Exhibit (10)-1
SENIOR OFFICER CHANGE IN CONTROL, SEVERANCE
AND NON-COMPETE AGREEMENT
THIS SENIOR OFFICER CHANGE IN CONTROL, SEVERANCE AND NON-COMPETE
AGREEMENT (the "Agreement") is made as of this 18th day of July,
2000 between WISCONSIN ENERGY CORPORATION (the "Company") and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ (the "Executive").
The Executive is currently the Chief Executive Officer, President
and Chairman of the Board of Directors of the Company (the
"Board") and the Board wishes to encourage the Executive to
continue to devote his time and attention to pursuit of Company
matters without distractions relating to his employment security.
In consideration of the terms and conditions set forth below, the
parties agree as follows:
1. Defined Terms. All of the capitalized terms used in this
Agreement are defined in the attached Appendix.
2. Purpose of Agreement. This Agreement is intended to provide
the Executive with certain minimum compensation rights in the
event of his termination of employment under certain
circumstances as set forth herein and to provide for a
non-compete agreement from the Executive.
3. Obligation of the Company on a Covered Termination of
Employment Associated with a Change in Control. In the event of
a Covered Termination of Employment Associated with a Change in
Control, then the Company shall provide the Executive with the
following compensation and benefits:
(a) General Compensation and Benefits. The Company shall
pay the Executive's full salary to the Executive from the
time notice of termination is given through the date of
termination of employment at the rate in effect at the time
such notice is given or, if higher, at an annual rate not
less than twelve times the Executive's highest monthly base
salary for the twelve-month period immediately preceding the
month in which the Effective Date occurs, together with all
compensation and benefits payable to the Executive through
the date of termination of employment under the terms of any
compensation or benefit plan, program or arrangement
maintained by the Company during such period. Such payments
shall be made in a lump sum not later than ten business days
after such termination. The Company shall also pay the
Executive's normal post-termination compensation and
benefits to the Executive as such payments become due,
except that any normal cash severance benefits shall be
superseded and replaced entirely by the benefits provided
under this Agreement. Such post-termination compensation
and benefits shall be determined under, and paid in
accordance with, the Company's retirement, insurance and
other compensation or benefit plans, programs and
arrangements most favorable to the Executive in effect at
any time during the 180-day period immediately preceding the
Effective Date or, if more favorable to the Executive, those
provided generally at any time after the Effective Date to
executives of the Company of comparable status and position
to the Executive.
(b) Incentive Compensation. Notwithstanding any provision
of any cash bonus or incentive compensation plan of the
Company, the Company shall pay to the Executive, within ten
business days after the Executive's termination of
employment, a lump sum amount, in cash, equal to the sum of
(i) any bonus or incentive compensation which has been
allocated or awarded to the Executive for a fiscal year or
other measuring period under the plan that ends prior to the
date of termination of employment, but which has not yet
been paid, and (ii) a pro rata portion of the Highest Bonus
Amount for all uncompleted periods under any bonus or
incentive compensation plan.
(c) Special Compensation. The Company shall pay to the
Executive a lump sum equal to three times the sum of (a) the
highest per annum base rate of salary in effect with respect
to the Executive during the three-year period immediately
prior to the termination of employment plus (b) the Highest
Bonus Amount. Such lump sum shall be paid by the Company to
the Executive within ten business days after the Executive's
termination of employment, unless the provisions of Section
3(e) below apply. The amount of the aggregate lump sum
provided by this Section 3(c), whether paid immediately or
deferred, shall not be counted as compensation for purposes
of any other benefit plan or program applicable to the
Executive.
(d) Special Retirement Plans Lump Sum. The Company shall
pay to the Executive an aggregate lump sum equal to the
total of the amounts described in (a) and (b) herein.
