Exhibit (10)-1
WISCONSIN ENERGY CORPORATION
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
As Amended and Restated as of June 2, 1999
WISCONSIN ENERGY CORPORATION
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
This Plan (the "Wisconsin Energy Corporation Supplemental
Executive Retirement Plan"), succeeds to and constitutes an
amendment and restatement of the Wisconsin Energy Corporation
Supplemental Executive Retirement Plan, effective January 1,
1996; such amendment and restatement is effective as of June 2,
1999. All the provisions of this amended and restated Plan shall
apply to all active employee Participants. Retired Participants
will continue to receive the benefits under the provisions
applicable at the time of their retirement. Capitalized terms
used in the Plan which are not defined in the text are defined in
Appendix A.
I) Purpose and Objective
This Plan is intended to be a "top hat plan" under the
provisions of the Employee Retirement Income Security Act
of 1974, as amended.
The objective of this Plan is to also provide an incentive
to attract and retain key employees in the service of
Wisconsin Energy Corporation (the "Company") and/or its
subsidiaries by providing them with supplemental
retirement benefits which are payable, except for the
change in control provisions in this Plan, only if they
remain in the service of Company and/or its subsidiaries
until they die or retire or become disabled.
II) Participation
1) Definition of a "Participant"
The term "Participant" as used in this Plan refers to
any key employee of the Company and/or its
subsidiaries who is designated for participation in
the Plan by the Chief Executive Officer of the
Company, the Company's Board of Directors (the
"Board") or the Compensation Committee of the Board
(the "Committee") and who has not been removed from
the Plan pursuant to Paragraph (2) below. An
employee can be designated as a "Participant" for
Benefit A, for Benefit B, the Disability Benefit or
any combination of these benefits described by this
Plan.
2) Removal of a Participant
A Participant may be removed from the Plan at any
time by the Chief Executive Officer of the Company,
the Board or the Committee, provided no such removal
may eliminate or reduce any benefits which are
protected under Section XII in the event of
termination of this Plan.
III) Vesting
A Participant becomes Vested in the benefits outlined in
Section IV under the provisions of this Plan upon
attaining age 60. A Participant who leaves service prior
to age 60 may become Vested in the benefits outlined in
Section IV with the approval of the Chief Executive
Officer, the Board or the Committee and will be deemed
Vested upon the commencement of such benefits. Persons
will be deemed to be Vested in the Disability Benefit
under Section VII upon the commencement of disability
payments.
IV) Amount of Supplemental Executive Retirement Benefit
Eligible Participants may receive either or both of the
following described supplemental pension benefits:
1) Supplemental Pension Benefit A provides a "make
whole" supplemental executive pension. This amount
will be calculated as if it were held in a defined
contribution account (the "Account Balance") for
credit to the Participant under the WE Retirement
Account Plan. This Account Balance is a lump sum
amount that increases each year as additional amounts
are credited in two ways: a benefit credit and an
interest credit.
Benefit Credit: For each calendar year in which
an employee is a Plan Participant, starting as
early as 1995, the Participant's Account Balance
will be credited with at least 5% of his/her
Pension Eligible Earnings for the year, reduced by
the amount credited to the cash balance account
under the WE Retirement Account Plan applicable to
the Participant for the year. This addition to
the account is called the Benefit Credit.
A Participant's Benefit Credit for a year will be
between 5% and 7% of the Pension Eligible Earnings
for the year less the amount credited to his/her
cash balance account under the WE Retirement
Account Plan. The actual percentage of the
Benefit Credit will be the same percentage (the
"Relevant Percentage") as is determined for the WE
Retirement Account Plan for that year.
If a Participant terminates employment during the
year, a Benefit Credit of Relevant Percentage of
the Participant's Pension Eligible Earnings to
date for the year less the amount credited to the
cash balance account under the WE Retirement Plan
for the same time period will be credited to his
or her Account Balance. To be eligible for a
Benefit Credit of more than 5% for any year, the
Participant must be actively employed on
December 31 of that year.
