Document:

alrs_Ex10_1

		
			Exhibit 10.1
		

		
			Senior Executive Officers
		

		
			ALERUS FINANCIAL CORPORATION
		

		
			2019 EQUITY INCENTIVE PLAN
		

		
			PERFORMANCE-BASED RESTRICTED STOCK UNIT AWARD AGREEMENT
		

		
			 
		

		
			The Participant specified below is hereby granted a restricted stock unit award (the “Award”) by ALERUS FINANCIAL CORPORATION, a Delaware corporation (the “Company”), under the ALERUS FINANCIAL CORPORATION 2019 EQUITY INCENTIVE PLAN (the “Plan”). The Award shall be subject to the terms of the Plan and the terms set forth in this Performance-Based Restricted Stock Unit Award Agreement (“Award Agreement”).
		

		
			Section 1.          Award.  The Company hereby grants to the Participant the Award of restricted stock units (each such unit, an “RSU”),  where each RSU represents the right of the Participant to receive one Share in the future, subject to the terms of this Award Agreement and the Plan.
		

		
			Section 2.          Terms of Restricted Stock Unit Award. The following words and phrases relating to the Award shall have the following meanings:
		

		
			(a)         The “Participant” is ______________________________.
		

		
			(b)         The “Grant Date” is ______________________________.
		

		
			(c)         The number of “RSUs” is ______________________.
		

		
			(d)         The “Performance Period”  begins on _______________________ and concludes on _______________________.
		

		
			Except for words and phrases otherwise defined in this Award Agreement, any capitalized word or phrase in this Award Agreement shall have the meaning ascribed to it in the Plan.
		

		
			Section 3.          Performance Measurement and Vesting.
		

		
			(a)         General.  The Committee has established one or more performance objectives for the Performance Period. On a date following the conclusion of the Performance Period (the “Certification Date”), the Committee shall certify the level of performance for each applicable performance objective and the number of RSUs subject to this Award that shall become vested,  if any, as set forth in Schedule A to this Award Agreement. Unless otherwise provided in this Section 3, the Participant shall forfeit all right, title and interest in and to the RSUs that do not become vested as of the Certification Date.
		

		
			(b)         Termination of Service.  Except as otherwise provided in Section 3(c) or Section 3(d),  if the Participant’s Termination of Service occurs prior to the Certification Date, the Participant shall forfeit all right, title and interest in and to the RSUs as of such Termination of Service.
		

		
			(c)         Disability, Death, and Retirement. Upon the Participant’s Termination of Service due to the Participant’s Disability, Retirement, or death,  the number of RSUs that would vest as of the Certification Date if the Committee were to certify a target level of performance for each performance objective during the Performance Period shall become immediately vested.
		

		
			 
		

		
			

		 

		

		
			For the purposes of this Section 3(c),  “Retirement” means the Participant’s voluntary Termination of Service following the Participant’s attainment of age sixty (60), provided that the Participant has been employed with the Company for at least ten (10) years prior to such Termination of Service; and “Disability” (1) has the meaning provided in the then-effective employment agreement, if any, between the Participant and the Company, or, in absence thereof, (2) means a medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than six (6) months, where such impairment causes the Participant to be unable to perform the duties of the Participant’s position of employment or any substantially similar position of employment.
		

		
			(d)         Change in Control. If a Change in Control occurs prior to the conclusion of the Performance Period, a portion of the RSUs shall immediately vest (i) if prior to the Change in Control, the Committee determines that this Award will not continue after the Change in Control or that the successor entity (or its parent) will not agree to provide at the time of the Change in Control for the assumption or replacement of this Award with a comparable equity-based award covering shares of the successor entity (or its parent) that would equitably preserve the compensation element of the Award (the date of such determination by the Committee, the “Determination Date”); or,  (ii) if the foregoing is  inapplicable, if within one (1) year following the Change in Control the Participant incurs a Termination of Service by the Company other than for Cause or by the Participant for Good Reason.  The portion of RSUs subject to accelerated vesting pursuant to this Section 3(d) shall equal the number of RSUs that would vest as of the Certification Date if the Committee were to certify a target level of performance for each performance objective during the Performance Period,  multiplied by a fraction, the numerator of which is the number of days between the Grant Date and, as applicable, the Determination Date or the date of the qualifying Termination of Service, and the denominator of which is the number of days in the Performance Period.
		

		
			For the purposes of this Section 3(d), “Cause” (1) has the meaning provided in the then-effective employment agreement, if any, between the Participant and the Company, or, in absence thereof, (2) means (A) the Participant’s commission of any act constituting a felony or the Participant’s conviction or guilty or no contest plea to any criminal misdemeanor involving fraud, misrepresentation, or theft; (B) gross misconduct or any act of fraud, disloyalty, or dishonesty by the Participant related to or in connection with the Participant’s employment with the Company, or otherwise likely to cause material harm to the Company or its reputation; (C) a material violation by the Participant of the Company’s policies or codes of conduct; or (D) the willful or material breach by the Participant of any agreement between the Participant and the Company. “Good Reason” (1) has the meaning provided in the then-effective employment agreement, if any, between the Participant and the Company, or, in absence thereof, (2) means any of the following conditions arising without the consent of the Participant, provided that the Participant has notified the Company in writing of the existence of such condition within ninety (90) days of its first occurrence, and the Company has failed to remedy such condition within thirty (30) days of such notice: (A) a material diminution in the Participant’s base salary, authority, duties, or responsibilities; (B) relocation of the Participant’s principal office more than fifty (50) miles from its location as of the Grant Date; or (C) any other action or inaction that constitutes a material breach by the Company or any terms or conditions of any agreement between the Participant and the Company, which breach has not been caused by the Participant.
		