Amount (a) is a lump sum equal to the difference between (i)
the actuarial equivalent of the benefit under the Company's
tax-qualified pension plan, the Retirement Account Plan (the
"Retirement Plan"), the Supplemental Executive Retirement
Plan (the "SERP") and any applicable non-qualified pension
plan letter agreement (the "Letter Agreement") between the
Executive and the Company, which the Executive would receive
if his employment continued for a three-year period
following termination of employment, assuming that the
Executive's compensation during such three-year period would
have been equal to the Executive's salary as in effect
immediately before the termination or, if higher, as in
effect at any time during the 180-day period immediately
preceding the termination date, and the Highest Bonus
Amount, and (ii) the actuarial equivalent of the Executive's
actual benefit (paid or payable) under the Retirement Plan,
the SERP, and any Letter Agreement as of the termination
date. Actuarial equivalency for this purpose shall be
determined using an interest rate equal to the five-year
United States Treasury note yield in effect on the last
business day of the month prior to the date of termination
of employment as such yield is reported in the Wall Street
Journal or comparable publication, and the mortality table
used for purposes of determining lump sum amounts then in
use under the Retirement Plan. Amount (b) is a lump sum
equal to the total of (i) the additional contributions which
would have been made to the Executive's account under the
Company's tax-qualified 401(k) plan, plus (ii) the
additional contributions which would have been credited to
the bookkeeping account balance of the Executive
attributable to the 401(k) match feature of the EDCP, had
the Executive continued in employment for a three-year
period following termination of employment and assuming that
the Executive's compensation would have been the same as set
forth above and that the Executive had made maximum
utilization of the pre-tax and after-tax opportunity in the
qualified 401(k) plan and obtained the maximum matching
contributions in such plan. The amount of the aggregate
lump sum under this Section 3(d) shall be paid by the
Company to the Executive within ten business days after the
Executive's termination of employment, unless the provisions
of Section 3(e) below apply. The amount of the lump sum
provided by this Section 3(d) shall not be treated as
compensation for purposes of any other benefit plan or
program applicable to the Executive. An example of the
calculation of the aggregate lump sum amount provided by
this Section 3(d) is attached following the Appendix and is
made a part of this Agreement.
(e) Deferral Option. Notwithstanding any other provision
of this Agreement, the Executive may file a written
irrevocable deferral election form with the Company prior to
the first date on which a Change in Control of the Company
occurs electing to defer all or part of the special
compensation provided by Section 3(c) and the special
retirement plans lump sum otherwise provided for in Section
3(d). Such form shall irrevocably specify a method of
payment for such compensation from among the methods
allowable under the Company's Executive Deferred
Compensation Plan (the "EDCP"). Any deferred amounts shall
be credited with earnings in the same manner as the Interest
Rate Fund provided for in the EDCP or any other investment
alternative that may later become allowable under the EDCP
and the EDCP provisions shall apply to deferrals made
hereunder except that (i) any provisions for a mandatory
lump sum payment upon a "Change in Control" as defined in
the EDCP shall not apply to deferrals made hereunder, (ii)
any amounts which become payable under this Section 3(e)
shall be deemed for purposes of the EDCP to have become
payable on account of the Executive's "retirement," and
(iii) the entire amount deferred under this Section 3(e)
shall be paid in a lump sum by the Company immediately prior
to the occurrence of a Change in Control to such grantor or
"rabbi" trust as the Company shall have established as a
vehicle to hold such amount pending payment, but with such
trust designed so that the Executive's rights to payment of
such benefits are no greater than those of an unsecured
creditor.
(f) Welfare Benefits. Subject to Section 3(g) below, for a
three-year period following termination of employment, the
Company shall provide the Executive (and his family) with
health, life and other welfare benefits (but excluding
disability benefits) substantially similar to the benefits
received by the Executive (and his family) pursuant to
welfare benefit programs of the Company or its affiliates as
in effect immediately during the 180 days preceding the
Effective Date (or, if more favorable to the Executive, as
in effect at any time thereafter until the termination of
employment); provided, however, that no compensation or
benefits provided hereunder shall be treated as compensation
for purposes of any of the programs or shall result in the
crediting of additional service thereunder. For purposes of
determining the amount of such welfare benefits, any part of
which shall be based on compensation, the Executive's
compensation during the relevant three-year period shall be
deemed to be equal to the Executive's salary as in effect
immediately before the termination of employment or, if
higher, as in effect at any time during the 180-day period
immediately preceding the termination date, and the Highest
Bonus Amount. To the extent that any of the welfare
benefits covered by this Section 3(f) cannot be provided
pursuant to the plan or program maintained by the Company or
its affiliates, the Company shall provide such benefits
outside the plan or program at no additional cost
(including, without limitation, tax cost) to the Executive
and his family. The Executive shall be entitled to be
covered by a retiree medical and dental program at the end
of the relevant three-year period, at a cost to the
Executive not to exceed the lesser of the cost, if any,
charged to other retirees or the COBRA continuation premium
charged to terminees who elect to continue in the Company's
health plan at their expense under applicable law. The
Company shall become obligated to continue such benefits for
the remainder of the Executive's life and that of his
surviving spouse, notwithstanding any contrary provision or
power of amendment or termination reserved to the Company in
any otherwise applicable document.