Interest Credit: For each calendar year, the
Participant's Account Balance will receive an
interest credit equal to a certain percentage of
his or her Account Balance at the beginning of the
year. This interest credit will be guaranteed at
a minimum of 4%, but the actual percentage will be
the same percentage that has been applied to the
WE Retirement Account Plan for that year. If the
Participant did not have an Account Balance at the
beginning of the year, the Account Balance will
not receive an interest credit at the end of the
year. If the Participant has a distribution from
his or her Account Balance, either in whole or in
part (through an annuity) before December 31, an
Interest Credit will be granted on such
distribution for the year of 1/12 of 4% for each
month prior to the commencement of payment.
Interest credits cease with the commencement of
payment.
Participants who were actively employed by the
Company and/or its subsidiaries on December 31,
1995 and who were covered on that date under the
WE Retirement Account Plan are eligible for
determination of Supplemental Pension Benefit A
under a grandfathered minimum benefit basis (the
"Benefit A Grandfather Alternative"), as detailed
in Appendix B.
2) Supplemental Pension Benefit B provides Participants
with a life annuity of 10% of the monthly average of
the Participant's Pension Eligible Earnings received
from the Company and/or its subsidiaries during
whichever period of 36 consecutive months produces
the highest monthly average. The monthly average of
Pension Eligible Earnings during such 36 month period
includes the monthly average of (i) any performance
award determined under the Company's Short-Term
Performance Plan or any other plan as designated by
the Board, calculated as of the date of determination
as if then paid in full as base salary, and (ii) any
amounts of base salary that would have been paid to
the Participant during such 36-month period but are
not paid because of deferral elections made by the
Participant under a savings or other deferred
compensation plan.
V) Form of Payment
Supplemental Pension Benefits A (including the Benefit A
Grandfather Alternative) and B will be paid commencing at
the same time as the benefit payable to the Participant
under the WE Retirement Account Plan in life annuity form
to unmarried Participants and in a 50% joint and survivor
annuity form to married Participants. However,
notwithstanding any other provision of this Plan, a
Participant may at any time prior to the commencement of
benefits under this Plan make a written request to the
Chief Executive Officer of the Company, the Board, or the
Committee for payment of any benefits under this Plan in
any of the forms allowed under the WE Retirement Account
Plan and such party may, in his or its sole and absolute
discretion, grant or deny such request. If such request
is for an alternative annuity benefit form and such
request is granted, the alternative annuity form shall be
the actuarial equivalent of a life annuity for the life of
the Participant commencing immediately, with actuarial
equivalency determined for this purpose by using the
interest rate and mortality tables then in use for
determining optional forms of annuity under the WE
Retirement Account Plan. If such request is for a lump
sum and such request is granted, the Supplemental Pension
Benefit A, if determined without reference to the
Benefit A Grandfather Alternative, shall be equal to the
Account Balance; the Supplemental Pension Benefit B and
Benefit A Grandfather Alternative lump sum forms shall be
the actuarial equivalent of a life annuity for the life of
the Participant commencing the later of the Participant's
current age or age 60, with actuarial equivalency
determined for this purpose by using the interest rate and
mortality table referenced in Article VIII (with such
interest rate to be that in effect on the last business
day of the month prior to the month in which the benefit
under this Plan is to be paid).
VI) Death Benefit
Each Participant from time to time may designate any
person or persons to receive such benefits as may be
payable under the Plan upon or after the Participant's
death, and such designation may be changed from time to
time by the Participant by filing a new designation. Each
designation will revoke all prior designations by the same
Participant, shall be in a form prescribed by the Company,
and will be effective only when filed in writing with the
Company during the Participant's lifetime. If the
Participant has failed to designate a beneficiary, or if
the beneficiary predeceases the Participant, benefits as
may be payable under the Plan will be paid to the
Participant's estate.
