Exhibit 10.16
INTERSTATE ENERGY CORPORATION
1998 OFFICER INCENTIVE COMPENSATION PLAN
Effective January 1, 1998
INTERSTATE ENERGY CORPORATION
1998 OFFICER INCENTIVE COMPENSATION PLAN
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I. Purpose
The Officer Incentive Compensation Plan (OICP) is based on short-term
goals that support Interstate Energy Corporation's (IEC) short- and long-
range plans, focus officers on building the value of the Company and
ensuring future superior returns to shareholders, reducing costs to
customers, and supporting an atmosphere of teamwork. Awards for plan
participants will be determined by Corporate and Business Unit
performance. The CEO reserves the right to modify payouts under the plan.
II. Administration
A) The OICP shall be administered by the Compensation and Personnel
Committee ("the Committee") of the Board of Directors of the
Company. The Committee may from time to time amend, suspend,
terminate or reinstate any or all of the provisions of the Plan
as may seem necessary or advisable in the administration of the
Plan.
B) The Committee shall subject to express provisions of the Plan,
have the power to construe the Plan, to prescribe rules and
regulations relating to the Plan and to make all other
determinations necessary or advisable in the administration of
the Plan. The Committee may correct any defect or supple any
omission or reconcile any inconsistency in the manner and to the
extent it shall deem expedient to carry it into effect.
C) All expenses and costs incurred in connection with the
administration and operation of the Plan shall be borne by the
Company.
II. Plan Eligibility
A) All Interstate Energy Corporation (IEC) officers will be
eligible for the 1998 OICP. IEC's officers will be divided into
one of four designated tiers for participation in the plan.
These tiers reflect individual duties and responsibilities in
the new organization and are shown, along with the projected
number of participants in each tier, in the table below:
Participant Group Projected Number of
Interstate Energy
Corporation Incumbents
Chairman of the Board, Vice-Chairman of the 3
Board, and President and CEO
Executive Vice Presidents 5
Sr. Vice President & Vice Presidents 12
Assistant Vice Presidents 2
Total Participants 22
B) Prior to the start of each calendar year, or as soon as
practical thereafter, the CEO shall recommend to the Committee
those eligible employees who shall participate in the Plan.
Designation as a Participant for any particular calendar year
shall not entitle an individual to participate or share in
award, with respect to any other calendar year.
C) Changes to the participant list: Following the start of the
calendar year, the list of the participants and awards for a
Plan year may be revised upon authorization of the CEO as
follows:
1) Employment: If an eligible employee participating in the
Plan terminates from the Company during the Plan year, the
replacement employee of said employee will automatically be
eligible to participate in the Plan for the remainder of
the year.
2) Cessation of Employment: If an employee terminates
employment with the Company during the calendar year, other
than on account of death or retirement, the employee may,
at the discretion of the CEO, receive a prorated award.
3) Proration of Payout: Any participant selected or deleted
after the start of the calendar y ear shall participate on
a prorata basis, determined by multiplying the maximum
incentive opportunity by a fraction, the numerator of which
shall be the number of full months of his/her participation
in the calendar year and the denominator of which shall be
twelve.
III. Payment of Incentive Award Earned
A) Payouts for all plan participants shall be at the discretion of
the CEO.
B) The amount of the incentive payout awarded for the calendar year
shall be paid to each eligible employee after the Company's
audited financial results are available, but no later than March
31 of the following year.
C) Following the end of the calendar year the CEO will report to
the Committee the results of the Plan. At the discretion of the
CEO and Committee, the award will be paid in cash, discounted
Company stock or a combination of both.
D) Participants may elect to defer a percentage amount of the
incentive award pursuant to the provisions of the Company's
Deferred Compensation Plan. All deferral elections are
irrevocable, and a written deferral notice must be filed by the
participant with the Company prior to December 31 of the year
preceding the Plan year for which the deferral is effective.
E) The committee may, following release of the Company's audited
financial statements, increase, decrease or eliminate awards if
the Committee decides that the amount of the award is
unreasonable in view of any unique circumstances or the
Company's financial performance. Any decision shall apply to
all Participants equally.
F) OICP payments will be included in 401(k) plan deferrals and
earnings used to determine retirement benefits.
IV. Effective Date
The plan effective January 1, 1998 shall continue in effect and
subsequently be amended from time to time, until terminated by the Board
of Directors.
V. Amendment or Termination of Plan
The Board shall have the right to amend or terminate the Plan at any
time.
VI. Non-Exclusivity of Incentive Compensation
The Plan shall not be deemed an exclusive method of providing
incentive compensation to eligible employees; nor shall it preclude the
Board from authorizing or approving other forms of incentive compensation.
