EXHIBIT 10(g)(6)
NORTHWESTERN PUBLIC SERVICE COMPANY
ANNUAL PERFORMANCE INCENTIVE PLAN
WHEREAS, the Board of Directors has established a Performance Incentive
Plan; and
WHEREAS, the Board of Directors of Northwestern Public Service Company
("Company") desires to amend such Plan by changing its name to Annual
Performance Incentive Plan ("Plan") and to provide market competitive
compensation to a broader management group;
NOW THEREFORE, the Annual Performance Incentive Plan, as amended,
provides as follows:
I. OBJECTIVE
The Northwestern Public Service Company Annual Performance Incentive
Plan ("Plan") is established to accomplish the following objectives: (1)
to motivate and reward outstanding performance by Northwestern Public
Service Company (the "Company") and its management employees by providing
additional compensation to officers and managers who influence the
profitability of the Company; (2) to compare the Company's performance with
a group of regional utilities; (3) to compare the Company's performance to
established annual objectives; (4) to compare individual performance to
established annual objectives; (5) to focus on stockholder and ratepayer
interests and (6) to support long-term objectives by achieving short-term
goals.
II. ADMINISTRATION
The Plan shall be administered by the Company. The Compensation
Committee ("Committee") of the Company's Board of Directors ("Board"),
shall have responsibility and authority with respect to the Plan, including
the following: (1) approving performance measures, the measurement scale
used, and the comparison utilities selected; (2) reviewing eligibility for
Plan participation; (3) approving the size of the performance fund
("Performance Fund") and individual levels of award opportunities; and (4)
reviewing and recommending awards for all Participants to the Board, which
shall have final approval of awards.
III. ELIGIBILITY FOR PARTICIPATION
Employees eligible to participate in the Plan are those members of the
Management Group set forth on Exhibit I attached hereto ("Participants").
The Chief Executive Officer of the Company shall determine for each
calendar year the identity of employees assigned to the Management Group
and may add additional employees to, and remove employees from, the
Management Group during each calendar year. All decisions of the Chief
Executive Officer relating to participation shall be subject to review and
change by the Committee.
All Participants will be eligible to participate in the Plan for that
calendar year unless any of the following circumstances occur:
(a) The Participant at any time is discharged from employment with the
Company for cause ("Cause"). "Cause" shall mean (i) a Participant's
conviction of any criminal violation involving dishonesty, fraud, or breach
of trust, or (ii) a Participant's willful engagement in any misconduct in
the performance of his duty that materially injures the Company, or (iii)
failure to adequately perform his duties; or
(b) The Participant's employment with the Company has terminated for
any reason other than death, permanent disability, or retirement on or
after the age of sixty-five (65) years or such earlier date as the Board,
in its discretion, shall designate. For the purposes of this Section, a
Participant will be considered to terminate employment by reason of
"permanent disability" if, in the determination of the Board, he is subject
to a physical or mental condition which is expected to render the
Participant unable to perform his usual duties or any comparable duties for
the Company.
In the event that an eligible Participant is not employed for an entire
plan year, his award shall be pro-rated to reflect the proportionate part
of the plan year during which he was actually employed.
IV. DETERMINATION OF PERFORMANCE AWARD AMOUNTS
(a) A Performance Award ("Award") shall be awarded under the Plan to
each Participant based on performance for the applicable calendar year
which shall be determined by reference to the measures of performance for
that year and weighting as set forth on Exhibit II attached hereto and
detailed as follows:
(i) Company Performance vs. Peer Utilities (50% weight)
The Company will compare itself against peer utilities set forth
on Exhibit II for (1) Change in Average Rates, defined as total retail
revenues, divided by retail sales in kilowatt-hours, for electric
operations, and total revenue from ultimate customers, divided by
volume of gas sold to ultimate customers, for gas operations, and for
(2) Change in Operating Expenses, defined as total operating expenses
per unit of energy furnished to customers. The results of both
electric and gas computations, in relation to a peer group, will be
weighted in proportion to the Company's operating income from each
source.
The Company will rank itself percentile-wise against the peer
utilities in terms of each of the above two measures. The average
percentile ranking will determine the overall degree of achievement of
peer-based goals and the degree to which this portion of the annual
incentive is earned. If the average percentile ranking is fifty
percent (50%), the target award level will be earned on the peer-based
measures. If the Company ranks first among peers in terms of both
measures (100th percentile), then the maximum award will be earned.
If the average percentile ranking is twenty-five percent (25%), then
the threshold award level will be earned with respect to the peer-
based portion of the annual incentive. A ranking below the
twenty-fifth percentile will eliminate this portion of the bonus.
(ii) Company Performance vs. Annual Objectives (25% Weight)
At the beginning of each year, Company management will establish
two overall Company objectives for approval by the Compensation
Committee of the Board. The first objective is Customer Service
Quality, which will be measured each year by a customer service survey
of the overall quality of the Company's service from the viewpoint of
customers. The second objective, Earnings Per Share, will be the
primary earnings per share of the Company as it appears in the approved
budget for the Company.
