EXHIBIT 10-12
ROCHESTER GAS AND ELECTRIC CORPORATION
EXECUTIVE INCENTIVE PLAN
Restatement of January 1, 1993
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I. SYNOPSIS OF PLAN
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The Plan seeks to balance the interests of ratepayers, shareholders
and employees by linking compensation to specific company objectives in such a
way that total compensation will increase when goals are reached or exceeded and
will decrease when goals are not met. An incentive fund is created if the
return on common equity equals or exceeds an approved objective. When the
incentive fund is activated, company performance is then measured equally as to
return on common equity, the rate of change in energy prices to customers, and
established corporate objectives. Depending on salary grade, individual target
awards may range from 5 percent to 25 percent of the person's salary grade
midpoint. Eighty percent (80%) of an award will be based on corporate
performance and twenty percent (20%) on the individual's performance. The total
1993 award will be paid in cash during the first quarter of 1994.
II. PURPOSE
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The purpose of this Plan is to provide an incentive to key employees
to meet and exceed certain specified goals as part of the RG&E cash compensation
program. This Restatement of
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January 1, 1993, amends and continues the Plan adopted as of January 1, 1992.
III. DEFINITIONS
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(a) "Company" means Rochester Gas and Electric Corporation.
(b) "Board" means the Board of Directors of the Company or the
Committee on Management of the Board.
(c) "Employee" means an individual employed by the Company in a
position other than as an independent contractor.
(d) "Participant" means an Employee who participates in this Plan.
(e) "ROCE" means return on common equity.
(f) "Financial Objective" means the ROCE objective established by the
Company each year.
(g) "Trigger Objective" means the ROCE objective set by the Board as
necessary in order to activate the award fund each year.
(h) "Price of Product" means the average unit retail price per unit
of energy sold during a year.
(i) "Price of Product Objective" means that the Price of Product for
a year is not to exceed designated average unit retail prices.
(j) "Corporate Objective" means the business plan objectives adopted
by the Board each year in areas such as, but
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not limited to, customer service, safety, productivity and public acceptance.
(k) "Target Award" means the amount or percentage payable when 100%
of all objectives have been achieved on average. Amounts or percentages may
vary up or down depending on the percentages actually achieved.
IV. ELIGIBILITY
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Eligibility for participation in the Plan shall include any Employee
who is on the Company's Executive Payroll or any other Employee whom the Board
may select in its sole discretion.
V. THE INCENTIVE FUND
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The Incentive Fund is created for any given year if the Trigger
Objective is met. For 1993, the Trigger Objective is set at a ROCE in excess of
10.53 percent, which is determined by the authorized return on common equity
(10.78%) less 25 basis points. The extent to which the Incentive Fund is
funded, in terms of being available to pay benefits under this Plan, is
determined by the extent to which the Trigger Objective is exceeded by up to
five basis points. If the ROCE is less than 10.58 percent, any award for
achieving the Price of Product and/or Corporate Objectives will be prorated up
to 100 percent of the award at the discretion of the Board. The amount of any
award which exceeds 100 percent will not be prorated.
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VI. COMPANY INCENTIVE OBJECTIVES
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Three Company Incentive Objectives will be established by the Board
each year: the Financial Objective, the Price of Product Objective, and the
Corporate Objective.
The Financial Objective for 1993 is a ROCE of 10.83 percent for a
payout of 100 percent. Payout will be made on a proportional basis for each
basis point in excess of 10.58 percent. For example, a ROCE of 10.68 percent
would be 40 percent of the objective and a ROCE of 11.08 percent would be 200
percent. However, in order for there to be a payment of 100 percent of the
Financial Objective (i.e., a ROCE of 10.83 is achieved), there must also be some
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payment under the Company's Performance Plus Plan. [There could be a payment of
50 percent with a ROCE of 10.705 even though there is no payment under the
Performance Plus Plan.]
The Price of Product Objective for 1993 is to achieve an average unit
retail price for electric energy of 9.96 cents per kilowatt hour and natural gas
of 64.2 cents per therm. If the average unit retail price meets 100 percent of
this Objective, then an 100 percent award will be payable. If the average unit
retail price exceeds 95 percent of the Objective, the award will be prorated on
the basis of 20 percent for each percentage point, e.g., 96 percent of the
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target will produce a 20 percent award, and 102 percent of target will produce
an 140 percent award (up to 200 percent at 105 percent).
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The Corporate Objective for 1993 consists of four components, customer
service, safety, productivity and public acceptance. Each has its own range of
achievement levels, and the percentages will be averaged, if required, to
determine the percentage of award payable for that component. In the case of
customer service, the achievement has to exceed 95 percent of target (i.e., 96%
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will mean 20%) and 110 percent will be the maximum 200 percent award. In the
case of safety, the achievement has to exceed 94 percent of target (i.e., 96%
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will mean 33-1/3%) and 110 percent will be the maximum 200 percent award. In
the case of productivity, i.e., staff reductions, the achievement has to exceed
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98 percent of target (i.e., 99% will mean 50%) and 102 percent will be the
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maximum. In the case of public acceptance, the achievement has to exceed 99.2
percent of target (i.e., 99.3 will mean 12.5%) and 100.8 percent will be the
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maximum. The award percentages for each of the four components will be averaged
to produce the award for the Corporate Objective.
