Exhibit 10.7
November 14, 1997
Mr. Larry Salustro
(Home Address)
Dear Larry:
This letter will confirm our offer of employment to you,
with the specifics to be as follows:
1) Position: Vice President, Legal, Regulatory and
Governmental Affairs. You would report to me in my
capacity as Chief Executive Officer of the Company. In
addition, you would be expected to participate in a
senior strategy group I have organized. The office of
the Corporate Secretary and the Law department and
Governmental Affairs department (federal, state &
local) will report to you. Further, upon completion of
existing cases, all future regulatory affairs
(including matters before the FERC, DOE, PSCW and MPSC)
will be your responsibility.
2) Base Salary: Base salary will be payable to you at the
rate of Two Hundred and Five Thousand Dollars
($205,000) per year, payable in accordance with the
Company's regular payroll practices.
3) Special Signing Bonus: In recognition of the financial
detriment to you regarding termination from your
present employment at this time, we will pay you a
special signing bonus of Seventy-Five Thousand Dollars
($75,000) promptly after you report for work with us.
4) Stock Based Incentives: You will receive a grant of a
non-qualified stock option covering 40,000 shares of
the common stock of Wisconsin Energy Corporation at an
option price equal to 100% of the fair market value of
the stock on the date of grant, promptly after you
report for work with us. The option will vest or
become exercisable by you 4 years from the date of
grant, provided you then remain in our employ, or upon
your earlier death or disability. You will also
promptly after you report for work with us receive an
award of restricted stock for 6,000 shares of the
common stock of Wisconsin Energy Corporation. The
restrictions on these shares will lapse 4 years from
the date of the award, provided you then remain in our
employ, or upon your earlier death or disability.
5) Other Benefits: You will participate in the Wisconsin
Energy Corporation Supplemental Executive Retirement
Plan with respect to monthly benefits "A" and "B."
Monthly benefit "A" is designed to make up for any
limitations imposed on the amount of your accrued
benefit under the Company's tax-qualified defined
benefit plan (the "Retirement Account Plan") upon your
retirement at or after age 60, because of benefit
limits under Section 415 of the Internal Revenue Code
or the limit on annual compensation imposed by Section
401(a)(17) of such Code. Monthly benefit "B" is a
special supplemental pension benefit equal to a life
annuity of 10% of your average total compensation
during your highest 36 consecutive months, which will
become available to you upon your retirement at or
after age 60. You will also participate on a basis
commensurate with other senior executives of the
Company in any other employee benefits, perquisites,
vacations plans, or executive short term and long term
incentive compensation programs as may exist from time
to time. Also, you will be entitled to participate in
all applicable retirement and savings plans and all
welfare benefit plans and practices which the Company
makes available to its salaried employees generally.
The Company requires an annual medical physical exam by
a physician or clinic of your choice, at Company
expense.
6) Additional Pension Benefit: In addition, the Company
will provide an additional pension benefit to you upon
your retirement at or after age 60 (or prior to age 60
with the approval of the Chief Executive Officer of the
Company and the Board of Directors of the Company).
This additional pension benefit will be equal to the
difference, if any, between (a) and (b) below, less the
amount of the monthly vested retirement benefit payable
to you at 65 or that would have been payable to you at
that age from defined benefit plans of previous
employers for periods of employment prior to your
employment by the Company had you elected to receive
your accrued benefits from such plans of such prior
employers at age 65 (the "Reduction Amount"), where (a)
and (b) are defined as follows:
(a) equals the monthly retirement benefit that is
payable from the Retirement Account Plan of the
Company, plus the amounts of any actual "make
whole" pension supplement due under the provisions
of Section IX(1) and (2) of the Wisconsin Energy
Corporation Executive Deferred Compensation Plan,
plus any amount payable under monthly benefit "A"
under Wisconsin Energy Corporation's Supplemental
Executive Retirement Plan, and
(b) equals the monthly retirement benefit that would
have been payable from the Management Employees'
Retirement Plan of the Company as in effect on
December 31, 1995 (the "1995 Management Plan") had
the defined benefit formula in effect on
December 31, 1995 continued until your retirement,
calculated without regard to any limitations
imposed by Section 415 of the Internal Revenue
Code or any limitation on annual compensation
imposed by Section 401(a)(17) of such Code and
under the assumptions that (i) your participation
in the 1995 Management Plan had commenced on the
first day of the month following your 25th
birthday and continued uninterrupted thereafter,
(ii) any deferrals of base salary you elected
under the Wisconsin Energy Corporation Executive
Deferred Compensation Plan were disregarded and
instead included in your compensation base for
calculating retirement income under the 1995
Management Plan, and (iii) the amount of any
Performance Award, Incentive Award or Special
Award, calculated at the time of its determination
by the Board of Directors had also been included
in your compensation base for calculating
retirement income under the 1995 Management Plan.
The Reduction Amount shall be converted into an
actuarial equivalent of a life annuity form of payment
payable at age 65 using the actuarial equivalency
factors under the Retirement Account Plan of the
Company, but shall be subtracted, without any further
adjustment, from any additional pension benefit
calculated as above set forth, whenever the same
commences, whether before or after your 65th birthday.
