PROXY
STATEMENT
|
||
TABLE
OF CONTENTS
|
||
PROXY
SOLICITATION AND COSTS
|
4
|
|
QUESTIONS
AND ANSWERS ABOUT THE ANNUAL MEETING AND VOTING
|
4
|
|
OWNERSHIP
OF ALLETE COMMON STOCK
|
8
|
|
Securities Owned by Certain
Beneficial Owners
|
8
|
|
Securities Owned by Directors and
Management
|
8
|
|
Section 16(a) Beneficial
Ownership Reporting Compliance
|
9
|
|
ITEM
NO. 1—ELECTION OF DIRECTORS
|
10
|
|
Nominees for
Director
|
10
|
|
CORPORATE
GOVERNANCE
|
13
|
|
Corporate Governance
Guidelines
|
13
|
|
Director Independence
Standards
|
14
|
|
Related Person Transactions and
Director Independence Determinations
|
15
|
|
Director
Nominations
|
16
|
|
Committee Membership, Meetings,
and Functions
|
16
|
|
Board Leadership and
Structure
|
17
|
|
Communications Between
Shareholders and the Board of Directors
|
17
|
|
Director Common Stock Ownership
Guidelines
|
18
|
|
Code of Business Conduct and
Ethics
|
18
|
|
Board’s Oversight of
Risk
|
18
|
|
COMPENSATION
DISCUSSION AND ANALYSIS
|
18
|
|
Executive Summary
|
18
|
|
Compensation Philosophy and
Objectives
|
19
|
|
Elements of Executive
Compensation
|
21
|
|
Benefits
|
24
|
|
Perquisites
|
25
|
|
Employment, Severance, and Change
in Control Agreements
|
25
|
|
Process for Determining Executive
Compensation
|
26
|
|
EXECUTIVE
COMPENSATION COMMITTEE REPORT
|
30
|
|
COMPENSATION
OF DIRECTORS AND EXECUTIVE OFFICERS
|
31
|
|
Summary Compensation
Table―2009
|
31
|
|
Grants of Plan-Based
Awards―2009
|
33
|
|
Grants of Plan-Based Awards
Discussion
|
34
|
|
Outstanding Equity Awards at
Fiscal Year-End—2009
|
37
|
|
Option Exercises and Stock
Vested—2009
|
38
|
|
Pension
Benefits—2009
|
39
|
|
Pension Benefits
Discussion
|
40
|
|
Nonqualified Deferred
Compensation—2009
|
42
|
|
POTENTIAL
PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
|
43
|
|
Estimated Potential Payments Upon
Termination Associated with a Change in Control
|
45
|
|
Estimated Potential Payments Upon
Termination Due to Retirement, Disability, or Death
|
45
|
|
Estimated Additional Payments Due
to Long-Term Disability
|
46
|
|
DIRECTOR
COMPENSATION—2009
|
47
|
|
EQUITY
COMPENSATION PLAN INFORMATION
|
49
|
|
AUDIT
COMMITTEE REPORT
|
49
|
|
Audit Committee Pre-Approval
Policies and Procedures
|
50
|
|
Audit and Non-Audit
Fees
|
50
|
ITEM
NO. 2—RATIFICATION OF THE APPOINTMENT OF INDEPENDENT
REGISTERED
PUBLIC ACCOUNTING FIRM
|
51
|
ITEM NO.
3—PROPOSAL TO AMEND THE COMPANY’S AMENDED AND RESTATED
ARTICLES OF
INCORPORATION TO CHANGE THE VOTE REQUIRED FOR
THE
ELECTION OF DIRECTORS AND A CORRESPONDING AMENDMENT
TO
THE COMPANY’S BYLAWS
|
51
|
Director Resignation
Policy
|
52
|
Reasons for Approval
|
52
|
Vote Required
|
53
|
Effective Time
|
53
|
ITEM NO.
4—PROPOSAL TO RE-APPROVE THE MATERIAL TERMS OF THE PERFORMANCE
GOALS UNDER THE ALLETE EXECUTIVE LONG-TERM INCENTIVE COMPENSATION
PLAN
|
53
|
Material Terms of the Performance
Goals
|
53
|
General Description of the
LTIP
|
53
|
LTIP Benefits
|
54
|
Grants Under the
LTIP
|
54
|
U.S. Federal Income Tax
Consequences
|
56
|
OTHER
BUSINESS
|
58
|
Shareholder Proposals for the
2011 Annual Meeting
|
58
|
APPENDIX
A—Articles of Amendment and Related Amendment to Bylaws
|
A-1
|
APPENDIX
B—Hewitt Custom Survey Peer Groups
|
B-1
|
|
1.
Elect twelve directors to the Company’s Board of Directors. The nominees
for director are: Kathleen A. Brekken, Kathryn W. Dindo, Heidi
J. Eddins, Sidney W. Emery, Jr., James S. Haines, Jr., Alan R. Hodnik,
James J. Hoolihan, Madeleine W. Ludlow, Douglas C. Neve, Leonard C.
Rodman, Donald J. Shippar, and Bruce W.
Stender;
|
|
2.
Ratify the appointment of PricewaterhouseCoopers LLP
(PricewaterhouseCoopers) as the Company’s independent registered
accounting firm for 2010;
|
|
3.
Approve an amendment to ALLETE’s Amended and Restated Articles of
Incorporation to change the vote required for the election of directors
and a corresponding amendment to the Company’s
Bylaws;
|
|
4.
Re-approve the material terms of the performance goals under the ALLETE
Executive Long-Term Incentive Compensation Plan (LTIP); and
|
5. Transact such other business as may properly come before the meeting. |
|
•
By Telephone:
Vote by calling 800-560-1965 and following the instructions on your
proxy card or, if you received these materials electronically, the
instructions in the e-mail message that you received notifying you of the
availability of these materials. If you vote by phone, do not return your
proxy card.
|
|
•
Online: You may
vote online at www.ematerials.com/ale. Follow the instructions on your
proxy card or, if you received these materials electronically, the
instructions in the e-mail message notifying you of the availability of
these materials. If you vote online, do not return your proxy
card.
|
|
•
By Mail:
Complete, sign, and date each proxy card that you received and
return it in the prepaid envelope provided to ALLETE, Inc., c/o Shareowner
Services, P.O. Box 64873, St. Paul, MN
55164-0873.
|
|
1.
Log onto the Internet at www.allete.com.
|
|
2.
Click on “Investors.”
|
|
3.
Click on “Shareholder Services.”
|
|
4.
Click on “Proxy Electronic
Delivery.”
|
|
5.
Follow the prompts to submit your electronic
consent.
|
Title
of Class
|
Name
and Address of Beneficial Owner
|
Amount
and Nature
of
Beneficial
Ownership
|
Percent
of
Class1
|
Common
Stock
|
BlackRock,
Inc.2
40
East 52nd
Street
New
York, NY 10022
|
2,479,400
|
______%
|
Common
Stock
|
Wachovia
Bank, N.A. (Wachovia)3
NC
1156 Wachovia Center
401
South Tryon Street
Charlotte,
NC 28288
|
_______
|
______%
|
|
1
As of March 12, 2010.
|
|
2
The information shown in this table for BlackRock, Inc. (successor
in interest to Barclays Global Investors NA) (i) is derived from
information filed with the SEC on January 29, 2010, on Schedule 13G; (ii)
reflects beneficial ownership as of December 31, 2009; and (iii) includes
BlackRock, Inc. and certain of its
affiliates.
|
|
3
Wachovia is the beneficial owner in its capacity as Trustee of the
Minnesota Power and Affiliated Companies Retirement Savings and Stock
Ownership Plan (RSOP). This information is as of March 12,
2010.
