Exhibit 10.1
SENIOR OFFICER EMPLOYMENT AND NON-COMPETE AGREEMENT
THIS AGREEMENT is made as of March 20, 2003 between WISCONSIN
ENERGY CORPORATION (the "Company") and GALE KLAPPA (the
"Executive").
WHEREAS, the Company wishes to employ the Executive as its
President and the Executive wishes to accept such employment on
the terms and conditions provided in this Agreement;
NOW, THEREFORE, in consideration of their mutual promises, the
parties agree as follows:
1. Defined Terms. All of the capitalized terms not otherwise
defined in this Agreement are defined in the attached Appendix.
2. Employment. Effective as April 14, 2003 (the "Employment
Starting Date"), the Company employs the Executive as the
President and the Executive hereby accepts such employment with
the Company and agrees to serve in such position and to perform
such other executive duties and serve in such other executive
capacities not inconsistent with the position of President as the
Board of Directors of the Company may request. The Executive's
employment is not for any fixed term and the Executive
acknowledges that he is an employee at-will. Further:
(a) Base Salary, Signing Bonus and Bonus Opportunity. Effective
as of the Employment Starting Date, the Executive's annual base
salary is hereby established at an annual rate of $640,000. The
Executive will receive a special lump sum signing bonus of
$350,000, with $250,000 of this amount payable promptly after the
Employment Starting Date and the balance of $100,000 payable six
months later. The Executive's target bonus opportunity for 2003
under the Company's Short-Term Performance Plan (the "STPP") is
fixed at 90% of base salary, with a minimum guaranteed bonus of
$576,000 for 2003 and a maximum bonus opportunity of two times
the target bonus. The Executive's target bonus opportunity under
the STPP for 2004 and subsequent years will not be less than 90%
of base salary, except under circumstances described in the next
sentence. Circumstances under which an adjustment below the 90%
target could take place would be limited to a general "Board
Action" resulting in the lowering of targets for the entire
senior executive group.
(b) Stock Based Incentives. Effective as of the Employment
Starting Date, the Executive will receive a grant of non-
qualified options for 250,000 shares of the Company's common
stock (the "Stock") at an exercise price per share equal to the
average of the lowest and highest reported sale prices for the
Stock on the Employment Starting Date, and on other terms and
conditions as specified for other senior officers in the grants
made to such officers in January of 2003. Additionally,
effective as of the Employment Starting Date, the Executive will
be granted an award of restricted stock, with the number of
shares awarded to be determined by dividing $1,000,000 by the
average of the lowest and highest reported sale prices for the
Stock on such date and then rounding the number of shares to the
nearest 10. The restricted Stock will vest at the rate of 10%
per year of service with the Company by the Executive, and with
100% vesting to occur upon the Executive's death or disability
while in the Company's employ.
3. Other Benefits and Special Additional Pension Benefit. The
Executive will be entitled to six weeks of vacation per year, to
participate in all retirement and welfare benefit plans and
programs generally available to employees in accordance with the
terms of such plans and programs and to participate on a basis
commensurate with other senior officers of the Company in any
benefit plans and programs available to such officers, including
the opportunity to participate in the Company's Executive
Deferred Compensation Plan (the "EDCP"). Additionally, and
provided the Executive's retirement occurs at or after age 60,
the Executive shall be entitled to (i) participate in the
Company's Supplemental Executive Retirement Plan (the "SERP")
with respect to monthly benefit "A," which is designed to make up
for any limitations imposed on the amount of Executive's accrued
benefit under the Company's tax-qualified defined benefit plan
(the "Retirement Account Plan") because of statutory or
regulatory limits relating to the Internal Revenue Code, and (ii)
receive a special additional pension benefit. Such special
additional pension benefit will be equal to the difference
between (a) and (b) below, less the monthly lifetime retirement
benefits payable to the Executive from all qualified and non-
qualified defined benefit pension plans of previous employers of
the Executive, calculated as if starting on the same date as the
special additional pension benefit, where (a) and (b) are as
follows:
a) equals the monthly lifetime retirement benefit payable from
the Company's Retirement Account Plan, plus any amount payable
under the SERP monthly benefit "A", and
b) equals the monthly lifetime 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 then in
effect continued until the Executive's retirement,
calculated without regard to Internal Revenue Code
limits, and as if the Executive had started
participation in the 1995 Management Plan at age
27 and as if any deferrals elected by the
Executive under the EDCP and any bonuses were all
included in the Executive's compensation base for
calculating benefits under the 1995 Management
Plan.
