EXHIBIT 10.01
NORTHERN STATES POWER COMPANY
EXECUTIVE ANNUAL INCENTIVE AWARD PLAN
I
PURPOSE AND EFFECTIVE TIME
This Northern States Power Company ("Company") Executive
Annual Incentive Award Plan (the "Plan") is designed to provide a
significant and flexible economic opportunity to selected
officers and employees of the Company and its Affiliates as a
reflection of their individual and group contributions to the
success of the Company and its Affiliates. Payments pursuant to
Section IX of the Plan are intended to qualify under Section
162(m)(4)(C) of the Internal Revenue Code of 1986, as amended, as
excluded from the term "applicable employee remuneration" (such
payments are hereinafter referred to as "Excluded Income"). The
Plan shall be effective as of January 1, 1998, subject to the
shareholder approvals required by Section XII of the Plan for
Covered Employees.
II
DEFINITIONS
"Affiliate" means (i) a corporation at least 50% of the
common stock or voting power of which is owned, directly or
indirectly, by the Company and (ii) any other corporation or
other entity controlled by the Company and designated by the
Committee from time to time as such.
"Board" shall mean the Board of Directors of the Company.
"Change in Control" shall mean the happening of any of the
following events:
(a) An acquisition by an individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange
Act) of 20% or more of either (1) the then outstanding
shares of common stock of the Company (the "Outstanding
Company Common Stock") or (2) the combined voting power of
the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); excluding,
however, the following: (i) any acquisition directly from
the Company, other than an acquisition by virtue of the
exercise of a conversion privilege unless the security being
so converted was itself acquired directly from the Company,
(ii) any acquisition by the Company, (iii) any acquisition
by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by
the Company or (iv) any acquisition by any corporation
pursuant to a transaction which complies with clauses (i),
(ii) and (iii) of subsection (b) of this definition; or
(b) The approval by the shareholders of the Company of
a reorganization, merger, consolidation, share exchange or
sale or other disposition of all or substantially all of the
assets of the Company ("Corporate Transaction") or, if
consummation of such Corporate Transaction is subject, at
the time of such approval by shareholders, to the consent of
any government or governmental agency, the obtaining of such
consent (either explicitly or implicitly by consummation);
excluding, however, such a Corporate Transaction pursuant to
which (i) all or substantially all of the individuals and
entities who are the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company
Voting Securities immediately prior to such Corporate
Transaction will beneficially own, directly or indirectly,
more than 60% of, respectively, the outstanding shares of
common stock, and the combined voting power of the then
outstanding voting securities entitled to vote generally in
the election of directors, as the case may be, of the
corporation resulting from such Corporate Transaction
(including, without limitation, a corporation which as a
result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or
through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such
Corporate Transaction, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities, as the case
may be, (ii) no Person (other than the Company, any employee
benefit plan (or related trust) of the Company or such
corporation resulting from such Corporate Transaction) will
beneficially own, directly or indirectly, 20% or more of,
respectively, the outstanding shares of common stock of the
corporation resulting from such Corporate Transaction or the
combined voting power of the outstanding voting securities
of such corporation entitled to vote generally in the
election of directors except to the extent that such
ownership existed prior to the Corporate Transaction and
(iii) individuals who were members of the board of directors
of the corporation resulting from such Corporate
Transaction; or
(c) The approval by the shareholders of the Company of
a complete liquidation or dissolution of the Company.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Committee" shall mean the Corporate Management Committee of
the Board, or such other committee of the Board as the Board may
from time to time determine, which, except as specifically
decided otherwise by the Board, is composed solely of not less
than two Disinterested Persons, each of whom shall be appointed
by and serve at the pleasure of the Board.
"Company" shall mean Northern States Power Company, a
Minnesota corporation.
"Covered Employees" shall mean the Participants designated
by the Committee prior to the award of an Incentive Award
opportunity hereunder who are or are expected to be "covered
employees" within the meaning of Section 162(m)(3) of the Code
for the Incentive Period as to which an Incentive Award hereunder
is payable and for whom the Committee intends that amounts
payable hereunder constitute Excluded Income.
"Disinterested Person" shall mean a member of the Board who
qualifies as an "outside director" for purposes of Section 162(m)
of the Code.
"Incentive Award" shall mean a cash award payable to a
Participant pursuant to the terms of the Plan, including a
Special Incentive Award.
