EXHIBIT 10A
MANAGEMENT INCENTIVE COMPENSATION PLAN
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
Amended December 17, 1996
PUBLIC SERVICE ELECTRIC AND GAS COMPANY
MANAGEMENT INCENTIVE COMPENSATION PLAN
1. Purposes
The purposes of this Plan are to foster attainment of the financial and
operating objectives of the Company which are important to customers and
stockholders by providing incentive to members of management who contribute to
attainment of these objectives; to supplement the Company's salary and benefit
programs so as to provide overall compensation for such executives which is
competitive with corporations with which the Company must compete for executive
talent; and to assist the Company in attracting and retaining executives who are
important to its continued success.
2. Definitions
As used in this Plan, the following words and phrases shall have the
meanings indicated:
(a) "Account" - an Account established pursuant to Paragraph
8(a) of this Plan.
(b) "Award" - the amount of final Incentive Award for a Participant
approved by the Committee pursuant to Paragraphs 5 and 7 of the Plan.
(c) "Award Year" - a Plan Year in which Incentive Awards are earned
by Participants in the Plan.
(d) "Committee" - the Organization and Compensation Committee
of the Board of Directors of Enterprise.
(e) "Company" - Public Service Electric and Gas Company.
(f) "Disability" - any physical or mental condition which renders
a Participant incapable of performing further work for the Company and
that results in termination of employment.
(g) "Distribution Date" - for each Award Year, the first
business day of January.
(h) "Enterprise" - Public Service Enterprise Group Incorporated.
(i) "Executive Officer Group" or "EOG" - those persons
designated from time-to-time by the Chief Executive Officer of the
Company.
(j) "Incentive Award" - the amount earned by a Participant in
accordance with Paragraph 7.
(k) "Participant" - each officer or other employee of the Company as
may be designated by the Committee pursuant to Paragraph 3 of the Plan.
(l) "Plan" - the Public Service Electric and Gas Company
Management Incentive Compensation Plan.
(m) "Plan Year" - the calendar year.
(n) "Primary Award" - the amount determined under Paragraph
7(a)(1).
(o) "Retirement" - termination of service with the Company with the
right to an immediately payable periodic normal or early retirement
benefit under the Pension Plan of Public Service Electric and Gas Company
or the Cash Balance Pension Plan of Public Service Electric and Gas
Company. Retirement shall not include termination of service with the
right to a deferred retirement benefits under either said plan.
(p) "Target Incentive Award" - the amount determined under
paragraph 6.
3. Eligibility
(a) The Committee may select such employees of the Company
(individually or by position) for participation in the Plan upon such
terms as it deems appropriate, due to the employee's responsibilities and
his opportunity to contribute substantially to the attainment of financial
and operating objectives of the Company. A determination of participation
for a Plan Year shall be made no later than the beginning of that Plan
Year. Provided, however, that employees whose duties and responsibilities
change significantly during a Plan Year may be added or deleted as a
Participant by the Committee. Provided further, the Committee may prorate
the Incentive Award of any Participant if appropriate to reflect any such
change in employee responsibilities during a Plan Year.
(b) Participation in the Plan in one Plan Year shall not guarantee
participation in another Plan Year.
(c) The Committee shall have sole discretion as to whether to
suspend operation of the Plan for any period of time.
4. Administration
(a) The Plan shall be administered by the Committee. Subject to the
provisions of the Plan, the Committee shall have full and final authority
to select Participants, to designate the Target Incentive Award for each
Participant, and to determine the performance objectives and the amount of
all Incentive Awards. The Committee shall also have, subject to the
provisions of the Plan, full and final authority to interpret the Plan, to
establish and revise rules, regulations and guides relating to the Plan,
and to make any other determinations that it believes necessary or
advisable for the administration of the Plan. The Committee may delegate
such responsibilities, other than final approval of Awards or appeals of
alleged adverse determinations under the Plan, to the Chief Executive
Officer of the Company or to any other officer of the Company.
(b) All decisions and determinations by the Committee shall be final
and binding upon all parties, including stockholders, Participants, legal
representatives and other employees.
5. Determination of Award Year
Not later than 120 days after the close of each Plan Year, the Committee
shall, in its sole discretion, determine whether any Participants shall be
eligible to earn Incentive Awards with respect to such Plan Year. The discretion
of the Committee with respect to this final approval of Awards shall be total.
