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EXHIBIT 10-M.3
ANNUAL INCENTIVE PLAN
Washington Energy Company
October 1994
Plan Year: Fiscal year beginning October 1 and ending
September 30.
Eligibility: All Vice Presidents and above of Washington Energy
Company and its subsidiaries.
Purposes of Plan: - Provide incentive to meet Company, department,
and individual goals.
- Link a greater portion of executive pay to
achieving objectives.
Administration: The plan will be administered by the Chairman, CEO,
and President at the direction of the Compensation
Committee of the Board of Directors.
Award Levels: Award Levels (% of Base Salary)
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Position Threshold Target Maximum
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Chairman, CEO, and President 20 40 60
SVP - Planning, Dev & CFO 15 30 45
SVP - Operations 15 30 45
SVP - Legal and HR and 15 25 35
President, WESCO 15 25 35
VP - Supply and Administration 15 25 35
SVP - Public Affairs 10 20 30
VP's 10 20 30
Weighting of Company and Department A portion of the participant s potential award will be
Performance Results: determined by "Corporate Performance" and the
remaining portion will be determined by "Department
Performance." These portions will be based on position
as follows:
Percentage of Target Award Based On:
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Position Corporate Department
Performance Performance
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Chairman, CEO, and President 100% -
SVP - Planning, Development & CFO 100% -
SVP - Operations 100%
SVP s/VP - Supply & Administration 60% 40%
President, WESCO 25% 75%
Other VP s 50% 50%
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Corporate and Department Corporate Performance. Corporate performance will be
Performance Measures: defined as Washington Energy Company Performance.
The Corporate performance measure(s) will be as shown
on the attached Exhibit 1. Other financial measures
may be used at the discretion of the Committee.
Department Performance. Through the planning process,
the President and/or CEO will discuss the Department s
goals for the plan year with each participant. Each of
these goals will be weighted based on their relative
importance. Overall Department performance will be
determined by applying these weights to the performance
of each specific goal.
Minimum Corporate Performance: The incentive cash payment for any specific Corporate
Performance Measure achieved will be paid for that
measure independent of attainment on other measures as
long as threshold attainment has been achieved for that
specific measure.
Award Adjustments: The Chairman, CEO and President can recommend
discretionary award adjustments of +30% of the award
amount.
If individual performance is significantly inferior,
the Chairman, CEO and President may significantly
reduce or eliminate the total incentive cash payment
award for that participant regardless of Corporate or
Department performance.
The Effect of Extraordinary and In comparing actual performance against the
Nonrecurring Items: performance goals, the Compensation Committee may exclude
from such comparison any extra-ordinary or nonrecurring
gains, losses, charges, or credits which appear on the
Company s books and records as it deems appropriate.
Less Than Full-Year Plan If an individual becomes a participant after the
Participation: beginning of the Plan Year, the Chairman, CEO, and
President will develop department performance measures
for the remainder of the plan year for that
participant.
The final award will be calculated by multiplying the
award by a proration factor. The proration factor will
be equal to the number of full weeks the individual
actually spent as a Plan participant, divided by
fifty-two.
If a participant s employment is terminated during a
plan year for reason of death, disability, or normal
retirement, an award will be determined based on the
performance as of the date of termination.
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The final award (paid after the end of the plan year)
will be calculated by multiplying the award by a
proration factor. The proration factor will be equal
to the number of full weeks of employment during the
plan year divided by fifty-two.
If a participant s employment is terminated by
resignation or for cause, an incentive award will not
be paid.
Change-In-Control: Change-in-control will be defined as set forth in the
Performance Share Plan. Upon change-in-control, target
incentive cash payment for the year will be paid if a
participant is terminated without cause.
Form and Timing of Payment: All awards will be paid in cash, less applicable
withholding requirements. The final award will be paid
as soon as practicable following the end of the Plan
Year.
Modifications: The Compensation Committee will approve all elements
and goals of the Plan each year and reserves the right
to modify, amend or repeal the Plan. No modifications,
however, may adversely affect an award which has
previously been earned, either in whole or in part.
Final Award Payment Approval: The Compensation Committee of the Board of Directors
has final approval of all incentive cash payments.
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Exhibit #1
Corporate Performance Measures
Fiscal Year 1995
Measure* Threshold Target Maximum
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Productivity O&M cost per average O&M cost per average O&M cost per average
Customer less than or Customer less than or Customer less than or
equal to $137 equal to $134 equal to $130
Operating Income Target for 1995 greater Target for 1995 greater
than or equal to $59.5mm than or equal to $62.5mm
Capital Expenditures - Non-revenue gen- - Non-revenue gen-
erating capital erating capital
less than or less than or
equal to $34mm equal to $32mm
- Revenue - generat- - Revenue-generating
ing capital earns capital earns
rate/return rate/return
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* Performance measures shall be weighted equally.
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