Document:

Exhibit
10.27

 

Executive Officer Compensation

 

On Dec. 14, 2004, the Governance, Compensation &
Nominating Committee (the “Committee”) of the Xcel Energy Inc. board of
directors took actions setting executives’ salaries, annual bonus targets and
long-term compensation awards for 2005. Executive compensation was set by the
Committee after consideration of, among other things, individual performance
and market-based data on compensation for executives with similar duties.
Payouts of 2005 annual bonus targets and long-term awards are dependent on
achievement of specified goals set by the Committee, and no officer is assured
of any payout. Set forth below is a description of the actions taken.

 

Salary 

 

The Committee made modest changes to the existing base
salaries of its senior executive group. The salary of Mr. Wayne Brunetti, the
Chairman of the Board and Chief Executive Officer, remained unchanged for the
third consecutive year, while increases in the salary for the other Xcel Energy
officers named in the Summary Compensation Table in Xcel Energy’s 2004 Proxy
Statement (the “Named Executive Officers”) ranged from 2.5 percent to 8.3
percent.

 

	
   

  	
   

  	
  2005 Base Salary

  	
   

  
	
  Wayne H. Brunetti

  	
   

  	
  $

  	
  1,065,000

  	
   

  
	
  Richard C. Kelly

  	
   

  	
  $

  	
  700,000

  	
   

  
	
  Gary R. Johnson

  	
   

  	
  $

  	
  400,000

  	
   

  
	
  Paul J. Bonavia

  	
   

  	
  $

  	
  455,000

  	
   

  
	
  Patricia K. Vincent

  	
   

  	
  $

  	
  450,000

  	
   

  

 

Annual Bonus Targets

 

Annual incentive awards, expressed as a percentage of
salary, were set by the Committee under the Xcel Energy Executive Annual
Incentive Award Plan (the “Xcel Annual Incentive Plan”), which was approved by
Xcel Energy’s shareholders in 2000 and is filed as Exhibit 10.02 to this Form
10-K. Payouts of annual incentive awards are dependent on the level of
achievement of corporate financial and operational goals and business unit
operational goals approved by the Committee, with each individual having the
opportunity to earn from 0 percent to 200 percent of his or her target annual
incentive award based on the level of achievement in 2005 of the goals
applicable to such individual.

 

Corporate goals for 2005 include targeted earnings per
share, a customer service measurement, an environmental measurement, operations
measurements related to generation availability, system reliability and safety,
and an employee engagement measurement. Business unit goals are related to
customer service, environmental responsibility, reliability, safety and
management to budgeted financial results, measured at a business unit level.

 

Target annual incentive awards, as a percent of base
salary, were set for all Xcel Energy officers, ranging from 100 percent of
salary for Mr. Brunetti (as compared to 85 percent for 2004) to 55 percent of
salary for the other Named Executive Officers. With the approval of the
Committee, an award may be multiplied by a leadership-rating factor from zero
to two.

 

Payouts of the annual incentive awards for Mr.
Brunetti and Mr. Kelly are dependent entirely on attaining corporate goals. For
the other executive officers, including Named Executive Officers, the formula
is weighted 67 percent to attaining corporate goals and 33 percent to attaining
business unit operational goals.

 

In order to encourage increased share ownership by
executive officers, the Xcel Energy Annual Incentive Plan provides the option
for executives to receive their payments in shares of common stock or shares of
restricted common stock, which vests in equal annual installments over a
three-year period, in lieu of cash. A 5 percent premium is added to amounts
paid in shares of common stock, and a 20 percent premium is added to amounts
paid in shares of restricted common stock.

 

 

Long-Term Awards

 

Long-term incentive grants effective Jan. 1, 2005 were
approved. The long-term incentive grants were made pursuant to the Xcel Energy
Omnibus Incentive Plan, which was approved by shareholders in 2000 and is filed
as Exhibit 10.01 to this Form 10-K. As explained below, payout of long-term
incentive grants is dependent on achievement of performance goals set by the
Committee. Long-term incentive grants were made 50 percent in the form of
performance-based restricted stock units and 50 percent in the form of
performance shares. Amounts granted to individuals were based on a percentage
of base salary established by the Committee and the average of the high and low
prices of the Company’s common stock on Jan. 3, 2005. For Mr. Brunetti, his
long-term award for 2005 was set at 415 percent of his salary, which is
unchanged from the target set for 2004. For other Named Executive Officers, the
percentage ranged from 160 percent to 295 percent, which again are unchanged
from the target set for 2004.

 

Awards of performance-based restricted stock units (“Units”)
represent an equal number of shares of Xcel Energy common stock. Prior to the
expiration of the restricted period, the Units may not be sold or otherwise
transferred by the recipients. Units are credited during the restricted period
at the same rate as dividends paid on all other shares of outstanding common
stock. The dividend equivalents are subject to all terms of the original grant.

 

Payout of the Units and the lapsing of restrictions on
the transfer of Units are based on two separate performance criteria.  Seventy-five percent of awarded Units plus
associated earned dividend equivalents shall be settled, and the restricted
period shall lapse after Xcel Energy achieves a specified earnings per share
(EPS) growth (adjusted for corporate-owned life insurance) measured against
Dec. 31, 2004 EPS (adjusted for corporate-owned life insurance). Additionally,
Xcel Energy’s annual dividend paid on its common stock must remain at $0.83 per
share or greater. EPS growth will be measured annually at the end of each
fiscal year. However, in no event will the restrictions lapse prior to Dec. 31,
2006. If the performance criteria have not been met within four years of the
date of grant, all associated Units shall be forfeited.  The forms of performance-based restricted
stock unit agreements are filed as Exhibits 10.30 and 10.32 to this Form 10-K.

