EXHIBIT A
TO
2002 EQUITY INCENTIVE PLAN
PERFORMANCE SHARE SUB-PLAN
(Effective July 9, 2002)
This Performance Share Sub-Plan ("Sub-Plan") sets forth the rules and
regulations adopted by the Committee for issuance of Performance Share Awards
under Section 10 of the 2002 Equity Incentive Plan ("Plan"). Capitalized terms
used in this Sub-Plan that are not defined herein shall have the meaning given
in the Plan. In the event of any conflict between this Sub-Plan and the Plan,
the terms and conditions of the Plan shall control. No Award Agreement shall be
required for participation in this Sub-Plan.
Section 1. Definitions
When used in this Sub-Plan, the following terms shall have the meanings as set
forth below, and are in addition to the definitions set forth in the Plan.
1.1 "Account" means the account used to record and track the number of
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Performance Shares granted to each Participant as provided in Section 2.4.
1.2 "Award" as used in this Sub-Plan means each aggregate award of Performance
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Shares as provided in Section 2.2.
1.3 "EBITDA" means earnings before interest, taxes, depreciation, and
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amortization as determined from time to time by the Committee.
1.4 "EBITDA Growth" means the percentage increase (if any) in EBITDA for any
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Year, as compared to the previous Year as determined from time to time by
the Committee.
1.5 "Peer Group" means the utilities included in the Standard & Poor's Utility
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(Electric Power Companies) Index.
1.6 "Performance Period" for purposes of this Sub-Plan means three consecutive
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Years beginning with the Year in which an Award is granted.
1.7 "Performance Schedule" means Attachment 1 to this Sub-Plan, which sets
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forth the Performance Measures applicable to this Sub-Plan.
1.8 "Performance Share" for purposes of this Sub-Plan means each unit of an
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Award granted to a Participant, the value of which is equal to the value of
Company Stock as hereinafter provided.
1.9 "Retire" or "Retirement" means termination of employment on or after:
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(a) becoming 65 years old with at least 5 years of service;
(b) becoming 55 years old with at least 15 years of service; or
(c) achieving at least 35 years of service, regardless of age.
1.10 "Salary" means the regular base rate of compensation payable by the Company
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to a Participant on an annual basis as of the date an Award is granted.
Salary does not include bonuses, if any, or incentive compensation, if any.
Such compensation shall not be reduced by any deferrals made under any
other plans or programs maintained by the Company.
1.11 "Total Shareholder Return" means the total percentage return realized by
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the owner of a share of stock during a relevant Year or any part thereof.
Total Shareholder Return is equal to the appreciation or depreciation in
value of the stock (which is equal to the closing value of the stock on the
last trading day of the relevant period minus the closing value of the
stock on the last trading day of the preceding Year) plus the dividends
declared during the relevant period, divided by the closing value of the
stock on the last trading day of the preceding Year. Closing values for the
stock on the dates given above shall be those published in the Wall Street
Journal.
1.12 "Year" means a calendar year.
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Section 2. Sub-Plan Participation and Awards
2.1 Participant Selection. Participants under this Sub-Plan shall be selected
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by the Committee in its sole discretion as provided in Section 4.2 of the
Plan.
2.2 Awards. Subject to any adjustments to be made under Section 2.5, the
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Compensation Committee may, in its sole discretion, grant Awards to some or
all of the Participants in the form of a specific number of Performance
Shares. The total value of any Award shall not exceed the following
limitations, based on the Participant's Salary on the date that the Award
is granted:
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Participant Award Limitation
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CEO*/COO* 150% of Salary
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Presidents*/Executive VPs* 100% of Salary
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Senior VPs* 85% of Salary
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Department Heads and Key Managers**
Level I 75% of Salary
Level II 50% of Salary
Level III 40% of Salary
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* Senior Management Committee level position
**Levels shall be determined in the sole discretion of the Committee
2.3 Award Valuation at Grant. In calculating the limitations set forth in
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Section 2.2, the value of each Performance Share shall be equal to the
closing price of a share of Stock on the last trading day before the Award
is granted, as published in the Wall Street Journal. Each Award is deemed
to be granted on the day that it is approved by the Committee.
2.4 Accounting and Adjustment of Awards. The number of Performance Shares
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awarded to a Participant shall be recorded in a separate Account for each
Participant. The number of Performance Shares recorded in a Participant's
Account shall be adjusted to reflect any splits or other adjustments in the
Stock. If any cash dividends are paid on the Stock, the number of
Performance Shares in each Participant's Account shall be increased by a
number equal to (i) the dividend multiplied by the number of Performance
Shares in each Participant's Account, divided by (ii) the closing price of
a share of Stock on the payment date of the dividend, as published in the
Wall Street Journal.