		
			Section 4.          Settlement of RSUs. Delivery of Shares or other amounts under this Award Agreement and the Plan shall be subject to the following:
		

		
			(a)         Delivery of Shares. The Company shall deliver to the Participant one Share free and clear of any restrictions in settlement of each of the vested and unrestricted RSUs within thirty (30) days of the Certification Date.
		

		
			
		

		
			

		 

		

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			(b)         Compliance with Applicable Laws. Notwithstanding any other term of this Award Agreement or the Plan, the Company shall have no obligation to deliver any Shares or make any other distribution of benefits under this Award Agreement or the Plan unless such delivery or distribution complies with all applicable laws and the applicable rules of any securities exchange or similar entity.
		

		
			(c)         Certificates Not Required.  To the extent that this Award Agreement and the Plan provide for the issuance of Shares, such issuance may be effected on a non-certificated basis, to the extent not prohibited by applicable law or the applicable rules of any securities exchange or similar entity.
		

		
			Section 5.          Withholding. All deliveries of Shares pursuant to the Award shall be subject to withholding of all applicable taxes. The Company shall have the right to require the Participant (or if applicable, permitted assigns, heirs and Designated Beneficiaries) to remit to the Company an amount sufficient to satisfy any tax requirements prior to the delivery date of any Shares in connection with the Award. Except as otherwise provided by the Committee, such withholding obligations may be satisfied (a) through cash payment by the Participant, (b) through the surrender of Shares that the Participant already owns or (c) through the surrender of Shares to which the Participant is otherwise entitled under the Plan; provided, however, that except as otherwise specifically provided by the Committee, such Shares under clause (c) may not be used to satisfy more than the maximum individual statutory tax rate for each applicable tax jurisdiction, or such lesser amount as may be established by the Company. In the instance the withholding obligation is satisfied through the surrender of Shares, the Company will not deliver fractional Shares, and it will pay, in lieu thereof, the Fair Market Value of such fractional Shares.
		

		
			Section 6.          Dividend Equivalents.  The Participant shall be entitled to receive a payment in cash upon the conclusion of the Performance Period in an amount equal in value to any dividends and distributions paid with respect to the RSUs (other than dividends and distributions that may be issued with respect to Shares by virtue of any corporate transaction, to the extent adjustment is made pursuant to Section 3.4 of the Plan) during the Performance Period (“Dividend Equivalents”); provided,  however, that no Dividend Equivalents shall be payable to or for the benefit of the Participant with respect to record dates for such dividends or distributions occurring before the Grant Date or on or after the date, if any, on which the Participant has forfeited the RSUs. Dividend Equivalents shall be credited at the time the respective dividends or distributions are paid and shall be accumulated, without interest, and shall be subject to the same restrictions applicable to the underlying RSUs.
		

		
			Section 7.          Restrictive Covenants.
		

		
			(a)         Confidential Information. Except as permitted by the Company, the Participant shall not at any time divulge, furnish or make accessible to anyone or use in any way other than in the ordinary course of the business of the Company or its affiliates, any confidential, proprietary, or secret knowledge or information of the Company or its affiliates that the Participant has acquired or will acquire about the Company or its affiliates, whether developed by himself or herself or by others, concerning (i) any trade secrets; (ii) any confidential, proprietary, or secret designs, programs, processes, formulate, plans devices, or material (whether or not patented or patentable) directly or indirectly useful in any aspect or the business of the Company or of its affiliates; (iii) any customer or supplier lists; (iv) any confidential, proprietary, or secret development or research work; (v) any strategic or other business, marketing, or sales plans; (vi) any financial data or plans; or (vii) any other confidential, proprietary, or secret information about any aspect or the business of the Company or of its affiliates. The Participant acknowledges that the knowledge and information described above constitutes a unique and valuable asset of the Company and represents a substantial investment of time and expense by the Company and that any disclosure or other use of such knowledge or information other than for the sole benefit of the Company or its affiliates would be wrongful and would cause irreparable harm to the Company. The Participant shall not intentionally commit any act that would materially reduce the value of such
		

		
			
		

		
			

		 

		

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			knowledge or information to the Company or its affiliates. The foregoing obligations or confidentially shall not apply to any knowledge or information that (i) is now or subsequently becomes generally publicly known, other than as a direct or indirect result of the breach of this Award Agreement, (ii) is independently made available to the Participant in good faith by a third party who has not violated a confidential relationship with the Company or its affiliates, or (iii) is required to be disclosed by law or legal process. The Participant’s obligations under this Award Agreement to maintain the confidentiality of the Company’s confidential, proprietary, and secret information are in addition to any obligations of the Participant under any other agreement between the Participant and the Company, and any applicable statutory or common law.
		

		
			(b)         Return of Records and Property. Upon the Participant’s Termination of Service, or at any time upon the Company’s request, the Participant shall promptly deliver to the Company all Company and affiliate records and all Company and affiliate property in his or her possession or under his or her control, including without limitation manuals, books, blank forms, documents, letters, memoranda, notes, notebooks, reports, printouts, computer disks, computer tapes, sources codes, data, tables, or calculations, and all copies thereof; documents that in whole or in part contain any trade secrets or confidential, proprietary, or other secret information of the Company or its affiliates and all copies thereof; and keys, access cards, access codes, passwords, credit cards, personal computers, telephones and other electronic equipment belonging to the Company or an affiliate.
		

