Exhibit 10.7
Adopted
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200[ ]
ANNUAL INCENTIVE PLAN
ALLEGHENY ENERGY, INC.
(Amended and Restated as of January 1, 2008)
SECTION
1. PURPOSES
The purposes of the Plan are:
(i) to recognize and reward outstanding performers who have
contributed significantly to the Company’s success and to
their respective business units; (ii) to align the corporate
vision, goals and business strategy to compensation strategy; and
(iii) to provide a compensation environment that will attract,
retain and motivate employees.
SECTION
2. DEFINITIONS
For purposes of the Plan, the
following terms have the following meanings:
“Adjusted Net Income” of
the Company for any Performance Year shall mean the consolidated
net income of the Company and its Subsidiaries, as determined in
accordance with generally accepted accounting principles (GAAP),
adjusted to exclude the impact on net income of any changes in
accounting principles, extraordinary items, non-recurring charges
or gains, discontinued operations, regulatory and/or legislative
changes, labor union disruptions and acts of God such as
hurricanes.
“Award” shall mean the
amount payable in cash as annual incentive compensation to a
Participant under the Plan.
“Board” shall mean the
Board of Directors of the Company.
“Code” shall mean the
Internal Revenue Code of 1986, as amended, and the rules and
regulations promulgated thereunder.
“Committee” shall mean
the Management Compensation and Development Committee of the Board
or any other committee of the Board having delegated authority over
the administration of the Plan.
“Company” shall mean
Allegheny Energy, Inc., a Maryland corporation.
“Corporate Performance
Goals” shall mean the pre-established, objective performance
goals established by the Committee upon attainment of which the
Award is paid.
“Covered Employee” shall
mean “covered employee” as such term is defined in
Section 162(m) of the Code.
“Employee” shall mean an
employee of the Company or any Subsidiary.
“Employment” shall mean
continuous employment with the Company or a Subsidiary.
“Maximum Award” shall
mean, for any Participant, two hundred percent (200%) of such
Participant’s Target Award or, if lesser, the amount
specified in Section 5(e).
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“Participant” shall mean
an Employee who is eligible to receive an Award under the
Plan.
“Performance Measure”
shall mean the measure upon which Awards are based and shall mean,
for any Performance Year, the Adjusted Net Income of the
Company.
“Performance Threshold”
shall mean, in relation to any Performance Year, the minimum level
of performance that must be achieved with respect to the
Performance Measure in order for an Award to become payable
pursuant to this Plan.
“Performance Year” shall
mean the period from January 1 through December 31 of any
given year upon which the next Award payout is based.
“Plan” shall mean the
Annual Incentive Plan of the Company, as amended.
“Subsidiary” shall mean
any entity in which the Company owns, directly or indirectly, fifty
percent or more of the total combined voting power of all classes
of stock or other securities.
“Target Award” shall have
the meaning specified in Section 5(b).
SECTION
3. THE COMMITTEE
(a) The Committee shall have
full and exclusive power to administer and interpret the Plan, to
grant Awards and to adopt such administrative rules, regulations,
procedures and guidelines governing the Plan and the Awards as it
may deem necessary in its discretion, from time to time. The
Committee’s authority shall include, but not be limited to,
the authority to (i) select Award recipients and determine
their Target Awards and the extent of their participation and (ii)
establish all other terms, conditions (including the Performance
Threshold to be utilized), restrictions and limitations applicable
to Awards, including, but not limited to, those relating to a
Participant’s retirement, death, disability, leave of absence
or termination of Employment. The Committee’s right to make
any decision or determination under the Plan shall be in its sole
and absolute discretion.
(b) The administration of the
Plan shall be managed by the Committee. The Committee shall have
the power to correct any defect, supply any omission or clarify any
inconsistency in the Plan and to take such actions and make such
administrative determinations as the Committee deems appropriate in
its discretion. Any decision of the Committee in the administration
of the Plan, as described herein, shall be final, binding and
conclusive on all parties concerned, including the Company, its
stockholders and Subsidiaries and all Participants.
(c) The Committee may, with
respect to Participants who are not Covered Employees, delegate to
one or more officers or directors of the Company some or all of its
authority over the administration of the Plan.
(d) No member of the Committee,
nor any officer or director of the Company acting on behalf of the
Committee, shall be personally liable for any action, determination
or interpretation taken or made in good faith with respect to the
Plan, and all members of the Committee and each and any officer or
director of the Company acting on their behalf, to the extent
permitted by law,
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shall be
entitled to full indemnification, reimbursement and protection by
the Company in respect of any such action, determination or
interpretation. In the performance of its functions under the Plan,
the Committee and any officer or director of the Company acting on
their behalf, shall be entitled to rely upon information and advice
furnished to them by the Company’s officers, accountants,
counsel and any other party that they deem necessary, and no member
of the Committee, nor any officer or director of the Company acting
on behalf of the Committee, shall be liable for any action taken or
not taken in reliance upon any such information or advice.
SECTION
4. ELIGIBLE PARTICIPANTS
All Employees at the level of
director and above shall be eligible to participate in the Plan in
accordance with any additional eligibility standards established by
the Committee. Members of the Board who are not also Employees
shall not be eligible to participate in the Plan.
SECTION
5. CALCULATION OF AWARDS
(a) Each Award shall be
conditioned on the Company’s achievement of the Performance
Threshold established by the Committee with r
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