will the employee need to
submit an expense request, as Huntington will directly bill the Company
for the appropriate costs. (This expense is taxable to the employee and
will be grossed-up for income tax liability. Employee will be notified of
their FICA tax liability for this expense.)
The employee can contact Huntington National Bank by calling
1-800-228-5576 or refer to their website at www.huntington.com
An employee utilizing a lender other than SIRVA Mortgage or Huntington
National Bank must provide a copy of their HUD-1 Settlement Statement in
order to be reimbursed the normal and customary closing costs. (This
expense is taxable to the employee and will be grossed-up for income tax
liability when check is issued, and FICA tax on this amount and the
gross-up will be withheld.)
Executive Officers and Directors of American Electric Power Company, Inc.
(AEP) or any AEP subsidiary with publicly registered securities are not
eligible to participate in this program.
ARTICLE V. TAXABILITY ON REIMBURSED EXPENSES
All reimbursements of moving expenses other than certain costs of moving
household goods and 30 days of household goods storage must be reported on the
employee's W-2 as other compensation at the end of the year in which such
reimbursements were received. The Company is required to withhold at statutory
rates for all federal/state/local taxes and FICA (Social Security) up to the
designated yearly base.
A. IRS 50-Mile Test
If a move meets the IRS 50-mile test, the payment for the transportation
of household goods is excluded from the employee's income. If the move
fails the IRS - 50 mile test, the payment for the transportation of
household goods and 30 days of storage are included in the employee's
income. To meet the IRS 50 - mile test, the employee's new work location
must be at least 50 miles farther from their former residence than was
their former work location. (It should be noted that the distance
calculation for the IRS 50 - mile test is different than the Company's
distance calculation used to determine the amount of the Lump Sum Payment
for the less than 50 mile transfer described in Article II. Section A.)
B. Tax Allowance/Gross-Up
The Company will pay to the appropriate taxing authorities on behalf of
the employee a tax allowance approximating the federal, state, and local
income taxes (there will be no tax allowance for any additional FICA
taxes) imposed as a result of the employee receiving from the Company the
following benefits: (1) the one-month salary allowance, (2) the lump sum
payment [which covers house hunting, return trips home and temporary
living, (3) the cost of settling any leases; (4) reimbursement of closing
expenses on the old residence if the employee sells the home without
SIRVA's assistance, (5) the payment for closing costs on the home
purchased at the new location if necessary, (6) the Loss on Sale
Protection payment, if any, and (7) certain duplicate housing expenses.
In the case of a move that fails the IRS - 50 mile Test, the tax allowance
will also cover cost of moving household goods and storage. The tax
allowance itself is additional gross income to the employee, so the
allowance will be "grossed up" to cover the additional tax resulting from
the tax allowance.
The tax allowance will be calculated on the basis of: (1) the employee's
annualized compensation from the Company less the amount the employee is
contributing through the Tax Deferral Option of the Savings Plan, (2) the
standard deduction and the portion of the moving expenses which qualify as
itemized deductions, and (3) the number of exemptions the employee is
entitled to claim on his/her federal income tax return (regardless of the
number claimed on his/her W-4 statement). In addition, only the Company's
W-2 source income will apply as the base for the Tax Assistance. No
outside income such as that from investments, rental properties or trusts
will be considered. Spousal income will also not be eligible for gross-up
unless the spouse also is employed by the Company.
TAX SUMMARY
--------------------------------------------------------------------------
Reimbursement Added to Taxable Tax Assistance (2)
W-2 Income
-------------------------------------------------------------------------
Home Sale Program No No No
--------------------------------------------------------------------------
MAP Home Sale Bonus Yes Yes No
--------------------------------------------------------------------------
Lump Sum Payment Yes Yes Yes
--------------------------------------------------------------------------
Lease Break Penalty Yes Yes Yes
--------------------------------------------------------------------------
Closing Cost on Old Yes Yes Yes
Residence (outside
the Home Sale
Program)
--------------------------------------------------------------------------
Loss on Sale Yes Yes Yes
--------------------------------------------------------------------------
Household Goods (1) No No No
Shipment
and 30 days of
Storage
--------------------------------------------------------------------------
Storage over 30 Yes Yes Yes
Days
--------------------------------------------------------------------------
New Home Purchase Yes*/No Yes*/No Yes*/No
--------------------------------------------------------------------------
Duplicate Housing Yes Yes Yes
--------------------------------------------------------------------------
Tax Assistance (1) Yes Yes Yes
--------------------------------------------------------------------------
1. Tax gross-up on gross-up payments
2. FICA will be withheld up to the yearly base and will not be grossed-up
* If the employee does not utilize SIRVA's `No Closing Cost Loan'
Program *
ARTICLE VI. ADMINISTRATION OF POLICY
A. After an employee has accepted a new position/job transfer, a relocation
authorization will be provided to SIRVA by AEP's Human Resources
Relocation Coordinator. Assuming the house is marketable, the offer
process will be continued. In addition, the employee will be requested to
inform SIRVA of the original purchase price of his/her home and the
outstanding balance of any existing mortgages on the property. If the
employee decides to not accept the transfer, the process will stop upon
notification to SIRVA.