(g) New Employment. If the Executive secures new
employment during the three-year period following
termination of employment, the level of any benefit being
provided pursuant to Section 3(f) hereof shall be reduced to
the extent that any such benefit is being provided by the
Executive's new employer. The Executive, however, shall be
under no obligation to seek new employment and, in any
event, no other amounts payable pursuant to this Agreement
shall be reduced or offset by any compensation received from
new employment or by any amounts claimed to be owed by the
Executive to the Company or its affiliates.
(h) Split-Dollar Life Insurance. Notwithstanding the
provisions of Section 3(f) above, the Company shall continue
to make premium payments on any split-dollar type life
insurance program in effect on the life of the Executive
during the 180 days preceding the Effective Date (or, if
more favorable to the Executive, as in effect at any time
thereafter until the termination of employment), in a manner
consistent with the past practices of the Company as to
timing and amount, until each policy has achieved paid-up
status.
(i) Equity Incentive Awards. Notwithstanding the
provisions in any stock option award, restricted stock award
or other equity incentive compensation award (the "Awards"),
the Executive shall become fully vested in all outstanding
Awards and all otherwise applicable restrictions shall lapse
and for purposes of determining the length of time the
Executive has to exercise rights, if applicable under any
such Award, the Executive shall be treated as if he had
retired from the service of the Company at or after age 55
and completion of ten years of service.
(j) Outplacement and Financial Planning. The Company
shall, at its sole expense as incurred, provide the
Executive with outplacement services, the scope and provider
of which shall be selected by the Executive in his sole
discretion (but at a cost to the Company of not more than
$30,000) or, at the Executive's option, the use of office
space, office supplies and equipment and secretarial
services for a period not to exceed one year. The Company
shall also continue to provide the Executive with financial
planning counseling benefits through the third anniversary
of the date of the Executive's termination of employment, on
the same terms and conditions as were in effect immediately
before the termination or, if more favorable, on the
Effective Date.
4. Obligation of the Company on a Covered Termination of
Employment Not Associated with a Change in Control of the
Company. In the event of a Covered Termination of Employment Not
Associated with a Change in Control of the Company, then the
Company shall provide the Executive with the same compensation
and benefits and subject to the same terms and conditions as are
specified in Section 3 above, but the tax gross-up provisions of
Section 5 hereof shall not apply. Further, the deferral election
for the Executive described in Section 3(e) above shall apply,
but only if the written irrevocable deferral form is filed with
the Company both prior to the expiration of thirty days from the
date this Agreement is signed by the Executive and prior to the
Executive's termination of employment.
5. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary
notwithstanding, and whether or not a Covered Termination of
Employment occurs, in the event it shall be determined that
any payment or distribution by the Company to or for the
benefit of the Executive (whether paid or payable or
distributed or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard to any
additional payments required under this Section 5) (a
"Payment") would be subject to the excise tax imposed by
Section 4999 of the Internal Revenue Code of 1986, as
amended (the "Code") or any interest or penalties are
incurred by the Executive with respect to such excise tax
(such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Executive shall be entitled to
receive an additional payment (a "Gross-Up Payment") in an
amount such that after payment by the Executive of all taxes
(including any interest or penalties imposed with respect to
such taxes), including, without limitation, any income taxes
(and any interest and penalties imposed with respect
thereto) and Excise Tax imposed on the Gross-Up Payment, the
Executive retains an amount of the Gross-Up Payment equal to
the Excise Tax imposed upon the Payments.
(b) Subject to the provisions of paragraph (c) of this
Section 5, all determinations required to be made under this
Section 5, including whether and when a Gross-Up Payment is
required and the amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such
determination, shall be made by a certified public
accounting firm designated by the Executive (the "Accounting
Firm"), which shall provide detailed supporting calculations
both to the Company and the Executive within fifteen
business days of the receipt of notice from the Executive
that there has been a Payment, or such earlier time as is
requested by the Company. In the event that the Accounting
Firm is serving as accountant or auditor for the individual,
entity or group effecting the Change in Control, the
Executive shall appoint another nationally recognized
accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to
as the Accounting Firm hereunder). All fees and expenses of
the Accounting Firm shall be borne solely by the Company.
Any Gross-Up Payment, as determined pursuant to this Section
5, shall be paid by the Company to the Executive within five
days of the receipt of the Accounting Firm's determination.
