Attached files
Exhibit
10(h)1
AMENDED
AND RESTATED
ALLETE
EXECUTIVE
ANNUAL INCENTIVE PLAN
With
Amendments through January 1, 2010
AMENDED
AND RESTATED
ALLETE
EXECUTIVE
ANNUAL INCENTIVE PLAN
Article 1.Establishment and Purpose
1.1Establishment of the
Plan. ALLETE, Inc., a Minnesota corporation, f/k/a Minnesota
Power, Inc., f/k/a Minnesota Power & Light Company (hereinafter referred to
as the “Company”), hereby establishes an annual incentive compensation plan (the
“Plan”), as set forth in this document. The Plan allows for annual
cash payments to Participants based on the Company’s annual performance relative
to both financial and non-financial goals.
1.2Purpose of the
Plan. The purpose of the Plan is to motivate Participants to
work toward improved annual financial and non-financial
performance. The Plan is further intended to assist the Company in
its ability to attract and retain the services of officers and key employees
upon whom the successful conduct of its operations is largely
dependent.
Article
2.Definitions
Whenever used in the Plan, the
following terms shall have the meanings set forth below and, when such meaning
is intended, the initial letter of the word is capitalized:
2.1“Award” means the
payment made to the Participant based on the achievement of established
financial and nonfinancial performance goals as provided under the
Plan.
2.2“Business Unit” means
any subsidiary or division of the Company labeled as a business unit for the
purposes of the Plan.
2.3“Change in Control” of
the Company shall be deemed to have occurred as of the first day that any one or
more of the following conditions shall have been satisfied:
(a)the dissolution of the Company;
(b)a reorganization, merger or consolidation of
the Company with one or more unrelated corporations, as a result of which the
Company is not the surviving corporation;
(c)the sale, exchange, transfer or other
disposition of shares of the common stock of the Company (or shares of the stock
of any person that is a shareholder of the Company) in one or more transaction,
related or unrelated, to one or more persons unrelated to the Company if, as a
result of such transactions, any person (or any person and its affiliates) owns
more than twenty percent of the voting power of the outstanding common stock of
the Company; or
(d)the sale of all or substantially all the assets
of the Company.
2.4“Code” means the
Internal Revenue Code of 1986, as amended from time to time.
2.5“Committee” means the
Executive Compensation Committee, appointed by the Board of Directors to
administer the Plan.
2.6“Disability” or “Disabled” means a
physical or mental condition in which the Participant is:
(a) unable
to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment that can be expected to result in
death or can be expected to last for a continuous period of not less than twelve
(12) months;
(b) by
reason of any medically determinable physical or mental impairment which can be
expected to result in death or can be expected to last for a continuous period
of not less than twelve (12) months, receiving income replacement benefits for a
period of not less than three (3) months under the Employer’s accident and
health plan;
(c) determined
to be totally disabled by the Social Security Administration; or
(d) disabled
pursuant to an Employer-sponsored disability insurance arrangement provided that
the definition of disability applied under such disability insurance program
complies with the foregoing definition of Disability.
2.7“Eligible Employee”
means an employee who is eligible to participate in the Plan, as approved by the
Committee.
2.8“Participant” means an
Eligible Employee who has received an opportunity for an Award.
2.9“Performance Year”
shall mean the period from January 1 through December 31 of any given
year.
2.10“Proration” or “Prorated” means an
Award calculation that accounts for time spent in a job position or Business
Unit based on the number of whole months spent in the position or Business Unit
and counting as a whole month any month the Participant was in the position or
Business Unit on the 15th of the month.
2.11“Related Company”
means ALLETE, Inc. and all persons with whom the ALLETE, Inc. would be
considered a single employer under Code section 414(b) (employees of controlled
group of corporations), and all persons with whom such person would be
considered a single employer under Code section 414(c) (employees of
partnerships, proprietorships, etc., under common control); provided that in
applying Code sections 1563(a)(1), (2), and (3) for purposes of determining a
controlled group of corporations under Code section 414(b), the language “at
least 50 percent” is used instead of “at least 80 percent” each place it appears
in Code sections 1563(a)(1), (2), and (3), and in applying Treasury Regulations
section 1.414(c)-2 for purposes of determining trades or businesses (whether or
not incorporated) that are under common control for purposes of Code section
414(c), “at least 50 percent” is used instead of “at least 80 percent” each
place it appears in Treasury Regulations section 1.414(c)-2
2.12“Retirement” or “Retires” means
Separation from Service, for reasons other than death or Disability, on or after
attaining normal retirement age or early retirement age as defined in the most
applicable qualified retirement plan sponsored by the Related Company that
employed the Participant immediately preceding the Separation from
Service, without regard to whether the Participant is a participant in such
plan, or if the employer Related Company does not sponsor such retirement plan,
on or after attaining Normal Retirement Age or Early Retirement Age as defined
in the Minnesota Power and Affiliated Companies Retirement Plan A, without
regard to whether the Participant is a participant under the Minnesota Power and
Affiliated Companies Retirement Plan A.