		
			Section 8.          Non-Transferability of Award. The Award, or any portion thereof, is not transferable except as designated by the Participant by will or by the laws of descent and distribution or pursuant to a domestic relations order. Except as provided in the immediately preceding sentence, the Award shall not be assigned, transferred, pledged, hypothecated or otherwise disposed of by the Participant in any way whether by operation of law or otherwise, and shall not be subject to execution, attachment or similar process. Any attempt at assignment, transfer, pledge, hypothecation or other disposition of the Award contrary to the provisions hereof, or the levy of any attachment or similar process upon the Award, shall be null and void and without effect.
		

		
			Section 9.          No Rights as Shareholder.  Notwithstanding the Participant’s right to receive dividend equivalents pursuant to Section 6,  the Participant shall not have any rights of a Shareholder with respect to the RSUs, including but not limited to, voting rights, prior to the settlement of the RSUs pursuant to Section 4(a) above.
		

		
			Section 10.        Heirs and Successors.  This Award Agreement shall be binding upon, and inure to the benefit of, the Company and its successors and assigns, and upon any person acquiring all or substantially all of the Company’s assets or business. If any rights of the Participant or benefits distributable to the Participant under this Award Agreement have not been settled or distributed at the time of the Participant’s death, such rights shall be settled for and such benefits shall be distributed to the Designated Beneficiary in accordance with the provisions of this Award Agreement and the Plan. The “Designated Beneficiary” shall be the beneficiary or beneficiaries designated by the Participant in a writing filed with the Committee in such form as the Committee may require. The Participant’s designation of beneficiary may be amended or revoked from time to time by the Participant in accordance with any procedures established by the Committee. If a Participant fails to designate a beneficiary, or if the Designated Beneficiary does not survive the Participant, any benefits that would have been provided to the Participant shall be provided to the legal representative of the estate of the Participant. If a Participant designates a beneficiary and the Designated Beneficiary survives the Participant but dies before the provision of the Designated Beneficiary’s benefits under this Award Agreement, then any benefits that would have been provided to the Designated Beneficiary shall be provided to the legal representative of the estate of the Designated Beneficiary.
		

		
			
		

		
			

		 

		

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			Section 11.        Administration. The authority to manage and control the operation and administration of this Award Agreement and the Plan shall be vested in the Committee, and the Committee shall have all powers with respect to this Award Agreement as it has with respect to the Plan. Any interpretation of this Award Agreement or the Plan by the Committee and any decision made by the Committee with respect to this Award Agreement or the Plan shall be final and binding on all persons.
		

		
			Section 12.        Plan Governs.  Notwithstanding any provision of this Award Agreement to the contrary, this Award Agreement shall be subject to the terms of the Plan, a copy of which may be obtained by the Participant from the office of the General Counsel of the Company. This Award Agreement shall be subject to all interpretations, amendments, rules and regulations promulgated by the Committee from time to time. Notwithstanding any provision of this Award Agreement to the contrary, in the event of any discrepancy between the corporate records of the Company and this Award Agreement, the corporate records of the Company shall control.
		

		
			Section 13.        Not an Employment Contract.  Neither the Award nor this Award Agreement shall confer on the Participant any rights with respect to continuance of employment or other service with the Company or a Subsidiary, nor shall they interfere in any way with any right the Company or a Subsidiary may otherwise have to terminate or modify the terms of the Participant’s employment or other service at any time.
		

		
			Section 14.        Amendment.  Without limitation of Section 17 and Section 18 below, this Award Agreement may be amended in accordance with the provisions of the Plan, and may otherwise be amended in writing by the Participant and the Company without the consent of any other person.
		

		
			Section 15.        Governing Law.  This Award Agreement, the Plan and all actions taken in connection herewith and therewith shall be governed by and construed in accordance with the laws of the State of Delaware, without reference to principles of conflict of laws, except as superseded by applicable federal law.
		

		
			Section 16.        Validity. If any provision of this Award Agreement is determined to be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Award Agreement shall be construed and enforced as if such illegal or invalid provision had never been included herein.
		

		
			Section 17.        Section 409A Amendment.  The Award is intended to be exempt from Code Section 409A and this Award Agreement shall be administered and interpreted in accordance with such intent. The Committee reserves the right (including the right to delegate such right) to unilaterally amend this Award Agreement without the consent of the Participant in order to maintain an exclusion from the application of, or to maintain compliance with, Code Section 409A; and the Participant hereby acknowledges and consents to such rights of the Committee.
		

		
			Section 18.        Clawback.  The Award and any amount or benefit received under the Plan shall be subject to potential cancellation, recoupment, rescission, payback or other action in accordance with the terms of any applicable Company or Subsidiary clawback policy (the “Policy”) or any applicable law, as may be in effect from time to time. The Participant hereby acknowledges and consents to the Company’s or a Subsidiary’s application, implementation and enforcement of (a) the Policy and any similar policy established by the Company or a Subsidiary that may apply to the Participant, whether adopted prior to or following the date of this Award Agreement and (b) any provision of applicable law relating to cancellation, rescission, payback or recoupment of compensation, and agrees that the Company or a Subsidiary may take such actions as may be necessary to effectuate the Policy, any similar policy and applicable law, without further consideration or action.
		