Any determination by the Accounting Firm shall be binding
upon the Company and the Executive. As a result of the
uncertainty in the application of Section 4999 of the Code
at the time of the initial determination by the Accounting
Firm hereunder, it is possible that Gross-Up Payments which
will not have been made by the Company should have been made
("Underpayment"), consistent with the calculations required
to be made hereunder. In the event that the Company
exhausts its remedies pursuant to paragraph (c) of this
Section 5 and the Executive thereafter is required to make a
payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred
and any such Underpayment shall be promptly paid by the
Company to or for the benefit of Executive.
(c) The Executive shall notify the Company in writing of
any claim by the Internal Revenue Service that, if
successful, would require the payment by the Company of the
Gross-Up Payment. Such notification shall be given as soon
as practicable but no later than ten business days after the
Executive is informed in writing of such claim and shall
apprise the Company of the nature of such claim and the date
on which such claim is requested to be paid. The Executive
shall not pay such claim prior to the expiration of the
thirty-day period following the date on which he gives such
notice to the Company (or such shorter period ending on the
date that any payment of taxes with respect to such claim is
due). If the Company notifies the Executive in writing
prior to the expiration of such period that it desires to
contest such claim, the Executive shall:
(i) give the Company any information reasonably
requested by the Company relating to such claim,
(ii) take such action in connection with contesting
such claim as the Company shall reasonably request in
writing from time to time, including, without
limitation, accepting legal representation with respect
to such claim by an attorney reasonably selected by the
Company.
(iii) cooperate with the Company in good faith in
order effectively to contest such claim, and
(iv) permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and pay
directly all costs and expenses (including additional
interest and penalties) incurred in connection with such
contest and shall indemnify and hold the Executive harmless,
on an after-tax basis, for any Excise Tax or income tax
(including interest and penalties with respect thereto)
imposed as a result of such representation and payment of
costs and expenses. Without limitation on the foregoing
provisions of this paragraph (c) of Section 5, the Company
shall control all proceedings taken in connection with such
contest and, at its sole option, may pursue or forego any
and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such
claim and may, at its sole option, either direct the
Executive to pay the tax claimed and ▇▇▇ for a refund or
contest the claim in any permissible manner, and the
Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court
of initial jurisdiction and in one or more appellate courts,
as the Company shall determine; provided, however, that if
the Company directs the Executive to pay such claim and ▇▇▇
for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and
shall indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto)
imposed with respect to such advance or with respect to any
imputed income with respect to such advance; and provided,
further, that any extension of the statute of limitations
relating to payment of taxes for the taxable year of the
Executive with respect to which such contested amount is
claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of the contest
shall be limited to issues with respect to which a Gross-Up
Payment would be payable hereunder and the Executive shall
be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any
other taxing authority.
(d) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to paragraph (c) of this
Section 5, the Executive becomes entitled to receive any
refund with respect to such claim, the Executive shall
(subject to the Company's complying with the requirements of
paragraph (c) of this Section 5) promptly pay to the Company
the amount of such refund (together with any interest paid
or credited thereon after taxes applicable thereto). If
after the receipt by the Executive of an amount advanced by
the Company pursuant to paragraph (c) of this Section 5, a
determination is made that the Executive shall not be
entitled to any refund with respect to such claim and the
Company does not notify the Executive in writing of its
intent to contest such denial of refund prior to the
expiration of thirty days after such determination, then
such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to
the extent thereof, the amount of Gross-Up Payment required
to be paid.
6. Termination of Employment. The Company shall be entitled to
terminate the Executive's employment on account of Disability
pursuant to the procedures set forth in Section (e) of the
Appendix, for Cause pursuant to the procedures set forth in
Section (a) of the Appendix, or without Cause by giving written
notice to the Executive of such termination. The Executive may
terminate his employment for Good Reason by giving the Company
written notice of the termination, setting forth in reasonable
detail the specific conduct of the Company that constitutes Good
Reason. A termination of employment by the Executive for Good
Reason shall be effective on the fifth business day following the
date such notice is given, unless the notice sets forth a later
date (which date shall in no event be later than thirty days
after the notice is given). In the event of a dispute regarding
whether the Executive's voluntary termination qualifies as a
termination for Good Reason, no claim by the Company that the
same does not constitute a termination for Good Reason shall be
given effect unless the Company establishes by clear and
convincing evidence that such termination does not constitute a
termination for Good Reason. The Executive may also terminate
his employment without Good Reason by giving the Company written
notice of such termination.