B. In the case of inter-company transfers, the Business Unit into which the
employee is transferred will bear the cost of the relocation.
C. All expenses pertaining to the relocation shall be approved by the Human
Resources Department after review by SIRVA.
D. The Human Resources Department at the new location will offer the employee
such assistance and advice as shall be required.
E. Any exceptions to this policy or home disposal procedures require the
approval of the appropriate member of management. All requests for
exceptions are to be submitted to the Human Resources Department.
ATTACHMENT I
SIRVA Relocation Equity Loan Agreement
and Promissory Note
Employee Name: File No:
Loan Amount $ Check Number: Date Issued:
SIRVA Approval:
Property Address:
$ Date:
For value received, the undersigned Makers hereby promise to pay to SIRVA
Relocation (hereinafter "SIRVA"), or its order, at its designated office, the
principal sum of _________ Dollars ($____) on or before the earliest to occur of
(a) the expiration of an offer by SIRVA to purchase the Maker's home; (b) the
closing of the sale of the Maker's home pursuant to contract of sales between
the Makers, as sellers, and a third party, as buyer, or the failure to
consummate such a sale at the scheduled place and time; (c) cancellation of the
Makers' relocation for any reason whatsoever, or (e) the effective date of
termination of the Relocation Management Agreement between SIRVA and the Makers'
employer of the Equity Loan Agreement Service contained herein, (f) SIRVA
determines that the Agreement and Promissory Note has remained outstanding for
an unreasonable period of time.
In the event that SIRVA purchases the Makers' home, the principal sum due shall
be deducted from the equity due the Makers' under the application contract, and
the deficit, if any, shall become immediately due and payable to SIRVA. In order
to secure repayment of the indebtedness, the Makers' hereby assign, transfer and
set over unto SIRVA all rights, title and interest in and to any agreement for
the sale of the Makers' home which the Makers have entered into or may in the
future enter into, and in and to all sums due or to become due thereunder or
which may be payable on account of the sale of the said Home. Any such sum
received by the Makers shall be held by them in trust as the property of SIRVA,
and shall be paid by the Makers to SIRVA on demand by SIRVA, up to the amount of
the Makers indebtedness to SIRVA under this agreement and promissory note.
Makers agree not to consummate a sale of their Home without advising SIRVA prior
thereto.
In consideration of SIRVA entering into this agreement and promissory note:
(a) The Makers represent that the loan will be used solely for the purpose of
purchasing a new principal residence in connection with a transfer to a new
principal place of employment and that neither the former for the new principal
residence is or will be located outside the United State or a United States
possession.
(b) The Makers represent that the Makers intend to sell their Home, and have
taken appropriate action, such as listing with brokers, or will do so within a
reasonable time. The Makers agree that the Makers will notify SIRVA in writing
when the Makers enter into an agreement to sell their Home, and again when title
passes.
(c) The Makers represent that the Makers have no intention of converting the
Makers' present or former principal residence to business or investment use.
(d) The Makers agree that any loss which the Makers sustain because of
nonfulfillment of any contract to sell and purchase their Home by either the
Makers, the buyer, or any other third party, is the Makers' responsibility, and
that in such event the Makers will be obligated to repay their indebtedness to
SIRVA.
(e) The Makers agree that the obligations and benefits under this agreement and
promissory note are personal to the Makers and may not be transferred, assigned
or otherwise disposed of to any person except their employer.