1) Death Benefits Respecting Benefit A
Supplemental Pension Benefit A (including the Benefit
A Grandfather Alternative) will be payable in a life
annuity form to any designated beneficiary who is a
natural person or in a lump sum form to the estate
(or to any beneficiary which is not a natural person)
of a Participant upon the death of such Participant
(whether before or after age 60) while in the service
of the Company or any of its subsidiaries before
retirement. However, notwithstanding any other
provisions of this Plan, a beneficiary who is a
natural person may at any time prior to the
commencement of benefits under this Plan make a
written request to the Chief Executive Officer of the
Company, the Board, or the Committee for payment of
benefits under this Plan in any of the forms allowed
under the WE Retirement Account Plan and such party
may, in his or its sole and absolute discretion,
grant or deny such request. If such request is for
an alternative annuity benefit form and such request
is granted, the alternative annuity form shall be the
actuarial equivalent of a life annuity for the life
of the Participant commencing immediately, with
actuarial equivalency determined for this purpose by
using the interest rate and mortality tables then in
use for determining optional forms of annuity under
the WE Retirement Account Plan and reflecting the age
of the beneficiary as of the benefit commencement
date. If such request is for a lump sum and such
request is granted, if the death benefit is
determined without reference to the Benefit A
Grandfather Alternative, such lump sum shall be equal
to the Account Balance; if the death benefit is
determined with reference to the Benefit A
Grandfather Alternative, such lump sum shall be the
actuarial equivalent of a life annuity for the life
of the Participant commencing on the later of the
Participant's age at death or the date when the
Participant would have attained age 60, with
actuarial equivalency determined for this purpose by
using the interest rate and mortality table
referenced in Article VIII (with such interest rate
to be that in effect on the last business day of the
month prior to the date of death). If a Participant
dies after the commencement of the receipt of monthly
benefits under this Plan, whether any payments
continue thereafter will depend on the form of
payment such Participant has elected prior to their
commencement of receipt of benefits.
2) Death Benefits Respecting Benefit B
If a Participant dies (whether before or after age
60) while in the service of the Company or any of its
subsidiaries before payments of Supplemental Pension
Benefit B commence, the beneficiary or beneficiaries
designated by the Participant shall become entitled
to receive a lump sum amount equal to the actuarial
equivalent of a life annuity for the life of the
Participant commencing on the later of the
Participant's age at death or the date when the
Participant would have attained age 60, with
actuarial equivalency determined for this purpose by
using the interest rate and mortality table
referenced in Article VIII (with such interest rate
to be that in effect on the last business day of the
month prior to the month in which the benefit under
this Plan is to be paid).
VII) Make Whole Long Term Disability Benefits
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 all
employees of the Company and/or its subsidiaries (the "LTD
Plan") because of either the exclusion of base salary
deferred under a savings or other deferred compensation
plan, or the limitations on annual compensation imposed by
Section 505(b)(7) of the Internal Revenue Code.
Therefore, in the event a Participant in this Plan becomes
eligible for and begins to receive a disability benefit
from the LTD Plan applicable to the Participant, and the
amount of such disability benefit is limited because of
application of salary deferral or the IRS 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 IRS limits. 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 XI below.
VIII) Payments Upon Change in Control
For purposes of this paragraph VIII, 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:
1) any "person" (as such term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934, but
excluding the Company its affiliates and any
qualified or nonqualified plan maintained by the
Company or its affiliates) becomes the "beneficial
owner" (as defined in Rule 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;
2) 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;
3) 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;
4) 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
5) 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 lump sum amount equal to the then
present value of all benefits then accrued under this
Plan, 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 date when
a Change in Control event described in subparagraphs (1)
through (5) above has occurred as such yield is reported
in the Wall Street Journal or comparable publication, and
(ii) the mortality table used for purposes of determining
lump sum amounts then in use under the qualified defined
benefit plan of the Company or its subsidiaries applicable
to the Participant. Such payments shall be made without
regard to whether the 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 payments.
IX) Government Regulations
It is intended that the Plan will comply with all
applicable laws and governmental regulations, and the
Company and/or its subsidiaries shall not be obligated to
perform an obligation hereunder in any case where, in the
opinion of the Company's counsel, such performance would
result in violation of any law or regulation. All amounts
payable under this Plan shall be subject to all applicable
withholding taxes.
X) Nonassignment
No benefit(s) under the Plan, nor any other interest
hereunder of any Participant or beneficiary shall be
assignable, transferable, or subject to sale, mortgage,
pledge, hypothecation, anticipation, garnishment,
attachment, execution, or levy of any kind.