		
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			IN WITNESS WHEREOF,  the Company has caused this Award Agreement to be executed in its name and on its behalf, and the Participant acknowledges understanding and acceptance of, and agrees to, the terms of the Plan and this Award Agreement, all as of the Grant Date.
		

			
					
						 

					
					
						 

					
					
						 

					
					
						 

				
	
					
						 

					
					
						    

					
					
						ALERUS FINANCIAL CORPORATION

				
	
					
						 

					
					
						 

					
					
						 

				
	
					
						 

					
					
						 

					
					
						By:

					
					
						 

				
	
					
						 

					
					
						 

					
					
						 

					
					
						 

				
	
					
						 

					
					
						 

					
					
						Print Name:

					
					
						 

				
	
					
						 

					
					
						 

					
					
						 

					
					
						 

				
	
					
						 

					
					
						 

					
					
						Title:

					
					
						 

				
	
					
						 

					
					
						 

					
					
						 

					
					
						 

				
	
					
						 

					
					
						 

					
					
						PARTICIPANT

				
	
					
						 

					
					
						 

					
					
						 

				
	
					
						 

					
					
						 

					
					
						 

				
	
					
						 

					
					
						 

					
					
						Print Name:

					
					
						 

				

		
			 
		

		
			
		

		
			

		 

		

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			PERFORMANCE-BASED
		

		
			RESTRICTED STOCK UNIT AWARD AGREEMENT
		

		
			SCHEDULE A
		

		
			Performance-Based Objectives
		

		
			The determination of the number of RSUs that will vest on the Certification Date as provided in Section 3(a) of the Award Agreement will be determined as follows:
		

		
			1.    The Committee will determine the Company’s Cumulative Net Income for the Performance Period.
		

		
			2.    Based on that Cumulative Net Income, the Committee will determine the Performance Factor for the Performance Period based upon the following table, specifically by determining where the Company’s Cumulative Net Income falls relative to the goals specified in the applicable column of the table, and then by selecting the corresponding Performance Factor. If the Company’s Cumulative Net Income for the Performance Period is between two amounts shown in the applicable column of the table, the corresponding Performance Factor will be determined by linear interpolation between the two relevant Performance Factors shown in the table. If Cumulative Net Income for the Performance Period is less than the Threshold Goal specified, the Performance Factor is zero. The Maximum Performance Factor is 150% regardless of Cumulative Net Income in excess of the Maximum Goal.
		

			
					
						Actual Performance Factor

					
					
						Target Cumulative Net Income

					
					
						Executive LTI Payout in $$ Value

				
	
					
						80%

					
					
						Minimum

					
					
						$_______

					
					
						50%

				
	
					
						100%

					
					
						Target

					
					
						$_______

					
					
						100%

				
	
					
						120%

					
					
						Maximum

					
					
						$_______

					
					
						150%

				

		
			 
		

		
			3.    The number of Units that will vest as of the Certification Date will be the number of RSUs specified in Section 2(c) multiplied by the Performance Factor.
		

		
			4.    For purposes of this Schedule A, the Company’s  “Cumulative Net Income” for any period shall mean the Company’s net income for that period as calculated under U.S. generally accepted accounting principles.
		

		
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			As an example, to compute the number of Units that will vest on the Certification Date, assume the following facts: (i) the number of RSUs awarded is 500; and (ii) the Company’s actual Cumulative Net Income for the Performance Period was half-way between the Threshold Goal and the Target Goal. Under these facts, the Performance Factor would be 75% (half-way between 50% and 100%), and the number of RSUs vesting on the Certification Date would be 375.
		

		 

		

			7Exhibit

Exhibit 4(b)
May 11, 2017

Company Order and Officers’ Certificate
3.300% Senior Notes, Series X, due 2027

The Bank of New York Mellon Trust Company, N.A., as Trustee
2 North LaSalle Street
Chicago, Illinois 60602

Ladies and Gentlemen:

Pursuant to Article Two of the Indenture, dated as of January 1, 1998 (as it may be amended or supplemented, the “Indenture”), from Appalachian Power Company (the “Company”) to The Bank of New York Mellon Trust Company, N.A., as successor to The Bank of New York, as trustee (the “Trustee”), and the Board Resolutions dated December 17, 2015, copies of which certified by the Secretary or an Assistant Secretary of the Company are being delivered herewith under Section 2.01 of the Indenture, and unless otherwise provided in a subsequent Company Order pursuant to Section 2.04 of the Indenture,

		
	1.
	The Company’s 3.300% Senior Notes, Series X, due 2027 (the “Notes”) are hereby established.  The Notes shall be in substantially the form attached hereto as Exhibit 1. 

		
	2.
	The terms and characteristics of the Notes shall be as follows (the numbered clauses set forth below corresponding to the numbered subsections of Section 2.01 of the Indenture, with terms used and not defined herein having the meanings specified in the Indenture):

(i)    The aggregate principal amount of Notes which may be authenticated and delivered under the Indenture shall be limited to $325,000,000 for the Notes, except as contemplated in Section 2.01(i) of the Indenture and except that such principal amount may be increased from time to time; all Notes need not be issued at the same time and the series may be reopened at any time, without the consent of any securityholder, for issuance of additional Notes, which Notes will have the same interest rate, maturity and other terms as those initially issued (other than the date of issuance, the issue price and, in some circumstances, the initial interest accrual date and the initial interest payment date);

(ii)    The date on which the principal of the Notes shall be payable shall be June 1, 2027;

