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                                                                   EXHIBIT 10.16

                       ANNUAL INCENTIVE COMPENSATION PLAN
                                       OF
                        OKLAHOMA GAS AND ELECTRIC COMPANY



I.      PURPOSE OF THE PLAN
        -------------------
         The purpose of the Annual  Incentive  Plan (the  "Plan") is to maximize
the efficiency and  effectiveness of the operations of Oklahoma Gas and Electric
Company (the "Company") by providing  incentive  compensation  opportunities  to
certain key executives and managers  responsible for operational  effectiveness.
The Plan is intended to encourage and reward the  achievement of certain results
critical to meeting the  Company's  operational  goals.  It is also  designed to
assist in the attraction and retention of quality employees, to link further the
financial interest and objectives of employees with those at the Company, and to
foster accountability and teamwork throughout the Company.

         This Plan is designed to provide incentive compensation  opportunities;
awards made under this Plan are in addition to base salary  adjustments given to
maintain market competitive salary levels.

         Annual awards will be determined by the  achievement  of annual Company
Objectives and Individual  Objectives subject to the parameters set forth in the
Plan.  Shortly  after the  beginning  of the Plan Year,  each  Participant  will
receive established Company Objectives and Individual  Objectives that should be
achievable,  measurable and  controllable.  Quarterly reports are expected to be
developed and presented at review meetings to monitor  progress on achieving the
established objectives.

II.      DEFINITIONS
         -----------
         When used in the Plan,  the following  words and phrases shall have the
following meanings:

         "Plan" means the Annual Incentive Compensation Plan of the Company.
          ----

         "Company" means Oklahoma Gas and Electric  Company,  its successors and
          -------
         assigns, and each of its subsidiaries,  if any, designated by the Board
         for participation in this Plan.

         "Base  Salary"  means the actual base salary in effect at the beginning
          ------------
         of the Plan Year as shown in the personnel  records of the Company and,
         for a Participant  who is added to the Plan during a Plan Year pursuant
         to Article  XII, his or her base salary in effect at the time he or she
         becomes a Participant as shown in the personnel records of the Company.

         "Board"  means the Board of  Directors  of  Oklahoma  Gas and  Electric
          ----- 
         Company.

         "Committee" means the Compensation  Committee of the Board or any other
          ---------
         Committee of the Board designated by resolution of the Board to perform
         certain administrative functions under the Plan.


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         "Maximum" means the maximum level of performance of Company  Objectives
          -------
         that is judged  acceptable  or  standard  by the Board,  above which no
         additional   awards  are  paid  under  the  Plan   related  to  Company
         Objectives.

         "Participant"  means any  officer,  executive  or key  employee  of the
          -----------
         Company  selected  by the  Board to  receive  an award  under the Plan.
         Members of the Board who are not  employed on a full-time  basis by the
         Company are not eligible to receive awards under the Plan.

         "Incentive  Amount"  means the amount the  Participant  is  eligible to
          -----------------
         receive as an award under the Plan.  The Incentive  Amount is expressed
         as a percentage of Base Salary.

         "Performance Criteria" means those financial, operational or individual
          --------------------
         performance  measures that are selected each Plan Year by the Committee
         and used to determine awards under the Plan. Performance Criteria shall
         consist of Company  Objectives,  which shall be financial  and/or other
         goals  established  for  measuring  performance  by  the  Company,  and
         Individual  Objectives,  which shall be individual goals and objectives
         for measuring performance by a Participant.

         "Payout  Schedule" means the Incentive Amount that will be paid to each
          ----------------
         Participant  at  various  levels  of  actual   performance  of  Company
         Objectives when compared to Target performance.

         "Performance Matrix" means the chart approved by the Board that is used
          ------------------
         to determine the  percentage  of each  Participant's  Incentive  Amount
         which  the  Participant  will  actually  receive  as a  result  of  the
         attainment of Company Objectives.

         "Target" means the level of performance of Company  Objectives  that is
          ------
         judged  acceptable  or  standard by the Board,  based on  predetermined
         objectives.  With actual  performance  of Company  Objectives  equal to
         Target, 100% of the Target Pool is funded for each year of the Plan.

         "Target Pool" means the aggregate  pool of cash that may be distributed
          -----------
         to all  Participants.  This pool will be funded at the 100%  level when
         the Target has been 100% achieved and will be funded at lower or higher
         amounts  based on the actual  performance  of the  Company  Objectives.
         Funding of the Target  Pool will be based  solely on  consolidated  net
         income for the Company.

         "Threshold"   means  the  minimum  level  of   performance  of  Company
          ---------
         Objectives  that is judged  acceptable or standard by the Board,  below
         which no awards shall be paid from the Plan. It is understood that this
         Threshold may be adjusted up or down in the future to reflect  changing
         business conditions and investor requirements.

         "Plan Year" means a fiscal year beginning January 1 and ending December
          ---------
          31.

III.     ADMINISTRATION OF THE PLAN
         --------------------------
         The Plan shall be  administered by the Committee to the extent provided
herein.  Subject to the  provisions of the Plan,  the Board shall have exclusive
authority to amend, modify, suspend or terminate the Plan at any time.

