Exhibit 10(a)(1)
EMPLOYMENT CONTRACT
THIS CONTRACT by and between Upper Peninsula Power Company, a
Michigan corporation (the "Company"), and Xxxxxxxx X. Xxxxxx (the
"Executive"), dated as of the 10th day of July , 1997.
WHEREAS, WPS Resources Corporation ("WPS") and Upper Peninsula
Energy Corporation, a Michigan corporation (collectively, the "Merger
Parties"), have entered into an Agreement and Plan of Merger dated as of
July 10, 1997 (the "Merger Agreement"); and
WHEREAS, the Merger Parties wish to provide for the orderly
succession of management of the Company following the Effective Time (as
defined in the Merger Agreement); and
WHEREAS, the Merger Parties further wish to provide for the
employment by the Company of the Executive, and the Executive wishes to
serve the Company, in the capacities and on the terms and conditions set
forth in this Agreement:
NOW, THEREFORE, it is hereby agreed as follows:
1. Employment Period; Consulting Period. The Company shall
employ the Executive, and the Executive shall serve the Company as an
employee and officer of the Company, on the terms and conditions set forth
in this Agreement, for the period of three years commencing on the
Effective Time and ending on the third anniversary of the Effective Time
(the "Employment Period") and thereafter the Company shall employ the
Executive and the Executive shall serve the Company as a consultant for a
period of two years ending on the fifth anniversary of the Effective Time
(the "Consulting Period").
2. Position and Duties.
(a) Title. During the Employment Period, the Executive shall
serve as the President and chief executive officer of the Company and if
the Company is merged into Wisconsin Public Service Corporation ("WPSC")
as the chief operating officer of the Upper Peninsula Region of WPSC.
(b) Duties. During the Employment Period, the Executive shall
report to the Board of Directors of the Company (the "Board") and shall
perform the duties, undertake the responsibilities and exercise the
authority customarily performed, undertaken and exercised by persons
situated in a similar executive capacity and shall additionally perform
such duties as may be reasonably assigned from time to time by the Board,
consistent with his status as President. During the Employment Period,
and excluding any periods of vacation and sick leave to which the
Executive is entitled, the Executive shall devote the whole of his
attention and time during normal business hours (and outside those hours
when reasonably necessary to his duties hereunder) to the business and
affairs of the Company and, to the extent necessary to discharge the
responsibilities assigned to the Executive under this Agreement, use the
Executive's reasonable best efforts to carry out such responsibilities
faithfully and efficiently. It shall not be considered a violation of the
foregoing for the Executive to serve on corporate, industry, civic or
charitable boards or committees, and to direct time and attention to
personal investments so long as such activities do not materially
interfere with the performance of the Executive's responsibilities as an
employee of the Company in accordance with this Agreement. During the
Consulting Period, the Executive shall make himself available upon
reasonable advance notice to consult with the management of the Company,
but shall not be required to devote more than half his time during normal
business hours to such consulting activity.
(c) Office. The Executive's services hereunder shall be
performed primarily at the executive offices of the Company located in
Houghton, Michigan, subject to such business travel as shall be necessary
and appropriate.
3. Compensation.
(a) Salary; Consulting Fee. The Executive's compensation
during the Employment Period shall be determined by the Board upon the
recommendation of the Compensation Committee (or other appropriate
committee) of the Board, subject to the next sentence. During the
Employment Period, the Executive shall receive an annual salary ("Annual
Salary") of $216,000 commencing at the Effective Time. The Annual Salary
shall be payable in accordance with the Company's regular payroll practice
for its senior executives, as in effect from time to time. If the
Effective Time occurs after July 10, 1998, the Annual Salary shall
immediately be subject to upward adjustment under the annual review
standards described in the following sentence.During the Employment
Period, the Annual Salary shall be reviewed at least annually consistent
with WPS executive compensation policy then in effect and shall be
increased in accordance with such policy but in no event will such
increase be less than the percentage increase in the Consumer Price Index-
For All Urban Consumers (CPI-U) for the preceding year. The Annual Salary
shall not be reduced after any such increase, and the term "Annual Salary"
shall thereafter refer to the Annual Salary as so increased. During the
Consulting Period the Executive will receive an annual consulting fee for
each year of the Consulting Period equal to 50% of the Executive's
aggregate salary for the last twelve months of the Employment Period
payable in the same manner as the Annual Salary but will not be subject to
annual increase.
