AMERICAN ELECTRIC POWER
SYSTEM
INCENTIVE COMPENSATION DEFERRAL
PLAN
(As Amended and Restated Effective
January 1, 2008)
ARTICLE I
PURPOSE AND EFFECTIVE
DATE
1.1 The American Electric Power
System Incentive Compensation Deferral Plan (the
“Plan”) was established by American Electric Power
Service Corporation and such subsidiaries and affiliates designated
by the Company for participation in the Plan (“AEP”) to
allow Eligible Employees to elect to defer receipt of all or a
portion of their Incentive Compensation until after their
termination of employment.
1.2 The Plan was most recently
amended and restated effective January 1, 2005 pursuant to a
document that was signed on December 28, 2006. The Plan
is now amended and restated again, effective January 1,
2008. Except as otherwise specifically provided herein,
the effective date of the Plan, as amended and restated by this
document, is January 1, 2008. This amended and restated Plan
continues to apply to all deferrals of compensation made under the
Plan, unless specifically provided otherwise herein.
ARTICLE II
DEFINITIONS
2.1 “Account” means the
separate memo account established and maintained by the Company or
the recordkeeper employed by the Company to record Participant
deferrals of Incentive Compensation and to record any related
Investment Income on the Fund or Funds selected by the Participant
or Former Participant. The portion of the Account attributable to
Incentive Compensation earned and vested prior to January 1, 2005
(excluding, for this purpose Incentive Compensation attributable to
2004 that was subject to discretionary adjustment and first
available for payment subsequent to December 31, 2004) shall be
referred to as the Participant’s “Legacy Account
Balance.” The portion of the Account attributable to
Incentive Compensation other than that described in the immediately
preceding sentence shall be referred to as the Participant’s
“Active Account Balance.”
2.2 “Base Compensation”
means an employee’s regular annual base salary or wage rate
determined without regard to any salary or wage reductions made
pursuant to sections 125 or 402(e)(3) of the Code or participant
contributions pursuant to a pay reduction agreement under the
American Electric Power System Supplemental Retirement Savings
Plan, as amended.
2.3 “Claims Reviewer”
means the person or committee designated by American Electric Power
Service Corporation (or by a duly authorized person) as responsible
for the review of claims for benefits under the Plan in accordance
with Section 8.1. Until changed, the Claims Reviewer shall be the
Director - Compensation and Executive Benefits.
2.4 “Code” means the
Internal Revenue Code of 1986 as amended from time to
time.
2.5 “Committee” means the
committee designated by the American Electric Power Service
Corporation (or by a duly authorized person) as responsible for the
administration of the Plan. Until changed, the Committee
shall consist of the employees of the Company holding the following
positions: employees of the Company holding the following
positions: head of the Human Resources department (currently, Vice
President Human Resources); the employee to whom the head of the
Human Resources department reports (currently, Senior Vice
President – Shared Services) and the chief financial officer
of the Company. The Committee may authorize any person
or persons to act on its behalf with full authority in regard to
any of its duties and hereunder other than those set forth in
Section 8.2.
2.6 “Company” means
American Electric Power Service Corporation.
2.7 “Eligible Employee”
means any employee of AEP is designated by the Company as eligible
to participate in this Plan, provided that effective for deferral
election periods that begin after January 1, 2005, such employee
must be employed at exempt salary grade 28 or
higher. Individuals not directly compensated by AEP or
who are not treated by AEP as an active employee shall not be
considered Eligible Employees.
2.8 “Executive Officer”
means Participant who, with respect to AEP, is subject to the
disclosure requirements set forth in Section 16 of the Securities
Exchange Act of 1934, as amended.
2.9 “First Date
Available” or “FDA” means (a) with respect to Key
Employees, the last day of the month coincident with or next
following the date that is six (6) months after the date of the
Participant’s or Former Participant’s Termination; and
(b) with respect to all other Participants and Former Participants,
the last day of the month coincident with or next following the
date that is one (1) month after the date of the
Participant’s Termination; provided, however, that the FDA
with respect to an Executive Officer shall be no earlier than the
December 31of the calendar year of such Executive Officer’s
Termination.
2.10 “Former Participant”
means a Participant whose employment with AEP has terminated or a
Participant who is no longer an Eligible Employee, but whose
Account has a balance greater than zero.
2.11 “Fund” means the
investment options made available to participants in the American
Electric Power System Retirement Savings Plan, as revised from time
to time, except as the Committee may specify
otherwise. The investment options under the American
Electric Power System Retirement Savings Plan were revised
effective on or about July 5, 2006 in connection with a transition
of the recordkeeping and trustee services from Fidelity Management
Trust Company to affiliates of JP Morgan Chase Bank,
NA. The investments made available through the
self-directed brokerage account option thereupon being offered
under the American Electric Power System Retirement Savings Plan
shall not be available to Participants in this Plan.