(f) The Makers agree that their Home will not be made subject to any further
indebtedness by the Makers' affirmative act subsequent to signing this agreement
and promissory note without prior written approval of SIRVA.
(g) The Makers hereby represent that the Makers intent to and will itemize their
deductions on their Federal Income Tax Returns.
The undersigned Makers hereby waive presentment and notice of dishonor and agree
that the obligations and benefits under this agreement and promissory note are
personal to them and may not be transferred, assigned, or otherwise disposed of
to any person except the Maker's employer.
This instrument shall be governed by the laws of the State of Ohio.
Maker: Date:
Social Security No.:
Maker: Date:
Social Security No.:
Newly Hired Exempt Employee ATTACHMENT II
Salary Grade 26 and Above
RELOCATION SERVICES - EMPLOYMENT CONTRACT
THIS AGREEMENT, made and entered into this ___ day of __________ by and between
AMERICAN ELECTRIC POWER, a corporation (hereinafter called "Company") and
______________________ of _________________ hereinafter called "Employee").
WITNESSETH THAT
WHEREAS, Employee proposes to accept employment as an exempt employee of
the Company at ______________, and
WHEREAS, Employee, in order to accept such position, must move his place
of residence to ______________________________________, or its environs, and
WHEREAS, Company is willing to pay the moving and incidental expenses of
Employee providing Employee agrees to certain conditions,
NOW, THEREFORE, for and in consideration of the agreements hereinafter
contained, Company and Employee do hereby agree as follows:
1. Company will pay the moving and incidental expenses of Employee in
accordance with the Special Relocation Expense Policy - Newly-Hired
Exempt Employees SG 26 & Above.
2. Should Employee voluntarily terminate his/her employment with the
Company within one year from the date of his/her employment,
Employee, upon request of the Company, agrees to reimburse Company,
promptly upon such termination, for all payments made to Employee,
or in his/her behalf pursuant to the Special Relocation Expense
Policy - Newly-Hired Exempt Employees SG 26 & Above, EXCEPT those
made pursuant to Article III - Sections A (Lump Sum Payment for
house hunting, temporary living and final move) and E (payment for
movement of household goods).
IN WITNESS WHEREOF, the parties hereto have executed this agreement, the day and
year first above written.
AMERICAN ELECTRIC POWER
By Date
(Company Representative)
Date
(Employee)
EXHIBIT B
AMERICAN ELECTRIC POWER SERVICE CORPORATION
CHANGE IN CONTROL AGREEMENT
FOR THE OFFICE OF THE CHAIRMAN
Whereas, American Electric Power Service Corporation, a New York
corporation, including any of its subsidiary companies, divisions,
organizations, or affiliated entities (collectively referred to as "AEPSC")
considers it essential to its best interests and the best interests of the
shareholders of the American Electric Power Company, Inc., a New York
corporation, (hereinafter referred to as "Corporation") to foster the continued
employment of key management personnel; and
Whereas, the uncertainty attendant to a Change In Control of the
Corporation may result in the departure or distraction of management personnel
to the detriment of AEPSC and the shareholders of the Corporation; and
Whereas, the Board of the Corporation has determined that steps should be
taken to reinforce and encourage the continued attention and dedication of
members of AEPSC's management to their assigned duties in the event of a Change
In Control of the Corporation.
Now Therefore, AEPSC hereby establishes the American Electric Power
Service Corporation Change In Control Agreement (the "Agreement").
ARTICLE I
DEFINITIONS
As used herein the following words and phrases shall have the following
respective meanings unless the context clearly indicates otherwise.
(a) "Anniversary Date" means January 1 of each Calendar Year.
(b) "Annual Compensation" means the sum of the Executive's Annual Salary
and the Executive's Target Annual Incentive.
(c) "Annual Salary" means the Executive's regular annual base salary
immediately prior to the Executive's termination of employment, including
compensation converted to other benefits under a flexible pay arrangement
maintained by AEPSC or deferred pursuant to a written plan or agreement with
AEPSC, but excluding allowances and compensation paid or payable under any of
AEPSC's long-term or short-term incentive plans or any similar payments.
(d) "Board" means the Board of Directors of American Electric Power
Company, Inc.
(e) "Calendar Year" means the twelve (12) month period commencing each
January 1 and ending each December 31.