XI) Provision of Benefits
The Company may establish a grantor trust (a "rabbi
trust") to serve as a vehicle to hold such contributions
as the Company may choose to make to prefund its
obligation for benefits hereunder, but the trust shall be
designed so that all assets therein are subject to the
claims of the creditors of the Company or any of its
subsidiaries which have used such rabbi trust in the event
of insolvency, consistent with the provisions of Revenue
Procedure 92-64. Notwithstanding the existence of such
grantor trust, the Plan shall remain an unfunded plan. A
Participant's rights to benefits under the Plan shall be
those of an unsecured creditor of the Company and/or its
subsidiaries.
XII) Termination or Modification of Plan
The Board or the Committee shall have the right to
terminate or modify this Plan for specific individuals at
any time and from time to time, provided that no such
action may eliminate or reduce or change the time or
manner of payment of any benefits which: (i) have already
become payable to any Participant or beneficiary; or (ii)
would have become payable to any Participant or
beneficiary without the Board's, the Committee's or the
Chief Executive Officer's approval under the terms of
Article III hereof if such Participant had retired
immediately before such action is taken. The Chief
Executive Officer may also make amendments to this Plan at
any time, consistent with the authority delegated to the
Chief Executive Officer by the Board regarding such
amendments.
XIII) Claim Procedures
A Participant or beneficiary (a `Claimant') may file a
written request for benefits or claim with the Company
under the 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 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 the
Committee. 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 his/her
representative shall be entitled to review all
pertinent documents, and to submit issues and
comments orally and in writing. The Board or
Committee shall render a review decision in writing,
within 60 days after receipt of a request for a
review, provided that, in special circumstances the
Board or Committee may extend the time for decision
by not more than 60 days upon written notice to the
Claimant. The Claimant shall receive notice of the
separate review decision of the Board or Committee,
together with specific reasons for the decision and
reference to the pertinent provisions of this Plan.
3) The Company as the administrator of this Plan shall
have full and complete discretionary authority to
determine eligibility for benefits, to construe the
terms of the Plan and to decide any matter presented
through the claims review procedure. Any final
determination by the Company 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 upon the evidence considered by the
Company at the time of such determination.
XIV) Miscellaneous
1) The Chief Executive Officer, the Board or the
Committee may establish, amend or rescind from time
to time rules and regulations which are necessary or
desirable in connection with the Plan. The Chief
Executive Officer may not act on any matter involving
his own participation in this Plan. The Company
shall have the right to withhold from any amounts
payable under this Plan any taxes or other amounts
required to be withheld by any governmental
authority.
2) 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 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.
3) 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 Compensation
Committee of the Board.
4) The Company, or its subsidiaries, or their Boards of
Directors or any committees thereof, or any officer
or director of the Company or its subsidiaries or any
other person shall not be liable for any act or
failure to act hereunder, except for fraud.
5) This Plan shall be governed by and construed in accordance
with the laws of the State of Wisconsin, to the extent not
preempted by federal law, without reference to conflicts of law
principles.
APPENDIX A
DEFINITIONS:
VESTED: The Participant has an enforceable legal right to
receipt of the benefits described in this Plan. Participants
become Vested in their Supplemental Executive Retirement Benefit
when they reach age 60 (or in Mr. R.A. Abdoo's case, age 58 and
if his actual retirement occurs at or after age 58 but prior to
age 60, he shall be deemed to be age 60 for purposes of all
calculations respecting Supplemental Provision Benefits A and B
hereof), or when prior to age 60 (or in Mr. R.A. Abdoo's case,
age 58) with the approval of the Chief Executive Officer and the
Board of Directors of the Company, the Participant retires and
commences receipt of benefits. A Participant becomes Vested in
the Disability Benefits after such payments of the benefits have
commenced. Vesting also occurs upon the occurrence of a Change
in Control as defined in Article VIII.
PENSION ELIGIBLE EARNINGS: Established base salary for assigned
responsibilities including payments for absences, without regard
for any limitations imposed by the Internal Revenue Code on
benefits or compensation and including any amounts of base salary
that would have been paid to the Participant, but were not paid
because of deferral elections made by the Participant under a
savings or other deferred compensation plan, and including the
total of any incentive performance award determined under the
Company's Short-Term Performance Plan or other short-term plan
which has been approved by the Board for inclusion into Pension
Eligible Earnings for this Plan. Amounts of base salary and
annual incentive will be calculated without regard to any amounts
deferred from such base salary or annual incentive compensation.
