EXHIBIT 10.16
PIEDMONT NATURAL GAS COMPANY, INC.
SHORT-TERM INCENTIVE PLAN (STIP)
(EFFECTIVE NOVEMBER 1, 2003)
The Piedmont Natural Gas Company Board of Directors (Board) adopted a fiscal
year 2004 Short-Term Incentive Plan (Plan) on August 22, 2003. Each year the
Board will consider a Plan for the new fiscal year. The design of the Plan
provides for cash payments upon the attainment of performance measures approved
by the Board.
The Plan is designed to promote the interests of the Company by attracting and
retaining in its employment persons of outstanding ability, and to provide
executives and other key employees greater incentive to make material
contributions to the success of the Company. Plan performance periods are one
year in length.
Eligibility
The Board approves Plan participation. Generally, job classification determines
those that are eligible to participate. Employees in a job classification of
District Manager (A, B, C), Director, Vice President, Senior Vice President, or
President/CEO have been approved as participants.
*PROCEDURE - The President/CEO recommends participants in the Plan with
approval from the Board.
Formula
A standard formula has been established to determine the target award for each
participant. This formula considers title, base salary effective for the
majority of the fiscal year, and number of months of participation.
Title Target %
- ----- --------
President/CEO 40%
Senior VP 30%
Vice President (Senior Team) 20%
Vice President 15%
Director 10%
District Manager (A, B, C) 10%
Example: Vice President with a base salary of $150,000, participant for entire
performance period.
$150,000 x .15 = $22,500
Base Salary Target Cash Target
*PROCEDURE - Near the beginning of a fiscal year or after there is a new
hire/promotion, the Director - Compensation/HRIS creates
spreadsheets listing all participants and award targets.
This information is provided to the Board for approval
after review by the Vice President - Human Resources and
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the President/CEO. Generally, the Board approves new awards
at the August meeting and specific participants and award
targets at the December meeting. Upon approval, the Vice
President and Controller and the Vice President, Corporate
Counsel and Secretary receive a copy of all appropriate
documents. The Vice President, Corporate Counsel and
Secretary documents the actions of the Board in the Minutes
from the Board Meeting. The Director - Compensation/HRIS
budgets for the Plan in area code 9140. The Vice President
and Controller makes necessary accruals concerning the
expensing of the Plan.
Performance Periods and Performance Criteria
The performance periods are one year in length. The fiscal year 2004 Plan is the
first. The fiscal year 2005 Plan was approved by the Board on August 27, 2004.
Any subsequent Plans will be determined by the Board. The Board determines
performance measures.
*PROCEDURE - The Board determines the performance periods and performance
measures. The performance measure for fiscal year 2004 and
fiscal year 2005 Plans is earnings per share.
Distribution
Assuming that performance objectives are met for the fiscal year, cash payments
will occur at the end of the performance period.
The company's tax withholding requirements must be met. Federal and state income
taxes and FICA taxes are withheld at statutory rates.
For the fiscal year 2004 Plan, if EPS performance is less than 90% of target
there is no cash distribution. If EPS performance is at 90% of target, there is
a 50% distribution. If EPS is at 100% of target, there is a 100% distribution.
If EPS is at 110% or greater than target, there is a 150% distribution. EPS
performance levels between threshold and stretch will be subject to mathematical
interpolation.
For the fiscal year 2005 Plan, if EPS performance is less than 95% of target
there is no cash distribution. If EPS performance is at 95% of target, there is
a 50% distribution. If EPS is at 100% of target, there is a 100% distribution.
If EPS is at 105% or greater than target, there is a 150% distribution. EPS
performance levels between threshold and stretch will be subject to mathematical
interpolation.
*PROCEDURE - The performance measures for each award are determined at the
beginning of each award period. At the end of each fiscal
year, the Director - Compensation/HRIS will confirm EPS
with the Chief Financial Officer or his designee. At the
conclusion of the fiscal year, performance information is
presented to the Board who will declare the appropriate
distribution. These distributions will occur in December or
January following the end of the performance period.
STIP Agreement
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For the fiscal year 2004 Plan, each participant was provided a detailed document
and invited to attend a presentation on this new incentive opportunity. For the
fiscal year 2005 Plan and any subsequent Plans, participants will be asked to
sign an agreement that provides details for the Plan.
* PROCEDURE- Near the beginning of an Award Period or after the Board has
approved a new participant, two original agreements are
prepared by the Director - Compensation/HRIS. These are
enclosed with a letter from the President/CEO and forwarded
to the participants for their review and signature. One of
the agreements is returned to Human Resources and
maintained on file.
Change of Events
Resignation/Termination/Retirement/Death
Unless otherwise determined by the Board, in the event of the resignation,
termination, retirement, or death of a participant prior to the end of any
fiscal year, participation shall be immediately forfeited and canceled.
Promotion as Participant
Upon promotion to a higher-level position, an adjustment may be made to
the target award that is associated with the new position.
New Participant
Promotion
An employee promoted into an eligible position will be considered
for an incentive opportunity in accordance with the formula outlined
on page 1.
New Hire
An employee hired into an eligible position will be considered for
an incentive opportunity in accordance with the formula outlined on
page 1.
*PROCEDURE - The Director - Compensation/HRIS is notified of any Change of
Events and provides calculations concerning incentive
opportunities under the Plan.
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