EX-10.3



 




Exhibit 10.3


	 	 	 	 	 



Allegheny Energy Service Corporation

800 Cabin Hill Drive

Greensburg, PA 15601




August 3, 2006




David E. Flitman

c/o Allegheny Energy, Inc.

800 Cabin Hill Drive

Greensburg, PA 15601





     Dear David:



     You and Allegheny Energy Service Corporation (“AESC”) for itself and as agent for its parent,
Allegheny Energy, Inc. (“AEI”), the affiliates and subsidiaries of AESC and AEI (the “AE
Companies”), and any successors or assigns of any of the foregoing, entered into an Offer of
Employment (the “Offer Letter”) dated as of January 3, 2005 (attached hereto as Exhibit A) which
provided for certain severance benefits in the event of your termination of employment without
cause. You, AESC, and AEI have agreed that, effective July 7, 2006, you will no longer serve as
Vice President, Distribution and that instead you will serve as the President of Allegheny Power
and President of each of Monongahela Power Company, The Potomac Edison Company and West Penn Power
Company.



     Accordingly, the Board of Directors of Allegheny Energy, Inc. (the “Board”), at its July 13,
2006 meeting, approved certain severance benefits in the event your employment is terminated
without Cause. It is hereby agreed that the following severance benefits, which were approved by
the Board, shall replace and supersede the severance benefits documented in the fifth bulleted
sentence of the Offer Letter:



     If your employment with AESC is terminated by AESC other than for Cause,




	 	(i)	 	AESC shall pay to you in a lump sum cash payment, less applicable taxes and
withholdings, within thirty (30) days after the date of termination of your employment an
amount equal to the sum of your annual base salary (as in effect immediately prior to the
date of termination) plus your target bonus under the AEI Annual Incentive Plan,
	 
	 	(ii)	 	for one year from the date of termination, AESC shall either (A) arrange to provide
you and your dependents, at AESC’s cost, with life, disability, medical and dental
coverage, whether insured or not insured, providing substantially similar benefits to
those which you and your dependents were receiving immediately prior to the date of
termination, or (B) in lieu of providing such coverage, pay to you no less frequently than
quarterly in advance an amount which, after taxes, is sufficient for you to purchase
equivalent benefits coverage referred to in clause (A) and




 









 






	 	(iii)	 	all stock options that would have vested had you continued employment with AESC
until one (1) year from the date of termination shall vest on the scheduled vesting date
and shall be exercisable for ninety (90) days after the scheduled vesting date,
provided, however, that in no event shall such options be exercised later
than the date of expiration of the options determined pursuant to the option award letters
(determined as if your employment with AESC had not terminated). Except as otherwise set
forth in clause (iii), all unvested stock options shall expire as of the date of such
employment termination.





     For purposes of this letter agreement, “Cause” shall mean any of the following:



          (A) Your conviction of, or plea of guilty or nolo contendere to a felony or a lesser crime
or offense which, in the reasonable opinion of AESC, could adversely affect the business or
reputation of the AE Companies;




          (B) Your repeated failure to follow specific lawful directions of the Board or any officer to whom
you report;




          (C) Your willful misconduct, gross neglect, fraud, embezzlement or dishonesty either in connection
with your duties hereunder or which otherwise causes damage or, in the reasonable opinion of AESC,
is likely to cause damage, to the AE Companies;




          (D) Your failure to perform a substantial part of your duties;




          (E) Your willful violation of any policy, procedure or guideline of the AE Companies that could
materially and adversely affect the business or reputation of the AE Companies;




          (F) Your abuse of alcohol or illegal drugs; or




          (G) Your material violation of the confidentiality, non-competition or non-solicitation covenants
in any Agreement between you and any AE Company.




 









 








     Please signify your agreement with the foregoing by signing the attached copy of this letter
in the place indicated.



	 	 	 	 	 
	 	Very truly yours,



Allegheny Energy Service Corporation

 	 
	 	By:  	/s/
Paul J. Evanson 	 
	 	 	Paul J. Evanson 	 
	 	 	Chairman, President, and
Chief Executive Officer 	 
	 
	 	Allegheny Energy, Inc.

 	 
	 	By:  	/s/
Paul J. Evanson 	 
	 	 	Paul J. Evanson 	 
	 	 	Chairman, President, and
Chief Executive Officer 	 
	 



	 	 	 
	AGREED AND ACCEPTED:
	 	 
	/s/
David E. Fitman
	 	 
	 

David E. Flitman