|
Other3
|
||||||
Name
of
Beneficial
Owner
|
Company
Share
Ownership
Guidelines1
|
Number
of
Shares
Beneficially
Owned2
|
Options
Exercisable
within
60 days
after
March 12, 2010
|
Restricted
Stock
Units
|
Deferred
Shares
Under
the
Director
Deferred
Stock
Plan
|
|
Directors
and
Nominees
For
Director
|
Kathleen
A. Brekken
Kathryn
W. Dindo
Heidi
J. Eddins
Sidney
W. Emery, Jr.
James
S. Haines, Jr.
James
J. Hoolihan
Madeleine
W. Ludlow
George
L. Mayer
Douglas
C. Neve
Jack
I. Rajala
Leonard
C. Rodman
Bruce
W. Stender
|
3,000
3,000
3,000
3,000
3,000
3,000
3,000
3,000
–
3,000
3,000
3,000
|
______
______
______
______
______
______
______
______
______
______
______
______
|
0
0
0
0
0
0
0
0
0
________
0
0
|
______
______
______
______
______
______
______
______
______
______
______
______
|
______
______
______
______
______
______
______
______
______
______
______
______
|
Named
Executive
Officers
|
Donald
J. Shippar
Mark
A. Schober
Alan
R. Hodnik
Deborah
A. Amberg
Robert
J. Adams
Claudia
Scott Welty
|
______
______
______
______
______
______
|
______
______
______
______
______
______
|
________
________
________
________
________
________
|
______
______
______
______
______
______
|
______
______
______
______
______
______
|
All
directors, nominees for director, and executive officers as a group
___:
|
–
|
|
1
The amounts in this column for the Named Executive Officers were
determined based on 2009 base salaries and the closing share price of
$______________ on March 12, 2010.
|
|
2
Includes: (i) shares as to which voting and investment power is
shared with the person’s spouse:
______________________________________________________; (ii) shares owned
by the person’s spouse: ______________________________; and (iii) shares
held by the person’s children: __________________________________. Each
director and executive officer owns only a fraction of 1 percent of
the Common Stock, and all directors and executive officers as a group own
__________ percent of the Common
Stock.
|
|
3
While amounts in the “Other” column do not represent a right of the
holder to receive stock within 60 days, these amounts are included
here because management believes they reflect similar objectives of 1)
encouraging directors and officers to have a stake in the Company, and 2)
aligning interests of directors and officers with those of shareholders.
Under the ALLETE Non-Employee Director Compensation Deferral Plan II
(Deferral Plan II), directors are able to defer their stock retainer.
Under the terms of the Deferral Plan II, distributions of deferred shares
will be made in common stock. In our view, restricted stock units and
deferred stock units are equivalent to actual stock ownership because they
take into account both upside and downside risk in our stock
price.
|
Nominees
for Director
|
|||
[PHOTO OMITTED]
|
KATHLEEN A. BREKKEN, 60,
of Cannon Falls, Minnesota, has been a Director since 2006. She is a
member of the Executive Compensation Committee and the Corporate
Governance and Nominating Committee. Ms. Brekken is the retired President
and Chief Executive Officer of Midwest of Cannon Falls, Inc., a company
that designs, wholesales, and distributes home accessories and giftware.
She previously served on the ALLETE Board of Directors from 1997 to 2003.
Ms. Brekken is a board member of the Cannon Falls Medical Center—Mayo
Health System.
Ms.
Brekken brings experience as the CEO of a Minnesota-based company, and in
strategic planning, leadership development, and diversified
business.
|
||
[PHOTO OMITTED]
|
KATHRYN W. DINDO, 60, of
Akron, Ohio, was added to the Board in July 2009 and is a member of the
Audit Committee. Ms. Dindo is the retired Vice President and Chief Risk
Officer of FirstEnergy Corporation (NYSE: FE), a diversified electric
company. She is a certified public accountant who was a partner at Ernst
& Young and later served as a senior financial executive at Roadway
Services, Inc. before joining FirstEnergy in 1998. Ms. Dindo has also
served on the board of The J.M. Smucker Company (NYSE:SJM) since 1996,
Bush Brothers & Company, and the GAR Foundation.
Ms.
Dindo is a financial expert within the meaning of the rules of the SEC and
brings experience in electric utility risk management. She has broad
public company financial reporting and oversight experience, and a broad
business perspective.
|
||
[PHOTO OMITTED]
|
HEIDI J. EDDINS, 53, of
St. Augustine, Florida, has been a Director since 2004. She is Chair of
the Corporate Governance and Nominating Committee. Ms. Eddins is the
former Executive Vice President, Secretary and General Counsel of Florida
East Coast Railway, LLC, a railway company that is a successor to Florida
East Coast Industries, Inc.’s transportation business. Ms. Eddins joined
Florida East Coast Industries, Inc. in 1999 and was responsible for all
legal and governmental affairs of the corporation in addition to managing
a variety of real estate transactions. Ms. Eddins also serves as a
Director of the Flagler Hospital Foundation.
Ms.
Eddins contributes her expertise in corporate governance matters for
public companies, her experience in Florida real estate, and strategic
planning and diversified business knowledge.
|
||
[PHOTO OMITTED]
|
SIDNEY W. EMERY, JR.,
63, of Minneapolis, Minnesota, has been a Director since 2007. He is a
member of the Executive Compensation Committee. Mr. Emery is the former
Chief Executive Officer of MTS Systems Corporation (NASDAQ: MTSC), a
global supplier of mechanical testing systems and industrial position
sensors. He also serves as a director of Urologix, Inc., a
Minneapolis-based manufacturer of minimally invasive medical
products.
Mr.
Emery contributes his experience as a public company CEO, knowledge of
executive compensation matters, and strategic planning and diversified
business experience.
|
Nominees
for Director
|
|||
[PHOTO OMITTED]
|
JAMES S. HAINES, JR.,
63, of Lawrence, Kansas, was added to the Board in October 2009 and is on
the Executive Compensation Committee. He is the retired Chief Executive
Officer of Westar Energy, Inc. [NYSE: WR], the largest electric energy
provider in Kansas. Mr. Haines was a director of Westar Energy from 2002
until his retirement in 2007. He has also served as Chief Executive
Officer of El Paso Electric Company. He is a member of the board of
Stormont-Vail HealthCare and is chairman of the board of the Topeka
Community Foundation.
Mr.
Haines brings a long career of public utility experience, having served as
CEO at two public utilities. He brings expertise in regulatory matters,
strategic planning, and executive compensation.
|
||
[PHOTO OMITTED]
|
ALAN R. HODNIK, 50, of
Hermantown, Minnesota, was named President of the Company in May 2009 and
has been appointed CEO effective May 1, 2010. Since joining the Company in
1982, Mr. Hodnik has served as Vice President – Generation Operations,
Senior Vice President of Minnesota Power Operations, and Chief Operating
Officer. As Chief Operating Officer, Mr. Hodnik led transmission,
distribution, generation, and engineering for all aspects of the Company.
Mr. Hodnik serves on the Board of Directors of SMDC Health Systems and the
Area Partnership for Economic Expansion (APEX). He was also the elected
mayor of the City of Aurora, Minnesota from 1988 to 1997.
Mr.
Hodnik has served the Company for 28 years, working in a wide variety of
positions of increasing responsibility. He brings utility operations,
strategic planning, leadership, and broader organizational development
experience, as well as a deep understanding of the region served by the
Company.
|
||
[PHOTO OMITTED]
|
JAMES J. HOOLIHAN, 57,
of Grand Rapids, Minnesota, has been a Director since 2006. He is a member
of the Audit Committee. Mr. Hoolihan is the President and Chief Executive
Officer of the Blandin Foundation, a private, philanthropic foundation
whose mission is to strengthen communities in rural Minnesota. From 1981
to 2004, Mr. Hoolihan was the President of Industrial Lubricant
Company, which provides industrial supplies and services to logging,
railroad, taconite, and coal mining industries. He serves as the chairman
of the board of directors of Industrial Lubricant Company.
Mr. Hoolihan served as the elected mayor of the City of Grand
Rapids from 1990 to 1995.
Mr.
Hoolihan is a long-time community leader in the Company’s electric utility
service area. He brings his knowledge of the industries and political
issues of the service area, and has operated a business serving these
industries.
|
||
[PHOTO OMITTED]
|
MADELEINE W. LUDLOW, 55,
of Cincinnati, Ohio, has been a Director since 2004 and is Chair of the
Executive Compensation Committee. She is currently a Principal of Market
Capital Partners LLC and from 2005 to 2009 was a Principal of LudlowWard
Capital Advisors, LLC, each of which is an Ohio-based investment banking
firm serving middle market companies. She was the Chairman, Chief
Executive Officer, and President of Cadence Network, Inc., a web-based
provider of utility expense management services from 2000 to 2004. Ms.