2.13“Separation from
Service” means that the Participant terminates employment within the
meaning of Treasury Regulations section 1.409A-1(h) and other applicable
guidance with all Related Companies. Whether a termination of
employment has occurred is determined under the facts and circumstances, and a
termination of employment shall occur if all Related Companies and the
Participant reasonably anticipate that no further services shall be performed
after a certain date or that the level of bona fide services the Participant
shall perform after such date (as an employee or an independent contractor)
shall permanently decrease to no more than 20 percent of the average level of
bona fide services performed (whether as an employee or an independent
contractor) over the immediately preceding 36-month period (or the full period
of services to the Related Companies if the Participant has been providing
services to the Related Companies less than 36 months). A Participant
shall not be considered to separate from service during a bona fide leave of
absence for less than six (6) months or longer if the Participant retains a
right to reemployment with any Related Company by contract or
statute. With respect to disability leave, a Participant shall not be
considered to separate from service for 29 months unless the Participant
otherwise terminates employment or is terminated by all Related
Companies
2.14“Target Award” means
the percent of base salary set out at the beginning of the Performance Year, a
percentage of which is earned based on performance.
Article
3.Administration
3.1The
Committee. The Plan shall be administered by the Executive
Compensation Committee of the Board.
3.2Authority of the
Committee. The Committee shall have full power to administer
the Plan, including, without limitation, the following: to determine the size of
Awards; to determine the terms and conditions under which Awards will be made;
to interpret the Plan as it deems appropriate; to establish, amend or waive
rules relating to the administration of the Plan; and to delegate its authority
as it deems appropriate.
3.3Costs. The
Company shall pay all costs of administration of the Plan.
Article
4. Funding
4.1Required
Funding. The required funding for Awards under the Plan will
be determined before the start of each Performance Year by summing the Target
Awards of the Participants.
4.2Adjustments. As
soon as practical after the end of the Performance Year, Awards will be
calculated and the funded Award pool will be adjusted accordingly. If
the sum total of actual Awards is greater than the sum total of Target Awards,
the difference will be paid out of the additional Company profit generated by
the results causing the higher payout.
Article
5.Eligibility and
Participation
5.1Eligibility. Eligible
Employees may include officers and key employees of Related Companies, including
employees who serve as members of the Company’s Board of Directors, as
determined by the Company Chief Executive Officer and approved by the Committee.
Article
6. Performance
Measurement
6.1Financial
Measures. Within ninety (90) days of the start of the
Performance Year, the Committee shall approve any financial performance goals
using measurements such as the following: return on gross investment
(ROGI), free cash flow, revenue growth, earnings before interest, taxes,
depreciation, amortization and leases (EBITDAL), and/or earnings per share
(EPS).
6.2Nonfinancial Measures
Employed. Within ninety (90) days of the start of the
Performance Year, the Committee will approve any non-financial performance goals
based on strategic objectives.
Article
7.Award
Determination
7.1Award
Calculation. As soon as possible after the close of the
Performance Year, based on audited financial statements (for financial goals)
and other records (for nonfinancial goals), each Participant’s Award shall be
calculated. The Committee reserves the right to select from all
Eligible Employees, an employee or employees who will not receive Awards under
the Plan due to individual performance. A Participant’s Award will be
reduced by, and the Participant will not receive, any amount that otherwise
would be disallowed as a deduction by the Company due to the limitations under
Code Section 162(m), or any subsequent or similar Code provision that limits the
amount of compensation expense the Company may deduct.
7.2Awards. Any
Award with respect to a Performance Year shall be paid between January 1 and
March 15 of the year following the close of such Performance Year.