"Incentive Period" shall mean the period with respect to
which a Participant is eligible to earn an Incentive Award.
"Participant" shall have the meaning set forth in Article IV
hereof.
"Payment Date" shall mean the date following the conclusion
of a particular Incentive Period on which the Committee certifies
that applicable Performance Goals have been satisfied and
authorizes payment of corresponding Incentive Awards.
"Performance Goals" shall have the meaning set forth in
Article IX hereof.
"Special Incentive Award" shall have the meaning set forth
in Article IX hereof.
"Target Incentive Award" shall mean the amount determined by
multiplying a Participant's base salary as of the last day of the
applicable Incentive Period by a percentage designated by the
Committee in its sole discretion at the time the award is
granted, which percentage need not be the same for each
Participant.
III
ADMINISTRATION
The Plan shall be administered by the Committee. In
administering the Plan, the Committee may at its option employ
compensation consultants, accountants and counsel (who may be the
compensation consultants, independent auditors and outside
counsel of the Company or an Affiliate) and other persons to
assist or render advice to the Committee, all at the expense of
the Company. The Committee shall have the sole authority to make
rules and regulations relating to the administration of the Plan,
and any interpretations and decisions of the Committee with
respect to the Plan shall be final and binding.
IV
ELIGIBILITY
The Committee shall, in its sole discretion, determine for
each Incentive Period those officers and salaried employees of
the Company and its Affiliates who shall be eligible to
participate in the Plan (the "Participants") for such Incentive
Period based upon such Participants' opportunity to have a
substantial impact on the operating results of the Company or an
Affiliate. Nothing contained in the Plan shall be construed as
or be evidence of any contract of employment with any Participant
for a term of any length nor shall participation in the Plan in
any Incentive Period by any Participant require continued
participation by such Participant in any subsequent Incentive
Period.
V
DETERMINATION OF INCENTIVE AWARDS
Subject to Article IX hereof, the amount and terms of each
Incentive Award to a Participant shall be determined by and in
the discretion of the Committee. The Committee may condition the
earning of an Incentive Award upon the attainment of specified
Performance Goals, measured over a period ending no later than
the end of the applicable Incentive Period. Such performance
goals may relate to the Participant or the Company, or any
Affiliate, division or department of the Company for or within
which the Participant is primarily employed, or upon such other
factors or criteria as the Committee shall determine, and may be
different for each Participant. Incentive Awards payable under
the Plan will consist of a cash award from the Company, based
upon a percentage (which may exceed 100%) of the Target Incentive
Award and, if applicable, the degree of achievement of such
performance goals. Incentive Awards under this Plan for Covered
Employees shall be subject to preestablished Performance Goals in
accordance with Article IX hereof. Except with respect to
Covered Employees, the Committee may, in its sole discretion,
increase or decrease the amount of any Incentive Award payable to
a Participant and, in recognition of changed or special
circumstances, may award Incentive Awards to Participants even
though the Incentive Awards are not earned. Incentive Awards
earned or otherwise awarded will be paid as soon as
administratively feasible on or after the Payment Date.
VI
TERMINATION OF EMPLOYMENT
In the event that a Participant's employment with the
Company and its Affiliates terminates for any reason during the
Incentive Period with respect to any Incentive Awards, the
balance of any Incentive Award which remains unpaid at the time
of such termination shall be payable to the Participant, or
forfeited by the Participant, in accordance with the terms of the
award granted by the Committee; PROVIDED, HOWEVER, that in the
case of a Covered Employee, no amount shall be payable pursuant
to the Plan unless the Performance Goals are satisfied or the
termination of employment of the Covered Employee is due to death
or disability. A Participant who remains employed through the
Incentive Period, but is terminated prior to the Payment Date,
shall be entitled to receive any Incentive Award payable to such
Participant with respect to such Incentive Period.
VII
AMENDMENT AND DISCONTINUANCE
The Board shall have the right to amend, alter, discontinue
or otherwise modify the Plan from time to time but no such
modification shall, without the consent of the Participant
affected, impair any award made prior to the effective date of
the modification.
VIII
MISCELLANEOUS
It is presently intended that the Plan constitute an
"unfunded" plan for incentive and deferred compensation. The
Committee may authorize the creation of trusts or other
arrangements to meet the payment obligations created under the
Plan; PROVIDED, HOWEVER, that, unless the Committee otherwise
determines, the existence of such trusts or other arrangements is
consistent with the "unfunded" status of the Plan. The Plan
shall be governed by and construed in accordance with the laws of
the State of Minnesota.