 

The remaining 25 percent of awarded Units plus
associated earned dividend equivalents shall be settled, and the restricted
period shall lapse after the average of actual performance results (adjusted
for actual megawatt hours) for the three components of an environmental index
measured as a percent of target performance meets or exceeds 100 percent. The
environmental index will be measured annually at the end of each fiscal year.
However, in no event will the restrictions lapse prior to Dec. 31, 2006. If the
performance criteria have not been met within four years of the date of grant,
all associated Units shall be forfeited.

 

The separate awards of performance shares also
represent an equal number of shares of Xcel Energy common stock. Performance
shares may not be sold or otherwise transferred. Payout of the performance
share award is dependent entirely on a single measure, total shareholder return
(TSR). Xcel Energy’s TSR will be measured over a three-year period. Xcel Energy’s
TSR is compared to the TSR of other companies in the Edison Electric Institute’s
Electrics Index as a peer group. At the end of the three-year period, potential
payouts of the performance shares range from 0 percent to 200 percent,
depending on Xcel Energy’s TSR compared to the peer group.  This form of performance-share agreement is
filed as Exhibit 10.31 to this Form 10-K.

 

The following table shows the performance-based
restricted stock units and performance shares granted to Named Executive
Officers as of Jan. 1, 2005:

 

	
  Named Executive

  	
   

  	
  Performance-based

  Restricted Stock Units

  Granted

  	
   

  	
  Performance Shares

  Granted

  	
   

  
	
  Wayne H. Brunetti

  	
   

  	
  122,093

  	
   

  	
  122,093

  	
   

  
	
  Richard C. Kelly

  	
   

  	
  57,044

  	
   

  	
  57,044

  	
   

  
	
  Gary R. Johnson

  	
   

  	
  17,680

  	
   

  	
  17,680

  	
   

  
	
  Paul J. Bonavia

  	
   

  	
  20,110

  	
   

  	
  20,110

  	
   

  
	
  Patricia K. Vincent

  	
   

  	
  19,890

  	
   

  	
  19,890

  	
   

  

 

 

Other Perquisites
and Benefits

 

Other perquisites and
benefits provided to executives generally are not tied to the Company’s
financial performance, but are primarily designed to attract and retain
executives.  Among the perquisites and
benefits provided by the Company in 2004 to its executives are Company-paid life insurance in an amount equal to four
times base pay (which, in general, the executives can purchase upon termination
by repaying to the Company the greater of the cash surrender value or the
aggregate premiums paid by the Company), and benefits provided under the Xcel
Energy Inc. Nonqualified Deferred Compensation Plan and the Xcel Energy
Supplemental Executive Retirement Plan that make up for retirement benefits
that cannot be paid under the Company’s qualified retirement plans due to
Internal Revenue Code limitations and the exclusion of certain elements of pay
from pension-covered earnings.  Other
perquisites and benefits provided by the Company in 2004 to its executives include reimbursement for financial planning services and home
security systems, cash perquisite allowance, executive medical insurance and
physicals, aircraft usage and club dues.

 

Certain executive
officers, including three of the Named Executive Officers, may receive
severance benefits in accordance with the Xcel Energy Senior Executive
Severance and Change in Control Policy, which is filed as Exhibits 10.15 and
10.28 to this form 10-K.  The remaining
two Named Executive Officers may receive severance benefits under their
employment agreements, which are filed as Exhibits 10.03 and 10.25 to this Form
10-KEXHIBIT 10.28

 

XCEL ENERGY SENIOR EXECUTIVE SEVERANCE AND CHANGE-IN-CONTROL
POLICY

 

Xcel Energy established, effective as of October 22,
2003, a separation compensation policy known as the Xcel Energy Senior
Executive Severance and Change-in-Control Policy, which is filed as Exhibit
10.15 to this Form 10-K.  Following is an
amended Schedule I to that policy.

 

 

 

SCHEDULE I

 

Participants

 

	
  Employee
  Name

  	
   

  	
  Tier

  	
   

  	
  Severance Multiple

  	
   

  	
  Change-in-Control

  Multiple

  
	
  Fowke
  III, Benjamin

  	
   

  	
  1

  	
   

  	
  2

  	
   

  	
  3

  
	
  Gogel,
  Raymond

  	
   

  	
  1

  	
   

  	
  2

  	
   

  	
  3

  
	
  Hart,
  Cathy

  	
   

  	
  1

  	
   

  	
  2

  	
   

  	
  3

  
	
  Johnson,
  Gary

  	
   

  	
  1

  	
   

  	
  2

  	
   

  	
  3

  
	
  Kelly,
  Richard

  	
   

  	
  1

  	
   

  	
  2

  	
   

  	
  3

  
	
  Lesher,
  Cynthia

  	
   

  	
  1

  	
   

  	
  2

  	
   

  	
  3

  
	
  Madden,
  Teresa

  	
   

  	
  2

  	
   

  	
  2

  	
   

  	
  2

  
	
  Sparby,
  David

  	
   

  	
  2

  	
   

  	
  2

  	
   

  	
  2

  
	
  Tyson
  II, George

  	
   

  	
  2

  	
   

  	
  2

  	
   

  	
  2

  
	
  Vincent,
  Patricia

  	
   

  	
  1

  	
   

  	
  2

  	
   

  	
  3

  
	
  Wilks,
  David

  	
   

  	
  1

  	
   

  	
  2

  	
   

  	
  3

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