6. Determination of Target Incentive Awards
For each Award Year, the Committee shall establish a Target Incentive Award
for each Participant based upon the Participant's position and potential for
contribution to the attainment of the Company's financial and operating
objectives. The Target Incentive Award shall be expressed as a percentage of the
Participant's rate of base salary in effect as of the last day of the Plan Year
to which such Target Incentive Award relates.
7. Determination of Incentive Award
(a) To determine each Participant's Incentive Award, the
Participant's Target Incentive Award shall be adjusted based upon the
following factors, provided that the Incentive Award for any Participant
shall in no event exceed 1.5 times the Target Incentive Award and provided
further that the Committee may determine, based upon the financial and
operating results of the Company or any other business factors that it
determines appropriate, that no Incentive Award shall be awarded for any
Plan Year:
(1) The Target Incentive Award shall be multiplied by a
factor of between 0 and 1.5 to proportionately reflect (i) for
members of the Executive Officer Group, Enterprise's return on
capital and (ii) for all other Participants, the return on
capital of the Company, each for the Plan Year as reported to
the Board of Directors in accordance with such rules and
procedures as are approved by the Committee; provided,
however, that if such return is below a minimum threshold
established by the Committee prior to the beginning of the
Plan Year, no Incentive Award shall be earned for such Plan
Year. This adjusted amount is the Participant's Primary Award.
(2) The Participant's Primary Award shall be adjusted by
a factor of between -0.5 and +0.5 to proportionately reflect
the relative annual increase or decrease in the Company's
weighted average of cost per unit of electricity and gas sold
in the Plan Year as compared with similar increases or
decreases of other designated comparison utilities, in
accordance with such rules and procedures as are approved by
the Committee.
(3) The sum of items (1) and (2) above shall be multiplied by a
factor of between 0 and 1.5 to reflect the Participant's level
of individual performance, in accordance with such rules and
procedures as are approved by the Committee.
(b) The Chief Executive Officer shall recommend to the Committee an
Award for each Participant, except that the Committee shall have full
responsibility for assessing the performance of the Chief Executive
Officer and that the Committee shall make the final determination of all
Awards.
8. Award Payment
(a) For Incentive Awards Relating to Plan Years Ending Prior to
1/1/96:
(i) There shall be established an account for each Participant for
each Plan Year which shall, to the extent not paid to the Participant, be
initially credited with the amount of the Participant's Incentive Award.
The Plan shall be unfunded. The Company shall not be required to segregate
any amounts credited to any Participant's Account, which shall be
established merely as an accounting convenience. Title to and beneficial
ownership of any amounts credited to a Participant's Account shall at all
times remain in the Company, and no Participant or shall have any interest
whatsoever in any specific assets of the Company. All amounts credited to
Participants' Accounts shall at all times remain solely the property of
the Company subject to the claims of its general creditors and available
for the Company's use for whatever purpose desired.
(ii) The amount credited to a Participant's Account shall be treated
for valuation purposes as if it had been used to purchase shares of the
Common Stock of the Company or Enterprise, whichever is then listed on the
New York Stock Exchange, on the date it is credited to the Participant's
Account at a price equal to the average of the high and low sale prices of
such Common Stock on such date on the New York Stock Exchange. For the
purpose of valuing a Participant's Account, the equivalent shares so
credited to a Participant's Account shall be treated as if they were to
accrue dividends the same as actual shares of Common Stock, and such
equivalent dividends were used to purchase additional shares of such
Common Stock at a price equal to 95% of the average of the high and low
sale prices of such Common Stock on the New York Stock Exchange on the
dividend payment date.
(iii) When a distribution or partial distribution is to be made,
cash in the amount of the equivalent number of shares of Common Stock to
be distributed times the average of the high and low sale prices of such
Common Stock on the New York Stock Exchange as of the Distribution Date
shall be distributed
(iv) Distribution of a Participant's Account attributable to a Plan
Year shall be made in yearly payments over a period of three years,
commencing with the second year following the Plan Year to which the
Incentive Award relates, each yearly payment to be determined by dividing
the value of such Account by the number of payments remaining.
(b) For Incentive Awards Related to Plan Years Beginning After
12/31/95: Participants' Incentive Awards shall be made in one lump sum
cash payment as soon as practicable after the Determination Date.
9. Deferral of Awards
(a) Effective January 1, 1997, receipt of payment of Incentive
Awards earned pursuant to this Plan may no longer be voluntarily deferred
pursuant to this Plan.
