TNP Enterprises, Inc.
Incentive Compensation Award Agreement
This Agreement is dated and effective as of January 1, 1996, and is between
________________________ ("Participant") and TNP Enterprises, Inc. ("Company").
RECITALS
On March 6, 1995, a Committee appointed by and having full authority to act
on behalf of the Board of Directors of the Company adopted the TNP Enterprises,
Inc. Management Short-Term Incentive Plan (the "Management Plan") and the TNP
Enterprises, Inc. Equity Incentive Plan (the "Equity Plan"), and the Equity Plan
later was approved by the Company's shareholders.
On February 27, 1996, the Committee established the performance goals to be
achieved to earn incentive compensation under the Management Plan and the Equity
Plan (collectively, the "Plans").
The Participant has been selected by the Committee to receive awards under
the Plans subject to the terms of the Plans and the Participant signing this
Agreement.
In consideration of the Recitals and the mutual covenants and agreements
below, the Participant and the Company desire to and by their respective
signatures do hereby agree as follows:
AGREEMENT
Short-Term Awards
Short-Term Cash Award: Participant is hereby awarded ____% of the control
point established for Participant's salary range as of February 27, 1996, as a
cash award subject to the 1996 goals for the Management Plan being met as such
goals are set forth on Exhibit A attached hereto and made a part hereof for all
purposes. Such award may be adjusted between 50% and 150% on a straight line
basis depending upon where the performance related to each goal occurs within
the range established for each goal. No award payment will be made for
performance below the established minimum for each goal set forth in Exhibit A.
The cash award will be paid no later than the end of the first quarter following
the end of the Management Plan year.
No portion of the cash award is due or payable regardless of whether any
Corporate Operational Goal is met unless the minimum Corporate Financial Goal is
met. Further, the Committee reserves the right to make year-end adjustments to
account for any unusual or unforeseen events that impact the attainability of
any goal.
Short-Term Stock Award: Participant is hereby awarded ____% of the control
point established for Participant's salary range as of February 27, 1996, as a
stock award subject to the 1996 goals for the Equity Plan being met as such
goals are set forth on Exhibit A. Such award may be adjusted between 50% and
150% on a straight line basis depending upon where the performance related to
each goal occurs within the range established for each goal. No award payment
will be made for performance below the established minimum for each goal set
forth in Exhibit A. The stock award will be paid no later than the end of the
first quarter following the end of the Equity Plan year.
No portion of the stock award is due or payable regardless of whether any
Corporate Operational Goal is met unless the minimum Corporate Financial Goal is
met. Further, the Committee reserves the right to make year-end adjustments to
account for any unusual or unforeseen events that impact the attainability of
any goal.
Restrictions on Sale of Stock: The short-term stock award is restricted
from being sold for a two-year period following the end of _______________ (the
"Restriction Period"). Any stock issued as a short-term stock award will bear a
legend stating any applicable restrictions. Such stock award is rendered null
and void and of no effect in the event that Participant attempts to sell such
stock during the Restriction Period.
Notwithstanding the foregoing, all restrictions on the sale of the stock
lapse and said stock may be freely sold or transferred if during the Restriction
Period one of the following should occur: a. Participant's employment is
terminated for any reason other than cause. b. A Change of Control occurs as
that term is defined in the Equity Plan. (Participant should be cognizant of
Rule 16(b) to the extent it may apply.)
Allocation of Awards: Total amounts of short-term cash and stock awards
will be allocated _____% to the Corporate Financial Goal, ____% to the Corporate
Operational Goals, and ____% to the Individual Performance Goal. The amounts
allocated to each set of goals will be due and payable only to the extent each
such goal is met as set forth in Exhibit A. The amount allocated to the
Corporate Operational Goal will be further allocated to each of the established
operational goals in the manner set forth on Exhibit B which is attached hereto
and made a part hereof for all purposes.
To the extent that any amount of the total short-term award is allocated to
the Individual Performance Goal, such amount will be due and payable only to the
extent the performance of the Participant, as determined by the Chief Executive
Officer in his sole discretion (or, if Participant is the Chief Executive
Officer, then as determined by the Compensation Committee in its sole
discretion), falls within the Performance Rating range set forth in Exhibit C
which is attached hereto and made a part hereof for all purposes.
Long -Term Award
Long-Term Stock Award: Participant is hereby awarded ____% of the control
point established for Participant's salary range as of February 27, 1996, as a
stock award subject to the 1996 goals for long-term awards under the Equity Plan
being met as such goals are set forth on Exhibit D attached hereto and made a
part hereof for all purposes. Such award may be adjusted between 50% and 150% on
a straight line basis depending upon where the performance related to each goal
occurs within the range established for each goal. No award payment will be made
for performance below the established minimum for each goal set forth in Exhibit
D. Any stock award earned will be paid no later than the end of the first
quarter following the end of the 1996 long-term award Equity Plan cycle. The
1996 long-term Equity Plan cycle will be a period of three years beginning
January 1, 1996.
Allocation of Award: The total amount of any long-term stock award under
the Equity Plan will be allocated 50% to the goal established for Total
Shareholder Return in comparison to the S&P 500 and 50% to the goal established
for Total Shareholder Return in comparison to the S&P Electric Utility Group.
The amount allocated to each goal will be due and payable only to the extent
each such goal is met as set forth in Exhibit D.
General Terms
Dividend Equivalents: Participant will have the right to receive, at the
time any stock awards are paid, cash or shares as determined in the Committee's
discretion at the time the award is paid, in an amount equal in value to the
dividends declared on each share on each record date occurring during the
applicable period of performance established by the Equity Plan.