2.5 Performance Schedule and Calculation of Awards. Each Award shall become
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vested on January 1 immediately following the end of the applicable
Performance Period, subject to adjustment in accordance with the following
procedure.
(a) One-half of the Award shall be adjusted as follows:
(i) The Total Shareholder Return for the Company shall be determined
for each Year during the Performance Period, and shall then be
averaged (the "Company TSR").
(ii) The average Total Shareholder Return for all Peer Group utilities
shall be determined for each Year during the Performance Period, and
shall then be averaged ( the "Peer Group TSR").
(iii)The Peer Group TSR for the Performance Period shall be subtracted
from the Company TSR for the Performance Period. The remainder shall
then be used to determine the number of vested Performance Shares
using the Performance Schedule, based on one-half of the number of
Performance Shares in the Participant's Account.
(b) The other one-half of the Award shall be adjusted as follows:
(i) The EBITDA Growth for the Company shall be determined for each
Year during the Performance Period, and shall then be averaged (the
"Company EBITDA Growth").
(ii) The average EBITDA Growth for all Peer Group utilities shall be
determined for each Year during the Performance period, and shall be
averaged (the "Peer Group EBITDA Growth").
(iii) The Peer Group EBITDA Growth for the Performance Period shall be
subtracted from the Company EBITDA Growth for the Performance Period.
The remainder shall then be used to determine the number of vested
Performance Shares using the Performance Schedule, based on one-half
of the number of Performance Shares in the Participant's Account.
(c) The total number of vested Performance Shares payable to the
Participant shall be the sum of the amounts determined in accordance
with subsections (a) and (b) above.
(d) The Performance Measures and the Performance Schedule will not change
during any Performance Period with regard to any Awards that have
already been granted. The Committee reserves the right to modify or
adjust the Performance Measures and/or the Performance Schedule in the
Committee's sole discretion with regard to future grants.
2.6 Payment Options. Except as provided in Section 3, Awards shall be paid
after expiration of the Performance Period. The Company will pay in cash to
each Participant the aggregate value of vested Performance Shares, which
shall be determined in accordance with Section 2.7. Payment shall be made
as follows:
(a) 100% during the month of April of the Year immediately following
expiration of the Performance Period, or as soon as practical
thereafter; or
(b) in accordance with an alternative payment election made by Participant
substantially in the form attached hereto as Attachment 2, provided
that such election is executed by the Participant and returned to the
Vice President, Human Resources Department no later than the end of
the first Year of the Performance Period. Once made, this election is
irrevocable.
2.7 Valuation of Performance Shares. For the purposes of payment under Section
2.6, the aggregate value of vested Performance Shares shall be equal to the
total number of vested Performance Shares in the Participant's Account
(after any applicable adjustments under Section 2.5) multiplied by the
closing price of the Stock on the March 31 (or if March 31 is not a trading
day, the closing price of the Stock on the next preceding trading day)
before payment of the Award, as published in the Wall Street Journal.
2.8 Grantor Trust. In the case of a Change in Control, the Company shall,
subject to the restrictions in this Section 2.8 and Section 13.12 of the
Plan, irrevocably set aside funds in one or more such grantor trusts in an
amount that is sufficient to pay each Participant employed by such Company
(or Designated Beneficiary), the net present value as of the date on which
the Change in Control occurs, of the earned benefits to which Participants
(or their Designated Beneficiaries) would be entitled pursuant to the terms
of the Plan if the value of their deferral account (if any) established
pursuant to section 2.6(b) would be paid in a lump sum upon the Change in
Control. Any such trust shall be subject to the claims of the general
creditors of the Sponsor or Company in the event of bankruptcy or
insolvency of the Sponsor or Company.
Section 3. Early Vesting and Forfeiture
3.1 Retirement, Death or Divestiture. If prior to expiration of the Performance
Period the Participant Retires or dies, or in the event of a Divestiture
during a Performance Period, the Participant's outstanding Award(s) for any
unexpired Performance Period shall immediately become vested, and the
aggregate value of the Award shall be paid in cash after being adjusted in
accordance with Section 3.3.
3.2 Change in Control. In the event of a Change in Control prior to the
expiration of the Performance Period, any outstanding Award of the
Participant for any unexpired Performance Period shall be treated as
follows:
(a) If the Award is assumed by the successor to the Sponsor as of the date
of the Change in Control, each outstanding Award not previously
forfeited shall continue to vest and shall be paid pursuant to the
terms of this Sub-Plan; provided, however, that in the event the
employment of the Participant is terminated by the Company without
Cause following the Change in Control, any outstanding Award shall
become vested as of the termination date, and the aggregate value of
the Award shall be paid in cash after being adjusted in accordance
with Section 3.3.