2.12 “Incentive
Compensation” means incentive compensation payable pursuant
to the terms of annual and long-term incentive compensation plans
approved by the Committee for inclusion in the Plan, provided that
such incentive compensation shall be determined (a) without regard
to (i) any salary or wage reductions made pursuant to sections 125
or 402(e)(3) of the Code or (ii) participant contributions pursuant
to a pay reduction agreement under the American Electric Power
System Supplemental Retirement Savings Plan, as amended, but (b)
after any deferral thereof pursuant to the American Electric Power
System Stock Ownership Requirement Plan, as
amended. Incentive Compensation will not include Base
Compensation, non-annual bonuses compensation (such as but not
limited to project bonuses and sign-on bonuses), severance pay, or
relocation payments.
2.13 “Investment Income”
means, with respect to Incentive Compensation deferred under this
Plan, the earnings, gains and losses that would be attributable to
the investment of such deferrals in a Fund or Funds.
2.14 “Key Employee means a
Participant who is classified as a “specified employee”
at the time of Termination in accordance with the policies adopted
by the Committee in order to comply with the requirements of
Section 409A(a)(2)(B)(i) of the Code and the guidance issued
thereunder.
2.15 “Next Date
Available” or “NDA” means the June 30 of the
calendar year immediately following the calendar year in which
falls the Participant’s Termination.
2.16 “Participant” means
an Eligible Employee who elects to defer part or all of his or her
Incentive Compensation. Except to the extent otherwise
specified in this Plan, references to a Participant shall be
considered to include a Former Participant.
2.17 “Plan Year” means
the twelve-month period commencing each January 1 and ending the
following December 31.
2.18 “Retire” means that
a Participant terminates employment with AEP and its subsidiaries
and affiliates after both attaining age 55 and the completing five
years of service with AEP.
2.19 “Termination” means
termination of employment with the Company and its subsidiaries and
affiliates for any reason; provided that effective with respect to
Participants whose employment terminates on or after January 1,
2005, determinations as to the circumstances that will be
considered a Termination (including a disability and leave of
absence) shall be made in a manner consistent with the written
policies adopted by the HR Committee from time to time to the
extent such policies are consistent with the requirements imposed
under Code 409A(a)(2)(A)(i).
2.20 “2005 Distribution
Election Period” means the period or periods designated by
the Committee during which Participants (or Former Participants)
are given the opportunity to select among the distribution options
set forth in Article VI, provided that any such period shall end no
later than December 31, 2005.
2.21 “2006 Distribution
Election Period” means the period or periods designated by
the Committee during which Participants (or Former Participants)
are given the opportunity to select among the distribution options
set forth in Article VI, provided that any such period shall end no
later than December 31, 2006.
2.22 ”Applicable Tax
Payments” means the following types of taxes that AEP may
withhold and pay that are applicable to the amount credited to the
Participant’s Account:
(a) Federal
Insurance Contributions Act (FICA) tax imposed under Code Sections
3101, 3121(a) and 3121(v)(2) (the “FICA
Amount”);
(b) Income
tax at source on wages imposed under Code Section 3401 or the
corresponding withholding provisions of applicable state, local and
foreign tax laws as a result of the payment of the FICA Amount;
and
(c) The
additional income tax at source on wages attributable to pyramiding
Code Section 3401 wages and taxes;
provided,
however, that the total Applicable Tax Payments may not exceed such
limits as may be applicable to comply with the requirements of Code
Section 409A.
ARTICLE III
ADMINISTRATION
3.1 The Committee shall have full
discretionary power and authority (i) to administer and interpret
the terms and conditions of the Plan; (ii) to establish reasonable
procedures with which Participants, Former Participant and
beneficiaries must comply to exercise any right or privilege
established hereunder; and (iii) to be permitted to delegate its
responsibilities or duties hereunder to any person or
entity. The rights and duties of the Participants and
all other persons and entities claiming an interest under the Plan
shall be subject to, and bound by, actions taken by or in
connection with the exercise of the powers and authority granted
under this Article.
3.2 The Committee may employ agents,
attorneys, accountants, or other persons and allocate or delegate
to them powers, rights, and duties all as the Committee may
consider necessary or advisable to properly carry out the
administration of the Plan.
