Exhibit 10.18
[GRAPHIC OMITTED]
KEYSPAN ENERGY
1999 ANNUAL INCENTIVE COMPENSATION
AND GAINSHARING PLAN
INTRODUCTION
MarketSpan Corporation d/b/a KeySpan Energy ("Company" or "KeySpan") recognizes
that the success and achievement of corporate goals is directly related to the
ability and performance of its employees. In this regard, the Company has
established an Annual Incentive Compensation and Gainsharing Plan ("Plan") which
provides incentives for achieving specific performance objectives and related
financial and operating goals.
In the deregulated utility environment, the need and use of incentive
compensation is a logical progression to providing competitive total
compensation in the external marketplace. The use of a combined base pay and
incentive compensation philosophy has become the norm in salary administration
programs.
In managing the compensation programs at KeySpan Energy, it is recognized that
both base pay and incentives are integral components in an effective salary
program. One of our compensation objectives is to identify methods which can be
used to enhance our existing programs to create better "pay for performance"
plans. In this regard, the Plan provides a method to establish specific
performance goals. The Plan also provides a direct link between team and group
performance results and corporate initiatives. The key operational goals are
based upon the corporate initiatives and specifically focus upon growth,
competitive pricing, customer satisfaction and employee excellence.
Compensation Department
Human Resources Division
KeySpan Energy
1999
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EXECUTIVE SUMMARY
ELIGIBILITY
o Includes all KeySpan Energy and Brooklyn Union Officers.
o The Plan also includes:
o All KeySpan Energy and Brooklyn Union regular full-time
and regular part-time management employees.
o All KeySpan Energy and Brooklyn Union regular full time bargaining
employees and temporary full time and temporary part time bargaining
employees who are members of Local 101 TWU and Local 3 IBEW.
o All KeySpan Energy and Brooklyn Union full time and part time
employees who are members of Local 1049 and Local 1381, IBEW.
o Personnel who participate in the KeySpan Energy Sales Commission Plan are
not eligible to participate in the Annual Incentive Compensation and
Gainsharing Plan.
o Personnel on loan to other KeySpan subsidiaries may participate at the
discretion of the Chairman of KeySpan.
PERFORMANCE GOALS
o Strategic considerations have been incorporated into the Plan design.
o Performance goals are established to reflect KeySpan Energy
performance at the Holding
Company and Utility level.
o Awards for participants in the plan may be based solely upon Holding
Company goals, Utility goals, Subsidiary goals (as appropriate),
Business Unit goals or some combination of these goals.
o Each goal will have a threshold, target and maximum performance level.
o The amount of the award will be determined by the performance level
achieved.
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Human Resources Division
KeySpan Energy
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o The award to each participant shall be determined by the goal
results for the Holding Company, Utility, Subsidiary or group, or
some combination thereof, defined by the individual's position.
REVIEW AND APPROVAL
o All determinations relative to the Plan, regarding Officers'
participating in the plan, including approval of awards, shall be
subject to the discretion of the KeySpan Energy and Brooklyn Union
Boards of Directors.
The Boards shall make determinations after receiving the
recommendations of the KeySpan Energy Compensation and Nominating
Committee and BU Organization and Nominating Committee. Such
determinations shall be final, conclusive and binding. All other
awards will be based on approval of the Chairman of KeySpan.
o Awards when granted, will be paid to each participant on an annual
basis, after the end of the plan year.
Compensation Department
Human Resources Division
KeySpan Energy
1999
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DEFINITIONS
The terms included in this Plan are defined below unless the context clearly
requires a different meaning.
"Actual Salary" the participant's annual base salary at the
end of the Plan year. Awards will be calculated based
upon annual base salary as of this date.
"AWARD DATE" the date incentive awards are approved. The
date shall be defined as the date the Board of
Directors reviews and approves incentive awards.
"BOARD" the Company's Board of Directors.
"CASH" award money paid in a lump-sum.
"COMMITTEES" the Compensation and Nominating Committee of
the KeySpan Energy Board of Directors, and the
Organization and Nominating Committee of the Brooklyn
Union Board of Directors.
"INCENTIVE AWARD" the award provided to eligible
participants expressed as a percentage of their annual
base salary.
"MAXIMUM AWARD" the upper limit as a percent of base salary
payable if the maximum level predetermined for the
goals are achieved.