Article
8. Other Awards
The Committee shall have the right to
make other Awards which it deems appropriate based on outstanding individual or
team performance. The Committee may grant shares of the Company’s
common stock in lieu of cash from time to time.
Article
9.Beneficiary
Designation
Each Participant under the Plan may
name any beneficiary to whom any benefit under the Plan is to be paid in case of
his or her death before he or she receives any or all of such
benefit. Each such designation shall revoke all prior designations by
the same Participant, shall be in a form prescribed by the Committee, and will
be effective only when filed by the Participant in writing with the Committee
during the Participant’s lifetime. In the absence of any such
designation, benefits remaining unpaid at the Participant’s death shall be paid
to the Participant’s estate.
Article
10. Deferrals
The Committee may permit a Participant
to defer such Participant’s receipt of an Award. If any such deferral
election is permitted, the Committee shall, in its sole discretion, establish
rules and procedures for such payment deferrals.
Article
11.New Hires
A new employee may become a Participant
in the year hired and become eligible to earn a Prorated Award for the
Performance Year corresponding to the year of hire.
Article
12.Transfers
If during a Performance Year the
Participant transfers to a different Business Unit and remains a Participant in
the new Business Unit but with different performance goals, different
opportunity level or both, the Participant will be eligible to earn a total
Prorated Award equal to the sum of: (a) the Prorated Award applicable to the
portion of the Performance Year spent in the Business Unit from which the
Participant transferred and (b) the Prorated Award applicable to the portion of
the Performance Year spent in the Business Unit to which the Participant
transferred.
Article
13.Promotions
If during a Performance Year the
Participant transfers to a different position in the same Business Unit but with
a different opportunity level, the Participant will be eligible to earn a total
Prorated Award equal to the sum of: (a) the Prorated Award applicable to the
portion of the Performance Year spent in the position from which the Participant
transferred and (b) the Prorated Award applicable to the portion of the
Performance Year spent in the position to which the Participant
transferred.
Article
14.Retirement or
Disability
In the case of Retirement or
Disability, the Participant will receive a Prorated Award based on the number of
months within the Performance Year which had elapsed as of the date of
Retirement or Disability.
Article
15.Death
Prorated Awards earned based on the
number of months during the Performance Year spent in the employ of the Company
until death will be paid to the Participant’s beneficiary or, if no beneficiary
is named, to the Participant’s estate.
Article
16.Separation from
Service
Separation from Service other than for
Retirement, Disability or death before December 31 of any Performance Year
results in forfeiture of any Award unless otherwise determined by the
Committee.
Article
17. Rights of
Employees
17.1Employment. Nothing
in the Plan shall interfere with or limit in any way the right of the Company to
terminate any Participant’s employment at any time, for any reason or for no
reason in the Company’s sole discretion, nor confer upon any Participant any
right to continue in the employ of the Company.
17.2Participation. No
employee shall have the right to be selected to receive an Award under the Plan,
or, having been so selected, to be selected to receive a future
Award.
Article
18.Change-in-Control
Upon the occurrence of a
Change-in-Control, as defined herein, Awards under the Plan will be calculated
as if the end of the Performance Year had occurred, based on the Company’s
performance to date.
Article
19.Withholding
The Company shall have the power and
the right to deduct or withhold, or require a Participant to remit to the
Company, an amount sufficient to satisfy federal, state and local taxes
(including the Participants' FICA obligation) required by law to be withheld
with respect to an Award made under the Plan.
Article
20.Amendment
The
Company reserves the right to cancel, amend, terminate, suspend or otherwise
change the Plan or outstanding Awards for any reason at any time before, during
or after the Performance Year to which an Award relates, upon authorization of
its Board of Directors. The Executive Compensation Committee of the
Board of Directors may expand, reduce or otherwise change any and all
opportunities, Awards, and any and all financial factors, or financial measures
used in the Plan or outstanding Awards for any reason at any time before, during
or after the Performance Year to which an Award relates. All changes
described in this paragraph are at the sole discretion of the Board of Directors
and/or the Executive Compensation Committee, may be made at any time, and may
have a retroactive effective date.
ALLETE,
Inc.
By Donald J.
Shippar
Donald J. Shippar
Chairman & Chief Executive
Officer
Attest:
By
Deborah A. Amberg
Deborah
A. Amberg
Senior
Vice President, General Counsel & Secretary