Ludlow was formerly the Vice President and Chief Financial Officer of
Cinergy Corp. She has also served as a trustee of the Darden Graduate
School of Business Administration at the University of
Virginia.
Ms.
Ludlow brings a sophisticated financial background and is a financial
expert within the meaning of the rules of the SEC. She also has executive
experience at a public utility and has worked with entrepreneurial and
diversified businesses.
|
Nominees
for Director
|
|||
[PHOTO OMITTED]
|
DOUGLAS C. NEVE, 54, of
Chatfield, Minnesota, has been a Director since July 2007. He is Chair of
the Audit Committee. Mr. Neve is the former Executive Vice President and
Chief Financial Officer of Minneapolis-based Ceridian Corp., a
multinational human resources company, where he worked from February 2005
until March 2007. Prior to February 2005, he was an audit partner with
Deloitte & Touche LLP, a public accounting firm. He has also served as
a director of Analysts International Corporation (NASDAQ: ANLY) since 2008
and is currently its chair.
Mr.
Neve is a financial expert within the meaning of the rules of the SEC, and
brings his knowledge of public accounting, corporate reporting, and risk
management. His financial background includes experience as an executive
for a publicly-traded company.
|
||
[PHOTO OMITTED]
|
LEONARD C. RODMAN, 61,
of Overland Park, Kansas, has been a Director since May 2009 and is a
member of the Audit Committee. Mr. Rodman has over 35 years of experience
with Black & Veatch, a major provider of engineering services to the
utility/power generation, water and environmental industries. Since 1998,
Mr. Rodman has been the President and Chief Executive Officer of Black
& Veatch and in 2000 he was also named its Chairman. Mr. Rodman
currently serves on the Board of the United Way of Greater Kansas City and
of the Iowa State University Foundation.
Mr.
Rodman has experience serving the electric utility and other regional
industries for over 30 years. He brings his leadership experience of a
large, international diversified company, and strategic
planning.
|
||
[PHOTO OMITTED]
|
DONALD J. SHIPPAR, 61,
of Superior, Wisconsin, has been a Director since 2004 and has been
Chairman of ALLETE since January 2006. Mr. Shippar has been the Company’s
Chief Executive Officer since 2004 and is retiring as CEO effective
April 30, 2010. Since joining the Company in 1976, Mr. Shippar has
served as Vice President of Transmission and Distribution, Senior Vice
President for Customer Service and Delivery, Chief Operating Officer of
Minnesota Power, and President of Minnesota Power. Mr. Shippar also serves
as a trustee of the College of St. Scholastica in Duluth,
Minnesota.
Mr.
Shippar has served the Company for over 30 years. He has significant
connections within the electric utility industry, and has expertise in
utility operations, leadership development and strategic
planning.
|
||
[PHOTO OMITTED]
|
BRUCE W. STENDER, 68, of
Duluth, Minnesota, has been a Director since 1995. Mr. Stender, as
Lead Director, is an ex-officio member of each Board committee.
Mr. Stender served as Chairman of ALLETE from September 2004 to
January 2006. He is Vice Chair of Duluth-based Labovitz Enterprises, Inc.,
which owns and manages hotels and commercial real estate. Mr. Stender
serves as a trustee of the Blandin Foundation and as member of the
Chancellor’s Advisory Committee for the University of
Minnesota-Duluth.
Mr.
Stender has significant connections to and understanding of the region
served by the Company. He brings corporate governance knowledge and varied
leadership experience, as well as diversified business
experience.
|
|
•
the director is or has been employed by the Company within the last three
years;
|
|
• a
member of the director’s immediate family is or has been employed by the
Company as an executive officer within the last three
years;
|
|
•
the director is an employee or a partner, or the director’s immediate
family member is a partner, of the Company’s current independent
registered public accounting firm; or an immediate family member is an
employee of the Company’s current independent registered public accounting
firm and personally works on the Company’s audit; or the director or an
immediate family member was within the last three years an employee or
partner of the Company’s current independent registered public accounting
firm and personally worked on the Company’s audit within that
time;
|
|
•
the director or a member of the director’s immediate family is or has been
employed within the last three years as an executive officer of any
business organization for which any of the Company’s executive officers
concurrently serves or served as a member of that business organization’s
compensation committee;
|
|
•
the director has received in any of the last three years more than
$120,000 in direct compensation from the Company (other than director and
committee fees, pension, and other deferred
compensation);
|
|
• a
member of the director’s immediate family has received in any 12-month
period within the last three years more than $120,000 in direct
compensation from the Company;
|
|
•
the director is a current employee, or a member of the director’s
immediate family is a current executive officer, of any business
organization that has made payments to the Company, or received payments
from the Company, for property or services in any of the last three fiscal
years in an amount that exceeds the greater of $1,000,000 or 2 percent of
the other company’s consolidated gross
revenue;
|
|
•
the director has been an employee within the last three years, or a member
of the director’s immediate family has been an executive officer within
the last three years, of any business organization to which the Company
was indebted at any time within the last three years in an aggregate
amount in excess of 5 percent of the Company’s total
assets;
|
|
•
the director or a member of the director’s immediate family has served
within the last three years as an executive officer or a general partner
of an entity that has received an investment from the Company or any of
its subsidiaries which exceeds the greater of $1,000,000 or 2 percent
of such entity’s total invested capital in any of the last three years;
or
|
|
•
the director or a member of the director’s immediate family has been an
executive officer of a foundation, university, non-profit trust or other
charitable organization within the last three years for which
contributions from the Company accounted for more than the greater of
$250,000 or 2 percent of such organization’s consolidated gross revenue in
any of the last three years.
|
|
·
|
Pay
is linked to performance;
|
|
·
|
Compensation
elements are balanced;
|
|
·
|
We
provide fair and competitive pay;
|
|
·
|
Executive
stock ownership is expected;
|
|
·
|
We
consider corporate tax deductions and accounting rules;
and
|
|
·
|
The
Compensation Committee and the Board exercise independent
judgment.
|
·
|
The Company changed the annual incentive to place more emphasis on pay-for-performance; |
|
·
|
The
Company changed the mix of long-term incentive awards to strike a better
balance between long-term performance and share ownership goals;
and
|
|
·
|
The
Company changed the group of companies used to measure total shareholder
return under the long-term incentive plan to place more emphasis on
long-term performance relative to the electric utility industry because
Florida real estate operations have become a much smaller component of the
Company.
|
Position
|
Stock
Ownership Value as a Multiple of Salary
|
|
Chief
Executive Officer
ALLETE
President
ALLETE
Senior Vice President
ALLETE
Vice President
President
of Major Affiliate
|
4X
2X
2X
1X
1X
|
Allocation
of Long-Term Incentive
Target
Opportunity
|
|||
Name
|
Long-Term
Incentive
Target
Opportunity
|
Performance
Shares
|
Restricted
Stock
Units
|
Mr.
Shippar
|
$450,000
|
12,916
|
4,305
|
Mr.
Schober
|
$150,000
|
3,846
|
1,894
|
Mr.
Hodnik*
|
$250,000
|
6,842
|
3,370
|
Ms.
Amberg
|
$100,000
|
2,564
|
1,263
|
Mr.
Adams
|
$75,000
|
1,923
|
947
|
Ms.
Welty
|
$100,000
|
2,564
|
1,263
|
|
*
Mr. Hodnik was promoted to President effective May 12, 2009. His 2009 LTIP
incentive opportunity reflects an additional grant that he received in
connection with his promotion and increased
responsibilities.
|
|
•
Performance
Shares. Performance shares reward executives for strong multi-year
performance, measured by TSR relative to a group of peer companies.