(f) "Cause" shall mean
(i) the willful and continued failure of the Executive to perform
substantially the Executive's duties with AEPSC (other than any such
failure resulting from incapacity due to physical or mental
illness), after a written demand for substantial performance is
delivered to the Executive by the Board or an elected officer of
AEPSC which specifically identifies the manner in which the Board or
the elected officer believes that the Executive has not
substantially performed the Executive's duties, or
(ii) the willful engaging by the Executive in illegal conduct or
gross misconduct which is materially and demonstrably injurious to
AEPSC or the Corporation, or a breach of the Executive's fiduciary
duty to AEPSC or the Corporation, as determined by the Board.
For purposes of this provision, no act or failure to act, on the part of
the Executive, shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of AEPSC or the
Corporation. Any act, or failure to act, based upon authority given pursuant to
a resolution duly adopted by the Board or upon the advice of counsel for AEPSC
or the Corporation, shall be conclusively presumed to be done, or omitted to be
done, by the Executive in good faith and in the best interests of AEPSC or the
Corporation
(g) "Change In Control" of the Corporation shall be deemed to have
occurred if (i) any "person" or "group" (as such terms are used in Section 13(d)
and 14(d) of the Securities Exchange Act of 1934 ("Exchange Act"), other than
AEPSC, any company owned, directly or indirectly, by the shareholders of the
Corporation in substantially the same proportions as their ownership of stock of
the Corporation or a trustee or other fiduciary holding securities under an
employee benefit plan of the Corporation, becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of more
than 25 percent of the then outstanding voting stock of the Corporation; (ii)
during any period of two consecutive years, individuals who at the beginning of
such period constitute the Board, together with any new directors (other than a
director nominated by a person (x) who has entered into an agreement with the
Corporation to effect a transaction described in this Article I (g)(i), (iii) or
(iv) hereof or (y) who publicly announces an intention to take or to consider
taking action (including, but not limited to, an actual or threatened proxy
contest) which if consummated would constitute a Change In Control) whose
election or nomination for election was approved by a vote of at least
two-thirds of the directors then still in office who were either directors at
the beginning of the period or whose election or nomination for election was
previously so approved, cease for any reason, except for death or disability, to
constitute at least a majority of the Board; or (iii) the consummation of a
merger or consolidation of the Corporation with any other entity, 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 percent of the total voting power represented
by the voting securities of the Corporation or such surviving entity outstanding
immediately after such merger or consolidation; or (iv) the shareholders of the
Corporation approve a plan of complete liquidation of the Corporation, or an
agreement for the sale or disposition by the Corporation (in one transaction or
a series of transactions) of all or substantially all of the Corporation's
assets.
(h) "Code" means the Internal Revenue Code of 1986, as amended from time
to time.
(i) "Commencement Date" means January 1, 2002, which shall be the
beginning date of the term of this Agreement.
(j) "Disability" means the Executive's total and permanent disability as
defined in AEPSC's long-term disability plan covering the Executive immediately
prior to the Change In Control.
(k) "Executive" means an employee of AEPSC who is designated by AEPSC as
an employee entitled to benefits, if any, under the terms of this Agreement.
(l) "Good Reason" means;
(1) an adverse change in the Executive's status, duties or
responsibilities as an executive of AEPSC as in effect immediately prior
to the Change In Control, provided that the Executive shall have given
AEPSC written notice of the alleged adverse change and AEPSC shall have
failed to cure such change within thirty (30) days after its receipt of
such notice;
(2) failure of AEPSC to pay or provide the Executive in a timely
fashion the salary or benefits to which the Executive is entitled under
any employment agreement between AEPSC and the Executive in effect on the
date of the Change In Control, or under any benefit plans or policies in
which the Executive was participating at the time of the Change In
Control, provided that such failure was other than an isolated,
insubstantial and inadvertent action not taken in bad faith and which is
remedied by the Corporation within eight days following notice from the
Executive;
(3) the reduction of the Executive's salary as in effect on the date
of the Change In Control;
(4) the taking of any action by AEPSC (including the elimination of
a plan without providing substitutes therefore, the reduction of the
Executive's awards thereunder or failure to continue the Executive's
participation therein) that would substantially diminish the aggregate
projected value of the Executive's awards or benefits under AEPSC's
benefit plans or policies in which the Executive was participating at the
time of the Change In Control;
(5) a failure by AEPSC or the Corporation to obtain from any
successor the assent to this Agreement contemplated by Article IV hereof;
or
(6) the relocation, without the Executive's prior approval, of the
office at which the Executive is to perform services on behalf of AEPSC to
a location more than fifty (50) miles from its location immediately prior
to the Change In Control or a change, without the Executive's prior
approval, in the Executive's business travel obligation subsequent to the
Change In Control that requires the Executive to travel on a regular and
continuous basis in an amount that represents a significant increase, from
immediately prior to the Change In Control, in the portion of the
Executive's working time routinely devoted to business travel.
