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EXHIBIT (10)-1
WISCONSIN ENERGY CORPORATION
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EXECUTIVE DEFERRED COMPENSATION PLAN
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Effective January 1, 1989
As Amended and Restated as of January 1, 1994
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WISCONSIN ENERGY CORPORATION
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EXECUTIVE DEFERRED COMPENSATION PLAN
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I. OBJECTIVES
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This Executive Deferred Compensation Plan (the "Plan") is maintained by
Wisconsin Energy Corporation (the "Company"), effective January 1, 1989,
to enable eligible participants, on a calendar year basis, an
opportunity to defer income until retirement or other termination of
employment.
II. ELIGIBILITY
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Elected officers and other management or highly compensated employees of
the Company and its utility subsidiaries as may be designated by the
Chief Executive Officer of the Company and approved by the Company's
Board of Directors (the "Board") and by the Board(s) of Directors of the
employing company or companies are eligible to participate in the Plan.
It is intended that participation in the Plan be limited to a select
group of management or highly compensated employees within the meaning
of Title 1 of the Employee Retirement Income Security Act and that the
designation of eligible participants will generally occur near the end
of a calendar year, to become effective as of the start of the
immediately following calendar year.
III. DEFINITION OF COVERED COMPENSATION
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Compensation that may be deferred into the Plan includes:
(1) Annual base salary,
(2) Individual Incentive Awards under the Company's Executive
Incentive Compensation Plan, and
(3) Performance awards under the Company's Short-Term Performance Plan
or other such short-term performance plan(s) as approved by the
Board.
IV. AMOUNT OF COMPENSATION WHICH MAY BE DEFERRED
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Participants in the Plan may elect to defer up to 30% of base salary
compensation, and 25%, 50%, 75% or 100% of their Performance Awards as
described hereinafter. Regarding such other Board approved short-term
performance plan(s), the amount of compensation which may be deferred
will be specified in the respective plan(s).
V. DEFERRAL ELECTIONS
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(1) BASE SALARY
A participant may elect to defer from 1% to 30% of monthly base
salary (defined as the aggregate monthly base salary from the
Company and its utility subsidiaries). A written deferral
election form regarding base salary must be filed with the Company
on or before December 31st of a particular calendar year, to
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take effect only as to compensation earned from and after the
January 1st of the immediately following year. However, if an
individual is designated as eligible to participate in the Plan
effective as of a date other than a January 1st, the deferral
election form regarding base salary must be filed with the Company
prior to such special effective date and such form shall apply
only to compensation earned after the special effective date.
(2) PERFORMANCE AWARDS AND SUCH OTHER AWARDS AS APPROVED BY THE BOARD
A participant may elect to defer from 25% to 100% (increments of
25%) of any Performance Award under the Company's Short-Term
Performance Plan. A written deferral election form regarding a
Performance Award which may ultimately become payable on account
of a participant's services during the calendar year under the
Company's Short-Term Performance Plan (or any other Board approved
short-term performance plan) must be filed with the Company no
later than December 31st of such calendar year and in any event,
prior to the time that the participant has earned an absolute and
unconditional right to payment.
(3) DEFERRAL ELECTION RULES
A participant may revoke any deferral election regarding base
salary under (1) above at any time by giving written notice of
revocation to the Company; such notice shall become effective the
first day of the month immediately following receipt of such
notice by the Company. A participant may not revoke a deferral
election regarding either portion of an Incentive Award, a
Performance Award or any such like award once such election has
been made. Any election or revocation will be given prospective
effect only and will not affect prior deferrals.
VI. INTEREST CREDITED
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(1) An amount equivalent to the deferrals elected regarding base
salary, Incentive Awards, Performance Awards, or such other Board
approved short-term performance plan awards shall be credited to a
bookkeeping account on the records of the Company in the name of
the participant, at the time when such base salary, Incentive
Awards, Performance Awards or other awards would otherwise have
been payable in cash had the participant not made such deferral
elections. Such account shall be simply an unsecured claim
against the general assets of the Company. A participant shall
have no interest in such account, which is established merely as
an accounting convenience.