Relative TSR was selected by the Compensation Committee because it
measures the benefit our shareholders realize on their investment in
Common Stock compared to investment opportunities available in other
similar companies. Rewarding executives for creating shareholder value
over the long-term is consistent with our compensation philosophy of
linking pay to performance.
|
TSR Peer Groups
|
||
Performance
Period
2009–2011
|
Performance
Periods
2007–2009 and
2008–2010
|
|
Alliant
Energy Corporation
|
Avista
Corporation
|
|
Avista
Corporation
|
Black
Hills Corporation
|
|
Black
Hills Corporation
|
Brookfield
Asset Management, Inc.
|
|
CH
Energy Group, Inc.
|
CH
Energy Group, Inc.
|
|
Cleco
Corporation
|
Consolidated-Tomoka
Land Company
|
|
CMS
Energy Corporation
|
Great
Plains Energy Incorporated
|
|
DPL
Inc.
|
IDACORP,
Inc.
|
|
Great
Plains Energy Incorporated
|
Integrys
Energy Group, Inc.
|
|
Hawaiian
Electric Industries, Inc.
|
MDU
Resources Group, Inc.
|
|
IDACORP,
Inc.
|
Nicor
Inc.
|
|
Integrys
Energy Group, Inc.
|
Otter
Tail Corporation
|
|
MGE
Energy, Inc.
|
TECO
Energy, Inc.
|
|
Northeast
Utilities
|
The
Empire District Electric
Company
|
TSR
Peer Groups (continued)
|
||
Performance
Period
2009–2011
|
Performance
Periods
2007–2009 and 2008–2010
|
|
NorthWestern
Corporation
|
The
St. Joe Company
|
|
NSTAR
|
Vectren
Corporation
|
|
NV
Energy, Inc.
|
Wisconsin
Energy Corporation
|
|
OGE
Energy Corp.
|
||
Otter
Tail Corporation
|
||
Pinnacle
West Capital Corporation
|
||
PNM
Resources, Inc.
|
||
Portland
General Electric Company
|
||
TECO
Energy, Inc.
|
||
The
Empire District Electric Company
|
||
UIL
Holdings Corporation
|
||
UniSource
Energy Corporation
|
||
Vectren
Corporation
|
||
Westar
Energy, Inc.
|
|
•
Restricted Stock Units.
Restricted stock units are used as a retention incentive and to
encourage stock ownership. A restricted stock unit entitles the recipient
to one share of Common Stock when the unit vests after a period of time
specified in the award.
|
|
•
Stock Options.
The Company granted stock options prior to 2009. Stock options reward
Named Executive Officers for increases in the price of Common Stock over
the long term and encourage Named Executive Officers to remain with the
Company. In 2009, the Company did not grant stock options for the reasons
discussed under “2009 Executive Compensation Design Changes” on page
28.
|
Avista
Corporation
Black Hills
Corporation
Brookfield
Asset Management Inc.
CH Energy
Group, Inc.
Consolidated-Tomoka
Land Company
DPL
Inc.
Great Plains
Energy Incorporated
Hawaiian
Electric Industries, Inc.
IDACORP,
Inc.
Integrys Energy
Group, Inc.
MDU Resources
Group, Inc.
|
Nicor
Inc.
OGE
Energy Corp.
Otter
Tail Corporation
PNM
Resources, Inc.
TECO
Energy, Inc.
The
Empire District Electric Company
The
St. Joe Company
UIL
Holdings Corporation
Vectren
Corporation
Wisconsin
Energy Corporation
|
|
•
The Company changed the AIP design to place more emphasis on
pay-for-performance. In order to receive any AIP payout based on achieving
AIP strategic goals, the Company must achieve threshold net income
performance.
|
|
•
The Company changed the mix of long-term incentive awards granted to
executive officers in 2009 under the LTIP. Restricted stock units were
granted instead of stock options to place more emphasis on increased stock
ownership and retention. Each restricted stock unit entitles the executive
officer to one share of Common Stock after three years from the award
date. Dividend equivalents accrue during the vesting period and are paid
in shares of Common Stock when the underlying restricted stock units vest.
Executive officers must remain employed by the Company at the time the
restricted stock units and accrued dividend equivalents vest to receive
the full award of Common Stock. The restricted stock units will vest
immediately on a prorated basis upon retirement, disability, death, or a
change in control of the Company.
|
|
•
The Company allocated a greater proportion of the target value LTIP awards
to performance shares to further emphasize pay-for-performance. The target
value of the 2009 LTIP awards for all executive officers, except for Mr.
Shippar, were allocated 67 percent to performance shares and 33 percent to
restricted stock units. The target value of Mr. Shippar’s 2009 LTIP award
was allocated 75 percent to performance shares and 25 percent to
restricted stock units given the responsibility level of his position and
to link more pay to performance.
|
• The Company changed the group of companies used to measure TSR performance under the LTIP to place more emphasis on long-term performance relative to the electric utility industry, as our Florida real estate operations have become a much smaller component of the Company. Relative TSR performance is used to determine the number of performance shares earned under the LTIP. The peer group approved for 2009 is comprised of 27 companies selected from the Edison Electric Institute Stock Index based on comparability to the Company in terms of size as measured by market capitalization and payment of a dividend. These changes better align the peer group to our current operations which are focused on the electric utility industry and much less on Florida real estate. The changes to the peer group that were implemented are shown above, beginning on page 23. |
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
(g)
|
(h)
|
(i)
|
Name
and
Principal
Position
|
Year
|
Salary
|
Stock
Awards1
|
Option
Awards2
|
Non-Equity
Incentive
Plan
Compen-
sation3
|
Change
in
Pension
Value
And
Nonqual-
ified
Deferred
Compen-
sation
Earnings4
|
All
Other
Compen-
sation5
|
Total
|
Donald
J. Shippar
Chairman
and
Chief
Executive Officer
|
2009
2008
2007
|
$560,000
$553,827
$526,577
|
$578,325
$398,364
$346,295
|
$0
$131,359
$155,869
|
$44,688
$407,550
$176,033
|
$589,544
$689,641
$528,777
|
$149,257
$121,061
$118,697
|
$1,921,814
$2,301,802
$1,852,248
|
Mark
A. Schober
Senior
Vice President and Chief Financial Officer
|
2009
2008
2007
|
$275,000
$272,085
$258,562
|
$191,539
$110,678
$70,033
|
$0
$54,734
$53,057
|
$16,459
$144,331
$77,068
|
$198,186
$164,692
$87,381
|
$51,939
$65,005
$62,624
|
$733,123
$811,525
$608,725
|
Alan
R. Hodnik
President
|
2009
|
$268,998
|
$331,051
|
$0
|
$17,955
|
$105,382
|
$79,041
|
$802,427
|
Deborah
A. Amberg
Senior
Vice President,
General
Counsel, and
Secretary
|
2009
2008
2007
|
$257,000
$254,785
$243,339
|
$127,703
$73,785
$59,460
|
$0
$36,488
$45,078
|
$13,672
$117,526
$63,522
|
$51,696
$43,029
$17,504
|
$42,702
$53,534
$55,023
|
$492,773
$579,147
$483,926
|
Robert
J. Adams
Vice
President - Business Development and Chief Risk Officer
|
2009
|
$219,000
|
$95,769
|
$0
|
$8,738
|
$48,239
|
$35,520
|
$407,266
|
Claudia Scott Welty6
Retired
Senior Vice President and Chief Administrative Officer
|
2009
2008
2007
|
$238,000
$236,058
$226,108
|
$127,703
$73,785
$55,427
|
$0
$36,488
$42,021
|
$12,662
$108,843
$58,915
|
$152,951
$139,739
$69,218
|
$52,972
$65,191
$55,872
|
$584,288
$660,104
$507,561
|
|
1
The amounts shown in column (d) relate to LTIP performance share
opportunities and to restricted stock unit opportunities each year for
each Named Executive Officer. The amounts shown reflect the grant-date
fair value determined in accordance with generally accepted accounting
principles using the same assumptions used in the valuation of
compensation expense disclosed in Note 17 to the Company’s Consolidated
Financial Statements contained in the Annual Report, but based on the
probable outcome of any performance conditions and excluding the effect of
estimated forfeitures. The grant-date fair market value is the total
|
|
amount
that we will recognize as an expense over the awards' vesting period,
except that the amounts shown do not include a reduction for forfeitures.
|
Name
|
Year
|
Restricted Stock
Units
|
Performance
Shares*
|
Discretionary
Stock
Bonus
|
||||
Donald
J. Shippar
|
2009
2008
2007
|
$135,952
$0
$0
|
$442,373
$398,364
$308,525
|
$0
$0
$37,770
|
||||
Mark
A. Schober
|
2009
2008
2007
|
$59,813
$0
$0
|
$131,726
$110,678
$70,033
|
$0
$0
$0
|
||||
Alan
R. Hodnik
|
2009
|
$96,712
|
$234,339
|
$0
|
||||
Deborah
A. Amberg
|
2009
2008
2007
|
$39,886
$0
$0
|
$87,817
$73,785
$59,460
|
$0
$0
$0
|
||||
Robert
J. Adams
|
2009
|
$29,906
|
$65,863
|
$0
|
||||
Claudia
Scott Welty
|
2009
2008
2007
|
$39,886
$0
$0
|
$87,817
$73,785
$55,427
|
$0
$0
$0
|
|
*
The maximum grant-date fair value for each Named Executive Officer’s
unearned performance share awards assuming the highest level of
performance is probable: Mr. Shippar—$884,746, Mr.