Proration of Awards: If a Participant's employment is terminated due to
retirement, death, or disability during a plan year or the 1996 Equity Plan
long-term award cycle, any award earned will be prorated based on the number of
months of participation within the plan year or long-term cycle. The prorated
award will be based upon performance determined at year or cycle end and will be
paid at the same time as all other awards are paid under the Plans.
If employment is terminated for any reason other than retirement, death, or
disability, any award opportunity granted under the Plans will be forfeited,
provided that the Committee may waive such forfeiture upon the Chief Executive
Officer's recommendation.
Valuation of Shares: Shares issued under the Equity Plan will be valued by
averaging the high and low prices of the stock on the first trading day of the
Equity Plan year or three-year cycle, as applicable. Shares issued as the result
of the Committee's determination to pay dividends in stock will be valued as of
the ex-dividend date for each dividend declaration during the Equity Plan year.
Tax Treatment: Payments under the Plans are taxable to the Participant in
the year of receipt. The Company will have the right to deduct any federal,
state, or local taxes required by law to be withheld. In regard to any stock
award made hereunder, a Participant, at Participant's option, may elect to have
the Company withhold sufficient stock to pay the taxes then due on such stock
award.
Employment Status: This Agreement does not affect Participant's status as
an employee at will and either party may terminate Participant's employment at
any time with or without cause.
Provisions Consistent with Plans: This Agreement will be construed
consistent with the provisions of the Plans. If there is a conflict between the
provisions of this Agreement and either of the Plans, the provisions of the
applicable plan control. The Committee reserves the right, in its sole
discretion, to interpret the terms and conditions of and to resolve any
disagreements or disputes concerning any award, this Agreement, and the Plans,
and its decision is binding upon all parties. Unless otherwise noted to the
contrary, the definition of terms in the Plans also apply in this Agreement.
Attorney Fees: If either party is required to bring a cause of action
against the other to enforce the terms of this Agreement, then such party, to
the extent such party is successful in such action, will be entitled to
reasonable attorney fees from the other party.
Governing Law: This Agreement will be governed by the laws of the State of
Texas. Venue for any cause of action will be
Tarrant County, Texas.
TNP Enterprises, Inc. Participant:
By:______________________ __________________________
EXHIBIT A
GOALS FOR MANAGEMENT PLAN & EQUITY PLAN
SHORT-TERM AWARDS
Minimum Target Maximum
CORPORATE FINANCIAL:
1. Earnings Per Share
CORPORATE OPERATIONAL:
2. Customer Satisfaction
3. O&M Costs/KWH Sales
(cents/KWH)
4. Equivalent Forced
Outage Rate
5. Injury Frequency
Ratio
6. System Reliability
a. Minutes of Outage/
Customers Served
b. Number of Customers
Interrupted/
Customers Served
EXHIBIT B
Allocation of Short-Term Awards for
Management Plan & Equity Plan
CORPORATE OPERATIONAL:
1. Customer Satisfaction
2. O&M Costs/KWH Sales
(cents/KWH)
3. Equivalent Forced
Outage Rate
4. Injury Frequency
Ratio
5. System Reliability
a. Minutes of Outage/
Customers Served
b. Number of Customers
Interrupted/
Customers Served
1. Columns should total to__% and __%, respectively.
2. Note: only the appropriate % column will appear in the Exhibit for each
individual.
EXHIBIT C
INDIVIDUAL PERFORMANCE GOALS
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PERFORMANCE RATING INDIVIDUAL PERFORMANCE AS A % OF TARGET
AWARDS
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4 - Leading Edge - Performance is the very best we can expect of
an employee in a given position. The employee has
consistently performed far beyond expectations and has 150%
demonstrated outstanding skill, knowledge and initiative in
the job. This rating recognizes truly outstanding
contribution to the organization, within and sometimes
outside the scope of the position. The individual's job
accomplishments have made significant impact on the mission
of the department and company.
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3 - Out in Front - The employee consistently demonstrates
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performance at levels which exceed position requirements.
The employee can be counted on to achieve high quality
results on even the most difficult and complex parts of the 125%
job. The employee does advanced planning, anticipates problems, and
takes appropriate action. Each work assignment or project is done
thoroughly and completely.
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2 - With the Pack - Performance is full, complete, and
satisfactory. It is what is expected of a fully qualified
and experienced person in the assigned position. This
rating indicates no serious deficiency in any major element 100%
of the job. The employee works with a minimum of
supervision. This is a good rating; it does not imply
mediocrity.
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1 - Needs to Improve - Performance is generally satisfactory,
but sometimes falls below an acceptable performance level.
Close supervision and coaching are required particularly in
areas where results have been insufficient. Some 50%
improvement is necessary to meet job requirements.
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0 - Doesn't Get It - Performance clearly fails to meet
requirements and serious performance deficiencies exists.
Immediate corrective action must be taken by the employee
and supervisor to improve the performance level. An overall 0%
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rating at this level indicates that further employment is
contingent upon immediate and significant improvement. The
employee should consult with his/her supervisor to discuss alternatives
and actions required.
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EXHIBIT D
Long-Term Stock Award Goals
TNPE vs. S&P 500 (__% weighting)
TNPE vs. S&P Electric Utility Index (__% weighting)
SCHEDULE TO EXHIBIT 10(SS)
Executives with 1995 and 1996 Incentive Compensation Award Agreements
Employee Name
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