(2) Interest shall accrue on the average balance in each participant's
account which interest shall be determined by averaging the
beginning and ending balance of such account within the period
intervening since interest was last credited to the account
(except, in the case of a new participant, within the period from
the effective date of such participant's participation in the Plan
to the next June 30 or December 31 or the date such participant
terminates participation, whichever is earlier) and shall be
credited to the account semiannually, as of June 30 and December
31 of each year, until all distributions to which the participant,
the participant's estate or beneficiary is entitled shall have
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been made. Whenever a lump sum amount or final distribution is
made as of a date other than June 30 or December 31, interest
shall be credited to the account as of such payment date.
(3) The rate of interest used under (2) above shall be the "Firstar
Bank, Milwaukee, N.A. prime rate" which means the rate of interest
adopted by Firstar Bank, Milwaukee, N.A., from time to time, as
the base rate for interest rate determinations. Such rate of
interest in effect on June 30 shall be used for the period ending
June 30, and such rate as in effect on December 31 shall be used
for the period ending December 31 of each year, except for any
period in which any lump sum amount or final distribution from an
account is made as of a date other than June 30 or December 31, in
which case the rate of interest shall be the Firstar Bank,
Milwaukee, N.A. prime rate in effect on the date interest was last
credited as determined under (2) above.
VII. VESTING
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Participants are always 100% vested in amounts deferred to the Plan plus
interest credited to their account.
VIII. BENEFIT PAYMENT
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(1) IN THE EVENT OF RETIREMENT
At the time when a participant completes any deferral election
form under this Plan, the participant shall also irrevocably
specify the method of payment in which all deferred compensation
covered by such election form shall be made if the participant
terminates service with the Company or its utility subsidiaries
because of "retirement". For purposes of the Plan, "retirement"
shall have occurred if the participant terminates service and
thereupon begins to receive an immediate retirement income benefit
under the Company's or a utility subsidiary's tax-qualified
defined benefit retirement plan or would have been able to receive
such an income had he been covered under such plan. The available
methods under such circumstances are:
(i) a single lump sum payment as soon as practical after the
participant's retirement,
(ii) a single lump sum payment to be made as of the first
business day of the year immediately following the
participant's retirement,
(iii) payment over a ten-year period [as of the first business day
of the January immediately following the participant's
retirement, 1/10th of the amount credited to the
participant's account (the "principal amount") shall be paid
to the participant and as of the first business day of each
January thereafter, 1/10th of the principal amount and in
addition thereto any interest credited to the account in the
period intervening since the last payment shall be paid
until a total of ten payments have been made. If any share
equivalents portion of an Incentive award shall be first
credited to the participant's account during the ten-year
period, it shall be treated for payout purposes solely as an
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additional interest credit. Such ten payments, regardless
of the total amount thereof, shall constitute full payment
of all amounts due the Participant under this Plan],
(iv) payment over a five year period [calculated in the same
fashion as provided in subparagraph (iii) above, but
substituting "1/5th" for "1/10th" and "five" for "ten"
wherever the same appear].
A participant shall have the right to designate a beneficiary or
beneficiaries to receive a distribution with respect to any
portion of such participant's account remaining unpaid at the
participant's death. Such designation shall be effected by filing
written notification with the Company in the form prescribed by it
and may be changed from time to time by similar action. If the
participant fails to make such designation, or if the beneficiary
predeceases the participant, any such distribution shall be paid
to the participant's estate within six months after the Company
has been notified of such death.
If a retired participant dies before all payments have been made
under the selected method, the remaining payments shall be paid to
the beneficiary for the balance of the applicable ten- or five-
year period (or under the lump sum method, if that was in effect).
If the last beneficiary shall die before receiving the full amount
payable under this Plan, then the balance of the account not paid
shall be paid in a single lump sum to the estate of such
beneficiary within six months after the Company has been notified
of such death.
(2) IN THE EVENT OF DEATH PRIOR TO TERMINATION OF EMPLOYMENT
If a participant dies prior to termination of employment with the
Company or its utility subsidiaries, the designated beneficiary
shall be paid the entire balance of the account in a single lump
sum, with such distribution to be made within six months after the
Company has been notified of such death. If the participant has
failed to designate a beneficiary, or if the beneficiary
predeceases the participant, the entire balance of the account
shall be paid to the participant's estate within six months after
the Company has been notified of such death.