Schober—$263,451, Mr. Hodnik—$468,677, Ms. Amberg—$175,634, Mr.
Adams—$131,726, and Ms.
Welty—$175,634.
|
|
2
The amounts shown in column (e) reflect the grant-date fair value
of the option awards excluding the effect of estimated forfeitures. The
assumptions used to calculate these amounts are disclosed in Note 17 to
the Company’s Consolidated Financial Statements included in the Annual
Report.
|
|
3
The amounts shown in column (f) are earned AIP awards, including
any amount that was deferred at the election of the Named Executive
Officer.
|
|
4
The amounts in column (g) for 2009 are comprised of the
following:
|
Aggregate Change in
Actuarial Present
Value of Accumulated
Defined Benefit
Pensions
During Year
|
Above Market Interest
on
Deferred
Compensation**
|
||
Donald
J. Shippar
|
$588,336
|
$1,208
|
|
Mark
A. Schober
|
$197,651
|
$535
|
|
Alan
R. Hodnik
|
$105,382
|
$0
|
|
Deborah
A. Amberg
|
$51,696
|
$0
|
|
Robert
J. Adams
|
$48,239
|
$0
|
|
Claudia
Scott Welty
|
$152,951
|
$0
|
|
**
Above-market interest was calculated using a 5.61 percent rate of return,
which exceeds 120 percent of the applicable federal long-term rate of 4.17
percent.
|
|
5
The amounts in column (h) for 2009 are comprised of the
following:
|
Perquisites
and
Other
Personal
Benefits*
|
Tax
Reimbursements **
|
Contributions
to
the RSOP and
Flexible Benefit
Plan
|
Contributions to
the
Supplemental
Executive
Retirement Plan
II
|
||||
Donald
J. Shippar
|
$25,152
|
$12,367
|
$49,639
|
$62,099
|
|||
Mark
A. Schober
|
$0
|
$0
|
$38,961
|
$12,978
|
|||
Alan
R. Hodnik
|
$19,285
|
$15,768
|
$36,474
|
$7,514
|
|||
Deborah
A. Amberg
|
$0
|
$0
|
$33,687
|
$9,015
|
|||
Robert
J. Adams
|
$0
|
$0
|
$32,631
|
$2,889
|
|||
Claudia
Scott Welty
|
$0
|
$0
|
$44,857
|
$8,115
|
|
* Amounts paid in 2009
include: (1) car allowances that were paid prior to their elimination in
early 2009: Mr. Shippar—$3,610, Mr. Hodnik—$2,755; (2) meal and
entertainment expenses for Named Executive Officer’s spouse paid by the
Company: Mr. Shippar—$3,382; (3) costs associated with an executive
physical for Mr. Shippar—$9,564, Mr. Hodnik—$13,866; and (4) club
memberships for Mr. Shippar—$7,212. Amounts also include reimbursement for
financial and tax planning services (up to $1,500 annually), an office
parking space, and club memberships having a primary business purpose (but
which may also allow Named Executive Officers personal use of the
facilities or services). The value assigned to each perquisite given to a
Named Executive Officer is based on the aggregate incremental cost to the
Company associated with the fringe benefit, except for club memberships,
in which the total cost is reported. The amounts reflect the full, actual
cost of the fringe benefit in all cases, except for spouses’ travel and
entertainment expenses. The aggregate cost to the Company for spousal
travel, meals, and entertainment was calculated as the full actual cost of
each benefit in excess of the amount the Company would have paid had the
Named Executive Officer been traveling or eating without his or her
spouse.
|
|
**
The tax reimbursements relate to imputed income from spousal travel,
executive physicals, and financial and tax planning services.
|
|
6
The amounts shown in column (d) for Ms. Welty were calculated
assuming she remained in the employ of the Company throughout the
applicable vesting periods. Under the terms of the LTIP, Ms. Welty’s stock
awards will be prorated as a result of her retirement. The prorated amount
of performance shares for which she is eligible due to her retirement is
shown in the Outstanding Equity Awards at Fiscal Year-End Table on page
37. The prorated amount of restricted stock units that vested due to her
retirement is shown in the Estimated Potential Payments Upon Termination
Due to Retirement, Disability, or Death Table on page 46.
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
(g)
|
(h)
|
(i)
|
(j)
|
(k)
|
Name
and
Award
Type1
|
Grant
Date
|
Date
of
Compen-
sation
Committee
Action2
|
Estimated
Future Payouts
Under
Non-Equity
Incentive
Plan Awards3
|
Estimated
Future Payouts
Under
Equity
Incentive
Plan Awards
|
All
Other
Stock
Awards:
Number
of
Shares
of
Stock
or Units
|
Grant
Date
Fair
Value
of
Stock
and
Option
Awards4
|
||||
Threshold
|
Target
|
Maximum
|
Threshold
(#)
|
Target
(#)
|
Maximum
(#)
|
|||||
Donald
J. Shippar
AIP
RSUs
Performance
Shares
|
1/19/09
2/02/09
2/02/09
|
1/19/09
1/19/09
1/19/09
|
$126,000
–
–
|
$336,000
–
–
|
$672,000
–
–
|
–
–
6,458
|
–
–
12,916
|
–
–
25,832
|
–
4,305
–
|
–
$135,952
$442,373
|
Mark
A. Schober
AIP
RSUs
Performance
Shares
|
1/19/09
2/02/09
2/02/09
|
1/19/09
1/19/09
1/19/09
|
$46,406
–
–
|
$123,750
–
–
|
$247,500
–
–
|
–
–
1,923
|
–
–
3,846
|
–
–
7,692
|
–
1,894
–
|
–
$59,813
$131,726
|
Alan
R. Hodnik
AIP
RSUs
RSUs
Performance
Shares
Performance
Shares
|
1/19/09
2/02/09
5/12/09
2/02/09
5/12/09
|
1/19/09
1/19/09
5/11/09
1/19/09
5/11/09
|
$50,625
–
–
–
–
|
$135,000
–
–
–
–
|
$270,000
–
–
–
–
|
–
–
–
1,282
2,139
|
–
–
–
2,564
4,278
|
–
–
–
5,128
8,556
|
–
1,263
2,107
–
–
|
–
$39,886
$56,826
$87,817
$146,522
|
Deborah
A. Amberg
AIP
RSUs
Performance
Shares
|
1/19/09
2/02/09
2/02/09
|
1/19/09
1/19/09
1/19/09
|
$38,550
–
–
|
$102,800
–
–
|
$205,600
–
–
|
–
–
1,282
|
–
–
2,564
|
–
–
5,128
|
–
1,263
–
|
–
$39,886
$87,817
|
Robert
J. Adams
AIP
RSUs
Performance
Shares
|
1/19/09
2/02/09
2/02/09
|
1/19/09
1/19/09
1/19/09
|
$24,638
–
–
|
$65,700
–
–
|
$131,400
–
–
|
–
–
962
|
–
–
1,923
|
–
–
3,846
|
–
947
–
|
–
$29,906
$65,863
|
Claudia
Scott Welty
AIP
RSUs5
Performance
Shares5
|
1/19/09
2/02/09
2/02/09
|
1/19/09
1/19/09
1/19/09
|
$35,700
–
–
|
$95,200
–
–
|
$190,400
–
–
|
–
–
1,282
|
–
–
2,564
|
–
–
5,128
|
–
1,263
–
|
–
$39,886
$87,817
|
|
1
AIP Awards are made under the AIP. Performance shares and
restricted stock units (RSUs), are awarded under the LTIP.
|
|
2
The restricted stock units and performance shares granted to Mr.
