NICOR ANNUAL INCENTIVE
COMPENSATION PLAN FOR OFFICERS
Nicor Inc. (the
“Company”, or “Nicor”) has established the
Nicor Annual Incentive Compensation Plan for Officers (the
“Plan”) to link participant incentive compensation to
the accomplishment of corporate and operating unit financial
performance, as well as to non-financial measures of operating
performance across the Company and operating units. It
ties the pay an individual receives to Company performance and
non-financial goals. This plan is intended to provide a
framework for a performance-based bonus program for Nicor, and is
effective January 1, 2008.
Purpose
The purpose of
this Plan is to provide meaningful annual incentive award
opportunity to the participants. Awards will be directly
tied to the achievement of corporate financial and goals and
non-financial objectives.
Eligible
Group
Officers of
Nicor are eligible for participation. As such,
participation is limited to employees in positions which enable
them to make significant contributions to the performance and
growth of the Company.
Compensation
Objective
Base Salary +
Bonus Target = Short-Term Compensation Objective
An
individual’s short-term compensation objective will be based
on salary plus a bonus, expected to be earned if established
performance targets are met. Short-term compensation
above (or below) target levels may be paid in the event performance
exceeds (or falls short of) goals.
Base
Salary
Standards for
base salaries will be targeted to the 50 th percentile of the appropriate blend of general
and industry survey data. Base salaries are reviewed
annually by the Compensation Committee of the Board of Directors
(the “Compensation Committee”).
Bonus
Targets
The bonus
target amount varies according to pay, job responsibilities and
ability to impact the organization and is consistent with the bonus
opportunity ranges set by officer salary bands. Higher
responsibility and impact levels result in greater dollars at
risk.
Performance
Targets
Performance
criteria focus on the achievement of established and documented
strategic goals. Performance targets may include
measures of corporate financial and operating performance, defined
group objectives or individual performance
objectives. Each particular performance target will be
assigned weighting reflected as a percentage of compensation
objectives.
Goal Setting
Guidelines
The most
important aspect of this Plan will be the establishment of
effective goals. In addition to measures of corporate
financial and operating performance, other non-financial measures
of performance will also be established. The goals
should be realistic and measurable wherever possible by
quantifiable performance criteria. It is recognized that
measurement of some goals will require subjective assessments of
performance. Goals must be consistent with the
longer-term strategic plan.
A set of
guidelines will be devised by the Nicor Human Resources Department
to aid in this process. These guidelines will provide
direction as to the formulation and reporting of non-financial
goals.
Amount of bonus
payment for financial/budget related goals can vary above and below
target based upon results achieved. For targets met,
bonus amount will be 100% of target. When targets are
exceeded or are not reached, bonus will be proportionately more or
less than the target.
The
Compensation Committee may make appropriate upward or downward
adjustments if, after taking into consideration all of the facts
and circumstances of the performance period, it determines that
adjustments are warranted.
Plan
Schedule and Bonus Payment
The Plan runs
on a calendar year basis, with the strategic planning cycle and
budgeting process serving as the primary link to performance and
bonus targets. The Accounting Department is responsible
for the determination of actual financial
results. Performance will be reviewed at least twice a
year to monitor progress and adjust accruals.
Year-end
results should be available and evaluated as early as possible in
the following year. No bonus shall be paid until the
Compensation Committee approves such payment.
Subject to the
provisions of the “Bonus Deferral” section below,
bonuses will be paid to participants in a single lump
sum. Payment will be made between January 1 and March 15
of the calendar year following the calendar year in which the
services were performed (or, in the event that payment is not made
by March 15, no later than December 31 of such calendar
year). Bonus payments under this Plan are intended to
satisfy either the short-term deferral exemption under Treas. Reg.
Sec. 1.409A-1(b)(4) or be compliant with Section 409A of the
Internal Revenue Code. All awards will be paid in cash,
except as provided below.
Bonus
Deferral
Deferral
under the Stock Deferral Plan or Salary