(3) IN THE EVENT OF TERMINATION FOR REASON OTHER THAN RETIREMENT OR
DEATH
If a participant terminates employment with the Company or its
utility subsidiaries for a reason other than retirement or death,
the participant's account shall be paid to the participant in a
single lump sum. Such distribution will be made within 90 days of
termination of employment.
(4) NO ACCELERATION OF INCENTIVE AWARD PAYMENT
It is recognized that the Company's Executive Incentive
Compensation Plan (under which the last Incentive Award was made
in January of 1992 and which Plan has been currently replaced by
the Short-Term Performance Plan) provided for a three-year
deferred payout of the share equivalents portion of any Incentive
Award. Thus, a participant who filed a deferral election form as
to any part of the share equivalents portion of an Incentive Award
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for a particular year will not have any amount with respect
thereto credited to his account until the end of such three-year
period. Further, nothing in this Article VIII shall accelerate
the time when the aforesaid three-year period expires, so that
whenever reference is made in this Plan to a single lump sum
payment, this Plan refers only to amounts already credited to the
participant's account at the time, not to future credits to the
account that would have accrued had the participant continued in
service.
(5) OPTIONAL LUMP SUM PAYMENTS UPON APPROVAL BY BOARD
Notwithstanding any other provision hereof, a participant at the
time of retirement may make a written request to the Board for a
single lump sum payment of all amounts covered by this Article
VIII and Article IX as soon as practical after the participant's
retirement. As to any "make whole" retirement income or long-term
disability benefit covered by Article IX, the same shall be
converted into a single lump sum payment equal to the then present
value of such benefit, calculated using (i) an interest rate equal
to the five-year United States Treasury Note yield in effect on
the last business day of the month prior to the payment as such
yield is reported in the WALL STREET JOURNAL or comparable
publication, (ii) the mortality tables then in use under the
qualified defined benefit plan of the Company or its subsidiaries
applicable to the participant, and (iii) any other factors needed
in order to determine the present value of the "make whole" long-
term disability benefit covered by Article IX as determined in
good faith by the Company. The Board, in its sole and absolute
discretion, may grant or deny such request.
(6) MANDATORY LUMP SUM PAYMENTS UPON CHANGE IN CONTROL
For purposes of this Plan, a "Change in Control" with respect to
the Company 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;
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(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.
Upon the occurrence of a Change in Control, then notwithstanding
any other provision of this Plan, the Company shall promptly cause
to be paid to each active and retired participant or beneficiary
receiving benefits under this Plan a single lump sum payment for
all amounts covered by this Article VIII and Article IX
(calculated as set forth in paragraph (5) above), without regard
to whether any participant's employment with the Company or any of
its subsidiaries is continuing. However, if the participant in
fact so continues and this Plan continues, appropriate provisions
shall be made so that any subsequent payments made from this Plan
are reduced to reflect the value of such lump sum payment.
IX. "MAKE WHOLE" RETIREMENT INCOME BENEFIT, COMPANY SAVINGS PLAN MATCH AND
LONG-TERM DISABILITY BENEFIT
(1) "MAKE WHOLE" RETIREMENT INCOME BENEFIT WITH RESPECT TO BASE SALARY
DEFERRALS
Base salary which is deferred pursuant to this Plan cannot be
included in the compensation base for calculating retirement
income under qualified defined benefit retirement plans of the
Company and its utility subsidiaries (the "Pension Plans").
