EXHIBIT 10.17
[SEMCOENERGY LOGO]
SHORT TERM
INCENTIVE PLAN
EFFECTIVE 1/1/2005
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SEMCO ENERGY, INC.
SHORT-TERM INCENTIVE PLAN
The Compensation Committee is responsible for recommending the compensation for
the top officers. The Board will be kept informed periodically about the work of
the Compensation Committee in order to support its recommendations. The Board
will rely on the Compensation Committee to manage the compensation process so
that these matters can be handled routinely at the full Board meetings.
The Compensation Committee will meet separately to approve the incentive plan
payouts and establish incentive plan goals. Separate meetings are also suggested
to evaluate the performance of the executives.
Although not a member of the Compensation Committee, the CEO will attend
Compensation Committee meetings in an advisory capacity. This structure allows
the Committee to remain fully independent of management while at the same time
receive input from management on the compensation program.
STRATEGY:
The incentive strategy of the Company is to benchmark peer group, industry, and
certain labor market criteria as a component of total remuneration. The base
compensation position is segmented at the 50th percentile of market consensus.
TARGET:
The target for the short-term Incentive Plan will be set and agreed to by the
Compensation Committee with input from Management, and agreed to by Management
and will be reviewed and approved by the Board.
INCENTIVE OPPORTUNITY LEVELS:
The trigger for the Short-Term Incentive Plan is the achievement of 95% of
typical earnings targets with the maximum at 110%. Thresholds and Maximums may
be adjusted for more non-typical measures. (Schedules A & B)
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The following table illustrates the incentive opportunity targets:
THRESHOLD TARGET MAXIMUM
GOAL PAY-OUT GOAL PAY-OUT GOAL PAY-OUT
- --------- ------- --------- ------- --------- -------
95% 50% 100% 100% 110% 200%
of target of target of target
The following table delineates the incentive opportunity levels as a percentage
of base salary for each group:
GROUP THRESHOLD TARGET MAXIMUM
----- --------- ------ -------
President & CEO 30.0% 60.0% 120.0%
SVP / COO & CFO 20.0% 40.0% 80.0%
SVP & General Counsel 17.5% 35.0% 70.0%
VP of HR & Deputy General Counsel 15.0% 30.0% 60.0%
VP & Controller 12.5% 25.0% 50.0%
Divisional & Technical Executive
Employee Director 10.0% 20.0% 40.0%
Manager 2.0% 4.0% 8.0%
Supervisor 1.0% 2.0% 4.0%
Eligible Professional Positions 1.0% 2.0% 4.0%
- - Engineers / Codes & Standards
- - Key Account & Marketing Reps
- - Safety & Risk Coordinators
- - Operations - Specialists,
Analysts, & ROW
PERFORMANCE MEASUREMENT WEIGHTINGS:
The short-term incentive plan metrics are a combination of Objective Corporate
results and Balanced Scorecard results as measured by the annual Performance
Assessment. The following table delineates the performance measurement
weightings:
CORPORATE RESULTS STRATEGIC RESULTS
GROUP (FINANCIAL TARGETS) (BALANCED SCORECARD)
----- ------------------- --------------------
President & CEO 70% 30%
SVP / COO & CFO 70% 30%
SVP & General Counsel 60% 40%
VP & Deputy General Counsel 50% 50%
VP & Controller 40% 60%
Divisional & Technical Executive
Employee Director 30% 70%
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Manager 20% 80%
Supervisor 20% 80%
Eligible Professional Positions 20% 80%
- - Engineers / Codes & Standards
- - Key Account & Marketing Reps
- - Safety & Risk Coordinators
- - Operations - Specialists,
Analysts, & ROW
SHORT-TERM PLAN PAYOUTS:
Payouts under the short-term incentive plan will be accrued on the books of the
Company during the Plan year. Accrual must be escalated prior to or at year-end
to accommodate above target performance. The performance level for Incentive
Opportunity must reflect all of the appropriate accrued payout. The CEO shall
submit to the Compensation Committee recommendations for payout under this Short
Term Incentive Plan. The CEO may recommend the payout to be less than the
formulas reflect considering the following factors: difficulty of objectives,
unusual occurrences, windfalls, or other extenuating circumstances (pay-out
recommendation may not be increased). Payouts will be reviewed by the
Compensation Committee and the Board at their February Board meeting following
the plan year and, if approved, will be paid no later than March 15th.
PARTICIPANTS:
Participation in the Plan shall be based on job title. Exceptions shall be
approved by the Compensation Committee and the Board of Directors.
Employees who become qualified to participate part way through the Plan year
will have their opportunity level prorated. Employees must be employed at the
time of the Plan payout to be eligible except for the case of death, total
disability or retirement which will be prorated based on the last day of active
employment. Employees who voluntarily leave the Company prior to the incentive
plan payout, or are released for cause are not eligible to receive any incentive
under the plan.
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Schedule A
SHORT-TERM INCENTIVE
If the annual earnings target is achieved, 100% of targeted bonus amount is
awarded.
EARNINGS ACHIEVEMENT IN RELATION TO PERCENTAGE OF TARGET BONUS AWARD
% of % of Target % of % of Target
Target Bonus Award Target Bonus Award
Achieved Recommended Achieved Recommended
-------- ----------- -------- -----------
- -0% = 100% of 100.0% 0% = 100% of 100.0%
-.25% 97.5% 0.5% 105.0%
-.50% 95.0% 1.0% 110.0%
-.75% 92.5% 1.5% 115.0%
-1.00% 90.0% 2.0% 120.0%
-1.25% 87.5% 2.5% 125.0%
-1.50% 85.0% 3.0% 130.0%
-1.75% 82.5% 3.5% 135.0%
-2.00% 80.0% 4.0% 140.0%
-2.25% 77.5% 4.5% 145.0%
-2.50% 75.0% 5.0% 150.0%
-2.75% 72.5% 5.5% 155.0%
-3.00% 70.0% 6.0% 160.0%
-3.25% 67.5% 6.5% 165.0%
-3.50% 65.0% 7.0% 170.0%
-3.75% 62.5% 7.5% 175.0%
-4.00% 60.0% 8.0% 180.0%
-4.25% 57.5% 8.5% 185.0%
-4.50% 55.0% 9.0% 190.0%
-4.75% 52.5% 9.5% 195.0%
-5.00% 50.0% 10.0% 200.0%
Schedule B
SHORT-TERM INCENTIVE AWARD
IN RELATION TO TARGET
[GRAPH]