WE RETIREMENT ACCOUNT PLAN: The Wisconsin Electric qualified
defined benefit retirement plan, a cash balance pension plan, as
amended and restated effective as of January 1, 1996, as amended
from time to time.
APPENDIX B
GRANDFATHERED MINIMUM BENEFITS FOR PARTICIPANTS WHO ON
DECEMBER 31, 1995 WERE BOTH ACTIVELY EMPLOYED BY THE COMPANY AND
COVERED UNDER THE WE RETIREMENT ACCOUNT PLAN
A Participant who was actively employed by the Company on
December 31, 1995 and who was then covered by the WE Retirement
Account Plan and who continued as an active employee of the
Company until his or her commencement of benefits under this
Plan, shall be eligible for the Benefit A Grandfather
Alternative. The Benefit A Grandfather Alternative will be equal
to the greater of (x) or (y), where:
(x) is the benefit that would have accrued for such
Participant under the provisions of the special
formula minimum retirement income grandfather
sections (the "Grandfathered Benefit Provisions") of
the WE Retirement Account Plan, if the WE Retirement
Account Plan were administered using all Pension
Eligible Earnings as defined in this Plan, less the
amount of the qualified pension benefit that such
Participant would be actually entitled to receive
were the Grandfathered Benefit Provisions of the WE
Retirement Account Plan applied, and
(y) is the benefit that would have accrued for such
Participant under the provisions of the cash balance
formula of the WE Retirement Account Plan, if the
WE Retirement Account Plan was administered using all
Pension Eligible Earnings as defined in this Plan,
less the amount of the qualified benefit that such
Participant would be actually entitled to receive
under the cash balance formula of the WE Retirement
Account Plan were such formula applied.
Credited service and Pension Eligible Earnings after December 31,
2010, will not be used to calculate this Benefit A Grandfather
Alternative, but existing early retirement reductions based upon
the Participant's age and service applicable to the Grandfathered
Benefit Provisions will continue in accordance with the terms of
the WE Retirement Account Plan.
An example of the Benefit A Grandfather Alternative is as
follows:
Assume the Participant actually receives a cash payment at
retirement from the WE Retirement Account Plan of $380,000.
At the time the Participant receives that benefit,
calculations are made to convert the formula (x) benefit
above into a lump sum amount that is the actuarial
equivalent of a life annuity for the life of the Participant
commencing at the later of age 60 or the Participant's age
at benefit commencement. This is accomplished in three
steps. First, the portion of the formula (x) benefit
calculated using all Pension Eligible Earnings is multiplied
by the early retirement reduction factor as determined under
the WE Retirement Account Plan. Secondly, the resulting
benefit is converted into a lump sum actuarial equivalent
($1,450,000 in the illustration below) of the life annuity
form described above, with actuarial equivalency determined
for this purpose by using the interest rate and mortality
table referenced in Article VIII (with such interest rate to
be that in effect on the last business day on the month
prior to payment), Thirdly, the value of the lump sum to
which the Participant would actually be entitled under the
WE Retirement Account were the Grandfathered Benefit
Provisions applied is subtracted ($350,000 in the
illustration below) to obtain the formula (x) net lump sum
amount ($1,100,000 in the illustration below). Calculations
are also made under formula (y) which compare the lump sum
account balance that would have been generated for the
Participant using all Pension Eligible Earnings under the
regular cash balance formula of the WE Retirement Account
Plan ($520,000 in the illustration below) with the actual
lump sum account balance that would be payable to the
Participant were the regular cash balance formula applied
($380,000 in the illustration below). The following
comparisons result:
1) WE Retirement Account Plan:
(a) Cash Balance Formula $380,000
(b) Grandfather Formula 350,000
2) SERP Benefit A Grandfather Alternative, calculated
under:
(a) Cash Balance Formula $ 520,000
(b) Grandfather Formula 1,450,000
3) Actual SERP Benefit A Grandfather is $1,100,000, which
is the greater of 2(a) - 1(a) [$140,000] or 2(b) - 1(b)
[$1,100,000].