(b) Other Benefits. Executive shall be entitled to participate
in all applicable medical, dental, vision, life, sickness, disability,
retirement, savings or other welfare or fringe benefit plans or programs
of the Company or successor programs on terms and conditions no less
favorable than such plans or programs are made available by the Company to
employees generally. Executive shall continue to accrue benefits under
the Company's SERP, but shall not participate in the WPSR SERP. During
the Employment Period Company shall maintain no less than $400,000 of term
life insurance covering Executive payable to a beneficiary named by the
Executive.
(c) Perquisites. During the Employment Period, the Executive
shall be entitled to receive such perquisites, including, without
limitation, stock options and incentives, as WPS may establish from time
to time which are commensurate with his position and at least comparable
to those received by other senior executives at WPS. Executive shall be
entitled to 40 vacation days per year.
(d) Expense Reimbursement. The Company shall reimburse the
Executive for all reasonable expenses incurred by the Executive in the
performance of the Executive's duties under this Agreement, including,
without limitation, travel and living expenses when the Executive's duties
require him to travel to Green Bay, Wisconsin. If the Executive is
required to be in Green Bay or otherwise out of the UPPCO service
territory for reasons inconsistent with his historical experience, more
than one-third of the business days of any calendar year, the Company
shall provide the Executive with a hardship bonus compensation of $25,000
for such year, payable within 90 days of the close of the calendar year.
4. Termination of Employment.
(a) Death or Disability. The Executive's employment shall
terminate automatically upon the Executive's death during the Employment
Period. The Company shall be entitled to terminate the Executive's
employment because of the Executive's Disability during the Employment
Period. "Disability" means that (i) the Executive has been unable, for a
period of one hundred and twenty (120) consecutive business days, to
perform the Executive's duties under this Agreement, as a result of
physical or mental illness or injury, and (ii) a physician selected by the
Company or its insurers, and acceptable to the Executive or the
Executive's 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 (30th)
day after receipt of such notice by the Executive (the "Disability
Effective Date"), unless the Executive returns to full-time performance of
the Executive's duties before the Disability Effective Date.
(b) By the Company. (i) The Company may terminate the
Executive's employment during the Employment Period for Cause or without
Cause. "Cause" means:
A. the willful and continued failure of the Executive
materially to perform the Executive's duties under this
Agreement (other than as a result of physical or mental illness
or injury), after the Board of Directors of the Company (the
"Board") delivers to the Executive a written demand for
substantial performance that specifically identifies the manner
in which the Board believes that the Executive has not
materially performed the Executive's duties; or
B. illegal conduct or gross misconduct by the Executive,
in either case that is willful and results in material and
demonstrable damage to the business or reputation of the
Company.
No act or failure to act on the part of the Executive shall be considered
"willful" unless it is done, or omitted to be done, by the Executive in
bad faith or without reasonable belief that the Executive's action or
omission was in the best interests of the Company. Any act or failure to
act that is based upon authority given pursuant to a resolution duly
adopted by the Board, or the advice of counsel for the Company, shall be
conclusively presumed to be done, or omitted to be done, by the Executive
in good faith and in the best interests of the Company.
(ii) A termination of the Executive's employment for Cause
shall be effected in accordance with the following procedures. The
Company shall give the Executive written notice ("Notice of Termination
for Cause") 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 Board Meeting for Cause. The "Board Meeting for
Cause" means a meeting of the Board at which the Executive's termination
for Cause will be considered, 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 Board Meeting for
Cause. The Executive's termination for Cause shall be effective when and
if a resolution is duly adopted at the Board 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.