7. Obligations of the Company on Termination of Employment for
Death, Disability, for Cause or by the Executive Other than for
Good Reason. If the Executive's employment is terminated by
reason of his death or Disability (but not under the
circumstances covered by paragraph (c)(iv) of the Appendix), or
if such employment is terminated by the Company for Cause or by
the Executive other than for Good Reason, the Company will pay to
the Executive's estate or legal representative or to the
Executive, as the case may be, all accrued but unpaid base salary
and all other benefits and amounts which may become due in
accordance with the terms of any applicable benefit plan,
contract, agreement or practice, but no other compensation or
benefits will be paid under this Agreement.
8. Non-Compete Agreement. In consideration of this Agreement,
the Executive agrees that he will not, for a period of one year
from the date of his or her termination of employment with the
Company, directly or indirectly own, manage, operate, join,
control, be employed by, or participate in the ownership,
management, operation or control of, or be connected in any
manner, including but not limited to, holding the position of
shareholder, director, officer, consultant, independent
contractor, executive partner, or investor with any "Competing
Enterprise." For purposes of this paragraph, a "Competing
Enterprise" means any entity, firm or person engaged in a
business within the State of Wisconsin or the upper peninsula
area of the State of Michigan (the "Territory") which is in
competition with any of the businesses of the Company or any of
its subsidiaries within the Territory as of the date the
Executive's termination of employment, and whose aggregate gross
revenues, calculated for the most recently completed fiscal year
of the Competing Enterprise, derived from all such competing
activities within the Territory during such fiscal year, equal at
least 10% or more of such Enterprise's consolidated net revenues
for such fiscal year. If the Executive notifies the Company in
writing of any employment or opportunity which the Executive
proposes to undertake during the one year non-compete period, and
supplies the Company with any additional information which the
Company may reasonably request, the Company agrees to promptly
notify the Executive within thirty days after all information
reasonably requested by it has been provided, whether the Company
considers the proposed employment or opportunity to be prohibited
by these provisions and, if so, whether the Company is willing to
waive the same. Notwithstanding anything in this Section 8, the
Executive shall not be prohibited from acquiring or holding up to
2% of the common stock of an entity that is traded on a national
securities exchange or a nationally recognized over-the-counter
market.
9. Successors and Binding Agreements.
(a) The Company shall require any successor (whether direct
or indirect, by purchase, merger, consolidation,
reorganization or otherwise) and the direct and indirect
parent of any such successor, to all or substantially all of
the business and/or assets of the Company expressly to
assume and to agree to perform this Agreement in the same
manner and to the same extent the Company would be required
to perform if no succession had taken place. This Agreement
shall be binding upon and inure to the benefit of the
Company and any such successor, and such successor shall
thereafter be deemed the "Company" for the purposes of this
Agreement.
(b) This Agreement shall inure to the benefit of and be
enforceable by the Executive's respective personal or legal
representative, executor, administrator, successor, heirs,
distributees and/or legatees.
(c) Neither the Company nor the Executive may assign,
transfer or delegate this Agreement or any rights or
obligations hereunder except as expressly provided in this
Section. Without limiting the generality of the foregoing,
the Executive's right to receive payments hereunder shall
not be assignable or transferable, whether by pledge,
creation of a security interest or otherwise, other than by
a transfer by will or the laws of descent and distribution.
In the event the Executive attempts any assignment or
transfer contrary to this Section, the Company shall have no
liability to pay any amount so attempted to be assigned or
transferred.
10. Notices. All communications provided for herein shall be in
writing and shall be deemed to have been duly given when
delivered or five business days after having been mailed by
United States registered or certified mail, return receipt
requested, postage prepaid, addressed to the Company (to the
attention of the Secretary of the Company) at its principal
executive office and to the Executive at his/her principal
residence, or to such other address as any party may have
furnished to the other in writing in accordance herewith, except
that notices of a change of address shall be effective only upon
receipt.
11. Governing Law. The validity, interpretation, construction
and performance of this Agreement shall be governed by the laws
of the State of Wisconsin without giving effect to the principles
of conflict of laws of such state, except that Section 12 shall
be construed in accordance with the Federal Arbitration Act if
arbitration is chosen by the Executive as the method of dispute
resolution.
