EXHIBIT 10.11
ROCHESTER GAS AND ELECTRIC CORPORATION
EXECUTIVE INCENTIVE PLAN
Restatement of January 1, 1995
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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
1995 award will be paid in cash during the first quarter of 1996.
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 January 1, 1995, 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.
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(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) "Cost of Product" means the average unit retail cost per unit of energy
sold during a year.
(i) "Cost of Product Objective" means that the Cost of Product for a year
is not to exceed designated average unit retail costs.
(j) "Corporate Objective" means the business plan objectives adopted by the
Board each year in areas such as, but not limited to, customer satisfaction,
safety, Equal Employment Opportunity/Affirmation Action (EEO/AA) and
productivity.
(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 1995, the Trigger Objective is set at a ROCE in excess of 11.98
percent, which is determined by the targeted return on common equity (12.48%)
less 50 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 12.03 percent, any award for
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achieving the 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.
VI. Company Incentive Objectives
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Three Company Incentive Objectives will be established by the Board each
year: the Financial Objective, the Cost of Product Objective, and the Corporate
Objective.
The Financial Objective for 1995 is a ROCE of 12.48 percent for a payout of
100 percent. Payout will be made on a proportional basis for each basis point
in excess of 11.98 percent. For example, a ROCE of 12.38 percent would be 80
percent of the Objective and a ROCE of 12.98 percent would be 200 percent.
The Cost of Product Objective for 1995 is to achieve an average unit retail
cost for electric energy of 7.2 cents per kilowatt hour and natural gas of 72.5
cents per therm. If the average unit cost meets 100 percent of this Objective,
then an 100 percent award will be payable. If the average unit cost exceeds 97
percent of the Objective, the award will be prorated on the basis of 33 1/3
percent for each percentage point, e.g., 98 percent of the target will produce a
33 1/3 percent award, and 102 percent of target will produce an 166 2/3 percent
award (up to 200 percent at 103 percent).
The Corporate Objective for 1995 consists of four topic objectives,
customer satisfaction, safety, productivity and EEO/AA. 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 topic objective.
In the case of customer satisfaction, the achievement for the Customer
Satisfaction index has to exceed 88.5% based on a target of 89.0% (i.e., 88.6%
will mean 20%) and 89.5% will be the maximum 200 percent award for that
component. For Customer Service Standards, achievement must exceed 99% based on
a target of 100% (i.e., 99.2 will mean 20%) and 101% will result in a maximum
award of 200%.
In the case of Safety, the achievement has to exceed 90% of the target for
the OSHA Injury Rate (2.43 accidents per 200,000 hours worked) and
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110% of the target or 2,187 will result in the maximum 200 percent award for
that component. For the Vehicle Accident Rate, achievement must exceed 95% of
the target of 7.88 accidents per 1,000,000 miles driven and 105% of the target
will equal a 200 percent award for the component.
In the case of the Productivity Objective, achievement has to exceed 97% of
the Target and 103% of the target will equal a 200 percent award for the
objective. In the case of the EEO/AA Objective, the achievement for the Open
Supervisory Positions component has to exceed 25% based on a target of 35%
(i.e., 28% will mean 30% award) and 45% will be the maximum 200% award for that
component. For the Management Succession Plan (MSP) component achievement must
exceed 15% based on a target of 20% and 25% will equal 200% award for that
component.
As there are two components for the Customer Satisfaction, Safety and
EEO/AA Objectives, the achievement level for the two components will be averaged
to determine the overall achievement level for that objective. The award
percentages for the four topic objectives will be averaged to produce the
overall award for the Corporate Objective.
While each of the three objectives have equal weight (i.e., one-third each)
the total award percentage cannot exceed the percent achievement for the
financial objective. For example, if the achievement level of the financial
objective was 125% and the achievement level for both the Cost of Product and
corporate objective was 200%, the total award would be limited to 125% of the
targeted award.
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%
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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 as determined by the Board
and/or senior officers. The Board shall determine the individual 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 1995 will be paid in
cash during the first quarter of 1996.
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
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.
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(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.
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.
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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 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 30th day of March, 1995,
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effective as of January 1, 1995.
ROCHESTER GAS AND ELECTRIC CORPORATION
By ROGER W. KOBER
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Roger W. Kober
Its Chairman, President and CEO