(iii) A termination of the Executive's employment without
Cause shall be effected in accordance with the following procedures. The
Company shall give the Executive written notice ("Notice of Termination
Without Cause") of its intention to terminate the Executive's employment
without Cause, stating the date, time and place of the Board Meeting
without Cause. The "Board Meeting without Cause" means a meeting of the
Board at which the Executive's termination without Cause will be
considered, that takes place not less than ten (10) and not more than
twenty (20) business days after the Executive receives the Notice of
Termination without Cause. The Executive shall be given an opportunity,
together with counsel, to be heard at the Board Meeting without Cause.
The Executive's termination without Cause shall be effective when and if a
resolution is duly adopted at the Board Meeting without Cause, excluding
employee directors, stating that the Executive is terminated without
Cause. Any termination of the Executive by the Company which does not
comply with the procedures in 4(b)(ii) shall be deemed to constitute a
termination without Cause.
(c) Good Reason. (i) The Executive may terminate employment
for Good Reason or without Good Reason. "Good Reason" means:
A. the assignment to the Executive of any duties
inconsistent in any respect with paragraphs (a) and (b) of
Section 2 of this Agreement, or any other action by the Company
that results in a diminution in the Executive's position,
authority, duties or responsibilities, or a diminution in the
overall importance of the Executive's role to WPS, other than an
isolated, insubstantial and inadvertent action that is not taken
in bad faith and is remedied by the Company promptly after
receipt of notice thereof from the Executive;
B. any failure by the Company to comply with any
provision of Section 3 of this Agreement, other than an
isolated, insubstantial and inadvertent failure that it not
taken in bad faith and is remedied by the Company promptly after
receipt of notice thereof from the Executive;
C. any requirement by the Company that the Executive's
services be rendered primarily at a location or locations other
than that provided for in paragraph (c) of Section 2 of this
Agreement;
D. any purported termination of the Executive's
employment by the Company for a reason or in a manner not
expressly permitted by this Agreement;
E. any failure by the Company to comply with paragraph
(c) of Section 11 of this Agreement;
F. any other substantial breach of this Agreement by the
Company that either is not taken in good faith or is not
remedied by the Company promptly after receipt of notice thereof
from the Executive; or
G. the failure of the Executive to be elected a Director
of WPS during the Employment Period.
(ii) A termination of employment by the Executive for Good
Reason shall be effectuated by giving the Company written notice ("Notice
of Termination for Good Reason") of the termination within three (3)
months of the event constituting Good Reason, setting forth in reasonable
detail the specific conduct of the Company that constitutes Good Reason
and the specific provision(s) of this Agreement on which the Executive
relies. A termination of employment by the Executive for Good Reason
shall be effective on the fifth (5th) business day following the date when
the Notice of Termination for Good Reason is given, unless the notice sets
forth a later date (which date shall in no event be later than (thirty) 30
days after the notice is given).
(iii) A termination of the Executive's employment by the
Executive without Good Reason shall be effected by giving the Company
written notice of the termination.
(d) Date of Termination. The "Date of Termination" means the
date of the Executive's death, the Disability Effective Date, the date on
which the termination of the Executive's employment by the Company for
Cause or without Cause or by the Executive for Good Reason is effective,
or the date on which the Executive gives the Company notice of a
termination of employment without Good Reason, as the case may be.
5. Obligations of the Company Upon Termination.
(a) By the Company other than for Cause, Death or Disability;
by the Executive for Good Reason. If, during the Employment Period or the
Consulting Period, the Company terminates the Executive's employment or
consultancy, other than for Cause, Death or Disability, or the Executive
terminates employment or consultancy for Good Reason, the Company shall
continue to provide the Executive with the compensation and benefits set
forth in paragraphs (a) and (b) of Section 3 as if he had remained
employed by the Company pursuant to this Agreement until the end of the
Employment Period and shall pay the consulting fee set forth in paragraph
(b) of Section 3 as if he had served as a consultant to the Company until
the end of the Consulting Period. The payments and benefits provided
pursuant to this paragraph (a) of Section 5 are intended as liquidated
damages for a termination of the Executive's employment by the Company
other than for Cause or Disability or for the actions of the Company
leading to a termination of the Executive's employment by the Executive
for Good Reason, and shall be the sole and exclusive remedy therefor.