12. Settlement of Disputes; Arbitration; Attorneys' Fees. Any
dispute or controversy arising under or in connection with this
Agreement shall be settled, at the Executive's election, either
by arbitration in Milwaukee, Wisconsin in accordance with the
rules of the American Arbitration Association then in effect or
by litigation; provided, however, that in the event of a dispute
regarding whether the Executive's employment has been terminated
for Cause or whether the Executive's voluntary termination
qualifies as a termination for Good Reason, the evidentiary
standards set forth in this Agreement shall apply. Judgment may
be entered on the arbitrator's award in any court having
jurisdiction. The Company agrees to pay, as incurred, to the
fullest extent permitted by law, all legal fees and expenses that
the Executive may reasonably incur as a result of any contest
(regardless of outcome) by the Company, the Executive or others
of the validity or enforceability of or liability under, or
otherwise involving any provision of this Agreement.
13. Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement which
shall remain in full force and effect. If any provision of this
Agreement shall be held invalid or unenforceable in part, the
remaining portion of such provision, together with all other
provisions of this Agreement, shall remain valid and enforceable
and continue in full force and effect to the fullest extent
consistent with law.
14. Entire Agreement; Amendments. This Agreement constitutes
the entire understanding and agreement of the parties with
respect to the matters discussed herein and supersedes all other
prior agreements and understandings, written or oral, between the
parties with respect thereto including, without limitation, the
Senior Officer Change in Control Agreement dated July 29, 1999
between the parties. There are no representations, warranties or
agreements of any kind relating thereto that are not set forth in
this Agreement. This Agreement may not be amended or modified
except by a written instrument signed by the parties hereto or
their respective successors and legal representatives.
15. Withholding. The Company may withhold from any amounts
payable under this Agreement all federal, state and other taxes
as shall be legally required.
16. Certain Limitations. Nothing in this Agreement shall grant
the Executive any right to remain an executive, director or
employee of the Company or of any of its subsidiaries for any
period of time.
IN WITNESS WHEREOF, the parties have executed this Agreement on
the day and date first written above.
WISCONSIN ENERGY CORPORATION
By:/s/ ▇▇▇▇▇▇▇ ▇ ▇▇▇▇▇
-----------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
APPENDIX
This is an appendix to the Senior Officer Change in Control,
Severance and Non-Compete Agreement between WISCONSIN ENERGY
CORPORATION and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ dated July 18, 2000 (the
"Agreement").
As used in the Agreement, the terms set forth below shall have
the following meanings:
(a) "Cause" means:
(i) the willful and continued failure of the Executive to
substantially perform the Executive's duties (other than
failure resulting from incapacity due to physical or mental
illness), after a written demand for substantial performance
is delivered to the Executive by the Board of Directors of
the Company (the "Board"), or the Compensation Committee of
the Board (the "Committee") which specifically identifies
the manner in which the Board or the Committee or the
elected officer believes that the Executive has not
substantially performed the Executive's duties, or
(ii) the willful engaging by the Executive in illegal
conduct or gross misconduct which is determined by the Board
to have been materially and demonstrably injurious to the
Company. However, no act, or failure to act, on the
Executive's part shall be considered "willful" unless done,
or omitted to be done, by the Executive not in good faith
and without reasonable belief that his action or omission
was in the best interest of the Company.
The Executive may only be terminated for Cause if the Company
gives written notice to the Executive of its intention to
terminate the Executive's employment for Cause, setting forth in
reasonable detail the specific conduct of the Executive that it
considers to constitute Cause and the specific provision(s) of
this Agreement on which it relies, and stating the date, time and
place of the Special Meeting for Cause. The "Special Meeting for
Cause" means a meeting of the Board called and held specifically
for the purpose of considering the Executive's termination for
Cause, that takes place not less than ten and not more than
twenty business days after the Executive receives the notice of
termination for Cause. The Executive shall be given an
opportunity, together with counsel, to be heard at the Special
Meeting for Cause. The Executive's termination for Cause shall
be effective when and if a resolution is duly adopted by the
affirmative vote of at least two-thirds (_) of the entire
membership of the Board, excluding employee directors, at the
Special Meeting for Cause, stating that in the good faith opinion
of the Board, the Executive is guilty of the conduct described in
the notice of termination for Cause and that conduct constitutes
Cause under this Agreement. In the event of a dispute regarding
whether the Executive's employment has been terminated for Cause,
no claim by the Company that Cause exists shall be given effect
unless the Company establishes by clear and convincing evidence
that Cause exists.