IX
PROCEDURES FOR CERTAIN DESIGNATED PARTICIPANTS
Incentive Awards under the Plan to Participants who are
Covered Employees shall be subject to preestablished Performance
Goals as set forth herein. Notwithstanding Article V hereof, the
Committee shall not have the discretion to modify the terms of
awards to such Participants except as specifically set forth in
this Article IX.
(a) TARGET BONUS. On or before the 90th day of each
Incentive Period, and in any event before 25% or more of the
Incentive Period has elapsed, the Committee shall establish in
writing specific Performance Goals for the Incentive Period, upon
the attainment of which will be conditioned the payment of
Incentive Awards ("Special Incentive Awards") to such of the
Participants who may be Covered Employees. A Special Incentive
Award shall consist of a cash award from the Company to be based
upon a percentage (which may exceed 100%) of a Target Incentive
Award. The extent, if any, to which a Special Incentive Award
will be payable will be based upon the degree of achievement of
preestablished Performance Goals over a specified Incentive
Period; provided, however, that the Committee may, in its sole
discretion, reduce the amount which would otherwise be payable
with respect to an Incentive Period.
(b) INCENTIVE PERIOD. The Incentive Period will be a
period of up to twelve months, unless a shorter period is
otherwise selected and established in writing by the Committee at
the time the Performance Goals are established with respect to
such Incentive Period.
(c) PERFORMANCE GOALS. The Performance Goals established
by the Committee at the time a Special Incentive Award is granted
will be based on one or more of the following: earnings per
share, market share, stock price, sales, costs, net operating
income, cash flow, retained earnings, return on equity, total
shareholder return, shareholder value analysis, results of
customer satisfaction surveys, aggregate product price and other
product price measures, safety record, service reliability,
demand-side management (including conservation and load
management), operating and maintenance cost management, energy
production availability, and individual performance measures;
provided, that all Performance Goals shall be objective
performance goals satisfying the requirements for "performance-
based compensation" within the meaning of Section 162(m)(4) of
the Code. Such Performance Goals also may be based on the
attainment of specified levels of performance of the Company
and/or any Affiliates under one or more of the measures described
above relative to the performance of other corporations.
(d) PAYMENT OF AN INCENTIVE AWARD. At the time the
Special Incentive Award is granted, the Committee shall prescribe
a formula to determine the percentage of the Target Incentive
Award which may be payable based upon the degree of attainment of
the Performance Goals during the Incentive Period. If the
minimum Performance Goals established by the Committee are not
met, no payment will be made to a Participant who is a Covered
Employee. To the extent that the minimum Performance Goals are
satisfied or surpassed, and upon written certification by the
Committee that the Performance Goals have been satisfied to a
particular extent and any other material terms and conditions of
the Special Incentive Awards have been satisfied, payment shall
be made on the Payment Date in accordance with the prescribed
formula based upon a percentage of the Target Incentive Award
unless the Committee determines, in its sole discretion, to
reduce the payment to be made.
(e) MAXIMUM PAYABLE. The maximum amount payable to a
Covered Employee under this Plan for any calendar year of the
Company pursuant to this Plan shall be $1,000,000.
X
CHANGE IN CONTROL
Notwithstanding any other provision of this Plan, (i) upon a
Change in Control, each Participant who is employed by the
Company or an Affiliate immediately before the Change in Control
shall be entitled to receive a payment equal to his or her Target
Incentive Award for the Incentive Period that includes the date
of the Change in Control, and (ii) any additional Incentive Award
that becomes payable to such a Participant for that Incentive
Period shall be reduced (but not below zero) by the amount of the
payment made to such Participant pursuant to clause (i) of this
Article X.
XI
DEFERRAL ELECTIONS
The Committee may at its option establish procedures
pursuant to which Participants are permitted to defer the receipt
of Incentive Awards payable hereunder.
XII
SHAREHOLDER APPROVAL
This Plan shall not become effective with respect to
individuals who are Covered Employees unless it shall have been
approved by the affirmative vote of a majority of the total
voting power of the shares of common stock and preferred stock of
Northern States Power Company present in person or by proxy and
entitled to vote thereon.