(b) Death and Disability. If the Executive's employment is
terminated by reason of the Executive's death or Disability during the
Employment Period or the Consulting Period, the Company shall pay to the
Executive or, in the case of the Executive's death, to the Executive's
designated beneficiaries (or, if there is no such beneficiary, to the
Executive's surviving spouse, or if the Executive is not survived by a
spouse, to the Executive's estate or legal representative), in a lump sum
in cash within thirty (30) days after the Date of Termination, any portion
of the Executive's Annual Salary or Annual Consulting Fee that has been
earned but not yet been paid, prorated through the Date of Termination.
(c) By the Company for Cause; by the Executive other than for
Good Reason. If the Executive's employment or consultancy is terminated
by the Company for Cause during the Employment Period or the Consulting
Period, the Company shall pay to the Executive the Annual Salary or
Consulting Fee, as the case may be, to the extent not yet paid, prorated
through the Date of Termination, within thirty (30) days of the Date of
Termination, and the Company shall have no further obligations under this
Agreement, except as specified in Section 6 below. If the Executive
voluntarily terminates employment or consultancy during the Employment
Period or the Consulting Period, other than for Good Reason, the Company
shall pay to the Executive the Annual Salary or Consulting Fee, as the
case may be, prorated through the Date of Termination to the extent not
yet paid, in a lump sum in cash within thirty (30) days of the Date of
Termination, and the Company shall have no further obligations under this
Agreement, except as specified in Section 6 below.
6. Non-Exclusivity of Rights. Subject to Section 12(f),
nothing in this Agreement shall prevent or limit the Executive's
continuing or future participation in any plan, program, policy or
practice provided by the Company for which the Executive may qualify, nor
shall anything in this Agreement limit or otherwise affect such rights as
the Executive may have under any contract or agreement with the Company
relating to subject matter other than that specifically addressed herein.
Vested benefits and other amounts that the Executive is otherwise entitled
to receive under the benefit programs referred to in paragraph (b) of
Section 3, or any other plan, policy, practice or program of, or any
contract or agreement with, the Company on or after the Date of
Termination shall be payable in accordance with the terms of each such
plan, policy, practice, program, contract or agreement, as the case may
be, except as explicitly modified by this Agreement.
7. Full Settlement. The Company's obligation to make the
payments provided for in, and otherwise to perform its obligations under,
this Agreement shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action that the Company may
have against the Executive or others. In no event shall the Executive be
obligated to seek other employment or take any other action by way of
mitigation of the amounts payable to the Executive under any of the
provisions of this Agreement. The amounts payable by the Company under
this Agreement shall not be offset or reduced by any amounts otherwise
receivable or received by the Executive from any source.
8. Confidential Information. The Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or
confidential information, knowledge or data relating to the Company or any
of its affiliated companies and their respective businesses that the
Executive obtains during the Executive's employment or consultancy to the
Company and that is not public knowledge (other than as a result of the
Executive's violation of this Section 8) ("Confidential Information").
The Executive shall not communicate, divulge or disseminate Confidential
Information at any time during or after the Executive's employment with
the Company, except with the prior written consent of the Company or as
otherwise required by law or legal process. In no event shall any
asserted violation of the provisions of this Section 8 constitute a basis
for deferring or withholding any amounts otherwise payable to the
Executive under this Agreement.