Company management will develop schedules for translating results
of the above two objectives into threshold, target and maximum
achievement levels. These schedules must be approved by the
Compensation Committee.
(iii) Performance vs. Individual Objectives (25% Weight)
Each year, Participants will establish three or four major
individual and department goals for review and approval by the Chief
Executive Officer. At the end of each year, Participants will provide
to the Chief Executive Officer an explanation regarding the degree to
which each goal has been achieved. The Chief Executive Officer will
review the Participant's explanations and will then determine the
achievement level for each Participant.
(b) At the end of each calendar year, percentages will be computed and
totaled for each Participant for each of the Measures of Performance in
Exhibit II. Each Participant will receive an Award for the applicable
calendar year equal to a percentage of his base salary as shown on Exhibit
I. Threshold is defined as a composite twenty-five percentage level,
Target as a composite fifty percentage level, and Maximum as a composite
one hundred percentage level.
The total amount of all awards made to Participants shall not exceed
three and one-half percent (3.5%) of the Company's net after tax income for
that year.
(c) All Awards shall be reviewed, and must be approved, by the
Compensation Committee and the Board.
(d) Annual base salary adjustments, as appropriate, will continue to
be made by the Company to individual employees predicated on merit,
performance, cost-of-living and such other factors as the Company normally
has considered without regard to Awards awarded under the Plan.
(e) Awards shall be paid to each Participant in a single sum as
promptly as practicable after the end of each calendar year.
V. PARTICIPANT'S DEATH
(a) In the event of the death of the Participant, any unpaid Award
held for the Participant shall be paid as promptly as practicable in a
single sum to the Participant's designated Beneficiary.
(b) In the event the Participant has not designated a Beneficiary, or
if no designated Beneficiary is living at the date of death of the
Participant, the unpaid Award shall be paid as promptly as practicable in a
single sum to the duly appointed executor or administrator of the
Participant's estate.
(c) For purposes of this Section, "Beneficiary" shall mean any
individual, corporation, partnership, association, trust or unincorporated
organization designated by a Participant in writing filed with the Company
as the recipient of the Participant's Award in the event of the
Participant's death prior to its payment. Such designation may be changed
by the Participant at any time in writing filed with the Company without
the consent of or notice to any Beneficiary previously designated.
VI. CONTINUITY OF THE PLAN
Although it is the present intention of the Company to continue the
Plan in effect for an indefinite period of time, the Board reserves the
right to terminate the Plan in its entirety as of the end of any calendar
year or other fiscal year of the Company or to modify the Plan as it exists
from time to time, provided that no such action shall adversely affect any
Awards previously awarded under the Plan.
VII. MISCELLANEOUS PROVISIONS
(a) No Award payable under the Plan shall be subject in any manner to
transfer, assignment, pledge, or hypothecation in any manner by operation
of law or otherwise, other than by will or by the laws of descent and
distribution nor be subject to execution, attachment or similar process.
(b) Neither the Plan nor any action taken hereunder shall be construed
as giving any Participant any right to be retained in the employ of the
Company.
(c) The Plan shall at all times be entirely unfunded and no provision
shall at any time be made with respect to segregating assets of the Company
for payment of any Awards hereunder. No Participant or any other person
shall have any interest in any particular assets of the Company by reason
of the right to receive an Award under the Plan and any such Participant or
any other person shall have only the rights of a general unsecured creditor
of the Company with respect to any rights under the Plan.
(d) Except when otherwise required by the context, any masculine
terminology in this document shall include the feminine, and any singular
terminology shall include the plural.
(e) This Plan shall be governed by the laws of the State of South
Dakota.
IN WITNESS WHEREOF, the Company has executed this revised Annual
Performance Incentive Plan as of the 1st day of January, 1994.
NORTHWESTERN PUBLIC SERVICE COMPANY
By: /s/ M. D. Lewis
------------------------------------
M. D. Lewis
President & CEO
By: /s/ Bruce I. Smith
------------------------------------
Bruce I. Smith, Chairman
Nominating and Compensation Committee
EXHIBIT I
January 1, 1994
Management Group
Range of Award Opportunities
(% of Base Salary)
----------------------------
Position Threshold Target Maximum
- -------- --------- ------ ------
Group I:
President & CEO 15% 20% 25%
Group II:
Other Executive Officers 10% 15% 20%
Group III:
Manager Level Employees 5% 10% 15%
EXHIBIT II
January 1, 1994
MEASURES OF PERFORMANCE
Performance will be measured in the following three ways for purposes of
determining awards under the Plan, with weightings placed on each as
indicated.
1. Company performance vs. peer utilities* (50% weight)
2. Company performance vs. annual objectives (25% weight)
3. Individual performance vs. objectives (25% weight)
* Peer Utility Companies
Black Hills Corporation
IES Industries, Inc.
Interstate Power Company
Madison Gas & Electric Company
MDU Resources Group, Inc.
Midwest Resources
Minnesota Power
Otter Tail Power Company
St. Joseph Light & Power Company
Southern Indiana Gas & Electric Company