Exhibit (10)-4
SENIOR OFFICER CHANGE IN CONTROL AGREEMENT
This SENIOR OFFICER CHANGE IN CONTROL AGREEMENT (the "Agreement")
is entered into as of this 29th day of July, 1999 between
WISCONSIN ENERGY CORPORATION (the "Company") and XXXXXXX X. XXXXX
(the "Executive").
WHEREAS, the Executive is currently the Chief Executive Officer,
President and Chairman of the Board of the Company and the Board
of Directors of the Company (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; and
WHEREAS, the Company intends that this Agreement will provide the
Executive with certain minimum compensation rights in the event
of the termination of his employment under the circumstances set
forth herein;
NOW, THEREFORE, in consideration of the terms and conditions set
forth herein, 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 associated with a Change in Control of the
Company as set forth herein.
3. Obligation of the Company on a Covered Termination of
Employment. In the event of a Covered Termination of
Employment, 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 (12) times the
Executive's highest monthly base salary for the
12-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 Employer during such
period. Such payments shall be made in a lump sum not
later than five (5) 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normal cash severance benefits shall be superseded and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 Employer'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
Employer, the Company shall pay to the Executive,
within five (5) 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, or (ii) a
pro rata portion to the date of termination of
employment of the aggregate value of all contingent
bonus or incentive compensation awards to the Executive
for all uncompleted periods under the plan calculated
as to each such award as if the "target" with respect
to such bonus or incentive compensation award had been
attained.
(c) Special Compensation. The Company shall pay to the
Executive a lump sum equal to three (3) times the sum
of (a) the highest per annum base rate of salary in
effect with respect to the Executive during the 3-year
period immediately prior to the termination of
employment plus (b) the higher of (i) the highest
annual bonus or incentive compensation earned by the
Executive under any cash bonus or incentive
compensation plan of the Company during the three (3)
complete fiscal years of the Company immediately
preceding the termination of employment or, if more
favorable to the Executive, during the three (3)
complete fiscal years of the Company immediately
preceding the Change in Control of the Company; or (ii)
the Executive's bonus or incentive compensation
"target" for the fiscal year in which the termination
of employment occurs. Such lump sum shall be paid by
the Company to the Executive within five (5) days after
the Executive's termination of employment. Such lump
sum shall not be treated as compensation for purposes
of any other benefit plan or program applicable to the
Executive.
(d) Welfare Benefits. Subject to Section 3(e) below, for a
three (3) year period following termination of
employment, the Company shall provide the Executive
with health, disability, life and other welfare
benefits substantially similar to the benefits received
by the Executive pursuant to the Company's (or an
affiliated employer's) welfare benefit programs 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. To the extent that any of the
welfare benefits covered by this Section 3(d) 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. For purposes of
determining the eligibility of the Executive for any
retiree medical, dental and life insurance benefits
under the Company's (or any affiliated employer's)
welfare benefit plans, practices and policies, the
Executive shall be considered to have remained employed
and to have retired on the last day of a three (3) year
period following termination of employment.
(e) New Employment. If the Executive secures new
employment during the 3-year period following
termination of employment, the level of any benefit
being provided pursuant to Section 3(d) 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 any affiliated employer.
4.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 4) (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 4, all determinations required to be made under
this Section 4, 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 (15) 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 4, shall be paid by the
Company to the Executive within five (5) 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 4 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 30-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 4,
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 xxx 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 xxx 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 4, 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
4) 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 4, 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 (30) 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.
5. Termination of Employment. The Executive's employment shall
cease on his death while in the Company's employ. The
Company shall be entitled to terminate the Executive's
employment on account of Disability pursuant to the
procedures set forth in Section (d) 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
(5th) 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 30 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.
6. 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, 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 compensation
or benefits will be paid under this Agreement.
7. Successors and Binding Agreements.
(a) The Company shall require any successor (whether direct
or indirect, by purchase, merger, consolidation,
reorganization or otherwise) 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.
8. Notices. All communications provided for herein shall be in
writing and shall be deemed to have been duly given when
delivered or five (5) 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.