Any circumstance described in this Article I (l) shall constitute Good
Reason even if such circumstance would not constitute a breach by AEPSC of the
terms of an employment agreement between AEPSC and the Executive in effect on
the date of the Change In Control. The Executive shall be deemed to have
terminated employment for Good Reason effective upon the effective date stated
in a written notice of such termination given by the Executive to AEPSC (which
notice shall not be given, in circumstances described in Article I (1), before
the end of the thirty (30) day period described therein, or in circumstances
described in Article I (l)(2), before the end of the eight day period described
therein), setting forth in reasonable detail the facts and circumstances claimed
to provide the basis for termination, provided that the effective date may not
precede, nor be more than sixty (60) days from, the date such notice is given.
The Executive's continued employment shall not constitute consent to, or a
waiver of rights with respect to, any circumstances constituting Good Reason
hereunder.
(m) "Retirement" shall mean an Executive's termination of employment after
attainment of age 55 with five or more years of service with AEPSC.
(n) "Target Annual Incentive" shall mean the award that the Executive
would have received under the Senior Officer Annual Incentive Compensation Plan
("SOIP") or the Management Incentive Compensation Plan ("MICP") for the year in
which the Executive's termination occurs, if one hundred percent (100%) of the
annual target award has been earned. Executives participating in annual
incentive compensation plans that do not have predefined target levels will be
treated as though they were participants in either the SOIP or MICP and will be
assigned the same annual target percent as their participating peers in a
comparable salary grade.
(o) "Qualifying Termination" shall mean following a Change In Control and
during the term of this Agreement the Executive's employment is terminated for
any reason excluding (i) the Executive's death, (ii) the Executive's Disability,
(iii) the Executive's Retirement, (iv) by AEPSC for Cause or (v) by the
Executive without Good Reason. In addition, a Qualifying Termination shall be
deemed to have occurred if, prior to a Change In Control, the Executive's
employment was terminated during the term of this Agreement by AEPSC without
Cause, or by the Executive for Good Reason based on events or circumstances that
occurred, (i) at the request of a person who has entered into an agreement with
AEPSC or the Corporation, the consummation of which would constitute a Change In
Control or (ii) otherwise in connection with, as a result of or in anticipation
of a Change In Control. The mere act of approving a Change In Control agreement
shall not in and of itself be deemed to constitute an event or circumstance in
anticipation of a Change In Control for purposes of this Article I (o).
ARTICLE II
TERM OF AGREEMENT
2.1 The initial term of this Agreement shall be for the period beginning
on the Commencement Date and ending on the December 31 immediately following the
Commencement Date. The term of this Agreement shall automatically be extended
for an additional Calendar Year on the first Anniversary Date immediately
following the initial term of this Agreement without further action by AEPSC,
and shall be automatically extended for an additional Calendar Year on each
succeeding Anniversary Date, unless AEPSC shall have served notice upon the
Executive at least sixty (60) days prior to such Anniversary Date of AEPSC's
intention that this Agreement shall not be extended, provided, however, that if
a Change In Control of the Corporation shall occur during the term of this
Agreement, this Agreement shall terminate two years after the date the Change In
Control is completed.
2.2 If an employee is designated as an Executive after the Commencement
Date or after an Anniversary Date, the initial term of this Agreement shall be
for the period beginning on the date the employee is designated as an Executive
and ending on the December 31 immediately following.
2.3 Notwithstanding Section 2.1, the term of this Agreement shall end upon
any termination of the Executive's employment prior to a Change In Control of
the Corporation. This Agreement shall also terminate if the Executive's position
is eliminated due to a downsizing, consolidation or restructuring of AEPSC other
than by reason of a Change In Control.