(b) Also effective on that date, all amounts previously deferred
under the voluntary deferral provisions of this Plan shall be transferred
(using the last sale price for the Common Stock on December 31, 1996 as a
reference for the amount to be transferred) to the Deferred Compensation
Plan for Certain Employees of Public Service Electric and Gas Company, as
amended, and be treated in accordance with the terms of that plan.
10. Termination
(a) If the employment of a Participant by the Company is terminated
by the Participant's death, Disability or Retirement, the entire value of
the Participant's Account shall be distributed as soon as practicable. In
addition, the Committee shall, if it determines that Incentive Awards may
be earned for such year of termination, prorate an Award for that part of
the year in which the Participant was participating prior to such
termination and the Company shall pay the prorated Award as soon as
practicable after determination, unless otherwise determined by the
Committee.
(b) If the employment of a Participant is terminated for any reason
other than death, Disability or Retirement, any amounts held for the
Account of Participant upon any such termination which have not been paid
because of the mandatory deferral provisions of Paragraph 8(a) shall be
forfeited, unless otherwise determined by the Committee, and the balance
of the Participant's Account shall be distributed as soon as practicable.
In addition, the Participant shall not receive an Award for that part of
the Plan Year in which the Participant was participating at the time of
termination, unless otherwise determined by the Committee.
(c) If a Participant becomes or ceases to be a Participant during a
Plan Year, any Award to the Participant shall be appropriately prorated
from the time the Participant entered or left the Plan to the end of the
Plan Year.
(d) In the case of a Participant's death, payment of the entire
value of the Participant's Account under the Plan and/or any Award related
to the Participant's final year of participation shall be made to the
Participant's estate as a lump sum as soon as practicable after the
Participant's death.
11. Assignment
No benefit under the Plan shall in any manner or to any extent be assigned,
alienated, or transferred by any Participant or be subject to attachment,
garnishment or other legal process.
12. Plan Does Not Constitute an Employment Agreement
This Plan shall not constitute a contract for the continued employment of
any Participant by the Company. The Company reserves the right to modify a
Participant's compensation at any time and from time to time as it considers
appropriate and to terminate his employment for any reason at any time
notwithstanding this Plan. 13. Amendment or Termination of the Plan by the
Company The Board of Directors of the Company may, in its sole discretion,
amend, modify or terminate this Plan at any time, provided, however, that no
such amendment, modification or termination shall materially adversely affect
the right of a Participant in respect of an Incentive Award previously earned by
him which has not been paid, unless such Participant or his legal representative
shall consent to such change. If this Plan is terminated during any Plan Year in
which Participants have been selected to participate, the Board of Directors may
authorize the Committee to prorate and make provision for payment of Awards for
such period.
14. What Constitutes Notice
Any notice hereunder to a Participant or his legal representative shall be
given either by delivering it, or by depositing it in the United States mail,
postage prepaid, addressed to his last-known address. Any notice to the Company
or the Committee hereunder shall be given either by delivering it, or depositing
it in the United States Mail, postage prepaid, to the Secretary, Public Service
Electric and Gas Company, 80 Park Plaza, T4B, P.O. Box 570, Newark, New Jersey
07101.
15. Advance Disclaimer of Any Waiver
Failure by the Company or the Committee to insist upon strict compliance
with any of the terms, covenants or conditions hereof shall not be deemed a
waiver of any such term, covenant or condition, nor shall any waiver or
relinquishment of any right or power hereunder at any one or more times be
deemed a waiver or relinquishment of any such right or power at any other time
or times.
16. Effect of Invalidity of Any Part of the Plan
The invalidity or unenforceability of any provision hereof shall in no way
affect the validity of enforceability of any other provision.
17. Plan Binding on Any Successor Owner
Except as otherwise provided herein, this Plan shall inure to the benefit
of and be binding upon the Company, its successors and assigns, including but
not limited to any corporation which may acquire all or substantially all of the
Company's assets and business or with or into which the Company may be
consolidated or merged.
18. Laws Governing This Plan
Except to the extent federal laws applies, this Plan shall be governed by
the laws of the State of New Jersey.
19. Miscellaneous
The masculine pronoun shall also mean the feminine wherever appropriate.
20. Withholding
The Company shall have the right to deduct from any payment any sums to be
withheld by federal, state, or local tax law. There is no obligation hereunder
that any Participant or other person be advised in advance of the existence of
the tax or the amount so required to be withheld.
21. Effective Date
This Plan shall be effective as of July 1, 1985.