VII. Rights of Participants and Forfeiture
A) Nothing contained in this Plan shall:
1) confer upon any employee any right with respect to
continuation of employment with the Company.
2) interfere in any way with the right of the Company to
terminate his or her employment at any time, or
3) confer upon any employee or any other person any claim or
right to any distribution under the Plan except in
accordance with its terms.
B) No right or interest of any Participation in the Plan shall,
prior to actual payment or distribution to such Participant, be
assignable or transferable in whole or in part, either
voluntarily or by operations of law or otherwise, or be subject
to payment of debts of any Participant by execution, levy,
garnishment, attachment, pledge, bankruptcy, or in any other
manner.
VIII. Distribution of Award Upon Death of Participant
Should a participant die during a calendar year for which an award is
made, the amount of such Participant's award shall be determined on a
prorata basis according to Section II, paragraph C3, and such total shall
be distributed in a lump sum to the participant's estate in the year
following the calendar year of the Plan.
IX. Incentive Targets by Participant Tier
Incentive award levels are based on IEC's current executive
compensation strategy of setting pay levels at the median of equally
weighted utility industry and general industry data. The table below
lists each of the designated tiers and their respective incentive targets.
PARTICIPANT GROUP TARGET MAXIMUM
INCENTIVE LEVEL INCENTIVE LEVEL
Chairman of the Board, Vice-Chairman 50% 100%
of the Board, and President and CEO
Executive Vice Presidents 35% 70%
Sr. Vice President & Vice Presidents 25% 50%
Assistant Vice Presidents 20% 40%
For all tiers of participants, actual awards under the plan may be as
great as 200% of the target award for exceptional performance. No payout
will occur if performance is significantly below target.
Total award payouts under the plan may be larger or smaller than the
sum of all target incentive awards.
X. Weighting of Performance Measures
Each performance measure will be weighted according to the relative
impact an officer has on Company performance and business unit
performance.
GROUP Corporate Business Unit/
Strategic Goals
Chairman and Vice-Chairman of the Board 100%
President and CEO 75% 25%
Executive Vice Presidents 50% 50%
Sr. Vice President & Vice Presidents 50% 50%
Assistant Vice Presidents 50% 50%
XI. Performance Measures and Methodology
1. Corporate Measure - At the beginning of each year, a company-wide
earnings per share (EPS) target will be established. The EPS target will
have a performance threshold that, if not met, will result in no company
measure payouts being awarded. EPS of less than $2.00 will result in no
officer incentives or other employee incentive program payments. Note:
EPS numbers will be weather normalized and may be adjusted to reflect
extraordinary events. See Appendix A for examples of calculations.
EPS % OF
INCENTIVE
AWARD
Maximum $2.40 or more 200%
$2.33-$2.39 130%
Target $2.30-$2.32 100%
$2.25-$2.29 80%
Minimum $2.10-$2.24 25%
$2.00-$2.09 0%*
Less than $2.10 No Payout
* business unit payouts may still be made.
2. Business Unit Measure - Each Business Unit will have between 3
and 5 goals that are reviewed and approved by the CEO and Senior Executive
Group (see Appendix A). If a Business Unit does not meet its goal,
employees are still eligible for the Corporate portion of the award.
VI. Individual Participation
The participation level for each officer is expected to be 100% of
the award opportunity, as determined by company and business unit
performance results. Satisfactory performance on the part of an officer
will result in full OICP participation. Based on less than satisfactory
individual performance, the CEO may reduce an individual's participation
level by as much as 20%. In the case of well documented extraordinary
performance, the CEO may increase an individual's participation level by
as much as 20%.
APPENDIX A
EXAMPLE CALCULATION
- Participant Tier: Vice Presidents
- Positions in Tier: Sr. Vice Presidents & Vice Presidents
- Number of Plan Participants 14
- Target Bonus Level: 25% of Salary
- Performance Measure Weighting:
Measure Weighting
Corporate 50%
Business Unit 50%
Hypothetical Performance Results
Example: Title: Vice President
Salary: $150,000
Employee Incentive Target
(See Section IX. Incentive Targets) A. 25%
1. Company Measure (50% of A) B. 12.5%
Assuming $2.33 per share: 12.5% (B.) times 130%
(see section XI) = 16.3%
Subtotal of Company Measure C. 16.3%
2. Business Unit Measure (50% of A) D. 12.5%
Assuming business unit measures were met.
Business Unit Measure portion (Therefore,
eligible for the whole 12.5%) E. 12.5%
3. Individual Participation Level: Satisfactory.
Therefore eligible for payout.
4. Total Amount of Award Employee is
Eligible for (Sum of C + E ) F. 28.8%
Individual Award Calculation
Base Salary x Percent Earned (F Above) = Incentive Award
$150,000 x 28.8% = $43,200