Therefore, a "make whole" benefit will be paid from this Plan as a
pension supplement to a participant whose deferrals of base salary
hereunder result in a lesser pension payment under the Pension
Plans. Such pension supplement shall equal the monthly amount by
which the participant's pension under the Pension Plans
(calculated for this purpose without regard to any limitation on
benefits imposed by Section 415 of the Internal Revenue Code or
the $200,000 limitation on annual compensation, as adjusted from
time to time, imposed by Section 401(a)(17) of such Code;
hereinafter, the "IRS Limitations") was less because deferrals of
base salary under this Plan were not taken into account in the
calculation of such participant's pension (but the amount of any
Monthly Benefit A applicable to the participant under the
Company's Supplemental Executive Retirement Plan shall be taken
into account to avoid any duplication of the pension supplement
provided hereunder). Payment of such pension supplement shall
commence at the same time and be paid in the same form as the
benefit paid under the Pension Plans. This section applies to all
forms of pensions payable under the Pension Plans, including
spousal pensions. All pension supplements paid hereunder shall be
paid out of general corporate assets or out of a grantor trust as
provided in Article XII hereof.
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(2) "MAKE WHOLE" RETIREMENT INCOME BENEFIT WITH RESPECT TO PERFORMANCE
AND INCENTIVE AWARDS AND SUCH OTHER AWARDS AS APPROVED BY THE
BOARD
Performance and Incentive Awards are excluded from the
compensation base used for calculating retirement income under the
Pension Plans. Further, in certain circumstances, a participant
may have been granted a special award and such special awards are
likewise excluded. Therefore, a "make whole" benefit will be paid
from this Plan as a pension supplement to a participant whose
pension paid under the Pension Plans would have been greater had a
Performance Award, Incentive Award or special awards been included
in the compensation base of the Pension Plans. Such pension
supplement shall equal the monthly amount of increase in the
participant's pension benefit under the Pension Plans (calculated
for this purpose without regard to the IRS Limitations) that would
have resulted if the amount of any Performance Award, Incentive
Award or special award, calculated as to an Incentive Award or
Performance Award at the time of its determination by the Board
under Article VI(1) of the Wisconsin Energy Corporation Executive
Incentive Compensation Plan or under Article 5 of the Short Term
Performance Plan and as to such special award at the time of its
determination by the Board, had then been paid in full as base
salary (but the amount of any Monthly Benefit A applicable to the
participant under the Company's Supplemental Executive Retirement
Plan shall be taken into account to avoid any duplication of the
pension supplement provided hereunder). Since the date of
determination rather than the date of payment is controlling for
purposes of the calculation of such pension supplement, the actual
date of payment of any Performance, Incentive or special award and
the amount of any Performance, Incentive or special award at the
time of payment shall be disregarded. Payment of such pension
supplement shall commence at the same time and be paid in the same
form as the benefit paid under the Pension Plans. This section
applies to all forms of pensions payable under the Pension Plans,
including spousal pensions. All pension supplements paid
hereunder shall be paid out of general corporate assets or out of
a grantor trust as provided in Article XII hereof. Any other
Board approved short-term performance plan must also have Board
approval for specific inclusion in this "make whole" retirement
income benefit or such inclusion must be specified in such other
Board approved short-term performance plan prior to the payment of
any "make whole" retirement income benefit hereunder.
(3) MANAGEMENT EMPLOYEE SAVINGS PLAN MATCH
It is the intent of this Plan that a participant not suffer any
loss with respect to an employer savings plan match under the
Management Employee Savings Plan of the Company and its utility
subsidiaries (the "Savings Plan") because of (a) having elected
deferrals of base salary under this Plan, (b) the limitation
imposed by Section 402(g)(1) of the Internal Revenue Code (the
"$7,000 Adjusted Limit") on the amount of a participant's Savings
Plan elective deferral contributions, (c) the $200,000 limitation
on annual compensation, as adjusted from time to time, imposed by
Section 401(a)(17) of such Code (the "$200,000 Adjusted Limit"),
or (d) any limitation on benefits and contributions imposed by
Section 415 of such Code (the "Section 415 Limits"). Therefore,
with respect to Savings Plan elective deferral contributions which
would have been made by a participant had the Savings Plan salary
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deferral contribution percentage actually chosen by such
participant been applied to all of such participant's otherwise
eligible Savings Plan compensation for the Savings Plan year
involved (including the deferrals of base salary elected under
this Plan) and without regard to the $7,000 or $200,000 Adjusted
Limits or the Section 415 Limits, a special contribution equal to
the additional employer matching contribution that would have been
made to the Savings Plan will be credited to such participant's
account in this Plan at the same time or times that it would have
been credited under the Savings Plan if allowed thereunder. An
example of the calculation of such special contribution is shown
on Exhibit 1 attached to and made a part of this Plan.
