Exhibit 10(a)(7)
NORTHWESTERN PUBLIC SERVICE COMPANY
NorthSTAR PLAN
I. Objective
The Northwestern Public Service Company NorthSTAR 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 employees by providing additional compensation to
eligible employees 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 approving awards for all Executive Officers.
III. Eligibility for Participation
Employees eligible to participate in the Plan are those full-time
employees who have completed one year of service with the Company. To be
eligible for an award, an employee must be employed with the Company on
December 31st of the year for which the award is based, except as hereafter
provided in Subsection (b).
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, or for the first year of eligibility, his award shall be
pro-rated to reflect the proportionate part of the plan year during which
he was actually employed or eligible.
IV. Determination of Performance Award Amounts
(a) A Performance Award ("Award") shall be awarded under the Plan to
each Participant, within the Range of Award Opportunities set forth on
Exhibit I attached hereto, 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 Objective (25% Weight)
Under this 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 a schedule for translating
results of the objective into threshold, target and maximum
achievement levels. This schedule 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 their
supervisor and by the Chief Executive Officer. At the end of
each year, Participants will provide to their supervisor and to
the Chief Executive Officer an explanation regarding the degree
to which each goal has been achieved. The supervisor and 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
seven percent (7%) of the Company's net after tax income for that year.
(c) All Executive Officer Awards shall be reviewed, and must be
approved, by the Compensation Committee. All Awards for other Company
employees shall be reviewed, and must be approved, by the Chief Executive
Officer of the Company.
(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 approved.
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 May, 1996.
NORTHWESTERN PUBLIC SERVICE COMPANY
By /s/ M. D. Lewis
______________________________________
M. D. Lewis
President & CEO
By /s/ Raymond M. Schutz
______________________________________
Raymond M. Schutz, Chairman
Nominating and Compensation Committee
EXHIBIT I
May 1, 1996
Range of Award Opportunities
(% of Base Salary)
Position Threshold Target Maximum
Group I:
President & CEO 20% 25% 30%
Executive Vice President
Group II:
Senior Executive Officers* 15% 20% 25%
Group III:
Other Executive Officers 10% 15% 20%
Group IV:
Manager Level Employees 5% 10% 15%
Group V:
Salaried-Non Manager 2.5% 5% 7.5%
Group VI:
Hourly 2% 4% 6%
* Vice President - Energy Services, Vice President - Energy Operations,
Vice President - Administration, Vice President - Market Development and
Vice President - Finance
EXHIBIT II
May 3, 1995
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