(iii)    Interest shall accrue from the date of authentication of the Notes; the Interest Payment Dates on which such interest will be payable shall be June 1 and December 1, and the Regular Record Date for the determination of holders to whom interest is payable on any such Interest Payment Date shall be the May 15 or November 15, respectively; provided that the first Interest Payment Date shall be December 1, 2017 and interest payable on the Stated Maturity Date of the Notes or any Redemption Date shall be paid to the Person to whom principal shall be paid;

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(iv)    The interest rate at which the Notes shall bear interest shall be 3.300% per annum;

(v)    The Notes may be redeemed by the Company at its option, in whole at any time or in part from time to time, upon not less than thirty but not more than sixty days’ prior notice given by mail to the registered owners of the Notes.   At any time prior to March 1, 2027, the Company may redeem the Notes either as a whole or in part at a redemption price equal to the greater of (1) 100% of the principal amount of the Notes being redeemed and (2) the sum of the present values of the remaining scheduled payments of principal and interest on the Notes being redeemed that would be due if such Notes matured on March 1, 2027 (excluding the portion of any such interest accrued to but excluding the date of redemption) discounted (for purposes of determining present value) to the redemption date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate (as defined below) plus 15 basis points, plus, in each case, accrued and unpaid interest thereon to but excluding the date of redemption.
 
At any time on or after March 1, 2027, the Company may redeem the Notes in whole or in part at 100% of the principal amount of the Notes being redeemed, plus accrued and unpaid interest thereon to but excluding the date of redemption.

“Comparable Treasury Issue” means the United States Treasury security selected by an Independent Investment Banker as having a maturity comparable to the remaining term (“remaining life”) of the Notes (assuming, for this purpose, that the Notes matured on March 1, 2027) that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining life of the Notes.

“Comparable Treasury Price” means, with respect to any redemption date, (1) the average of the Reference Treasury Dealer Quotations for such redemption date, after excluding the highest and lowest of such Reference Treasury Dealer Quotations, or (2) if the Company obtains fewer than four of such Reference Treasury Dealer Quotations, the average of all such quotations.

“Independent Investment Banker” means one of the Reference Treasury Dealers appointed by the Company and notified by the Company to the Trustee.

“Reference Treasury Dealer” means a primary U.S. Government securities dealer or dealers selected by the Company and notified by the Company to the Trustee.

“Reference Treasury Dealer Quotations” means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the Company and notified to the Trustee, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Company and the Trustee by such 

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Reference Treasury Dealer at or before 3:30 p.m., New York City time, on the third Business Day preceding such redemption date.

“Treasury Rate” means, with respect to any redemption, the rate per annum equal to the semiannual equivalent yield to maturity of the Comparable Treasury Issue, calculated using a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date.

(vi)     (a) the Notes  shall be issued in the form of a Global Note; (b) the Depositary for the Global Note shall be The Depository Trust Company; and (c) the procedures with respect to transfer and exchange of Global Notes shall be as set forth in the form of the Note attached hereto;

(vii)    the title of the Notes shall be “3.300% Senior Notes, Series X, due 2027”;

(viii)    the forms of the Notes shall be as set forth in Paragraph 1, above;

(ix)    not applicable;

(x)    the Notes may be subject to a Periodic Offering;

(xi)    not applicable;

(xii)    not applicable;

(xiii)    not applicable;

(xiv)    the Notes shall be issuable in minimum denominations of $2,000 and integral multiples of $1,000 in excess thereof;

(xv)    not applicable;

(xvi)    the Notes shall not be issued as Discount Securities;

(xvii)    not applicable;

(xviii)    not applicable; 

(xix)    Limitations on Liens:

So long as any of the Notes are outstanding, the Company will not create or suffer to be created or to exist any mortgage, pledge, security interest, or other lien (collectively, “Liens”) on any of the Company’s utility properties or tangible assets now owned or hereafter acquired to secure any indebtedness for borrowed money (“Secured Debt”), without providing that such Notes will be similarly secured.  This restriction does not apply to the Company’s subsidiaries, 

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nor will it prevent any of them from creating or permitting to exist Liens on their property or assets to secure any Secured Debt.  In addition, this restriction does not prevent the creation or existence of:

		
	•
	Liens on property existing at the time of acquisition or construction of such property (or created within one year after completion of such acquisition or construction), whether by purchase, merger, construction or otherwise, or to secure the payment of all or any part of the purchase price or construction cost thereof, including the extension of any Liens to repairs, renewals, replacements substitutions, betterments, additions, extensions and improvements then or thereafter made on the property subject thereto; 

		
	•
	Financing of the Company’s accounts receivable for electric service; 

		
	•
	Any extensions, renewals or replacements (or successive extensions, renewals or replacements), in whole or in part, of liens permitted by the foregoing clauses; and

		
	•
	The pledge of any bonds or other securities at any time issued under any of the Secured Debt permitted by the above clauses.

In addition to the permitted issuances above, Secured Debt not otherwise so permitted may be issued in an amount that does not exceed 15% of Net Tangible Assets as defined below.  

“Net Tangible Assets” means the total of all assets (including revaluations thereof as a result of commercial appraisals, price level restatement or otherwise) appearing on the Company’s balance sheet, net of applicable reserves and deductions, but excluding goodwill, trade names, trademarks, patents, unamortized debt discount and all other like intangible assets (which term shall not be construed to include such revaluations), less the aggregate of the Company’s current liabilities appearing on such balance sheet.  For purposes of this definition, the Company's balance sheet does not include assets and liabilities of the Company’s subsidiaries.