9. Limitation on Payments. (a) Notwithstanding any other
provision of this Agreement, if any portion of any payment under this
Agreement, or under any other agreement with or plan of the Company or its
affiliates (in the aggregate "Total Payments"), would constitute an
"excess parachute payment," then the Total Payments to be made to the
Executive shall be reduced such that the value of the aggregate Total
Payments that the Executive is entitled to receive shall be One Dollar
($1) less than the maximum amount which the Executive may receive without
becoming subject to the tax imposed by Section 4999 (or any successor
provision) of the Internal Revenue Code of 1986, as amended (the "Code")
or which the Company may pay without loss of deduction under Section
280G(a) of the Code (or any successor provision). For purposes of this
Agreement, the terms "excess parachute payment" and "parachute payments"
shall have the meanings assigned to them in Section 280G of the Code (or
any successor provision), and such "parachute payments" shall be valued as
provided therein. Present value for purposes of this Agreement shall be
calculated in accordance with Section 1274(b)(2) of the Code (or any
successor provision). Within fifteen (15) days following the Date of
Termination or notice by the Company to the Executive of its belief that
there is a payment or benefit due the Executive which will result in an
excess parachute payment as defined in Section 280G of the Code (or any
successor provision), the Executive and the Company, at the Company's
expense, shall obtain the opinion (which need not be unqualified) of
nationally recognized tax counsel selected by the Company's independent
auditors and acceptable to the Executive in his sole discretion (which may
be regular outside counsel to the Company), which opinion sets forth (i)
the amount of the Base Period Income, (ii) the amount and present value of
Total Payments and (iii) the amount and present value of any excess
parachute payments determined without regard to the limitations of this
paragraph (a) of Section 9. As used in this Agreement, the term "Base
Period Income" means an amount equal to the Executive's "annualized
includible compensation for the base period" as defined in Section
280G(d)(1) of the Code (or any successor provision). For purposes of such
opinion, the value of any noncash benefits or any deferred payment or
benefit shall be determined by the Company's independent auditors in
accordance with the principles of Sections 280G(d)(3) and (4) of the Code
(or any successor provisions), which determination shall be evidenced in a
certificate of such auditors addressed to the Company and the Executive.
Such opinion shall be dated as of the Date of Termination and addressed to
the Company and the Executive and shall be binding upon the Company and
the Executive. If such opinion determines that it is more likely than not
the payment would be deemed an excess parachute payment by the Internal
Revenue Service, any payment or benefit determined by such counsel to be
includible in Total Payments shall be reduced or eliminated as specified
by the Executive in writing delivered to the Company within thirty (30)
days of his receipt of such opinion or, if the Executive fails to so
notify the Company, then as the Company shall reasonably determine, so
that under the bases of calculations set forth in such opinion there will
be no excess parachute payment. If such legal counsel so requests in
connection with the opinion required by this paragraph (a) of Section 9,
the Executive and the Company shall obtain, at the Company's expense, and
the legal counsel may rely on in providing the opinion, the advice of a
firm of recognized executive compensation consultants as to the
reasonableness of any item of compensation to be received by the
Executive. If the provisions of Sections 280G and 4999 of the Code (or
any successor provisions) are repealed without succession, then this
paragraph (a) of Section 9 shall be of no further force or effect.
(b) If, notwithstanding the provisions of paragraph (a) of
Section 9, it is ultimately determined by a court or pursuant to a final
determination by the Internal Revenue Service that any portion of Total
Payments is subject to the tax (the "Excise Tax") imposed by Section 4999
of the Code (or any successor provision), the Company shall pay to the
Executive an additional amount (the "Gross-Up Payment") such that the net
amount retained by the Executive after deduction of any Excise Tax and any
interest charges or penalties in respect of the imposition of such Excise
Tax (but not any federal, state or local income tax) on the Total
Payments, and any federal, state and local income tax and Excise Tax upon
the payment provided for by this paragraph (b) of section 9, shall be
equal to the Total Payments. For purposes of determining the amount of
the Gross-Up Payment, the Executive shall be deemed to pay federal income
taxes at the highest marginal rate of federal income taxation in the
calendar year in which the Gross-Up Payment is to be made and state and
local income taxes at the highest marginal rates of taxation in the state
and locality of the Executive's domicile for income tax purposes on the
date the Gross-Up Payment is made, net of the maximum reduction in federal
income taxes which could be obtained from deduction of such state and
local taxes.