ARTICLE III
COMPENSATION UPON A CHANGE IN CONTROL FOLLOWED BY A TERMINATION
3.1 Upon a Qualifying Termination, the Executive shall be under no further
obligation to perform services for AEPSC and shall be entitled to receive the
following payments and benefits:
(a) As soon as practicable following the Executive's date of termination,
AEPSC shall make a lump sum cash payment to the Executive in an amount
equal to the sum of (1) the Executive's Annual Salary through the date
of termination to the extent not theretofore paid, (2) the product of
(x) the current plan year's Target Annual Incentive and (y) a
fraction, the numerator of which is the number of days in such
calendar year through the date of termination, and the denominator of
which is 365, except that annual incentive plans which do not have
predetermined annual target awards for participants shall have their
pro-rated incentive compensation award for the current plan year paid
as soon as practicable, and (3) any accrued vacation pay, in each case
the extent not theretofore paid and in full satisfaction of the rights
of the Executive thereto;
(b) Within sixty (60) days of the Executive's return of the signed release
form, AEPSC shall make a lump sum cash payment to the Executive in an
amount equal to three times the Executive's Annual Compensation; and
(c) For purposes of the American Electric Power System Excess Benefit
Plan, or any successor thereto, provided that the Executive is a
participant thereunder, the Executive shall be credited with three (3)
additional years of service; provided that if the Executive is older
than age 62 as of the Executive's date of termination the additional
years of service shall be limited to the difference between the
Executive's age as of the date of termination and the date the
Executive would attain age 65, and assuming that the Executive's
compensation for the additional period of service would have been
equal to the Executive's compensation in effect as of the Executive's
date of termination.
3.2 The Executive shall be entitled to the continuing benefits as follows:
(a) For the three (3) year period following the Executive's date of
termination, the Executive and the Executive's family shall be
provided with medical and dental insurance benefits as if the
Executive's employment had not been terminated; provided, however,
that if the Executive becomes reemployed with another employer and is
eligible to receive medical or other welfare benefits under another
employer-provided plan, the medical and other welfare benefits
described herein shall be secondary to those provided under such other
plan during such applicable period of eligibility. For purposes of
determining eligibility (but not the time of commencement of benefits)
of the Executive for retiree medical and dental insurance benefits
under AEPSC's plans, practices, programs and policies, the Executive
shall be considered to have remained employed during the three (3)
year period and to have retired on the last day of the three (3) year
period;
(b) AEPSC shall, at its sole expense as incurred, provide the Executive
with outplacement services the scope and provider of which shall be
selected by the Executive at the Executive's sole discretion (but at a
cost to AEPSC of not more than $30,000) or, at the Executive's option,
the use of comparable and accessible office space, office supplies and
equipment and secretarial services for a period not to exceed one
year, which in the aggregate are of comparable cost to the Corporation
or AEPSC as the outplacement services;
(c) To the extent any benefits described in this Article III, Section 3.2
cannot be provided pursuant to the appropriate plan or program
maintained by AEPSC, AEPSC shall provide such benefits outside such
plan or program at no additional cost (including without limitation
tax cost) to the Executive.
3.3 Notwithstanding the foregoing;
(a) The severance payments and benefits provided under Sections 3.1(b),
3.1(c) and 3.2 hereof shall be conditioned upon the Executive
executing a release at the time the Executive's employment is
terminated, in the form established by the Corporation or by AEPSC,
releasing the Corporation, AEPSC and their shareholders, partners,
officers, directors, employees and agents from any and all claims and
from any and all causes of action of kind or character, including but
not limited to all claims or causes of action arising out of
Executive's employment with the Corporation or AEPSC or the
termination of such employment.
(b) The severance payments and benefits provided under Sections 3.1 and
3.2 hereof shall be subject to, and conditioned upon, the waiver of
any other cash severance payment or other benefits provided by AEPSC
pursuant to any other severance agreement between AEPSC and the
Executive. No amount shall be payable under this Agreement to, or on
behalf of the Executive, if the Executive elects benefits under any
other cash severance plan or program, or any other special pay
arrangement with respect to the termination of the Executive's
employment.