(b) If the Award is not assumed by the successor to the Sponsor as of the
date of the Change in Control, any outstanding Award shall become
vested as of the date of the Change in Control, and the aggregate
value of the Award shall be paid in cash after being adjusted in
accordance with Section 3.3.
3.3 Adjustment of Awards. Any Award which is vested pursuant to this Section 3
prior to the end of the Performance Period shall be adjusted pursuant to
the following procedure.
(a) One-half of the Award shall be adjusted as follows:
(i) The Total Shareholder Return for the Company shall be determined
for each Year or partial Year, and a weighted average Total
Shareholder Return for the Company shall be calculated for the period
between the first day of the Performance Period and the date the
Participant Retires or dies, or the date of the Divestiture or the
date that the Award is vested pursuant to Section 3.2 (the "Prorated
Company TSR").
(ii) The average Total Shareholder Return for all Peer Group utilities
shall be determined for each Year or partial Year, and a weighted
average Total Shareholder Return shall be calculated for the period
between the first day of the Performance Period and the date the
Participant Retires or dies, or the date of the Divestiture or the
date that the Award is vested pursuant to Section 3.2 (the "Prorated
Peer Group TSR").
(iii) The Prorated Peer Group TSR for the Performance Period shall be
subtracted from the Prorated Company TSR for the Performance Period.
The remainder shall then be used to determine the vested Performance
Shares using the Performance Schedule, based on one-half of the number
of Performance Shares in the Participant's Account.
(b) The other one-half of the Award shall be adjusted as follows:
(i) The EBITDA Growth for the Company shall be determined for each
Year or partial Year, and a weighted average EBITDA Growth for the
Company shall be calculated for the period between the first day of
the Performance Period and the end of the calendar quarter immediately
preceding the date that the Participant Retires or dies, or end of the
calendar quarter immediately preceding the date of the Divestiture or
the date that the Award is vested pursuant to Section 3.2 (the
"Prorated Company EBITDA Growth").
(ii) The average EBITDA Growth for all Peer Group utilities shall be
determined for each Year or partial Year, and a weighted average
EBITDA Growth shall be calculated for the period between the first day
of the Performance Period and the end of the calendar quarter
immediately preceding the date the Participant Retires or dies, or the
end of the calendar quarter immediately preceding the date of the
Divestiture or the date that the Award is vested pursuant to Section
3.2 (the "Prorated Peer Group EBITDA Growth").
(iii) The Prorated Peer Group EBITDA Growth for the Performance Period
shall be subtracted from the Prorated Company EBITDA Growth for the
Performance Period. The remainder shall then be used to determine the
vested Performance Shares using the Performance Schedule, based on
one-half of the number of Performance Shares in the Participant's
Account.
(c) The total number of vested Performance Shares payable to the
Participant shall be the sum of the amounts determined in accordance
with subsections (a) and (b) above.
(d) If the Participant Retires, the Award shall be paid in accordance with
the Participant's election as provided in Section 2.6. If the
Participant dies, or in the event of a Divestiture, payment shall be
made in cash within a reasonable time after the Participant dies, or
within a reasonable time after the Divestiture becomes effective,
notwithstanding any election under Section 2.6. Payment upon death
shall be made to the Participant's Designated Beneficiary. If the
Award is vested pursuant to Section 3.2, the Award shall be paid
within a reasonable time after the date of vesting, notwithstanding
any election under Section 2.6. The aggregate value of the vested
Performance Shares shall be determined in accordance with section 3.4.
3.4 Valuation of Performance Shares. For the purposes of payment under Section
3.3(d), the aggregate value of vested Performance Shares shall be equal to
the number of vested Performance Shares in the Participant's Account (after
any applicable adjustments under Section 3.3) multiplied by the closing
price of the Stock on the date that the Participant Retires or dies, or on
the date of the Divestiture, or the on date the Award vests pursuant to
Section 3.2 (as applicable), as published in the Wall Street Journal.
3.5 Termination of Employment. In the event that a Participant's employment
with the Company terminates for any reason other than as provided in this
Section 3, any Award made to the Participant which has not vested as
provided in Section 2 or Section 3 shall be forfeited. Any vested Awards
shall be paid within a reasonable time after termination (for reasons other
than Retirement), notwithstanding any election to defer the payment of any
Award under Section 2.6.