10. Termination of Termination Agreement. The Termination
Agreement shall be cancelled and terminated and shall be of no further
force or effect upon the commencement of the Employment Period.
11. Successors. (a) This Agreement is personal to the
Executive and, without the prior written consent of the Company, shall not
be assignable by the Executive. This Agreement shall inure to the benefit
of and be enforceable by the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding
upon the Company and its successors and assigns.
(c) The Company shall require any successor (other than a
successor by merger or consolidation which assumes this Agreement by
operation of law) to all or substantially all of the business and/or
assets of the Company expressly to assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would
have been required to perform it if no such succession had taken place.
As used in this Agreement, "Company" shall mean both the Company as
defined above and any such successor that assumes and agrees to perform
this Agreement, by operation of law or otherwise.
12. Miscellaneous. (a) This Agreement shall be governed by,
and construed in accordance with, the laws of the State of Michigan,
without reference to principles of conflict of laws. The captions of this
Agreement are not part of the provisions hereof and shall have no force or
effect. This Agreement may not be amended or modified except by a written
agreement executed by the parties hereto or their respective successors
and legal representatives.
(b) All notices and other communications under this Agreement
shall be in writing and shall be given by hand delivery to the other party
or by facsimile, addressed as follows:
If to the Executive:
Xx. Xxxxxxxx X. Xxxxxx
Upper Peninsula Energy Corporation
000 Xxxx Xxxxx Xxxxx
Xxxxxxxx, XX 00000
If to the Company:
Upper Peninsula Power Company
000 Xxxx Xxxxx Xxxxx
X. X. Xxx 000
Xxxxxxxx, XX 00000
Attn: Secretary
with a copy to:
WPS Resources Corporation
000 Xxxxx Xxxxx Xxxxxx
P.O. Box 19001
Green Bay, Wisconsin 54307-9001
Attn: President
or to such other address as either party furnishes to the other in writing
in accordance with this paragraph (b) of Section 12. Notices and
communications shall be effective when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement. 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.
(d) Notwithstanding any other provision of this Agreement, the
Company may withhold from amounts payable under this Agreement all
federal, state, local and foreign taxes that are required to be withheld
by applicable laws or regulations.
(e) The Executive's or the Company's failure to insist upon
strict compliance with any provisions of, or to assert any right under,
this Agreement (including, without limitation, the right of the Executive
to terminate employment for Good Reason pursuant to paragraph (c) of
Section 4 of this Agreement) shall not be deemed to be a waiver of such
provision or right or of any other provision of or right under this
Agreement.
(f) The Executive and the Company acknowledge that this
Agreement supersedes any other agreement between the Executive and Company
concerning the subject matter hereof.
(g) The rights and benefits of the Executive under this
Agreement may not be anticipated, alienated or subject to attachment,
garnishment, levy, execution or other legal or equitable process except as
required by law. Any attempt by the Executive to anticipate, alienate,
assign, sell, transfer, pledge, encumber or charge the same shall be void.
Payments hereunder shall not be considered assets of the Executive in the
event of insolvency or bankruptcy.
(h) This Agreement may be executed in several counterparts,
each of which shall be deemed an original, and said counterparts shall
constitute but one and the same instrument.
IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and, pursuant to the authorization of the Board of
Directors, the Company has caused this Agreement to be executed in its
name on its behalf, all as of the day and year first above written.
UPPER PENINSULA POWER COMPANY
By: /s/ X.X. Xxxxx
Name: XXXXXX X. XXXXX
Title: V.P.-FINANCE, SEC & TREAS
/s/ Xxxxxxxx X. Xxxxxx, Pres. & CEO
XXXXXXXX X. XXXXXX