This restriction also will not apply to or prevent the creation or existence of leases made, or existing on property acquired, in the ordinary course of business; and

(xx)    Certain Tax Information.

In order to comply with applicable tax laws (inclusive of rules, regulations and interpretations promulgated by competent authorities) related to the Indenture, this Company Order and Officers’ Certificate and the Notes in effect from time to time (“Applicable Law”) that a foreign financial institution, issuer, trustee, paying agent or other party is or has agreed to be subject to, the Company agrees (i) to provide to the Trustee sufficient information about the parties and/or transactions (including any modification to the terms of such transactions) so the Trustee can determine whether it has tax related obligations under Applicable Law and (ii) that the Trustee shall be entitled to make any withholding or deduction from payments to the extent 

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necessary to comply with Applicable Law for which the Trustee shall not have any liability.

		
	3.
	You are hereby requested to authenticate $325,000,000 aggregate principal amount of 3.300% Senior Notes, Series X, due 2027 executed by the Company and delivered to you concurrently with this Company Order and Officers’ Certificate, in the manner provided by the Indenture.

		
	4.
	You are hereby requested to hold the Notes as custodian for DTC in accordance with the Blanket Issuer Letter of Representations dated June 24, 2004, from the Company to DTC.

		
	5.
	Concurrently with this Company Order and Officers’ Certificate, an Opinion of Counsel under Sections 2.04 and 13.06 of the Indenture is being delivered to you.

		
	6.
	The undersigned, Renee V. Hawkins and Thomas G. Berkemeyer, the Assistant Treasurer and Assistant Secretary, respectively, of the Company do hereby certify that:

		
	(i)
	The form and terms of the Notes have been established in conformity with the provisions of the Indenture;

		
	(ii)
	We have read the relevant portions of the Indenture, including without limitation the conditions precedent provided for therein relating to the action proposed to be taken by the Trustee as requested in this Company Order and Officers’ Certificate, and the definitions in the Indenture relating thereto;

		
	(iii)
	We have read the Board Resolutions of the Company and the Opinion of Counsel referred to above;

		
	(iv)
	We have conferred with other officers of the Company, have examined such records of the Company and have made such other investigation as we deemed relevant for purposes of this certificate;

		
	(v)
	In our opinion, we have made such examination or investigation as is necessary to enable us to express an informed opinion as to whether or not such conditions have been complied with; and 

		
	(vi)
	On the basis of the foregoing, we are of the opinion that all conditions precedent provided for in the Indenture relating to the action proposed to be taken by the Trustee as requested herein have been complied with.

5

Kindly acknowledge receipt of this Company Order and Officers’ Certificate, including the documents listed herein, and confirm the arrangements set forth herein by signing and returning the copy of this document attached hereto.

Very truly yours,

APPALACHIAN POWER COMPANY

	
		
	By:
	/s/ Renee V. Hawkins

	 
	Renee V. Hawkins

	 
	Assistant Treasurer

	 
	 

	 
	 

	And:
	/s/ Thomas G. Berkemeyer

	 
	Thomas G. Berkemeyer

	 
	Assistant Secretary

	 
	 

	 
	 

	Acknowledged by Trustee:

	 
	 

	 
	 

	By:
	/s/ Valerie Boyd

	 
	Authorized Signatory

6

Exhibit 1

Unless this certificate is presented by an authorized representative of The Depository Trust Company (55 Water Street, New York, New York) to the issuer or its agent for registration of transfer, exchange or payment, and any certificate to be issued is registered in the name of Cede & Co. or in such other name as is requested by an authorized representative of The Depository Trust Company and any payment is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest herein.  Except as otherwise provided in Section 2.11 of the Indenture, this Security may be transferred, in whole but not in part, only to another nominee of the Depository or to a successor Depository or to a nominee of such successor Depository.

No.   R-1

APPALACHIAN POWER COMPANY
3.300% Senior Notes, Series X, due 2027

	
				
	CUSIP:  037735 CW5
	Original Issue Date:  May 11, 2017

	 
	 
	 
	 

	Stated Maturity:  June 1, 2027
	Interest Rate:  3.300%

	 
	 
	 
	 

	Principal Amount:  $325,000,000
	 

	 
	 
	 
	 

	Redeemable:
	Yes  þ
	No   ̈
	 

	In Whole:
	Yes  þ
	No   ̈
	 

	In Part:    
	Yes  þ
	No   ̈
	 

  

APPALACHIAN POWER COMPANY, a corporation duly organized and existing under the laws of the Commonwealth of Virginia (herein referred to as the “Company”, which term includes any successor corporation under the Indenture hereinafter referred to), for value received, hereby promises to pay to CEDE & CO. or registered assigns, the Principal Amount specified above on the Stated Maturity specified above, and to pay interest on said Principal Amount from the Original Issue Date specified above or from the most recent interest payment date (each such date, an “Interest Payment Date”) to which interest has been paid or duly provided for, semi-annually in arrears on June 1 and December 1 in each year, commencing on December 1, 2017, at the Interest Rate per annum specified above, until the Principal Amount shall have been paid or duly provided for.  Interest shall be computed on the basis of a 360-day year of twelve 30-day months.

The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date, as provided in the Indenture, as hereinafter defined, shall be paid to the Person in whose name this Note (or one or more Predecessor Securities) shall have been registered at the close of business on the Regular Record Date with respect to such Interest Payment Date, which shall be the May 15 or November 15 (whether or not a Business Day) prior to such Interest Payment Date, provided that interest payable on the Stated Maturity or any redemption date shall be paid to the Person to whom principal is paid.  Any such interest not so punctually paid or duly provided for shall forthwith cease 

to be payable to the Holder on such Regular Record Date and shall be paid as provided in said Indenture.