4. Additional Preretirement Spouse's Benefit. In the event of
the Executive's death while in the Company's employ, the Company
will pay to the Executive's surviving spouse, if any, a monthly
benefit equal to the difference between (a) and (b) below, but
reduced as provided below to reflect the vested value of all
qualified and nonqualified defined benefit pension plans of
previous employers of the Executive, where (a) and (b) are as
follows:
a) equals the monthly spouse's benefit that is
payable from the Retirement Account Plan of the
Company, plus any amount payable under monthly
benefit "A" of the SERP, and
b) equals the monthly spouse's benefit that would
have been payable from the 1995 Management Plan
had the defined benefit formula in effect on
December 31, 1995 continued until the Executive's
death, calculated on all the same assumptions as
set forth in Section 3(b)above.
The reduction attributable to plans of previous
employers as referenced above in the event the
additional preretirement spouse's benefit becomes
payable is to be applied by reducing the monthly
surviving spouse benefit calculation as above set forth
by one-half of the dollar amount of offset attributable
to the plans of previous employers that would have
resulted under the third sentence of Section 3 above if
Section 3 were applicable.
5. Covered Termination Not Associated with a Change in Control.
In the event of a Covered Termination Not 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 5 (f) below apply.
The amount of the aggregate lump sum provided by this Section 5
(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 Retirement Account Plan, the SERP
monthly benefit "A" and the special additional pension benefit
provided under Section 3 above, 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 Account Plan, the SERP monthly benefit "A" and the
special additional pension benefit under Section 3 above.
Actuarial equivalency for this purpose shall be determined using
an interest rate equal to a 36 consecutive month (or shorter
period, as explained in the next sentence) average, using the
rates as of the last business day of each month starting with
January 31, 2002 (the "Month End Rate") of the five year United
States Treasury Note yields (the "36 Month Average Rate") in
effect ending with the Month End Rate immediately prior to the
Effective Date, 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 Account Plan. Prior to January 31, 2004, the 36
Month Average Rate shall mean only the average of the Month End
Rates which have occurred since January 31, 2002, even though
less than 36. 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 5(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 5(f) below apply. The amount of the lump
sum provided by this Section 5(d) shall not be treated as
compensation for purposes of any other benefit plan or program
applicable to the Executive.
e) Special Additional Monthly Pension Benefit. The Company
shall pay to the Executive an additional monthly pension benefit
equal to the difference between (i) the pension benefits the
Executive would have received under all qualified and non-
qualified defined benefit pension plans of his former employer
immediately prior to his employment with the Company had he
remained with such former employer until age 60, calculated as if
his pay with such employer had continued at its 2003 level,
increased by 3% annually thereafter, and (ii) the sum of the
pension benefits actually payable to the Executive under the
Retirement Account Plan and under Section 3 above, which will
become vested upon the Executive's termination under this Section
5 without regard to the Executive's age, plus the actuarial
equivalent (calculated as provided in subsection (d) above) of
the special retirement plans lump sum benefit provided in
subsection (d) above, provided that the benefit calculated under
(i) above is greater than the benefit calculated under (ii)
above.
f) Deferral Option. Notwithstanding any other provision of
this Agreement, the Executive may file a written irrevocable
deferral election form 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 electing to defer all or part of the special
compensation provided by Section 5(c) and the special retirement
plans lump sum otherwise provided for in Section 5(d). Such form
shall irrevocably specify a method of payment for such
compensation from among the methods allowable under the EDCP.
Any deferred amounts shall be credited with earnings in the
manner as elected by the Executive under the terms of 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 5(f) 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 5(f) 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.
g) Welfare Benefits. Subject to Section 3(h) 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(g) 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.
h) 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(g)
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.