(b) A "Change in Control" with respect to the Company shall be
deemed to have occurred if the event set forth in any one of the
following paragraphs shall have occurred:
(i) any Person is or becomes the Beneficial Owner, directly
or indirectly, of securities of the Company (not including
in the securities beneficially owned by such Person any
securities acquired directly from the Company or its
affiliates) representing 20% or more of the combined voting
power of the Company's then outstanding securities,
excluding any Person who becomes such a Beneficial Owner in
connection with a transaction described in clause (a) of
paragraph (iii) below; or
(ii) the following individuals cease for any reason to
constitute a majority of the number of directors then
serving: individuals who, on the date hereof, constitute
the Board and any new director (other than a director whose
initial assumption of office is in connection with an actual
or threatened election contest, including but not limited to
a consent solicitation, relating to the election of
directors of the Company) whose appointment or election by
the Board or nomination for election by the Company's
shareholders was approved or recommended by a vote of at
least two-thirds (_) of the directors then still in office
who either were directors on the date hereof or whose
appointment, election or nomination for election was
previously so approved or recommended; or
(iii) there is consummated a merger or consolidation of
the Company or any direct or indirect subsidiary of the
Company with any other corporation, other than (a) a merger
or consolidation immediately following which the directors
of the Company immediately prior to such merger or
consolidation continue to constitute at least a majority of
the board of directors of the Company, the surviving entity
or any parent thereof or (b) a merger or consolidation
effected to implement a recapitalization of the Company (or
similar transaction) in which no Person is or becomes the
Beneficial Owner, directly or indirectly, of securities of
the Company (not including in the securities Beneficially
Owned by such Person any securities acquired directly from
the Company or its affiliates) representing 20% or more of
the combined voting power of the Company's then outstanding
securities; or
(iv) the shareholders of the Company approve a plan of
complete liquidation or dissolution of the Company or there
is consummated an agreement (or series of related
agreements) for the sale or disposition by the Company of
all or substantially all of the Company's assets,
disregarding any sale or disposition to a company, at least
a majority of the directors of which were directors of the
Company immediately prior to such sale or disposition; or
(v) the Board determines in its sole and absolute
discretion that there has been a Change in Control of the
Company.
For purposes of this Change in Control definition, the terms
set forth below shall have the following meanings:
"Beneficial Owner" shall have the meaning set forth in Rule
13d-3 under the Exchange Act.
"Exchange Act" shall mean the Securities Exchange Act of
1934, as amended from time to time.
"Person" shall have the meaning given in Section 3(a)(9) of
the Exchange Act, as modified and used in Sections 13(d) and
14(d) thereof, except that such term shall not include (i)
the Company or any of its subsidiaries, (ii) a trustee or
other fiduciary holding securities under an employee benefit
plan of the Company or any of its affiliates, (iii) an
underwriter temporarily holding securities pursuant to an
offering of such securities, or (iv) a corporation owned,
directly or indirectly, by the stockholders of the Company
in substantially the same proportions as their ownership of
stock of the company.
(c) "Covered Termination of Employment Associated with a Change
in Control" means:
(i) a termination of employment by the Company other than
because of death or Disability and without Cause, which
occurs within a period of eighteen months following the
Effective Date or,
(ii) a termination of employment by the Company other than
because of death or Disability and without Cause within a
period of six months prior to the Effective Date, and it is
reasonably demonstrated by the Executive that such
termination of employment was at the request of a third
party who has taken steps reasonably calculated to effect a
Change in Control or otherwise arose in connection with or
in anticipation of a Change in Control, or
(iii) a termination of employment by the Executive for
Good Reason within a period of eighteen months following the
Effective Date and also subsequent to the occurrence,
without the Executive's written consent, of any event
described in Section (g) after the Effective Date, or a
termination of employment by the Executive within a period
of six months prior to the Effective Date and following the
occurrence without the Executive's consent of any event
described in Section (g)(i), (ii), (iii) or (iv) and it is
reasonably demonstrated by the Executive that such event
occurred at the request of a third party who has taken steps
reasonably calculated to effect a Change in Control or
otherwise arose in connection or in anticipation of a Change
in Control, or
(iv) a voluntary termination of employment by the Executive
without Good Reason following completion of one year of
service after a Change in Control of the Company, provided
that the voluntary termination must be effected by the
Executive within six months after the completion of that
one-year of service. Further, if the Executive gives
written notice to the Company any time after a Change in
Control of the Company but before completion of one year of
service thereafter that the Executive intends to so
voluntarily terminate and if the Executive should thereafter
die while in the employ of the Company or incur a
termination of employment because of Disability, in either
case before completion of such one year of service, such
death or termination of employment shall be treated as a
Covered Termination Associated with a Change in Control.