"PLAN" the Annual Incentive Compensation & Gainsharing Plan.
"PLAN YEAR" the calendar year period beginning January 1,
1999 and ending December 31, 1999.
"TARGET AWARD" a predetermined payout percentage for
achieving the established Goals.
"THRESHOLD" minimum level of achievement for a payout to
occur.
Compensation Department
Human Resources Division
KeySpan Energy
1999
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KEYSPAN ENERGY ANNUAL INCENTIVE COMPENSATION AND GAINSHARING PLAN
1. PURPOSE
KeySpan Energy's Annual Incentive Compensation and Gainsharing Plan is designed
to:
a) Provide incentives to achieve goals which are important to
shareholders and customers of the Company.
b) Emphasize pay for performance with variable awards linked to
corporate performance and profitability.
c) Promote the demonstration of our corporate values which are:
Performance Based (leadership at all levels,
community commitment) Customer Focused
(unparalleled customer service, teamwork)
Objective (integrity and trust, open
communication) One Workforce Oriented (respect for
diversity).
d) Maintain an overall compensation and benefit plan which is
competitive with the marketplace to attract the best talent.
e) Provide a compensation environment which fosters the retention
of talented personnel and encourages them to contribute
towards the success of the Company.
2. ADMINISTRATION
All determinations in connection with the Plan shall be made by the Board of
Directors after receiving the recommendations of its respective Compensation and
Nominating Committee, or Organization and Nominating Committee herein called the
"Committees". Such determinations shall be final, conclusive and binding.
The Plan will be administered by the Chief Executive Officer and the Senior Vice
President over Human Resources, under the general direction of the Committee.
The Compensation Department and Corporate Planning and Performance Department
will be responsible for the Plan design recommendations and administration.
The Committees will approve performance goals for the plan year as well as the
potential threshold, target and maximum award percentages that will provide a
reasonable and competitive level of awards if the primary threshold goals are
achieved.
Compensation Department
Human Resources Division
KeySpan Energy
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The Committees shall have full and final authority to designate the incentive
award for each participant, and to determine the performance objectives, amount
and form of all incentive awards. The Committees may delegate such
responsibilities, other than final approval of awards, to the Chief Executive
Officer who may then delegate such responsibility to any other officer of the
Company.
The Committees, as soon as practicable following the end of the plan year, will
review for approval the recommended incentive awards to be provided to the Plan
participants for the previous year. The Board of Directors shall make the final
determination regarding approval of all awards. Incentive awards for all
participants, except the Chief Executive Officer will be recommended by the
Chief Executive Officer subject to the approval of the Committee and the Board
of Directors. The incentive award for the Chief Executive Officer will be
recommended by the Chairman of the Committee subject to the approval of the
Board of Directors.
The Committees shall, in their sole discretion, recommend whether any
participant shall be eligible to earn an incentive award. In the event of
extraordinary windfall profits or losses beyond the control of the Company, or
in circumstances where prudent management decisions will diminish or preclude
the payment of incentive awards, the Committees will have the discretion to
recommend to the Board to provide or eliminate incentive awards as deemed
necessary. The Committee can also award such amounts that they deem appropriate
to recognize superior results which have been achieved. Finally, the Committees
may recommend to the Board of Directors to amend or terminate the Plan at any
time, with or without notice to the participants.
3. ELIGIBILITY
a)The Plan includes all KeySpan Energy and Brooklyn Union regular full-time
and regular part-time management employees, all KeySpan Energy and
Brooklyn Union regular full time bargaining employees and temporary full
time and temporary part time bargaining employees who are members of Local
101 TWU and Local 3 IBEW, and all KeySpan Energy and Brooklyn Union full
time and part time employees who are members of Local 1049 and Local 1381,
IBEW. Personnel who participate in the KeySpan Energy Sales Commission
Plan are not eligible to participate in the Annual Incentive Compensation
and Gainsharing Plan. Personnel on loan to other KeySpan subsidiaries may
participate at the discretion of the Chairman of KeySpan.
b) To receive an award, an employee must be actively employed with the
Company as of the date the awards are paid. Management employees hired
after the beginning of the Plan year (i.e. January 1), are eligible for
a prorata award based upon the number of full months of employment
during the plan year if they remain employed until the awards are paid.