If any Interest Payment Date, any redemption date or Stated Maturity is not a Business Day, then payment of the amounts due on this Note on such date will be made on the next succeeding Business Day, and no interest shall accrue on such amounts for the period from and after such Interest Payment Date, redemption date or Stated Maturity, as the case may be, with the same force and effect as if made on such date, except that if such Business Day is in the next succeeding calendar year, then payment will be made on the immediately preceding Business Day.  The principal of (and premium, if any) and the interest on this Note shall be payable at the office or agency of the Company maintained for that purpose in the Borough of Manhattan, The City of New York, New York, in any coin or currency of the United States of America which at the time of payment is legal tender for payment of public and private debts; provided, however, that payment of interest (other than interest payable on the Stated Maturity or any redemption date) may be made at the option of the Company by check mailed to the registered holder at such address as shall appear in the Security Register.

This Note is one of a duly authorized series of Notes of the Company (herein sometimes referred to as the “Notes”), specified in the Indenture, all issued or to be issued in one or more series under and pursuant to an Indenture dated as of January 1, 1998 duly executed and delivered between the Company and The Bank of New York Mellon Trust Company, N.A., a national banking association formed under the laws of the United States, as successor to The Bank of New York, as Trustee (herein referred to as the “Trustee”) (such Indenture, as originally executed and delivered and as thereafter supplemented and amended being hereinafter referred to as the “Indenture”), to which Indenture and all indentures supplemental thereto or Company Orders reference is hereby made for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Trustee, the Company and the holders of the Notes.  By the terms of the Indenture, the Notes are issuable in series which may vary as to amount, date of maturity, rate of interest and in other respects as in the Indenture provided.  This Note is one of the series of Notes designated on the face hereof.

This Note may be redeemed by the Company at its option, in whole at any time or in part from time to time, upon not less than thirty but not more than sixty days’ prior notice given by mail to the registered owners of the Notes.   At any time prior to March 1, 2027, the Company may redeem this Note either as a whole or in part at a redemption price equal to the greater of (1) 100% of the principal amount of the Notes being redeemed and (2) the sum of the present values of the remaining scheduled payments of principal and interest on the Notes being redeemed that would be due if such Notes matured on March 1, 2027 (excluding the portion of any such interest accrued to but excluding the date of redemption) discounted (for purposes of determining present value) to the redemption date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate (as defined below) plus 15 basis points, plus, in each case, accrued and unpaid interest thereon to but excluding the date of redemption.
 
At any time on or after March 1, 2027, the Company may redeem this Note in whole or in part at 100% of the principal amount of the Notes being redeemed, plus accrued but unpaid interest thereon to but excluding the date of redemption.

2

“Comparable Treasury Issue” means the United States Treasury security selected by an Independent Investment Banker as having a maturity comparable to the remaining term (“remaining life”) of the Notes (assuming, for this purpose, that the Notes matured on March 1, 2027) that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of comparable maturity to the remaining life of the Notes.

“Comparable Treasury Price” means, with respect to any redemption date, (1) the average of the Reference Treasury Dealer Quotations for such redemption date, after excluding the highest and lowest of such Reference Treasury Dealer Quotations, or (2) if the Company obtains fewer than four of such Reference Treasury Dealer Quotations, the average of all such quotations.

“Independent Investment Banker” means one of the Reference Treasury Dealers appointed by the Company and notified by the Company to the Trustee.

“Reference Treasury Dealer” means a primary U.S. Government securities dealer or dealers selected by the Company and notified by the Company to the Trustee.

“Reference Treasury Dealer Quotations” means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the Company and notified to the Trustee, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Company and the Trustee by such Reference Treasury Dealer at or before 3:30 p.m., New York City time, on the third Business Day preceding such redemption date.

“Treasury Rate” means, with respect to any redemption, the rate per annum equal to the semiannual equivalent yield to maturity of the Comparable Treasury Issue, calculated using a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date.

The Company shall not be required to (i) issue, exchange or register the transfer of any Notes during a period beginning at the opening of business 15 days before the day of the mailing of a notice of redemption of less than all the outstanding Notes of the same series and ending at the close of business on the day of such mailing, nor (ii) register the transfer of or exchange of any Notes of any series or portions thereof called for redemption.  This Global Note is exchangeable for Notes in definitive registered form only under certain limited circumstances set forth in the Indenture.

In the event of redemption of this Note in part only, a new Note or Notes of this series, of like tenor, for the unredeemed portion hereof will be issued in the name of the Holder hereof upon the surrender of this Note.

In case an Event of Default, as defined in the Indenture, shall have occurred and be continuing, the principal of all of the Notes may be declared, and upon such declaration shall become, due and payable, in the manner, with the effect and subject to the conditions provided in the Indenture.

3

The Indenture contains provisions for defeasance at any time of the entire indebtedness of this Note upon compliance by the Company with certain conditions set forth therein.

As described in the Company Order and Officers’ Certificate, the Company is subject to a covenant regarding making certain tax information available to the Trustee and, so long as this Note is outstanding, the Company is subject to a limitation on Liens, in each case as described therein.