(c) The Executive agrees that at all times following termination, the
Executive will not, without the prior written consent of AEPSC or the
Corporation, disclose to any person, firm or corporation any
"confidential information," of AEPSC or the Corporation which is now
known to the Executive or which hereafter may become known to the
Executive as a result of the Executive's employment or association
with AEPSC or the Corporation, unless such disclosure is required
under the terms of a valid and effective subpoena or order issued by a
court or governmental body; provided, however, that the foregoing
shall not apply to confidential information which becomes publicly
disseminated by means other than a breach of this provision. It is
recognized that damages in the event of breach of this Section 3.3(c)
by the Executive would be difficult, if not impossible, to ascertain,
and it is therefore agreed that AEPSC and the Corporation, in addition
to and without limiting any other remedy or right that AEPSC or the
Corporation may have, shall have the right to an injunction or other
equitable relief in any court of competent jurisdiction, enjoining any
such breach, and the Executive hereby waives any and all defenses the
Executive may have on the ground of lack of jurisdiction or competence
of the court to grant such an injunction or other equitable relief.
The existence of this right shall not preclude AEPSC or the
Corporation from pursuing any other rights or remedies at law or in
equity which AEPSC or the Corporation may have.
"Confidential information" shall mean any confidential, propriety and
or trade secret information, including, but not limited to, concepts,
ideas, information and materials relating to AEPSC or the Corporation,
client records, client lists, economic and financial analysis,
financial data, customer contracts, marketing plans, notes, memoranda,
lists, books, correspondence, manuals, reports or research, whether
developed by AEPSC or the Corporation or developed by the Executive
acting alone or jointly with AEPSC or the Corporation while the
Executive was employed by AEPSC.
3.4 Notwithstanding anything to the contrary in this Agreement, in the
event that any payment or distribution by AEPSC to or for the benefit of the
Executive, whether paid or payable or distributed or distributable pursuant to
the terms of this Agreement or otherwise (a "Payment"), would be subject to the
excise tax imposed by Section 4999 of the Code or any interest or penalties with
respect to such excise tax (such excise tax, together with any such interest or
penalties, are hereinafter collectively referred to as the "Excise Tax"), AEPSC
shall pay to the Executive an additional payment (a "Gross-up Payment") in an
amount such that after payment by the Executive of all taxes (including any
interest or penalties imposed with respect to such taxes), including any Excise
Tax imposed on any Gross-up Payment, the Executive retains an amount of the
Gross-up Payment equal to the Excise Tax imposed upon the Payments. AEPSC and
the Executive shall make an initial determination as to whether a Gross-up
Payment is required and the amount of any such Gross-up Payment. Executive shall
notify AEPSC immediately in writing of any claim by the Internal Revenue Service
which, if successful, would require AEPSC to make a Gross-up Payment (or a
Gross-up Payment in excess of that, if any, initially determined by AEPSC and
the Executive) within five days of the receipt of such claim. AEPSC shall notify
the Executive in writing at least five days prior to the due date of any
response required with respect to such claim, or such shorter time period
following AEPSC's receipt of the notice, if it plans to contest the claim. If
AEPSC decides to contest such claim, the Executive shall cooperate fully with
AEPSC in such action; provided, however, AEPSC shall bear and pay directly or
indirectly all costs and expenses (including additional interest and penalties)
incurred in connection with such action and shall indemnify and hold the
Executive harmless, on an after-tax basis, for any Excise Tax or income tax,
including interest and penalties with respect thereto, imposed as a result of
AEPSC's action. If, as a result of AEPSC's action with respect to a claim, the
Executive receives a refund of any amount paid by AEPSC with respect to such
claim, the Executive shall promptly pay such refund to AEPSC. If AEPSC fails to
timely notify the Executive whether it will contest such claim or AEPSC
determines not to contest such claim, then AEPSC shall immediately pay to the
Executive the portion of such claim, if any, which it has not previously paid to
the Executive.
3.5 The obligations of AEPSC to pay the benefits described in Sections 3.1
and 3.2 shall be absolute and unconditional and shall not be affected by any
circumstances, including, without limitation, any set-off, counterclaim,
recoupment, defense or other right which AEPSC may have against the Executive.
In no event shall the Executive be obligated to seek other employment or take
any other action by way of mitigation of the amounts payable to the Executive
under any of the provisions of this Agreement, nor shall the amount of any
payment hereunder be reduced by any compensation earned by the Executive as a
result of employment by another employer, except as specifically provided in
Section 3.2.