If within fifteen days after the Company notifies the Executive
that it is terminating his employment for Cause or the Executive
notifies the Company that he is terminating his employment for
Good Reason, the party receiving such notice notifies the other
party that a dispute exists concerning the termination, then for
purposes of this Section (c) the date of the Executive's
termination of employment shall not be deemed to have occurred
until the earlier of (i) the date that is 18 months following the
Effective Date or (ii) the date on which the dispute is finally
resolved, either by mutual written agreement of the parties or by
a final judgment, order or decree of an arbitrator or a court of
competent jurisdiction (which is not appealable or with respect
to which the time for appeal therefrom has expired and no appeal
has been perfected); provided, however, that the date of
termination shall be extended by a notice of dispute given by the
Executive only if such notice is given in good faith and the
Executive pursues the resolution of such dispute with reasonable
diligence.
If a purported termination occurs prior to or following a Change
in Control and the date of termination is extended in accordance
with the preceding paragraph, the Company shall continue to pay
the Executive the full compensation and benefits as are provided
in the first sentence of Section 3(a) of the Agreement until the
date of termination, as determined in accordance with the
preceding paragraph. Amounts paid under this Section (c) are in
addition to all other amounts due under the Agreement and shall
not be offset against or reduce any other amounts due under the
Agreement, other than amounts due under the first sentence of
Section 3(a) of the Agreement.
(d) "Covered Termination of Employment Not Associated with a
Change in Control of the Company" means:
(i) a termination of employment by the Company other than
because of death or Disability and without Cause, or
(ii) a termination of employment by the Executive for Good
Reason subsequent to the occurrence, without the Executive's
written consent, of any event described in Section (g).
(e) "Disability" means that the Executive has been unable, for a
period of 180 consecutive business days, to perform the material
duties of his job, as a result of physical or mental illness or
injury and that a physician selected by the Company or its
insurers and acceptable to the Executive or his legal
representative, has determined that the Executive's incapacity is
total and permanent. A termination of the Executive's employment
by the Company for Disability shall be communicated to the
Executive by written notice and shall be effective on the
thirtieth day after receipt of such notice by the Executive,
unless the Executive returns to full-time performance of his
duties before the expiration of such thirty-day period.
(f) "Effective Date" means the first date on which a Change in
Control of the Company occurs, except that if Section 4 of the
Agreement applies, the term shall mean the date immediately prior
to the Executive's termination of employment.
(g) "Good Reason" means:
(i) the assignment to the Executive of any duties
inconsistent, in the reasonable judgment of the Executive,
with the customary duties of a Chief Executive Officer of a
comparably sized company or any other action by the Company
that results in material reduction of the Executive's duties
and responsibilities, or
(ii) any reduction in the Executive's base salary or
percentage of base salary available as an incentive
compensation or bonus opportunity relative to those most
favorable to the Executive in effect at any time during the
180-day period prior to the Effective Date or to the extent
more favorable to the Executive, those in effect after the
Effective Date, or any failure by the Company to continue to
provide for the Executive's participation in the Company's
long-term incentive plans and programs on a basis
commensurate with other senior executives of the Company, or
reduction in any material element of the Executive's
compensation or benefits, or
(iii) the relocation of the Executive's principal place
of employment to a location more than 35 miles from the
Executive's principal place of employment immediately prior
to the Effective Date, or
(iv) the Company's requiring the Executive to travel on
Company business to a materially greater extent than was
required immediately prior to the Effective Date, or
(v) the failure by the Company to comply with Section 9(a)
of this Agreement.
(h) "Highest Bonus Amount" means the highest dollar bonus which
would result from three calculations, as follows: (i) the
highest percentage of base salary ever used with respect to the
calculation of the Executive's bonus during the three complete
fiscal years of the Company immediately preceding the termination
of employment or, if more favorable to the Executive, during the
three complete fiscal years of the Company immediately preceding
the Change in Control of the Company, multiplied times the
highest per annum base rate of salary in effect with respect to
the Executive during the three-year period immediately prior to
the termination of employment; (ii) the highest dollar bonus
earned by the Executive under any cash bonus or incentive
compensation plan of the Company during either of the three
complete fiscal year periods of the Company listed in (i) above,
whichever is more favorable to the Executive; or (iii) the
Executive's bonus or incentive compensation "target" for the
fiscal year in which the termination of employment occurs.