Hodnik on May 12, 2009, were approved by the Board on May 11, 2009, in
connection with his promotion to
President.
|
|
3
Actual awards earned
are shown in column (f) of the Summary Compensation Table on page 31.
|
|
4
The amounts shown in column (k) reflect the grant-date fair value
determined in accordance with generally accepted accounting principles
using the same assumptions used in the valuation of compensation expense
disclosed in Note 17 to the Company’s Consolidated Financial Statements
contained in the Annual Report, but based on the probable outcome of any
performance conditions and excluding the effect of estimated forfeitures.
The amounts shown for performance shares and restricted stock units are
the values of the awards for accounting purposes; the value a Named
Executive Officer realizes from performance shares will depend on actual
Common Stock performance relative to the 27-company peer group discussed
above, beginning on page 23, and market price appreciation and dividend
yield. The value Named Executive Officers realize from restricted stock
units will depend on the market value of Common Stock at the time of
vesting.
|
|
5
The amounts shown were calculated assuming Ms. Welty remained in the
employ of the Company throughout the applicable restricted stock unit
vesting periods and performance share performance periods. Under the terms
of the LTIP, Ms. Welty’s restricted stock units and performance shares
will be prorated as a result of her
retirement.
|
|
GRANTS
OF PLAN-BASED AWARDS DISCUSSION
|
AIP
Performance
Goals
|
Goal
Weighting
|
Goal
Measures
|
||||
Threshold
|
Target
|
Superior
|
||||
Net
Income (NI)
|
50%
|
$72.6
million
|
$74.8
million
|
$83.1
million
|
||
Cash
From Operating Activities (CFOA)
|
25%
|
$157.9
million
|
$162.8
million
|
$180.7
million
|
||
Strategic
Goals
|
25%
|
Various;
See Below
|
Goal
|
Goal
Weighting
|
%
of Goal
Achievement
|
%
of Target
Opportunity
Payout
|
|||
NI
|
50%
|
0.0%
|
0.0%
|
|||
CFOA
|
25%
|
53.2%
|
13.3%
|
|||
Strategic
Goals
|
25%
|
112.0%
|
0.0%*
|
|||
Total
|
100%
|
13.3%
|
|
*While each strategic goal was
achieved, there was no associated payout because 2009 NI fell below
threshold.
|
Performance
Period
Beginning
|
Performance
Period
Ending
|
Status
of Performance Share
Award
as of December 31, 2009
|
||
January
1, 2009
|
December
31, 2011
|
Performance
Period Not Complete; Not Vested
|
||
January
1, 2008
|
December
31, 2010
|
Performance
Period Not Complete; Not Vested
|
||
January
1, 2007
|
December
31, 2009
|
Unearned;
Forfeited
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
(g)
|
(h)
|
(i)
|
|
Option
Awards
|
Stock
Awards
|
||||||||
Name
|
Number
of Securities
Underlying
Unexercised
Options
|
Option
Exercise
Price
|
Option
Expiration
Date
|
Number
of
Shares
or
Units
of
Stock
That
Have
Not
Vested3
|
Market
Value
of
Shares or
Units
of Stock
That
Have Not
Vested4
|
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units,
or
Other Rights That Have Not
Vested5
|
Equity
Incentive
Plan
Awards:
Market
or
Payout
Value of
Unearned
Shares,
Units,
or
Other Rights
That
Have Not
Vested6
|
||
Exercisable
|
Unexercisable1
|
||||||||
Donald
J. Shippar
|
5,090
|
$166,341
|
17,095
|
$558,665
|
|||||
7,217
|
0
|
$29.79
|
1/02/2012
|
||||||
13,905
|
0
|
$37.76
|
2/02/2014
|
||||||
19,618
|
0
|
$41.35
|
2/01/2015
|
||||||
20,256
|
0
|
$44.15
|
2/01/2016
|
||||||
12,750
|
6,375
|
$48.65
|
2/01/2017
|
||||||
11,029
|
22,059
|
$39.10
|
2/01/2018
|
||||||
Mark
A. Schober
|
2,239
|
$73,171
|
4,902
|
$160,197
|
|||||
4,413
|
0
|
$29.79
|
1/02/2012
|
||||||
2,207
|
0
|
$23.79
|
2/03/2013
|
||||||
3,579
|
0
|
$37.76
|
2/02/2014
|
||||||
4,167
|
0
|
$41.35
|
2/01/2015
|
||||||
5,234
|
0
|
$44.15
|
2/01/2016
|
||||||
4,340
|
2,170
|
$48.65
|
2/01/2017
|
||||||
4,595
|
9,192
|
$39.10
|
2/01/2018
|
||||||
Alan
R. Hodnik
|
3,984
|
$130,197
|
5,312
|
$173,596
|
|||||
1,366
|
0
|
$37.76
|
2/02/2014
|
||||||
1,655
|
0
|
$41.35
|
2/01/2015
|
||||||
2,165
|
0
|
$44.15
|
2/01/2016
|
||||||
1,874
|
938
|
$48.65
|
2/01/2017
|
||||||
2,214
|
4,429
|
$39.10
|
2/01/2018
|
||||||
Deborah
A. Amberg
|
1,493
|
$48,791
|
3,268
|
$106,798
|
|||||
1,360
|
0
|
$27.40
|
1/02/2011
|
||||||
1,209
|
0
|
$29.79
|
1/02/2012
|
||||||
1,209
|
0
|
$23.79
|
2/03/2013
|
||||||
1,070
|
0
|
$37.76
|
2/02/2014
|
||||||
3,549
|
0
|
$41.35
|
2/01/2015
|
||||||
6,004
|
0
|
$44.15
|
2/01/2016
|
||||||
3,687
|
1,844
|
$48.65
|
2/01/2017
|
||||||
3,063
|
6,128
|
$39.10
|
2/01/2018
|
||||||
Robert
J. Adams
|
1,120
|
$36,602
|
2,246
|
$73,399
|
|||||
2,889
|
0
|
$37.76
|
2/02/2014
|
||||||
3,492
|
0
|
$41.35
|
2/01/2015
|
||||||
3,411
|
0
|
$44.15
|
2/01/2016
|
||||||
2,114
|
1,058
|
$48.65
|
2/01/2017
|
||||||
1,939
|
3,879
|
$39.10
|
2/01/2018
|
||||||
Claudia
Scott Welty2
|
0
|
$0
|
1,673
|
$54,674
|
|||||
3,862
|
0
|
$27.40
|
1/02/2011
|
||||||
3,367
|
0
|
$29.79
|
1/02/2012
|
||||||
3,367
|
0
|
$23.79
|
12/31/2012
|
||||||
3,557
|
0
|
$37.76
|
12/31/2012
|
||||||
4,338
|
0
|
$41.35
|
12/31/2012
|
||||||
5,442
|
0
|
$44.15
|
12/31/2012
|
||||||
5,156
|
0
|
$48.65
|
12/31/2012
|
||||||
9,191
|
0
|
$39.10
|
12/31/2012
|
|
1
Each option award has a ten-year term. Therefore, the grant date
for each award is the date ten years prior to the date shown in column
(e). Options vest in three equal installments on each of the first,
second, and third anniversaries of the grant date.
|
|
2
Ms. Welty retired on
December 31, 2009. Her options then unexercisable became fully vested as
of her retirement date. She has until the earlier of the original
expiration date or three years from her retirement date to exercise all
her outstanding options.
|
|
3
The amounts shown include the restricted stock units granted on
February 2, 2009, to each Named Executive Officer and to Mr. Hodnik on May
12, 2009, plus dividend equivalents. Restricted stock units vest three
years after the grant date provided the Named Executive Officer continues
to be employed by the Company. The restricted stock units granted to Ms.