ARTICLE IV
SUCCESSOR TO CORPORATION
4.1 This Agreement shall bind any successor of AEPSC or the Corporation,
its assets or its businesses (whether direct or indirect, by purchase, merger,
consolidation or otherwise) in the same manner and to the same extent that AEPSC
or the Corporation would be obligated under this Agreement if no succession had
taken place.
4.2 In the case of any transaction in which a successor would not by the
foregoing provision or by operation of law be bound by this Agreement, AEPSC and
the Corporation shall require such successor expressly and unconditionally to
assume and agree to perform AEPSC's and the Corporation's obligations under this
Agreement, in the same manner and to the same extent that AEPSC and the
Corporation would be required to perform if no such succession had taken place.
The term "Corporation," as used in this Agreement, shall mean the Corporation as
hereinbefore defined and any successor or assignee to the business assets which
by reason hereof becomes bound by this Agreement.
ARTICLE V
MISCELLANEOUS
5.1 Any notices and all other communications provided for herein shall be
in writing and shall be deemed to have been duly given when delivered or mailed,
by certified or registered mail, return receipt requested, postage prepaid
addressed to AEPSC at its principal office and to the Executive at the
Executive's residence or at such other addresses as AEPSC or the Executive shall
designate in writing.
Section 5.2 No provision of this Agreement may be modified, waived or
discharged except in a writing specifically referring to such provision and
signed by either AEPSC or the Executive against whom enforcement of such
modification, waiver or discharge is sought. No waiver by either AEPSC or the
Executive of the breach of any condition or provision of this Agreement shall be
deemed a waiver of any other condition or provision at the same or any other
time.
5.3 The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Ohio.
5.4 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.
5.5 This Agreement does not constitute a contract of employment or impose
on the Executive, AEPSC or the Corporation any obligation to retain the
Executive as an employee, to change the status of the Executive's employment, or
to change AEPSC's policies regarding the termination of employment.
5.6 If the Executive institutes any legal action in seeking to obtain or
enforce or is required to defend in any legal action the validity or
enforceability of, any right or benefit provided by this Agreement, AEPSC will
pay for all actual and reasonable legal fees and expenses incurred (as incurred)
by the Executive, regardless of the outcome of such action; provided, however,
that if such action instituted by the Executive is found by a court of competent
jurisdiction to be frivolous, the Executive shall not be entitled to legal fees
and expenses and shall be liable to AEPSC for amounts already paid for this
purpose.
5.7 If the Executive makes a written request alleging a right to receive
benefits under this Agreement or alleging a right to receive an adjustment in
benefits being paid under the Agreement, AEPSC shall treat it as a claim for
benefit. All claims for benefit under the Agreement shall be sent to the Human
Resources Department of AEPSC and must be received within 30 days after the
Executive's termination of employment. If AEPSC determines that the Executive
who has claimed a right to receive benefits, or different benefits, under the
Agreement is not entitled to receive all or any part of the benefits claimed, it
will inform the Executive in writing of its determination and the reasons
therefore in terms calculated to be understood by the Executive. The notice will
be sent within 90 days of the claim unless AEPSC determines additional time, not
exceeding 90 days, is needed. The notice shall make specific reference to the
pertinent Agreement provisions on which the denial is based, and describe any
additional material or information, if any, necessary for the Executive to
perfect the claim and the reason any such addition material or information is
necessary. Such notice shall, in addition, inform the Executive what procedure
the Executive should follow to take advantage of the review procedures set forth
below in the event the Executive desires to contest the denial of the claim. The
Executive may within 90 days thereafter submit in writing to AEPSC a notice that
the Executive contests the denial of the claim by AEPSC and desires a further
review. AEPSC shall within 60 days thereafter review the claim and authorize the
Executive to appear personally and review pertinent documents and submit issues
and comments relating to the claim to the persons responsible for making the
determination on behalf of AEPSC. AEPSC will render its final decision with
specific reasons therefore in writing and will transmit it to the Executive
within 60 days of the written request for review, unless AEPSC determines
additional time, not exceeding 60 days, is needed, and so notifies the
Executive. If AEPSC fails to respond to a claim filed in accordance with the
foregoing within 60 days or any such extended period, AEPSC shall be deemed to
have denied the claim.