(4) "MAKE WHOLE" LONG-TERM DISABILITY BENEFIT
It is the intent of this Plan that a participant not suffer any
loss with respect to a disability benefit under the Long-Term
Disability Benefit Plan applicable to employees of the Company and
its utility subsidiaries (the "LTD Plan") because of either the
exclusion of base salary deferred under this Plan from the
compensation base in the LTD Plan ("Salary Deferral") or the
$200,000 limitation on annual compensation, as adjusted from time
to time, imposed by Section 505(b)(7) of the Internal Revenue Code
(the "IRS Special Limit"). Therefore, in the event a participant
of this Plan becomes eligible for and begins to receive a
disability benefit from the LTD Plan and the amount of such
disability benefit is limited because of application of Salary
Deferral or the IRS Special Limit, a "make whole" disability
benefit shall be paid from this Plan as a supplement to the
disability benefit paid from the LTD Plan. Such LTD supplement
shall equal the monthly amount by which the participant's
disability benefit under the LTD Plan was less because of
application of Salary Deferral and the IRS Special Limit. Such
LTD supplement shall commence at the same time as the disability
benefit paid under the LTD Plan and continue for so long as such
disability benefit is paid. All LTD supplements paid hereunder
shall be paid out of general corporate assets or out of a grantor
trust as provided in Article XII hereof.
X. PLAN AMENDMENT
The Board reserves the right to amend, modify or terminate this Plan at
any time; provided, however, no such action will reduce the amounts then
credited to any participant's account or change the time and manner of
payment of the value thereof, without the consent of the participant, if
living, or the participant's designated beneficiary or beneficiaries, if
the participant is not living.
XI. CLAIM PROCEDURE
The participant or the participant's beneficiary (a "Claimant") may file
a written request for benefits or claim with the Company under this
Plan. In the event of any dispute with respect to such a claim, the
following claim procedures shall apply:
(1) The Company acting as the administrator for this Plan, shall
notify the Claimant within 90 days of receipt by the Company of a
written claim of its allowance or denial, unless the Claimant
receives written notice from the Company prior to the end of the
initial 90-day period indicating that special circumstances
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require an extension of time for decision. A written notice of
decision shall be provided to the Claimant and if the claim is
denied in whole or in part, the notice shall contain the following
information: the specific reasons for the denial; specific
reference to pertinent provisions of the Plan on which the denial
is based; if applicable, a description of any additional material
information necessary to perfect the claim and an explanation of
why such information is necessary; and an explanation of the claim
review procedure.
(2) A Claimant is entitled to request a review of any denial of
his/her claim by the Board or Committee thereof. The request for
review must be submitted in writing within 60 days of mailing of
notice of the denial. Absent a request for review within the 60-
day period, the claim will be deemed to be conclusively denied.
The Claimant or the Claimant's representative shall be entitled to
review all pertinent documents, and to submit issues and comments
orally and in writing. The Board or Committee thereof shall
render a review decision in writing, within 60 days after receipt
of a request for a review, provided that, in special circumstances
(such as the necessity of holding a hearing) the Board or
Committee thereof may extend the time for decision by not more
than 60 days upon written notice to the Claimant. The Claimant
shall receive written notice of the separate review decision of
the Board or Committee thereof, together with specific reasons for
the decision and reference to the pertinent provisions of this
Plan.
(3) The Company, as administrator for this Plan (whether acting
through its employees, the Board or a Committee thereof), shall
have full and complete discretionary authority to construe and
interpret this Plan and to decide any matter presented through the
claims review procedure. Any final determination by the
administrator shall be binding on all parties. If challenged in
court, such determination shall not be subject to DE NOVO review
and shall not be overturned unless proven to be arbitrary and
capricious based upon the evidence considered by the administrator
at the time of such determination.
XII. MISCELLANEOUS
(1) Neither the Company nor the participant nor any beneficiary shall
have the power to transfer, assign, encumber, commute or
anticipate any amounts payable hereunder.