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.
6. Obligation of the Company on a Covered Termination of
Employment Associated with a Change in Control of the Company.
In the event of a Covered Termination of Employment 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 5 above, but the tax gross-up provisions of Section 7
hereof shall apply. Further, the deferral election for the
Executive described in Section 5(f) above shall apply, but only
if the written irrevocable deferral form is filed with the
Company prior to the first date on which a change in Control of
the Company occurs.
7. 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 7)
(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
7, all determinations required to be made under this Section 7,
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 7, 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 7 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 7, 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 sue 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 sue 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 7, 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
7) 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 7, 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.
8. 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.
9. 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, including amounts which may have
become due under the terms of Sections 3 and 4 of this Agreement,
but no other compensation or benefits will be paid under this
Agreement.
10. 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 10, 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.
11. Relocation Benefit. The Company will provide the Executive
with the same relocation benefits for his move from his current
residence to a residence near the Company's principal office in
Milwaukee, Wisconsin as are provided on the date of this
Agreement by his current employer.
12. 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.
13. 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 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.
14. 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 15 shall
be construed in accordance with the Federal Arbitration Act.
15. Resolution of Disputes. The parties shall endeavor to
resolve any dispute arising out of or relating to this Agreement
by mediation in Milwaukee, Wisconsin, under the Mediation
Procedure of the Center for Public Resources ("CPR"). Unless the
parties agree otherwise, the mediator will be selected from the
CPR Panels of Distinguished Neutrals. Any such dispute which
remains unresolved 45 days after appointment of a mediator, shall
be finally resolved by arbitration in Milwaukee, Wisconsin, by a
sole arbitrator in accordance with the CPR Rules for
Non-Administered Arbitration, and judgment upon the award
rendered by the arbitrator may be entered by any court having
jurisdiction thereof. The Company will pay any fees and costs of
the mediator in connection with the mediation, but the parties
agree to each pay one-half of the fees and costs of the
arbitrator in connection with the arbitration.
16. 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.
17. 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.
18. Withholding. The Company may withhold from any amounts
payable under this Agreement all federal, state and other taxes
as shall be legally required.
19. 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
/s/ Gale Klappa By: /s/ Richard A. Abdoo
_______________ ____________________
GALE KLAPPA
APPENDIX
This is an appendix to the Senior Officer Employment Agreement
between WISCONSIN ENERGY CORPORATION and GALE KLAPPA dated March 20,
2003 (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 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 within a period of twelve months 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.
(v) 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 one provided in the first sentence of Section 5(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 5(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) in the event the Executive is not appointed as the Chief
Executive Officer of the Company or any successor company or
companies on or before December 31, 2005 and the Executive
terminates employment after December 31, 2005 but before March 31,
2006, or
(iii) 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)(ii),
(iii), (iv) or (v).
(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 5 of the
Agreement applies, the term shall mean the date immediately prior
to the Executive's termination of employment.
(g) "Good Reason" means:
(i) solely in the context of a Covered Termination Associated
with a Change in Control, the assignment to the Executive of any
duties inconsistent, in the reasonable judgment of the Executive,
with the customary duties of a President 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 failure by the Company from and after the date of the
Agreement to provide for the continuation of the Executive's
compensation (base salary and incentive compensation or bonus
opportunity) and benefits and his participation in the Company's
long-term incentive plans and programs on a basis commensurate
with other senior executives of the Company, or 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 first date on
which a Change in Control of the Company occurs or to the extent
more favorable to the Executive, those in effect after such date,
or from and after the first date on which a Change in Control of
the Company occurs, a 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 12(a) of
this Agreement.
(h) "Highest Bonus Amount" means the higher of (i) the highest
dollar bonus earned by the Executive under any cash bonus or
incentive compensation plan of the Company during either the
three complete fiscal years of the Company immediately prior to
the Executive's termination of employment or the three complete
fiscal years of the Company immediately preceding the Change in
Control of the Company, whichever is more favorable to the
Executive, or (ii) the Executive's bonus or incentive
compensation "target" for the fiscal year in which the
termination of employment occurs.