Bargaining employees hired after the beginning of the plan year are
eligible for an
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Human Resources Division
KeySpan Energy
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award, as long as they remain employed until the awards are paid, based
on the following schedule:
Employed before Janu ry 31Eligible for a full potential award.
Employed between February 1
and June 31: Eligible for 50% of potential award.
Employed on or after July 1: Not eligible for an award
c) Receipt of an award in one year shall have no bearing on receipt of an
award in future years.
d) An eligible employee must have a performance level that the Company
deems acceptable to participate in the Plan. For management employees,
this means an employee must maintain a performance appraisal rating of
"Effective" or better. Employees who receive a performance rating in
the "Marginal" category may be eligible to receive an award at the
discretion of their Officer. Employees who receive a performance rating
in the "Not Effective" category are not eligible to receive an award.
4. WEIGHTING OF GOALS
o The award to each participant shall be determined by a combination of the
Holding Company/ Utility/Business Unit/Division/Department, or individual
performance, and (depending on position) on Subsidiary performance.
o Weighting of awards shall be determined by an individual's band/position
within the organization. In general, weighting of Officer awards will
reflect a mix of Holding Company/ Utility/Business Unit/Subsidiary goals
(refer to Schedule A, attached). Weighting of all other awards are generally
as follows, with an allowance for individual measures as appropriate:
Management Band 4 60% Corporate / 40% Business Unit
Management Band 1 - 3 50% Corporate / 50% Business Unit
Bargaining Employees 50% Corporate / 50% Business Unit
5. ANNUAL INCENTIVE PLAN TARGETS
Incentive awards for eligible employees will be calculated based upon their
status as of the end of the plan year, (i.e. December 31) as a percentage of
their annual base salary as of that date, according
Compensation Department
Human Resources Division
KeySpan Energy
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to the target awards indicated below. Based upon goal performance, awards can
range from 0% to the maximum, with no payout if the Threshold level is not
achieved for the specified goals:
Band 1999 Threshold 1999 Target 1999 Maximum
---- --------------- ----------- ------------
Chairman/CEO 30.0% 60% 120%
President /COO 25.0% 50% 100%
Senior VP, KEMG 20.0% 40% 80%
Senior Vice President 17.5% 35% 70%
Vice President 12.5% 25% 50%
Band 1999 Threshold 1999 Target 1999 Maximum
---- --------------- ----------- ------------
Band 4 10.0% 20% 40%
Band 3 7.5% 15% 30%
Band 2 5.0% 10% 20%
Band 1 2.5% 10%
Union Affiliation 1999 Threshold 1999 Target 1999 Maximum
----------------- --------------- ----------- ------------
Local 101 and Local 3 1.25% 2.5% 5%
Local 1381 and Local 1049 $425 $850 $1,700
Part time employees are eligible for 1/2 of the award target/awards stated
above.
6. PAYMENT OF AWARDS
Awards will be paid in cash as soon as practicable following the end of the plan
year after review and approval by the Committee and Board of Directors. The
amounts required by law to be withheld for income and Social Security taxes, as
well as a 401(k) deduction for participants of the 401(k) plan, will be deducted
from the award payments. An employee must be actively employed as of the date
the awards are paid to receive an award.
Compensation Department
Human Resources Division
KeySpan Energy
1999
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7. CHANGE OF EMPLOYMENT STATUS DURING THE PLAN YEAR
a) Promotions/Demotions
Awards to each plan participant will be based on the employee's target and
status in effect at the end of the plan year. Employees who are demoted
due to performance during the plan year, shall be eligible for an award at
the target of their new position.
b) Termination
An employee whose services are terminated during the plan year for reasons
of misconduct, failure to perform, or other performance related reasons
shall not be considered for an award. Unless the Board of Directors shall
otherwise determine, such an individual shall not be entitled to any
portion of an incentive award. If the termination is due to other reasons
such as reorganization, transfer to subsidiary, etc., and the termination
is not due to a fault of the employee, the employee may be considered for
a pro-rata award.
c) Resignation
An employee who resigns to accept employment elsewhere (including
self-employment) during the plan year or prior to the date the awards are
paid will not be considered for an award.
d) Death, Disability, Retirement, Leave of Absence
(for Sickness, FMLA or Personal Reasons)
An employee whose status as an active employee is changed during the plan
year for any of the reasons cited may be considered for a pro-rata award
at the end of the plan year depending upon the actual length of paid
service during the plan year. In the event of death, any prorated payment
shall be made to the beneficiary as indicated on the individual's group
term life insurance beneficiary card.