(2) The Company shall have the right to withhold from any amounts
payable hereunder any taxes or other amounts required by any
governmental authority to be withheld. The Company may establish
a grantor trust to serve as a vehicle to hold such contributions
as the Company may choose to make to pre-fund its obligations for
benefits hereunder, but the trust shall be designed so that this
Plan remains an unfunded plan and a participant's rights to
benefits under this Plan shall be those of an unsecured creditor
of the Company.
(3) Every person receiving or claiming payments under this Plan shall
be conclusively presumed to be mentally competent until the date
on which the Company receives a written notice, in form and manner
acceptable to it, that such person is incompetent and that a
guardian, conservator, or other person legally vested with the
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care of such person's estate has been appointed. In the event a
guardian or conservator of the estate of any person receiving or
claiming payments under this Plan shall be appointed by a court of
competent jurisdiction, payments may be made to such guardian or
conservator provided that proper proof of appointment and
continuing qualification is furnished in a form and manner
acceptable to the Company. Any such payment so made shall be a
complete discharge of any liability therefor.
(4) Participation in this Plan, or any modifications thereof, or the
payment of any benefits hereunder, shall not be construed as
giving to the participant any right to be retained in the service
of the Company or its subsidiaries, limiting in any way the right
of the Company or its subsidiaries to terminate the participant's
employment at any time, evidencing any agreement or understanding,
express or implied, that the Company or its subsidiaries will
employ the participant in any particular position or at any
particular rate of compensation and/or guaranteeing the
participant any right to receive a salary increase in any year,
such increase being granted only at the sole discretion of the
Board.
(5) The Company, or its utility subsidiaries, or their Boards of
Directors or any committees thereof, or any officer or director of
the Company or its utility subsidiaries or any other person shall
not be liable for any act or failure to act hereunder, except for
gross negligence or fraud.
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EXHIBIT 1
SPECIAL CONTRIBUTION ATTRIBUTABLE TO SAVINGS PLAN
EXAMPLE
ASSUMPTIONS: The participant will have pre-deferred compensation in 1994 of
$240,000. The participant has signed up for a Savings Plan deferral
contribution percentage of 6% of pay. The Savings Plan calls for an employer
match of 50% of the elective deferral contribution made by the participant up
to 6% of pay. The participant has also elected a deferral of 15% of base
salary under the Executive Deferred Compensation Plan for 1994. Article IX(3)
of the Plan requires a comparison between the actual employer matching
contribution received by the participant under the Savings Plan and the
matching contribution that would have been received, but for the deferrals
under the Plan and the application of the $7,000 and $200,000 Adjusted Limits
and the Section 415 Limits (this Example simply assumes flat $7,000 and
$200,000 limits, whereas in reality the actual adjusted limits applicable in
1994 would apply) as follows:
ACTUAL SAVINGS PLAN MATCH v. HYPOTHETICAL SAVINGS PLAN MATCH
Monthly Pay: Monthly Pay:
Gross $240,000 $240,000/12 = $20,000
15% Deferral -36,000
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Net $204,000
$204,000/12 = $ 17,000
Hypothetical Elective Monthly
Elective Monthly Deferral Deferral to Savings
Contribution Plan: Contributions to Savings Plan:
$ 17,000 x 6% = $ 1,020 $ 20,000 x 6% = $ 1,200
Elective Deferral Contribution
Over First 6 Months:
$ 1,020 x 6 = $ 6,120
Elective Deferral
Contribution 7th Month
($7,000 Limit): $ 880
Actual Employer Savings Plan Match: Hypothetical Employer Savings
Plan Match:
50% of $1,020 x 6 = $ 3,060
50% of $ 880 x 1 = $ 440 50% of $1,200 x 12 = $7,200
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Total Actual Total Hypothetical
Employer Match: = $ 3,500 Employer Match: = $7,200
SPECIAL CONTRIBUTION CALCULATIONS
Hypothetical Employer Match $7,200
Less Actual Employer Match - 3,500
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Special Contribution to be
Credited to Participant's
Records 3,700