Each of these three Objectives is to be weighted equally (i.e., one-
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third each), and each is to be independent of the others, assuming that the Fund
is initially activated pursuant to Section V. For example, it would be possible
to activate 40 percent of the Fund with a ROCE of 10.55 (which exceeds the
threshold of 10.53). This would not be enough to establish an award for the
Financial Objective (at least 10.58 is
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needed) but it could be possible to have awards for the Price of Product and/or
Corporate Objectives.
VII. INDIVIDUAL AWARDS
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A Participant's Target Award potential shall be a percentage of the
midpoint of the Participant's salary grade according to the following chart:
Salary
Grade Midpoint Total
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E7 $ X 25.0%
E6 $ X 20.0%
E5 $ X 17.5%
E4 $ X 15.0%
E3 $ X 15.0%
E2 $ X 10.0%
E1 $ X 10.0%
Other $ X 5.0%
The Target Award established by the above chart is the amount which
can be granted to a Participant if all objectives are 100% achieved on average.
As noted in Section VI, the various parts of the award may be more or less,
depending on the extent to which the various objectives are met.
Each Participant's Target Award has two components: (1) eighty
percent of the amount will be based on the Company's performance as indicated by
the objectives; and (2) twenty percent of the award will be based on the
Participant's individual performance for the year according to specific
individual objectives established by the Board and/or senior officers. The
Board shall determine the individual
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components, if any, for the Chairman of the Board, and the Chairman shall review
and approve the other individual awards.
VIII. PAYMENT OF AWARDS
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A Participant's award, if any, for 1993 will be paid in cash during
the first quarter of 1994.
IX. 1992 AWARD AMENDMENT
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(a) A Participant's award for 1992 was payable in two pieces: (1) 75
percent of the award was paid in cash to the Participant during the first
quarter of 1993; and (2) 25 percent of the award was to have been deferred for 3
years. With this Restatement, the Board has amended the timing of the deferral
from 3 to 2 years and the deferred portion of the 1992 Award will be payable
during the first quarter of 1995.
(b) The 1992 amount deferred has been credited to an account for each
Participant and shall be deemed to have been invested in as many shares of
Company common stock as could have been purchased with the award at the average
of the closing prices of the Company's stock during the calendar month preceding
the month of the award. No actual acquisition of such shares shall be made and
no shares will be issued or distributed to such Participant. When dividends are
paid on the Company's common stock, an amount equal to the dividends that would
have been paid on the number of shares deemed credited to the Participant's
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account will be credited to the Participant's account and will be deemed to be
reinvested in additional shares at the closing price on the dividend payment
date.
(c) When the 1992 deferral becomes payable pursuant to this Section
IX, payment shall be made to the Participant (whether still employed or not at
the time) in an amount equal to the total amount which would have been received
if the Company's shares credited to the appropriate account had been sold at the
average of the closing prices of the stock during the calendar month preceding
the month of payment.
(d) If (1) the Participant is still employed by the Company on the
payment date or if the Participant's employment has terminated prior to the
payment date on account of retirement under the Company's Retirement Plan and
(2) the two-year average award equals seventy-five percent or more, the Company
will make an additional payment to the Participant in an amount which will equal
federal and state income taxes on both the deferred payment and the additional
payment assuming a combined tax rate of 40 percent.
(e) In the event of death, payment of the amount credited to the
Participant's account as of the date of death, without any additional payment
for taxes, shall be paid to the Participant's estate as soon as practicable.
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X. PARTICIPANT'S RIGHTS
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This Plan constitutes a contractual obligation on the part of the
Company, and a Participant acquires the right of an unsecured general creditor
of the Company. No trust or fund of any kind is created by reason of this Plan.
Participation in this Plan shall not be construed as giving any Participant the
right to be retained in the Company's employ or the right to receive any
benefits not specifically provided by the Plan.
The rights of a Participant to any payment under this Plan shall not
be assigned, transferred, pledged, encumbered or be subject in any manner to
alienation or anticipation. No Participant may borrow against an account.
XI. ADMINISTRATION
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This Plan shall be administered by the Committee on Management of the
Board which shall possess the authority to delegate authority and to adopt rules
and regulations for carrying out the Plan and to interpret, construe and
implement the provisions of the Plan and any decision or integration of any
provision of the Plan by such Committee or its delegate shall be final and
conclusive.
XII. AMENDMENT AND TERMINATION
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The Plan may, at any time and from time to time, be amended, modified
or terminated by the Board. The Board may
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eliminate or modify the Fund and/or award payments in any year due to special
circumstances. Such action shall not diminish the amount credited to a
Participant's deferred account but the timing for payment may be changed in the
sole discretion of the Board.
XIII. GENERAL PROVISIONS
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(a) All expenses of administering the Plan shall be borne by the
Company and shall not be charged against any Participant's account.
(b) To the extent required by law, the Company shall withhold taxes
from any payments made under the Plan.
(c) Except to the extent superseded by federal law, the laws of the
State of New York shall be controlling in all matters relating to the Plan.
IN WITNESS WHEREOF, Rochester Gas and Electric Corporation has caused
its duly authorized executive to sign this Plan this 14th day of December, 1993,
effective as of January 1, 1993.
ROCHESTER GAS AND ELECTRIC CORPORATION
By ROGER W. KOBER
Its Chairman, President and CEO