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EXHIBIT 10.12
Wisconsin Gas Company
Officers' Incentive Compensation Plan
1995
I. Objectives
The principal objectives of the Plan are:
A. To motivate and to provide incentive for key officers and
executive management team (EMT) of Wisconsin Gas Company to
achieve superior operating results for the benefit of both
customers and stockholders.
B. To assist in the retention of quality senior management.
C. To yield competitive total compensation levels when performance
goals are attained.
II. Eligibility
Participation in the Plan is limited to designated corporate officers
and EMT of Wisconsin Gas. The Chief Executive Officer of WICOR will be
responsible for recommending eligibility changes to the Compensation
Committee of the Board of Directors of WICOR, Inc.
III. Amount of Potential Award
A. The minimum, target and maximum award opportunities for each
participant, as a percentage of base salary, are as follows:
Award as % of Salary
------------------------------
Position Minimum Target Maximum
---------------- --------- -------- ---------
President & CEO 0% 40% 60%
VP and EMT 0% 20% 30%
B. Only 50% of the President & CEO's award opportunity will be
determined according to the provisions of this Plan. Of that
50%, 67% will be determined by Performance Plus and 33% will be
determined by Net Income as a percentage of budget. The remain-
ing 50% will be determined based on the WICOR Officers' Incentive
Compensation Plan.
IV. Performance Criteria and Objective Setting
A. Each executive's incentive award will be related to the
achievement of Company performance goals, and a component
reflecting individual performance.
B. Total incentive opportunity is further based on the following
measures:
- 50% Performance Plus (Company-wide operational and
financial incentive Plan)
- 25% Net Income as a percentage of budget
- 25% Individual
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Therefore, 75% of the total bonus opportunity is based on
operational and financial results and 25% is based on individual
performance.
The individual portion of the incentive payout will be based on
the individual's overall performance as measured against
previously identified and agreed upon goals and objectives. The
award may vary up to 150% of the individual performance portion
of the target award, and will be determined and paid
independently of Company financial performance.
C. If the Compensation Committee of WICOR, Inc. determines that the
Net Income level was inadequate or that services to customers did
not meet corporate goals or standards developed, it may exercise
discretion to reduce or eliminate any or all bonus payments.
V. Performance Period
Company performance goals will be for the 1995 calendar year.
VI. Bonus Award Determination
A. Performance Plus. Each year management will recommend specific
goals for safety, customer service and cost effectiveness.
Associated with various levels of performance for each goal will
be a certain number of award points. The cumulative total of
these points adjusted by a "multiplier", based on Net Income as a
percent of budget, will determine the formula payout under this
portion of the Plan.
For 1995, the performance measures and related points and the
"multiplier" are set forth in Exhibit I.
B. Net Income as a Percentage of Budget
Actual net income as a percentage of budget will generate
incentive compensation equal to 25% of the target award
multiplied by the following percentages:
Net Income Award Determination
--------------------------------------------
Net Income
as % of % of Target
Performance Level Budget Awarded
------------------- ---------- -----------
Less than Threshold < 85% 0.0%
Threshold 85% 1.0%
Target 100% 100.0%
Maximum 120% 150.0%
For performance at levels between Threshold and Target or between
Target and Maximum, award calculations will be pro-rated on a
linear basis.
For 1995, the amount of targeted net income is set forth in
Exhibit I.
C. Total performance awards will be calculated by combining the
payouts from Performance Plus, Net Income and Individual
Components.
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VII. Form and Timing of Award Payments
A. Awards will be determined and paid as soon as practicable after
the close of the Plan year.
B. At each participant's discretion and with the concurrence of the
Compensation Committee of WICOR, Inc., awards may be paid in one
of three ways:
1. Lump Sum
2. Partly in lump sum, and the remainder in deferred annual
installments.
3. Completely in deferred annual installments.
C. The Company will offer a deferred payment option to those
participants who prefer not to receive their awards in current
cash, following these guidelines:
1. Deferred incentive award payments will be carried as an
accrued liability with an interest rate (three-year
treasury bill rate) credited each year.
2. Deferral elections must be made prior to the end of the
performance period, and a definite time period for deferral
must be specified.
VIII. Plan Administration
A. Compensation Committee:
1. The Plan will be administered by the Compensation Committee
of the Board of Directors of WICOR, Inc.
2. The Committee's administration is subject to approval of
the Board of Directors of WICOR, Inc.
3. The decisions of the Board are final and binding on all
Plan participants.
4. The Board retains the right to terminate or amend the Plan
as it may deem advisable.
5. In evaluating actual Company performance results in
comparison with pre-established objectives established for
the Plan year, and in establishing resulting incentive
compensation levels, the Compensation Committee, at their
sole discretion, may take unusual and unique factors into
consideration as they deem appropriate. Similarly, the
Committee may modify performance targets during the course
of a Plan year if significant change takes place which
would affect the measure.
6. It shall be the Committee's responsibility to review the
overall reasonableness of incentive compensation paid to
participants of this Plan in relation to overall services
performed and results obtained by the Company during the
Plan year. The Committee shall make its determination on
the basis of its judgement as to what constitutes
satisfactory performance with respect to the fulfillment of
the Company's mission or charter. Issues to be considered
shall include, but not be limited to the
following:
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a. Quality and level of service provided to customers.
b. Health and safety considerations.
c. Maintenance of specific required standards of
performance.
d. Representation of shareholders' interests (including
Rate of Return achieved compared to allowed).
Based upon this review, the incentive compensation paid to
participants may be reduced or withheld so that the total
compensation paid will be reasonable in relation to services
performed. The decisions of the Committee are final and binding
on all parties.
B. Partial Year Participation:
1. Participants must be employed by the Company on the last
day of the Plan year in order to receive a bonus for that
year. However, once earned, a bonus will be paid to a
participant regardless of whether he/she is employed by the
Company on the date payment is made.
2. Awards for part year participants will be pro-rated based
on the proportion of the year that the participant was in
the Plan. This includes participants who terminate
employment due to death, disability or retirement.
3. Participants who terminate employment with the Company
prior to the last day of the Plan year shall forfeit all
rights to an incentive award payment under the Plan except
for terminations due to death, retirement or disability.
4. A participant is deemed to be disabled if he/she becomes
eligible for benefits under the Company's Long Term
Disability Plan.
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Exhibit I
Wisconsin Gas Company
Incentive Compensation Plan
Formula Performance Goals
1995
Performance Plus*
Maximum
Points
1. Rate Improvement
Improvement in Residential Rates 5
2. Customer Service
Favorability/Customer Satisfaction 5
3. Safety 5
4. Cost Effectiveness
Operation & Maintenance Expense 5
5. Competitiveness
Margin Rate Reductions 5
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Maximum Total Points (Target = 15 points) 25
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6. Multiplier
Net Income as % of Budget Multiplier
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Less than 85% 0.0000
85% 0.0100
90% 0.3333
95% 0.6667
100% 1.0000
110% 1.2500
120% 1.5000
* This is a summarization of the Performance Plus Plan which will govern
the actual calculation of the payout amounts.
Net Income as a % of Budget
Minimum (85%) $19,690,000
Target (100%) $23,165,000
Maximum (120%) $27,798,000