9. 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 10 shall be construed in accordance with the Federal
Arbitration Act if arbitration is chosen by the Executive as
the method of dispute resolution.
10. Settlement of Disputes; Arbitration. 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.
11. 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.
12. 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. 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.
13. Withholding. The Company may withhold from any amounts
payable under this Agreement all federal, state and other
taxes as shall be legally required.
14. 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.
15. IN WITNESS WHEREOF, the parties have executed this Agreement
on the day and date first written above.
WISCONSIN ENERGY CORPORATION
/s/Xxxxxxx X. Xxxxx /s/Xxxxxx X. Xxxxxxx
---------------------------- By:-----------------------------
XXXXXXX X. XXXXX Corporate Secretary
APPENDIX
This is an appendix to the Senior Officer Change in Control Agreement
between WISCONSIN ENERGY CORPORATION and XXXXXXX X. XXXXX dated July
29, 1999 (the "Agreement").
As used in the Agreement, the terms set forth below shall have the
following meanings:
(a) "Cause" means that the Executive shall, prior to any termination
of employment have:
(i) engaged in any act of fraud, embezzlement or theft in
connection with his duties for or in the course of his
employment by the Company or any of its affiliates;
(ii) wrongfully disclosed any confidential information of the
Company or any of its affiliates; or
(iii) engaged in willful misconduct in the performance of his
duties for the Company or any of its affiliates that was
intended to personally benefit the Executive; and in any
such case the act shall have been determined by the Board
to have been materially harmful to 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 Board Meeting for Cause. The "Special Board
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 (10) and not more than twenty (20) 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 Board Meeting for Cause. The Executive's
termination for Cause shall be effective when and if a
resolution is duly adopted at the Special Board Meeting
for Cause by affirmative vote of a majority of the entire
membership of the Board, excluding employee directors,
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) "Change in Control" with respect to the Company means the
occurrence of any of the following events, as a result of one
transaction or a series of transactions:
(i) any "person" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, but
excluding the Company, its affiliates and any qualified
or nonqualified plan maintained by the Company or its
affiliates) becomes the "beneficial owner" (as defined in
Rule 13(d) promulgated under such Act), directly or
indirectly, of securities of the Company representing
more than 20% of the combined voting power of the
Company's then outstanding securities;
(ii) individuals who constitute a majority of the Board
immediately prior to a contested election for positions
on the Board cease to constitute a majority as a result
of such contested election;
(iii) the Company is combined (by merger, share exchange,
consolidation, or otherwise) with another corporation and
as a result of such combination: (A) less than 60% of
the outstanding securities of the surviving or resulting
corporation are owned in the aggregate by the former
shareholders of the Company and (B) those individuals who
were directors of the Company immediately prior to such
transaction do not constitute a majority of the Board of
Directors of the surviving or resulting corporation
immediately after such transaction; or
(iv) the Company sells, leases, or otherwise transfers all or
substantially all of its properties or assets not in the
ordinary course of business to another person or entity
unless such sale, lease or transfer is pursuant to a plan
adopted by the Company to disaggregate its electric
generation, transmission or distribution assets.
These Change in Control provisions shall apply to successive Changes
in Control on an individual transaction basis.
(c) "Covered Termination of Employment" 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 (18) 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 (6) 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 (18) months following
the Effective Date and also subsequent to the occurrence,
without the Executive's written consent, of any event
described in Section (f) after the Effective Date, or, in
the case of an event described in Section (f)(i), (ii),
(iii) or (iv), such event occurs on or before the
Effective Date 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 (6) months after the
completion of that one-year of service.
(d) "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
30th 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 30-day period.
(e) "Effective Date" means the first date on which a Change in
Control of the Company occurs.
(f) "Good Reason" means:
(i) the assignment to the Executive of any duties
inconsistent with the customary duties of a Chief
Executive Officer or any other action by the Company that
results in a diminution in the Executive's position,
authority, duties or 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
(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 7(a) of
this Agreement.