3.3 The Company shall maintain, or
cause to be maintained, records showing the individual balances in
each Participant’s Account. Statements setting
forth the value of the amount credited to the Participant's Account
as of a particular date shall be made available to each Participant
no less often than quarterly. The maintenance of the
Account records and the distribution of statements may be delegated
to a record keeper by either the Company or the
Committee.
ARTICLE IV
PARTICIPATION
4.1 An Eligible Employee shall become
a Participant by making a deferral election during an applicable
election period on a form prescribed by the Company to defer part
or all of the Eligible Employee’s Incentive Compensation to
which such election relates, provided that such election shall not
result in the deferral of Incentive Compensation in excess of an
amount that allows for the current payment of Applicable Tax
Payments.
4.2 For purposes of Section 4.1, the
election period during which Incentive Compensation may be subject
to an effective deferral election shall be determined as
follows:
(a) To
the extent that the Incentive Compensation is
“performance-based compensation” (within the meaning of
Section 409A(a)(4)(B)(iii) of the Code) that is based on services
performed over a period of at least 12 months, the election period
shall end no later than six (6) months before the end of the
performance period.
(b) To
the extent that the Incentive Compensation is not described in
Section 4.2(a), the election period shall end on or before December
31 of the calendar year prior to the year in which the services on
which the Incentive Compensation is based are to be
performed.
(c) Notwithstanding
(a) and (b), in the case of the first year in which an Eligible
Employee becomes eligible to participate in the Plan, and the
Participant has not previously become a Participant in another plan
that is required to be aggregated with this Plan under Treasury
Regulation Section 1.409A-1(c)(2) or other guidance of the Code,
the election period shall end within 30 days after the date such
Eligible Employee became eligible to participate and such election
shall apply only with respect to compensation paid for services
performed subsequent to the election.
4.3 If a deferral election is not
made by the end of the election period prescribed by the Company
with regard to certain Incentive Compensation that may be earned by
an Eligible Employee, no portion of such Incentive Compensation
shall be deferred for such Eligible Employee.
4.4 Incentive Compensation that is
deferred under this Plan shall be credited to the
Participant’s Account as follows:
(a) Deferred
Incentive Compensation that had been earned and vested prior to
January 1, 2005 has been credited to the Participant’s Legacy
Account Balance. No additional amounts of Incentive
Compensation that is deferred under the terms of this Plan shall be
credited to a Legacy Account Balance.
(b) Deferred
Incentive Compensation that is earned or vested on or after January
1, 2005 shall be credited to the Participant’s Active Account
Balance. This shall include the deferral under this Plan
of Incentive Compensation attributable to 2004 that was subject to
discretionary adjustment and first available for payment subsequent
to December 31, 2004.
4.5 The
Termination (or any subsequent re-employment) of a Participant
after such Participant has submitted an election to defer any
Incentive Compensation shall not affect the terms of such election
with respect to the Incentive Compensation to which such election
relates, subject, however, to the provisions for the distribution
of any such deferred Incentive Compensation pursuant to the
provisions of Article VI.
ARTICLE V
INVESTMENT OF DEFERRED
AMOUNTS
5.1 Amounts credited to the
Participant’s Account (without regard to whether such Account
is allocated to such Participant’s Legacy Account Balance or
Active Account Balance) shall be further credited with earnings as
if invested in the Funds selected by the Participant. To
the extent the Participant fails to select Funds for the investment
of Contributions under the Plan, the Participant shall be deemed to
have selected the Managed Income Fund option. The Participant may
change the selected Funds by providing notification in accordance
with the Plan’s procedures. Any change in the
Funds selected by the Participant shall be implemented in
accordance with the Plan’s procedures.
5.2 A Participant may elect to
transfer all or a portion of the amounts credited to his Account
from any Fund or Funds to any other Fund or Funds by providing
notification in accordance with the Plan’s
procedures. Such transfers between Funds may be made in
any whole percentage or dollar amounts and shall be implemented in
accordance with the Plan’s procedures.
5.3 The amount credited to each
Participant's Account shall be determined daily based upon the fair
market value of the Fund or Funds to which that Account is
allocated. The fair market value calculation for a
Participant's Account shall be made after all deferrals,
distributions, Investment Income and transfers for the day are
recorded. A Participant’s Account, as adjusted
from time to time, shall continue to be credited with Investment
Income until the balance of the Account is zero and the Committee
anticipates no additional contributions from such
Participant.
5.4 The Plan is an unfunded
non-qualified deferred compensation plan and therefore the
deferrals credited to a Participant's Account and the investment of
those deferrals in the Fund or Funds selected by the Participant
are memo accounts that represent g