Further, the Reduction Amount applies to any additional
pension benefit calculated as above set forth and
expressed as a life annuity form of benefit and shall
be made prior to the application of factors applicable
for any other form of benefit available under the 1995
Management Plan (which forms shall be available to
you). Prior to the date of your retirement, you will
provide the Company with certified information
regarding the Reduction Amount.
7) Additional Preretirement Spouse's Benefit: Further in
the event of your death while in the employ of the
Company, the Company will pay to your surviving spouse
(if any) a monthly benefit equal to the difference
between (i) and (ii) below, but reduced as provided
below to reflect the value of any vested defined
benefit retirement benefits attributable to prior
employment (the "Reduction Amount" as defined above),
where (i) and (ii) are defined as follows:
(i) equal the monthly spouse's benefit that is payable
from the Retirement Account Plan of the Company,
plus the amounts of any actual "make whole"
spousal pension supplements due under the
provisions of Sections IX(1) and (2) of the
Wisconsin Energy Corporation Executive Deferred
Compensation Plan, plus any amount payable under
monthly benefit "A" under the Wisconsin Energy
Corporation Supplemental Executive Retirement
Plan, and
(ii) equals the monthly spouse's benefit which would
have been payable from the 1995 Management Plan
had the defined benefit formula in effect on
December 31, 1995 continued until your death,
calculated on all the same assumptions as set
forth in subsection (b) above.
The Reduction Amount in the event the above surviving
spouse benefit becomes payable is to be applied by
reducing the monthly surviving spouse benefit
calculated as above set forth by 1/2 of the dollar amount
of the Reduction Amount that would have been offset in
the event the additional pension benefit provisions of
paragraph 6 (a) and (b) above were applicable.
8) Conditions of Payment Regarding Additional Pension
Benefits: The additional pension benefits provided for
in paragraphs 6 and 7 hereof shall be subject to and
administered as if the same were payable directly from
the 1995 Management Plan and all of the forms of
payment available under the 1995 Management Plan shall
be available to you. However, you may at the time of
your retirement make a written request to the Board of
Directors of the Company for a single lump sum payment
of an amount equal to the then present value of all
additional benefits accrued under paragraphs 6 and 7,
calculated using (i) an interest rate equal to the
5-Year United States Treasury Note yield in effect on
the last business day of the month prior to the payment
(as reported in the Wall Street Journal or comparable
publication), and (ii) the mortality tables then in use
under the Retirement Account Plan of the Company. The
Board of Directors of the Company, in its sole and
absolute discretion, may grant or deny such request.
Further, upon the occurrence of a "Change in Control"
of the Wisconsin Energy Corporation (as defined in
Exhibit A attached to and made a part of this letter),
then notwithstanding any other provision hereof, the
Company shall promptly pay to you or to anyone then
receiving additional benefits under paragraphs 6 or 7
of this letter a single lump sum payment of an amount
equal to the then present value of all such additional
benefits accrued (whether or not in pay status and
without regard to whether your employment is
continuing), calculated using the same assumptions as
set forth in the immediately preceding paragraph, with
an interest rate to equal the 5-Year United States
Treasury Note yield in effect on the last business day
of the month prior to the date when the Change in
Control occurred. If you continue in employment and
the additional benefits provided for in this letter
continue, appropriate provisions shall be made so that
any subsequent payments under paragraphs 6 or 7 of this
letter are reduced to reflect the value of such lump
sum payment.
9) Moving Expenses and Temporary Living Expenses: The
Company will pay or reimburse you for your reasonable
moving costs in accordance with standard Company
policy. In addition, the Company will pay or reimburse
you for your reasonable temporary living expenses in
the Milwaukee area for a period of up to 120 days prior
to your purchase of a residence here.
All the benefits described above which are further defined
in plan documents are subject to all of the terms in those
documents which supersede any other description. Management
reserves the right in its discretion to change or terminate all
current benefit plans or practices and other policies and
procedures.
Your employment would be considered at-will; that is, you
could be discharged for any reason or no reason at all, at any
time and without notice, and, likewise, you may resign at any
time and without notice.
We anticipate that your staring date with us would be within
30 days. This offer supersedes all our prior discussions and
will remain open until December 2, 1997.
We look forward to hearing from you and hope that you will
join us.
Very truly yours,
/s/Richard A. Abdoo
-------------------------
Richard A. Abdoo,
Chairman of the Board and CEO
EXHIBIT A
Change in Control Definition
For purposes of this Plan, a "Change in Control" with
respect to Wisconsin Energy Corporation shall mean the occurrence
of any of the following events, as a result of one transaction or
a series of transactions:
(a) 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 non-qualified plan maintained by the Company or its
affiliates) becomes the "beneficial owner" (as defined
in Rule 13d-3 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;
(b) 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;
(c) the Company is combined (by merger, share exchange,
consolidation, or otherwise) with another corporation
and as a result of such combination, 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;
(d) 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; or
(e) the Board determines in its sole and absolute
discretion that there has been a Change in Control of
the Company.
These Change in Control provisions shall apply to successive
Changes in Control on an individual transaction basis.