Welty on
|
|
4
The amount shown was calculated by multiplying the number of units
in column (f) by $32.68, the closing price of Common Stock on
December 31, 2009.
|
|
5
Represents the Common Stock that would be payable for outstanding
performance share awards if target performance were achieved (a TSR
ranking of ninth among the 16-company peer group) for the performance
period 2008–2010 and if threshold performance was achieved (a TSR ranking
of nineteenth among the 27-company peer group) for the performance period
2009–2011. The amounts shown for Ms. Welty reflect the prorated amounts
for which she is eligible due to her December 31, 2009 retirement. The
Named Executive Officers did not earn a performance share payout for the
2007–2009 performance period. As a result, those performance shares are
not shown because they were
forfeited.
|
|
6
These amounts were calculated by multiplying the number of shares
and units in column (h) by $32.68, the closing price of Common Stock on
December 31, 2009.
|
|
OPTION
EXERCISES AND STOCK VESTED—2009
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
Option
Awards
|
Stock
Awards
|
|||
Number
of Shares
Acquired
on
Exercise
|
Value
Realized
on
Exercise
|
Number
of Shares
Acquired
on Vesting1
|
Value
Realized
on
Vesting
|
|
Donald
J. Shippar
|
–
|
–
|
–
|
–
|
Mark
A. Schober
|
–
|
–
|
–
|
–
|
Alan
R. Hodnik
|
–
|
–
|
–
|
–
|
Deborah
A. Amberg
|
–
|
–
|
–
|
–
|
Robert
J. Adams
|
–
|
–
|
–
|
–
|
Claudia
Scott Welty
|
–
|
–
|
335
|
$11,167
|
|
1Pursuant to the LTIP terms, Ms.
Welty will not receive the Common Stock until six months after her
separation from service.
|
(a)
|
(b)
|
(c)
|
(d)
|
|
Name
|
Plan
Name
|
Number
of
Years
Credited
Service1
|
Present
Value of
Accumulated
Benefit2
|
|
Donald
J. Shippar
|
Minnesota
Power and Affiliated Companies
Retirement
Plan A
|
28.67
|
$941,571
|
|
Minnesota
Power and Affiliated Companies
Retirement
Plan B
|
1.08
|
$129,753
|
||
ALLETE
and Affiliated Companies
Supplemental
Executive Retirement Plan
|
28.00
|
$514,140
|
||
ALLETE
and Affiliated Companies
Supplemental
Executive Retirement Plan II
|
33.00
|
$2,845,412
|
||
Mark
A. Schober
|
Minnesota
Power and Affiliated Companies
Retirement
Plan A
|
28.67
|
$729,077
|
|
ALLETE
and Affiliated Companies
Supplemental
Executive Retirement Plan II
|
31.92
|
$526,101
|
||
Alan
R. Hodnik
|
Minnesota
Power and Affiliated Companies
Retirement
Plan A
|
11.75
|
$151,167
|
|
Minnesota
Power and Affiliated Companies
Retirement
Plan B
|
12.75
|
$365,855
|
||
ALLETE
and Affiliated Companies
Supplemental
Executive Retirement Plan II
|
27.75
|
$203,942
|
||
Deborah
A. Amberg
|
Minnesota
Power and Affiliated Companies
Retirement
Plan A
|
16.17
|
$160,021
|
|
ALLETE
and Affiliated Companies
Supplemental
Executive Retirement Plan II
|
19.33
|
$98,003
|
||
Robert
J. Adams
|
Minnesota
Power and Affiliated Companies
Retirement
Plan A
|
19.67
|
$217,320
|
|
ALLETE
and Affiliated Companies
Supplemental
Executive Retirement Plan II
|
22.92
|
$97,554
|
||
Claudia
Scott Welty
|
Minnesota
Power and Affiliated Companies
Retirement
Plan A
|
27.67
|
$797,336
|
|
ALLETE
and Affiliated Companies
Supplemental
Executive Retirement Plan
|
25.92
|
$173,041
|
||
ALLETE
and Affiliated Companies
Supplemental
Executive Retirement Plan II
|
30.75
|
$303,003
|
|
1
The amounts in column (c) for SERP II reflect actual years of
service with the Company. Credited service under Retirement Plan A (as
defined below) stopped on September 30, 2006 and under SERP I stopped on
December 31, 2004. Mr. Shippar and Mr. Hodnik’s credited service under
Retirement Plan B (as defined below) reflects the actual time that they
were active participants in Retirement Plan
B.
|
|
2
The amounts shown in column (d) represent the discounted net
present values of the annual annuity payments to which the Named Executive
Officers would be entitled at retirement assuming they retire at age 62,
the earliest age at which Named Executive Officers may receive unreduced
pension benefits. In addition to retirement age, the following assumptions
were used to calculate the present value of accumulated benefits: discount
rate of 5.81 percent; cost of living adjustment of 2.5 percent; and
female spouses are assumed to be three years younger than male spouses.
The amounts reflect the accumulated pension benefits over the years of
credited service shown for each
plan.
|
[
|
0.8%
|
×
|
years
of credited service from July 1, 1980
through
September 30, 2006
|
]
|
×
|
final
average earnings
|
|
plus
(for Named Executive Officers hired before July 1,
1980)
|
|||||||
[
|
10%
|
+
|
(1%
× years of credited service
prior
to July 1, 1980)
|
]
|
×
|
final
average earnings
|
[
|
10%
|
+
|
(1%
× years of credited service)
|
]
|
×
|
final
average earnings
|
[
|
0.8%
|
×
|
years
of credited service from July 1, 1980
through
retirement or termination date
|
]
|
×
|
SERP
final average earnings
|
|
plus
(for Named Executive Officers hired before July 1,
1980)
|
|||||||
[
|
10%
|
+
|
(1%
× years of credited service
prior
to July 1, 1980)
|
]
|
×
|
SERP
final average earnings
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
|
Name
|
Plan
Name
|
Executive
Contributions
in
20091
|
Company
Contributions
in
20092
|
Aggregate
Earnings
in
20093
|
Aggregate
Balance as of
December
31,
20094
|
|
Donald
J.
Shippar
|
ALLETE
and Affiliated Companies Supplemental
Executive
Retirement Plan
|
$0
|
$0
|
$33,849
|
$414,279
|
|
ALLETE
and Affiliated Companies Supplemental
Executive
Retirement Plan II
|
$16,800
|
$70,046
|
$57,441
|
$729,119
|
||
Minnesota
Power and Affiliated Companies
Executive
Investment Plan II
|
$0
|
$0
|
$12,414
|
$201,357
|
||
Mark
A.
Schober
|
ALLETE
and Affiliated Companies Supplemental
Executive
Retirement Plan
|
$0
|
$0
|
$118,751
|
$720,791
|
|
ALLETE
and Affiliated Companies Supplemental
Executive
Retirement Plan II
|
$71,459
|
$13,624
|
$15,199
|
$927,057
|
||
Minnesota
Power and Affiliated Companies
Executive
Investment Plan II
|
$0
|
$0 |
$5,609
|
$95,257
|
||
Alan
R.
Hodnik
|
ALLETE
and Affiliated Companies Supplemental
Executive
Retirement Plan
|
$0
|
$0
|
$32,780
|
$173,064
|
|
ALLETE
and Affiliated Companies Supplemental
Executive
Retirement Plan II
|
$0
|
$7,514
|
$10,624
|
$72,695
|
||
Deborah
A.
Amberg
|
ALLETE
and Affiliated Companies Supplemental
Executive
Retirement Plan
|
$0
|
$0
|
$19,010
|
$224,270
|
|
ALLETE
and Affiliated Companies Supplemental
Executive
Retirement Plan II
|
$6,836
|
$9,213
|
$50,062
|
$278,731
|
||
Robert
J.
Adams
|
ALLETE
and Affiliated Companies Supplemental
Executive
Retirement Plan
|
$0
|
$0
|
$14,417
|
$60,508
|
|
ALLETE
and Affiliated Companies Supplemental
Executive
Retirement Plan II
|
$0
|
$0
|
$5,750
|
$28,311
|
||
Claudia
Scott
Welty
|
ALLETE
and Affiliated Companies Supplemental
Executive
Retirement Plan
|
$0
|
$0
|
$85,442
|
$571,314
|
|
ALLETE
and Affiliated Companies Supplemental
Executive
Retirement Plan II
|
$0
|
$0
|
$16,607
|
$963,112
|
|
1The
amounts shown in column (c) include the following amounts: (i) salary
earned and deferred in 2009 that was also reported in column (c) of the
Summary Compensation Table on page 31: Mr. Shippar—$16,800 and Mr.