         At the  beginning  of each Plan Year,  the CEO of the Company will make
recommendations  to  the  Committee  regarding  Participants,  size  of  awards,
Performance  Criteria,  the Payout  Schedule  and the


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Performance  Matrix.  The  Committee  will  consider  and  approve or modify the
recommendations as appropriate,  subject to the final approval of the Board, and
will select  Individual  Objectives  for the CEO. At the conclusion of each Plan
Year, the CEO of the Company (along with one or more officers  designated by the
CEO) will present to the Committee a schedule  indicating actual performance and
the recommended award. The Committee will review the recommendations and approve
or modify the  recommendations as presented.  Payment to Participants is subject
to final approval of the Board.

IV.      PERFORMANCE CRITERIA
         --------------------
         The Company  Objectives to be used to measure actual performance by the
Company for establishing award opportunities in the Plan shall be established by
the Board.  The Board will also establish a Target level of performance for each
Company  Objective  as well as the  Threshold  level  of  performance  which  is
required  before  any  awards  are  paid  under  the  Plan.  In  addition,  each
Participant  shall have the opportunity to have his or her award adjusted upward
or  downward  by as  much  as  20%  based  upon  the  attainment  of  Individual
Objectives.

         The Company  Objectives  shall relate to the achievement of established
financial objectives for the Company. The Individual  Objectives shall relate to
the level of the Participant's  overall performance during the Plan Year, taking
into consideration the attainment of established individual goals and objectives
as well as other relevant aspects of performance.

V.       DETERMINATION OF AWARDS
         -----------------------
         As soon as practicable  after the end of each Plan Year, the Committee,
upon recommendation of the CEO of the Company, will determine the actual funding
for the Target Pool.  This actual level of funding will then be  distributed  to
the  Participants  in any manner  determined  to be  reasonable  and  equitable,
subject  to the  pre-determined  Payout  Schedule,  a form of  which is shown in
Schedule A. The percentage of the award paid out based on performance of Company
Objectives  is determined by using the  Performance  Matrix,  a form of which is
shown in Schedule B. When actual  performance  of Company  Objectives  is either
above or below the Target,  funds available for payouts to all Participants will
be increased or decreased to reflect actual performance. There is no requirement
that all funds  from the Target  Pool must be  distributed  each year;  however,
funds that are not  distributed  will not be carried  over to future Plan Years;
they will simply be restored to the consolidated net income of the Company.

         In  recommending  how awards are to be  distributed  each year, the CEO
should  consider the  Performance  Criteria that were  established  for the Plan
Year, and measure the degree of achievement of each of these criteria. It is not
the intent of the Plan that  awards be made on a  discretionary  basis;  rather,
awards  should  be made  from the pool on the  basis of  measurable  performance
compared to the pre-set Performance  Criteria.  In unusual  situations,  the CEO
shall also  consider  the  awarding of special  bonus  awards for  extraordinary
performance  by an  individual.  Any such bonus  award must be  approved  by the
Board.

VI.      COMPANY THRESHOLD, TARGET AND MAXIMUM
         -------------------------------------
         The Board will  establish a Company  Threshold,  Target and Maximum for
each Plan Year.  When actual  Company  performance  is below the  Threshold,  no
payments  of  awards  will be made  under  the Plan,  regardless  of  individual
performance.  In addition to this Threshold limit,  total awards under this Plan


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cannot exceed 1% of annual  consolidated net income of the Company in any single
year without the express approval of the Board.

VII.     REVISED AWARD LEVELS AND PERFORMANCE CRITERIA
         ---------------------------------------------
         For  Participants  who are  assigned to  different  position  levels or
transferred  between Company business units during the Plan Year, the Board may,
at any  time,  and  upon  recommendation  of the CEO of the  Company,  establish
revised award levels and Individual Objectives for that Participant.

VIII.    FORM OF PAYMENT
         ---------------
         All  awards  under  the  Plan  will be paid in cash,  in one lump  sum,
subject to such payroll taxes and other deductions,  if any, as may be in effect
at the time of payment.

IX.      TIMING OF PAYMENT
         -----------------
         All awards  will be paid as soon as  practicable  following  the end of
each Plan Year and the approval by the Board of actual awards.

X.       ADJUSTMENTS
         -----------
         Subject  to Article  VII,  the Board may not  retroactively  change any
Performance Criteria, Targets, Payout Schedules,  Performance Matrix, Threshold,
Maximum,  or participation  levels for a Plan year,  except as and to the extent
determined  by the Board in the event of  changes  in  accounting  practices  or
extraordinary or unanticipated  circumstances which could have a material effect
on the achievement of Performance Criteria.