The Indenture contains provisions permitting the Company and the Trustee, with the consent of the Holders of not less than a majority in aggregate principal amount of the Notes of each series affected at the time outstanding, as defined in the Indenture, to execute supplemental indentures for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the Indenture or of any supplemental indenture or of modifying in any manner the rights of the Holders of the Notes; provided, however, that no such supplemental indenture shall (i) extend the fixed maturity of any Notes of any series, or reduce the principal amount thereof, or reduce the rate or extend the time of payment of interest thereon, or reduce any premium payable upon the redemption thereof, or reduce the amount of the principal of a Discount Security that would be due and payable upon a declaration of acceleration of the maturity thereof pursuant to the Indenture, without the consent of the holder of each Note then outstanding and affected; (ii) reduce the aforesaid percentage of Notes, the holders of which are required to consent to any such supplemental indenture, or reduce the percentage of Notes, the holders of which are required to waive any default and its consequences, without the consent of the holder of each Note then outstanding and affected thereby; or (iii) modify any provision of Section 6.01(c) of the Indenture (except to increase the percentage of principal amount of securities required to rescind and annul any declaration of amounts due and payable under the Notes), without the consent of the holder of each Note then outstanding and affected thereby.  The Indenture also contains provisions permitting the Holders of a majority in aggregate principal amount of the Notes of all series at the time outstanding affected thereby, on behalf of the Holders of the Notes of such series, to waive any past default in the performance of any of the covenants contained in the Indenture, or established pursuant to the Indenture with respect to such series, and its consequences, except a default in the payment of the principal of or premium, if any, or interest on any of the Notes of such series.  Any such consent or waiver by the registered Holder of this Note (unless revoked as pro-vided in the Indenture) shall be conclusive and binding upon such Holder and upon all future Holders and owners of this Note and of any Note issued in exchange herefor or in place hereof (whether by registration of transfer or otherwise), irrespective of whether or not any notation of such consent or waiver is made upon this Note.

No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of and premium, if any, and interest on this Note at the time and place and at the rate and in the money herein prescribed.

As provided in the Indenture and subject to certain limitations therein set forth, this Note is transferable by the registered holder hereof on the Security Register of the Company, upon surrender of this Note for registration of transfer at the office or agency of the Company as may be designated by the Company accompanied by a written instrument or instruments of transfer in form satisfactory to the Company or the Trustee duly executed by the registered Holder hereof or his or her attorney duly authorized in writing, and thereupon one or more new Notes of authorized denominations and for the same aggregate principal amount and series will be issued to the 

4

designated transferee or transferees.  No service charge will be made for any such trans-fer, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in relation thereto.

Prior to due presentment for registration of transfer of this Note, the Company, the Trustee, any paying agent and any Security Registrar may deem and treat the registered Holder hereof as the absolute owner hereof (whether or not this Note shall be overdue and notwithstanding any notice of ownership or writing hereon made by anyone other than the Security Registrar) for the purpose of receiving payment of or on account of the principal hereof and premium, if any, and interest due hereon and for all other purposes, and neither the Company nor the Trustee nor any paying agent nor any Security Registrar shall be affected by any notice to the contrary.

No recourse shall be had for the payment of the principal of or the interest on this Note, or for any claim based hereon, or otherwise in respect hereof, or based on or in respect of the Indenture, against any incorporator, stockholder, officer or director, past, present or future, as such, of the Company or of any predecessor or successor corporation, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance hereof and as part of the consideration for the issuance hereof, expressly waived and released.

The Notes of this series are issuable only in registered form without coupons in denominations of $2,000 and any integral multiples of $1,000 in excess thereof.  As provided in the Indenture and subject to certain limitations, Notes of this series are exchangeable for a like aggregate principal amount of Notes of this series of the same authorized denomination, as requested by the Holder surrendering the same.

All terms used in this Note which are defined in the Indenture shall have the meanings assigned to them in the Indenture.

This Note shall not be entitled to any benefit under the Indenture hereinafter referred to, be valid or become obligatory for any purpose until the Certificate of Authentication hereon shall have been signed by or on behalf of the Trustee.

5

IN WITNESS WHEREOF, the Company has caused this Instrument to be executed.

APPALACHIAN POWER COMPANY

By:  __________________________                    
Renee V. Hawkins
Assistant Treasurer
Attest:

By:  ___________________________                    
Thomas G. Berkemeyer
Assistant Secretary

6

CERTIFICATE OF AUTHENTICATION

This is one of the Notes of the series of Notes designated in accordance with, and referred to in, the within‐mentioned Indenture.

Dated:  May 11, 2017

THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.

By: ___________________________
  Authorized Signatory

7

FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and transfer(s) unto

(PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE)

_______________________________________

________________________________________________________________

________________________________________________________________
(PLEASE PRINT OR TYPE NAME AND ADDRESS, INCLUDING ZIP CODE, OF
________________________________________________________________
ASSIGNEE) the within Note and all rights thereunder, hereby
________________________________________________________________
irrevocably constituting and appointing such person attorney to 
________________________________________________________________
transfer such Note on the books of the Issuer, with full
________________________________________________________________
power of substitution in the premises.

Dated:________________________        _________________________

		
	NOTICE:
	The signature to this assignment must correspond with the name as written upon the face of the within Note in every particular, without alteration or enlargement or any change whatever and NOTICE:  Signature(s) must be guaranteed by a financial institution that is a member of the Securities Transfer Agents Medallion Program (“STAMP”), the Stock Exchange Medallion Program (“SEMP”) or the New York Stock Exchange, Inc. Medallion Signature Program (“MSP”).

8

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