Schober—$55,000; and (ii) compensation that was earned and deferred in
2009 that was also reported in column (f) of the 2009 Summary Compensation
Table: Mr. Schober—$16,459 and Ms.
Amberg—$6,836.
|
|
2Amounts
shown in column (d) reflect compensation that was earned and deferred in
2009 that was also reported in column (h) of the Summary Compensation
Table.
|
|
3The
amounts shown in column (e) represent unrealized and realized earnings,
including above-market interest earned in 2009 on nonqualified deferral
balances, which was also reported in column (g) of the Summary
Compensation Table as follows: Mr. Shippar—$1,208 and Mr. Schober—$535.
Above-market interest was calculated using a 5.61 percent rate of return,
which exceeds 120 percent of the applicable federal long-term rate of 4.17
percent.
|
|
4
The aggregate balance shown for the SERP II includes
compensation that was previously earned and reported in 2007 and 2008
on the Summary Compensation Table as follows: Mr. Shippar—$223,979, Mr.
Schober—$267,832, Ms. Amberg—$105,071, and Ms. Welty—$360,941.
These amounts have since been adjusted for investment performance (i.e.,
earnings and losses) and deferrals credited during 2009. The aggregate
balances shown for the SERP I and the Minnesota Power and Affiliated
Companies Executive Investment Plan II include compensation that was
previously earned and reported in the Summary Compensation Table prior to
2007 and have since been adjusted for investment performance (i.e.,
earnings and losses).
|
|
•
Acquisition by any person, entity, or group acting together of more than
50 percent of the total fair market value or total voting power of the
Company’s Common Stock;
|
|
•
Acquisition in any 12-month period of 40 percent or more of the Company’s
assets by any person, entity, or group acting
together;
|
|
• A
majority of members of the Board of Directors is replaced during any
12-month period.
|
Payments
|
Mr.
Shippar
|
Mr.
Schober
|
Mr.
Hodnik
|
Ms.
Amberg
|
Mr.
Adams
|
Ms.
Welty10
|
Severance
|
$2,240,000
|
$996,875
|
$1,087,500
|
$792,582
|
$427,050
|
$0
|
Annual
Incentive Plan1
|
0
|
0
|
0
|
0
|
0
|
0
|
Unvested
Stock Options2
|
0
|
0
|
0
|
0
|
0
|
0
|
Performance
Shares3
|
561,212
|
148,098
|
126,564
|
107,524
|
69,102
|
0
|
Unvested
Restricted Stock Units4
|
45,552
|
20,056
|
30,779
|
13,371
|
10,012
|
0
|
SERP
II Pension5
|
400,328
|
129,494
|
63,821
|
0
|
0
|
0
|
SERP
II Defined Contribution6
|
175,117
|
34,060
|
18,784
|
23,032
|
4,334
|
0
|
Benefits7
|
46,909
|
41,703
|
39,704
|
39,559
|
23,022
|
0
|
Outplacement
Services8
|
25,000
|
25,000
|
25,000
|
25,000
|
25,000
|
0
|
Excise
Tax & Gross-Up9
|
1,307,398
|
552,169
|
584,425
|
0
|
0
|
0
|
Total
Payments
|
$4,801,516
|
$1,947,455
|
$1,976,577
|
$1,001,068
|
$558,520
|
$0
|
|
1
Because the performance period ended on December 31, 2009, no
acceleration of benefits would have occurred under this
scenario.
|
|
2
The award values for stock options were calculated based on the
difference between the option exercise price and the $32.68 closing price
of Common Stock on December 31,
2009.
|
|
3
Outstanding performance shares for the performance periods
2007—2009, 2008—2010, and 2009—2011 would be accelerated under this
scenario. The amounts shown assume that target TSR performance would be
used to calculate the award payout for the 2007—2009, 2008—2010, and
2009—2011 performance periods; all amounts were calculated based on the
$32.68 closing share price of Common Stock on December 31,
2009.
|
|
4
The award values for restricted stock units were calculated based
on the $32.68 closing price of Common Stock on December 31,
2009.
|
|
5
Ms. Amberg and Mr. Adams would not be eligible for retirement
benefits even after being credited with an additional 2.5 and 1.5 years of
service, respectively.
|
|
6
The amounts shown reflect 2.5 years and 1.5 years, as applicable,
of SERP II defined contribution
benefits.
|
|
7
The amounts shown reflects the value of (i) medical, dental, and basic
group term life insurance benefit premiums, (ii) Company
contributions under the Flexible Benefit Plan that the Named Executive
Officers would have received had they remained in the employ of the
Company after their termination for an additional 2.5 years or, in the
case of Mr. Adams, an additional 1.5
years.
|
|
8
The Company will pay outplacement service providers directly up to
the amount shown for the cost of outplacement services provided to the
Named Executive Officers. No amount will be paid unless the Named
Executive Officers choose to utilize outplacement services within the time
frame specified in the Severance
Plan.
|
|
9
Mr. Shippar, Mr. Schober, and Mr. Hodnik would be subject to the
excise tax and eligible for a gross-up payment. The gross-up payment would
cover (i) the amount of federal excise taxes, and (ii) the additional
income taxes resulting from payment of the
gross-up.
|
|
10
Because Ms. Welty retired, she was not eligible to receive
any payments upon a change in control on December 31,
2009.
|
Payments
|
Mr.
Shippar
|
Mr.
Schober
|
Mr.
Hodnik
|
Ms.
Amberg
|
Mr.
Adams
|
Ms.
Welty
|
Annual
Incentive Plan1
|
$0
|
$0
|
$0
|
$0
|
$0
|
$0
|
Unvested
Stock Options2
|
0
|
0
|
0
|
0
|
0
|
0
|
Performance
Shares3
|
166,323
|
46,218
|
22,277
|
30,812
|
19,494
|
30,808
|
Unvested
Restricted Stock Units4
|
45,552
|
20,056
|
30,779
|
13,371
|
10,012
|
10,938
|
Total
Payments
|
$211,875
|
$66,274
|
$53,056
|
$44,183
|
$29,506
|
$41,746
|
|
1Because
the performance period ended on December 31, 2009, no acceleration of
benefits would have occurred under this
scenario.
|
|
2
The award values for stock options were calculated based on the
difference between the option exercise price and the $32.68 closing share
price of Common Stock on December 31,
2009.
|
|
3
Outstanding performance shares for the performance periods
2007—2009, 2008—2010, and 2009—2011 would be earned on a prorated basis
under this scenario if TSR performance goals are achieved at the
conclusion of the three-year performance period. The amounts shown assume
performance shares would be earned for the 2009—2011 performance period
based on TSR performance of 83.3 percent of target through December 31,
2009. The amounts shown assume no performance shares were or would be
earned for the 2008—2010 performance period because TSR performance for
this performance period as calculated through December 31, 2009 was below
the threshold performance level. The amounts shown reflect no performance
share amount for the performance period 2007—2009 because TSR performance
was below the threshold performance level and as a result, the performance
shares were forfeited. Award values were based on the $32.68 closing price
of Common Stock on December 31,
2009.
|
|
4
The award values for restricted stock units were calculated and
prorated based on the $32.68 closing share price on December 31,
2009.
|
Mr.
Shippar
|
Mr.
Schober
|
Mr.
Hodnik
|
Ms.
Amberg
|
Mr.
Adams
|
Ms.
Welty2
|
|
Additional
SERP II Benefit1
|
$0
|
$0
|
$11,150
|
$158,901
|
$138,486
|
$0
|
|
1 The
amounts shown represent the difference between the discounted net present
values of the annual annuity payments to which the Named Executive
Officers would be entitled upon a termination of employment occurring on
December 31, 2009, and at normal retirement age. The following assumptions
were used to calculate the amounts shown above: Each Named Executive
Officer became disabled on December 31, 2009, and remained on disability
until reaching normal retirement age; discount rate of 5.81 percent; cost
of living adjustment of 2.5 percent; and female spouses are assumed to be
three years younger than male spouses.
|
|
2
Because Ms. Welty retired, she was not eligible to receive any
additional SERP II benefit.
|
(a)
|
(b)
|
(c)
|
(d)
|
(e)
|
(f)
|
Name
|
Fees Earned
or
Paid in
Cash1
|