Section 4. Non-Assignability of Awards
The Awards and any right to receive payment under the Plan and this Sub-Plan may
not be anticipated, alienated, pledged, encumbered, or subject to any charge or
legal process, and if any attempt is made to do so, or a Participant becomes
bankrupt, then in the sole discretion of the Committee, any Award made to the
Participant which has not vested as provided in Sections 2 and 3 shall be
forfeited.
Section 5. Amendment and Termination
This Sub-Plan shall be subject to amendment, suspension, or termination as
provided in the Plan.
ATTACHMENT 1
PERFORMANCE SCHEDULE
PERFORMANCE SHARE CALCULATION(1)
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The following table shall be used to adjust one half of the Participant's Award
in accordance with Section 2.5(a) or Section 3.3(a) of the Plan:
If the Company TSR(2) minus Then the 50% of the vested
the Peer Group TSR(2) is: Performance Share Award
shall be multiplied by:
5% or better 2.00
4.0 - 4.99 1.75
3.0 - 3.99 1.50
2.0 - 2.99 1.25
1.0 - 1.99 1.00
(0.99) - 0.99 .50
(1.0) - (1.99) .25
(2.0) or less 0.00
The following table shall be used to adjust one half of the Participant's Award
in accordance with Section 2.5(b) or Section 3.3(b) of the Plan:
If the Company EBITDA Growth(2) minus Then the 50% of the vested
the Peer Group EBITDA Growth(2) is: Performance Share Award
shall be multiplied by:
5% or better 2.00
4.0 - 4.99 1.75
3.0 - 3.99 1.50
2.0 - 2.99 1.25
1.0 - 1.99 1.00
0.00 - 0.99 .50
Less than 0 0
(1) The number of Performance Shares as calculated above shall be paid in
accordance with the provisions of Section 2.5 and 2.6 of the Sub-Plan.
(2) For purposes of Section 3, the Prorated Company TSR and EBITDA Growth and
Prorated Peer Group TSR and EBITDA Growth shall be used, and the number of
Performance Shares as calculated above shall be paid in accordance with the
provisions of Section 3.3 of the Sub-Plan.
ATTACHMENT 2
Performance Share Sub-Plan
200_ Deferral Election Form
As a Participant in the Performance Share Sub-Plan of the 2002 Equity Incentive
Plan ("Sub-Plan"), I hereby elect to defer payment of my Award otherwise payable
to me by the Company and attributable to services to be performed by me during
the Performance Period beginning on January __, 200__. This election shall apply
to [CHECK ONE]:
[ ] 100% of the Award [ ] 50% of the Award
[ ] 75% of the Award [ ] 25% of the Award
Upon vesting, I understand that my Award shall continue to be recorded in my
Account as Performance Shares as described in the Sub-Plan and adjusted to
reflect the payment and reinvesting of the Company's common stock dividends over
the deferral period, until paid in full.
I hereby elect to defer receipt (or commencement of receipt) of my Award until
the date specified below, or as soon as practical thereafter [CHECK ONE]:
[ ] a specific date certain at least 5 years from
expiration of the Performance Period: 4 / 1 / *
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(month/day/year)
[ ] the April 1 following the date of retirement
[ ] the April 1 following the first anniversary
of my date of retirement
* Notwithstanding my election above, if I elect a date certain distribution and
I retire before that date certain, I understand that the Company will commence
distribution of my account no later than the April 1 following the first
anniversary of the date of retirement, or as soon as practical thereafter, even
though said date is earlier than 5 years from expiration of the Performance
Period.
I hereby elect to be paid as described in the Sub-Plan in the form of [CHECK
ONE]:
[ ] a single payment [ ] annual payments commencing on the date set forth
above and payable on the anniversary date
thereof over:
[ ] a two year period [ ] a three year period
[ ] a four year period [ ] a five year period
I understand that I will receive "earnings" on those deferred amounts when they
are paid to me.
I understand that the election made as indicated herein is irrevocable and that
all deferral elections are subject to the provisions of the Sub-Plan, including
provisions that may affect timing of distributions.
I understand and acknowledge that my interests herein and my rights to receive
distribution of the deferred amounts may not be anticipated, alienated, sold,
transferred, assigned, pledged, encumbered, or subjected to any charge or legal
process, and if any attempt is made to do so, or I become bankrupt, my interest
may be terminated by the Committee, which, in his sole discretion. I further
understand that nothing in the Sub-Plan shall be interpreted or construed to
require the Company in any manner to fund any obligation to me, or to my
beneficiary(ies) in the event of my death.
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(Signature) (Date)
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(Print Name) (Company Location)
Received:
Agent of Chief Executive Officer
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(Signature) (Date)