8. CHANGE IN CONTROL
In the event of a change in control, all participants shall be paid an award
based upon the effective date of the change in control. The award would either
be prorated or annualized based upon the timing of the change of control.
Prorated awards will be made as determined by the Committee.
Compensation Department
Human Resources Division
KeySpan Energy
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A Change in Control is defined as:
a) The acquisition by any Person of beneficial ownership of 20% or more of
either (x) the then outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (y) the combined voting power of
the then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that for purposes of this subsection (a),
the following acquisitions shall not constitute a Change of Control; (A)
Any acquisition directly from the Company, (B) Any acquisition by the
Company, (C) Any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any Person controlled by
the Company or (D) Any acquisition by any person pursuant to a transaction
which complies with clauses (A), (B), and (C) of paragraph c) below; or
b) Individuals who, as of the Effective Date, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a Director
subsequent to the date of this Plan whose election, or nomination for
election by the Company's shareholders, was approved by a vote of at least
a majority of the Directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board,
but excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an actual or threatened
election contest with respect to the election or removal of Directors or
other actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Board; or
c) Consummation of a reorganization, merger or consolidation or sale or other
disposition of all or substantially all of the assets of the Company or
the acquisition of assets of another corporation (a "Business
Combination"), in each case, unless, following such Business Combination,
(A) All or substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common Stock
and Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than
65% of, respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities entitled
to vote generally in the election of Directors, as the case may be, of the
corporation resulting from such Business Combination (including, without
limitation, a corporation which as a result of such transaction owns the
Company or all or substantially all of the Company's assets either
directly or through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such Business
Combination of the Outstanding Company Common Stock and Outstanding
Company Voting Securities, as the case may be, (B) No Person (excluding
any corporation resulting from such Business Combination or any employee
benefit plan (or related trust) of the Company or such corporation
resulting from such Business
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Human Resources Division
KeySpan Energy
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Combination) beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of the
corporation resulting from such Business Combination or the combined
voting power of the then outstanding voting securities of such corporation
except to the extent that such ownership existed prior to the Business
Combination; and
d) At least a majority of the members of the board of directors of the
corporation resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial agreement, or
of the action of the Board, providing for such Business Combination; or
e) Approval by the shareholders of the Company of a complete liquidation or
dissolution of the Company.
9. GENERAL PROVISIONS
a) The Plan shall not constitute a contract for the continued employment of
any participant by the Company. The Company reserves the right to modify
management and officer compensation and benefits at any time and from time
to time, as it considers appropriate and to terminate employment for any
reason at any time notwithstanding this Plan.
b) Cash payments made under this Plan generally will be treated as
compensation for the purposes of the Company's Retirement Plan benefit if
the employee is:
1) Enrolled in the Employee's Retirement Plan of KeySpan Energy,
2) Enrolled in the Retirement Income Plan of KeySpan Energy, with a base
salary of $75,000 or above.
Awards will be considered pensionable earnings provided that such payments do
not result in disqualification of the Retirement Plan under 401(a) of the
Internal Revenue Code or adversely affect the exempt status of the Retirement
Plan trust under Section 501(a) of said code. Cash payments of any
non-deferred portion of an incentive award received after retirement or death
shall be treated for Retirement Plan benefit purposes as compensation for
services rendered in the last Retirement Plan year in which the recipient was
employed, if the employee was a participant in an existing incentive plan
prior to 10/1/95. Cash payments of the portions that were actually deferred
or would have normally been deferred which are received after retirement or
death will not be considered compensation for Retirement Plan benefit
purposes.
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Human Resources Division
KeySpan Energy
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c) No benefit under the plan shall in any manner or extent be assigned,
alienated, or transferred by any participant under the Plan, or be subject
to attachment, garnishment or other legal process.
d) Except as addressed herein, incentive compensation payments will not
affect the level of benefits under any other employee benefit plan or
program of the Company.
e) Cash payments will be eligible for any Employee Savings Plan 401(k)
deferral or after tax contribution election made by the employee subject
to the limitations established in the current 401(k) plan.
f) The Board of Directors of the Company may change, modify or terminate the
Plan in whole or in part, either in general or in particular cases, at any
time with or without notice.
Compensation Department
Human Resources Division
KeySpan Energy
1999
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