Exhibit 10.4

 

 

TECO ENERGY, INC.

ANNUAL INCENTIVE COMPENSATION PLAN

REVISED AS OF FEBRUARY 2, 2011

 

 

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Exhibit 10.4

ANNUAL INCENTIVE COMPENSATION PLAN

BASIC PLAN CONCEPT

The Annual Incentive Compensation Plan provides a consistent framework for
applying annual incentive pay to officers of TECO Energy and each of its
operating units. Each participant is assigned a target award amount, expressed
as a percentage of annual salary, which will represent an appropriate incentive
payment when performance is at the targeted level. Smaller awards may be earned
when performance is below target, and larger awards may be earned when
performance exceeds target.

Performance for each participant will be measured, in part, against a
combination of one or more quantifiable profit and operational goals. These
goals will be set at the corporate and operating levels, and most participants
will have a portion of their awards related to each. The remaining portion of
each participant’s performance that is not measured by the quantified goals
mentioned above will be evaluated on a subjective basis considering overall
contribution level and achievement of other individual goals. Each participant
will have a “Business Plan” goal, which will reflect the participant’s
contribution to (i) achieving initiatives in support of the business plan and
(ii) overcoming any “business challenges” by: (a) mitigating the impact of
unexpected adverse business or regulatory developments on the business unit or
(b) enhancing profitability or capacity for profit, through effective management
initiatives beyond those in the business plan.

ELIGIBILITY

All officers that are approved by the Chief Executive Officer of TECO Energy and
the Compensation Committee of the TECO Energy Board (the “Compensation
Committee”) will be eligible to participate.

TARGET AWARD LEVELS

Target award levels are established at a level that, when combined with each
participant’s base salary, will provide a fully competitive total cash
compensation opportunity. The incentive portion of the total compensation
opportunity reflects compensation “at risk” which is directly related to
performance and results achieved. Generally, the portion of compensation “at
risk” (i.e., the target award level) is influenced by the level of the
participant’s accountability for contributing to bottom-line results, the degree
of influence the participant has over results and competitive practice.

ESTABLISHING PERFORMANCE GOALS AND WEIGHTINGS

For each plan year, profit, growth and/or operational effectiveness goals will
be established for TECO Energy and each of its operating units. Financial goals
may measure performance relative to other companies over periods of one-year or
longer.

For each financial goal the target level of performance, as well as threshold
and maximum levels, will be approved by the Compensation Committee. Threshold
performance represents the minimum performance that still warrants incentive
recognition for that particular goal (paid at 50 percent of the target award
level), and maximum performance represents the highest level likely to

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Exhibit 10.4

 

be attained (paid at 150 percent of the target award level for all goals, except
the Business Plan goal which can be paid up to 200 percent). Regardless of the
degree of achievement of each established goal, the payout to all participants
will be zero if TECO Energy’s income threshold set for that year by the
Compensation Committee is not achieved.

A determination will be made for each participant regarding their portion of the
award that will be based on corporate, operating unit or individual performance.
Generally, the weightings among these three measurement groups will vary by
organizational level.

APPLICATION OF DISCRETION

While not anticipated to be a common occurrence, the Compensation Committee may
occasionally decide that the plan formula would unduly penalize or reward
management. In such cases, award funds may be increased or decreased to better
meet the plan’s intent of relating rewards to management performance.

AWARD DETERMINATION

At the end of each plan year, a four-step process will be followed in
determining actual incentive awards.

 

Step 1:   The actual degree of achievement for each goal at the corporate,
operating unit and individual level is determined. Levels of achievement can
range up to 200 percent for the Business Plan goal and up to 150 percent for all
other goals. Step 2:   Corporate, operating unit and individual performance
factors are determined by multiplying levels of goal achievement by the
weightings assigned to each goal. Step 3:   The total of all performance factors
is multiplied by the target award, producing the calculated award. Step 4:   The
calculated award may be adjusted up or down by the Compensation Committee with
respect to the senior officers and by the Chief Executive Officer of TECO Energy
with respect to other officers, based on the participant’s total performance
during the plan year. The actual award, as so adjusted, may not exceed 150
percent of the target award level and will be approved by the Compensation
Committee.

PLAN ADMINISTRATION

The Compensation Committee and the Chief Executive Officer of TECO Energy shall
perform the respective functions set forth in this plan. The Compensation
Committee may elect to fulfill its responsibility in the form of recommendations
to the TECO Energy Board. The Chief Human Resources Officer of TECO Energy is
responsible for administering the plan.

OTHER CONSIDERATIONS

For any year in which a participant’s employment is terminated or an officer
first becomes eligible for participation in the plan, whether any incentive
award shall be granted for that year and the

 

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Exhibit 10.4

 

amount of any such award shall be determined by the Compensation Committee with
respect to senior officers and by the Chief Executive Officer of TECO Energy
with respect to other officers. Any such determination by the Chief Executive
Officer will be reported to the Compensation Committee at its next meeting.

Notwithstanding the foregoing, for any year in which a participant’s employment
terminates following a Change in Control of TECO Energy (as defined in the
change in control severance agreement between TECO Energy and the participant
(the “change in control agreement”)), other than a termination by TECO Energy
for Cause (as defined in the change in control agreement) or a termination by
the participant without Good Reason (as defined in the change in control
agreement), then such participant shall be entitled to receive an incentive
award equal to (a) the number of days employed during that year divided by 365
multiplied by (b) the greater of (i) the participant’s target award for the year
in which the change in control occurred or (ii) the participant’s target award
for the year immediately preceding the year in which the termination of
employment occurred.

DISTRIBUTIONS

Distribution of annual incentive payments will be made to eligible officers (as
defined under ELIGIBILITY above) who either remain actively employed at date of
payment, are determined to be eligible for an incentive as described under OTHER
CONSIDERATIONS above, or who have died. Payments shall be made in the taxable
year of TECO Energy, Inc. following the year in which it was earned. At the
Committee’s discretion, payments may be made partially or fully in the form of
TECO Energy common stock, including restricted stock, issued under the 2010
Equity Incentive Plan (or its successor), upon such terms and conditions as the
Committee determines. Notwithstanding the foregoing:

 

  (1) If any participant who is entitled to receive a distribution of annual
incentive payments experiences a separation from service and is a “specified
employee” as defined in Internal Revenue Code Section 409A and the regulations
and guidance thereunder, such individual shall not receive any annual incentive
payments until the date that is six months following the participant’s
separation from service with TECO Energy, Inc. and all its affiliates.

 

  (2) Payment of benefits for a deceased participant will be made to the
designated beneficiary of the deceased participant (as designated on a form
provided by TECO Energy, Inc.) or, if no beneficiary is designated, to the
estate of the deceased participant.

AMENDMENT AND TERMINATION

TECO Energy, Inc. reserves the right to amend this Annual Incentive Compensation
Plan at any time, provided that any such amendment shall not reduce a benefit
already accrued under the Plan and further provided that any such amendment
shall comply with the requirements of applicable law including, but not limited
to, Internal Revenue Code Section 409A. The Plan will be amended as necessary to
comply with applicable law, including Section 409A. TECO Energy, Inc. may
terminate the Plan prospectively but may not accelerate payment of benefits
accrued hereunder except in the limited circumstances specifically allowed by
Section 409A including, but not limited to, termination within 30 days prior to
or 12 months following a change in control of the company.

COMPLIANCE WITH SECTION 409A

 

 

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Exhibit 10.4

This Plan shall be administered in accordance with Internal Revenue Code
Section 409A.