Exhibit 10.6
TECO ENERGY, INC.
ANNUAL INCENTIVE COMPENSATION PLAN
REVISED JANUARY 20, 1999
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Exhibit 10.6
ANNUAL INCENTIVE COMPENSATION PLAN
BASIC PLAN CONCEPT
The Annual Incentive Compensation Plan provides a consistent framework
for applying annual incentive pay to officers of TECO Energy and each
of its operating units. Each participant is assigned a target award
amount, expressed as a percentage of salary range midpoint, which will
represent an appropriate incentive payment when performance is at the
targeted level. Smaller awards (or none at all) may be earned when
performance is below target, and larger awards may be earned when
performance exceeds target.
While not anticipated to be a common occurrence, the Board may
occasionally decide that the plan formula would unduly penalize or
reward management. In such cases, award funds may be increased or
decreased to better meet the plan's intent of relating rewards to
management performance.
Performance for each participant will be measured, in part, against a
combination of one or more quantifiable profit and operational goals.
These goals will be set at the corporate and operating levels, and
most participants will have a portion of their awards related to each.
The remaining portion of each participant's performance that is not
measured by the quantified goals mentioned above will be evaluated on
a subjective basis considering overall contribution level and
achievement of other individual goals. Each participant will have a
"Business Challenge" goal, to reflect the participant's contribution
to: (a) mitigating the impact of unexpected adverse business or
regulatory developments on the business unit or (b) enhancing
profitability or capacity for profit, through effective management
initiatives beyond those included in the business plan.
ELIGIBILITY
Officers are recommended by the respective President of their
organization for participation in the annual incentive plan each year.
All recommended officers that are approved by the Chief Executive
Officer of TECO Energy and the Compensation Committee of the TECO
Energy Board will be eligible to participate.
TARGET AWARD LEVELS
Target award levels are established at a level that, when combined
with each participant's base salary midpoint, will provide a fully
competitive total cash compensation opportunity. The incentive
portion of the total compensation opportunity reflects compensation
"at risk" which is directly related to performance and results
achieved. Generally, the portion of compensation "at risk" (i.e., the
target award level) is influenced by the level of the participant's
accountability for contributing to bottom-line results, the degree of
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Exhibit 10.6
influence the participant has over results and competitive practice.
ESTABLISHING PERFORMANCE GOALS AND WEIGHTINGS
For each plan year, profit, growth and/or operational effectiveness
goals will be established for TECO Energy and each of its operating
units. Financial goals may measure performance relative to other
companies over periods of one-year or longer. The number of goals set
for each unit and each operating unit should not normally exceed five
or six so as not to dilute plan focus.
Once goals have been established that represent the target level of
performance, threshold and maximum levels should also be established.
Threshold performance represents the minimum acceptable performance
that still warrants incentive recognition (paid at 50 percent of the
target award level), and maximum performance represents the highest
level likely to be attained (paid at 150 percent of the target award
level for all goals, except the Business Challenge goal which can be
paid at 200 percent). Regardless of the degree of achievement of each
established goal, the payout to all participants will be reduced by
one-half if TECO Energy's net earnings for that year are not at least
80 percent of that year's targeted net earnings.
Additionally, a further performance threshold equal to a percentage of
its operating income target must be achieved by each operating unit
for its participants to be eligible for an award. These threshold
percentages for the respective operating units shall be set by the
Compensation Committee of the TECO Energy Board. TECO Energy must
achieve 85 percent of its net income target for its participants to be
eligible.
A determination will be made for each participant regarding their
portion of the award that will be based on corporate, operating unit
or individual performance. Generally, the weightings among these
three measurement groups will vary by organizational level.
AWARD DETERMINATION
At the end of each plan year, a four-step process will be followed in
determining actual incentive awards.
Step 1: The actual degree of achievement for each goal at the
corporate, operating unit and individual level is determined.
Levels of achievement can range up to 200 percent for the
Business Challenge goal and up to 150 percent for all other
goals.
Step 2: Corporate, operating unit and individual performance factors
are determined by multiplying levels of goal achievement by the
weightings assigned to each goal.
Step 3: The total of all performance factors is multiplied by the
target award, producing the calculated award.
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Step 4: The calculated award may be adjusted up or down by the
Compensation Committee of the TECO Energy Board with respect to
the senior officers and by the Chief Executive Officer of TECO
Energy with respect to other officers based on the participant's
total performance during the plan year. The actual award, as so
adjusted, may not exceed 150 percent of the target award level.
PLAN ADMINISTRATION
The Compensation Committee of the TECO Energy Board, the Chief
Executive Officer of TECO Energy and the respective Presidents shall
perform the functions set forth in this plan. The Compensation
Committee may elect to discharge its responsibility in the form of
recommendations to the TECO Energy Board. The Vice President-Human
Resources of TECO Energy is responsible for administering the plan.
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OTHER CONSIDERATIONS
For any year in which a participant's employment is terminated or an
officer first becomes eligible for participation in the plan, whether
any incentive award shall be granted for that year and the amount of
any such award shall be determined by the Compensation Committee of
the TECO Energy Board with respect to senior officers and by the Chief
Executive Officer of TECO Energy with respect to other officers.
Notwithstanding the foregoing, for any year in which a participant's
employment terminates for any reason following a change in control of
TECO Energy, as defined in the TECO Energy 1996 Equity Incentive Plan,
such participant shall be entitled to receive an incentive award equal
to (a) the number of days employed during that year divided by 365
multiplied by (b) the greater of (i) the participant's target award
for the year in which the change in control occurred or (ii) the
incentive award actually paid to the participant with respect to the
year immediately preceding the year in which the termination of
employment occurred.
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