XI.      TERMINATION, DEATH OR DISABILITY
         --------------------------------
         A Participant  who terminates  employment  due to death,  disability or
normal  retirement will be paid a pro-rata  portion of any award based on his or
her date of termination.  Such prorated  payment will be made at the time and in
the form  that all  payments  are  normally  made to all other  Participants.  A
Participant whose employment terminates for any other reason prior to the end of
the Plan Year  shall  forfeit  any and all  awards  and  payouts  from the Plan,
whether  terminated by the Company or voluntarily.  Such payments may be made at
the  discretion  of the  Board,  however,  based  on the  circumstances  of each
termination.

XII.     NEW PARTICIPANTS
         ----------------
         New  participants  may be added to the Plan at any time during the Plan
Year.  Awards for new  Participants  will be prorated  from date of promotion or
hire, except as otherwise determined by the Board.

XIII.    MISCELLANEOUS
         -------------
         No  Participant  shall have the right to  anticipate,  alienate,  sell,
transfer,  assign, pledge or encumber his or her right to receive any award made
under the Plan until such an award becomes payable to him or her.

 
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        No  Participant  shall  have any lien on any  assets of  the  Company by
reason of any award made under the Plan.

         The adoption of the Plan or any  modification or amendment  hereof does
not imply any commitment to continue or adopt the same plan, or any modification
thereof,  or any other plan for incentive  compensation for any succeeding year,
provided,  that no such  modification or amendment shall adversely affect rights
to receive any amount to which  Participants  have become entitled prior to such
modifications and amendments. Neither the Plan nor any award made under the Plan
shall create any employment contract between the Company and any Participant.

         No  Participant  or other employee shall at any time have a right to be
selected for  participation  in the Plan for any Plan Year,  despite having been
selected  for  participation  in a prior Plan  Year.  Nothing in this Plan shall
interfere  with or limit in any way the right of the  Company to  terminate  any
Participant's  employment at any time, nor confer upon any Participant any right
to continue in the employ of the Company.

         All  determinations  of the  Committee  or the Board as to any disputed
questions  arising  under the Plan,  including  questions  of  construction  and
interpretation, shall be final, binding and conclusive upon all Participants and
all other persons and shall not be reviewable.

         Each  Participant  shall be provided with a Plan description and a Plan
agreement for each Plan Year which shall include Company  Objectives,  Incentive
Amount,  Individual  Objectives  and a Performance  Matrix for each year. In the
event of a conflict  between the terms of the Plan description and the Plan, the
terms of the Plan shall control unless the Board decides otherwise.

         This Plan shall be binding on the successors of the Company.



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SCHEDULE A

FORM OF PAYOUT SCHEDULE



                                       Annual Incentive Payout Targets
                                       (Percent of Base Salary)

         Position                      Minimum          Target          Maximum

Chairman, President and CEO             ----%            ----%           ----%

EVP and COO                             ----%            ----%           ----%

SVP, VP, Controller                     ----%            ----%           ----%

Secretary                               ----%            ----%           ----%

Salary Grade E9                         ----%            ----%           ----%

Salary Grade E8                         ----%            ----%           ----%

Other Salary Grades                     ----%            ----%           ----%


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SCHEDULE B

FORM OF PERFORMANCE MATRIX


"A"








"B"
          Chart to  include % payouts  of  Incentive  Awards  based on  combined
          performance of objectives "A" and "B"












Notes:

        "A"     This line  across the top of the matrix will  include  levels of
                performance of a Company Objective, such as earnings per share.

        "B"     This line on the left side of the matrix will include  levels of
                performance of a different Company objective.



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                              AMENDMENT NUMBER ONE

                                     TO THE
                      ANNUAL INCENTIVE COMPENSATION PLAN OF
                        OKLAHOMA GAS AND ELECTRIC COMPANY


         Oklahoma  Gas  and  Electric  Company,  an  Oklahoma  corporation  (the
"Company"),  in accordance  with the  authority  contained in Aticle XIII of the
Annual  Compensation  Plan of Oklahoma  Gas and Electric  Company (the  "Plan"),
hereby amends the Plan, effective as of the effective date of the reorganization
of  the  Company  and  its  affiliates   (whereby  the  Company  will  become  a
wholly-owned subsidiary of OGE Energy Corp.), as follows:

         1.       The Annual  Incentive  Compensation  Plan of Oklahoma  Gas and
                  Electric  Company  is  hereby  renamed  the  Annual  Incentive
                  Compensation Plan of OGE Energy Corp.

         2.       The   references  to  "Oklahoma  Gas  and  Electric   Company"
                  contained  in Article I of the Plan is hereby  amended to tead
                  "OGE Energy Corp."

         3.       The reference to "Oklahoma Gas and Electric Company" contained
                  in the  definition  of  "Board"  in  Article II of the Plan is
                  hereby amended to read "OGE Energy Corp."

         4.       The  definition  of  "Company"  in  Article  II of the Plan is
                  hereby amended to read as follows:

                  " `Company' means OGE Energy Corp.,  its subsidiary,  Oklahoma
                     -------              
                  Gas and  Electric  Company,  and any  domestic  subsidiary  or
                  division of these  entities,  as  designated  by the Board for
                  participation  in the Plan, and any successor or assign of OGE
                  Energy Corp."

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