EXHIBIT 10.1(j)-1
SETTLEMENT AGREEMENT
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THIS AGREEMENT is made as of December 31, 1997 by and between
Wisconsin Electric Power Company ("WE"), a Wisconsin corporation with its
principal office at 231 West Michigan Street, Milwaukee, Wisconsin 53203 and
Upper Peninsula Power Company ("UP"), a Michigan corporation with its
principal office at 600 Lakeshore Drive, Houghton, Michigan 49931.
RECITALS
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A. On December 31, 1987, WE purchased the Presque Isle Power Plant
and certain related facilities ("PIPP") all located in Marquette County,
Michigan from Upper Peninsula Generating Company ("UPGENCO").
B. Prior to its purchase by WE, the PIPP was operated by UP for
UPGENCO.
C. On December 31, 1987, WE and UP entered into a Power Plant
Operating Agreement ("PPOA"), whereby UP agreed to operate the PIPP for WE
pursuant to certain terms and conditions.
D. On July 26, 1990, WE and UP entered into a Presque Isle Plant
Operating Agreement ("PIPPOA") superseding the PPOA, whereby UP agreed to
continue operating the PIPP for WE pursuant to modified terms and
conditions.
E. By notice given December 12, 1996, WE terminated the PIPPOA
pursuant to its terms effective as of December 31, 1997.
F. Pursuant to the terms of the PIPPOA, WE has offered employment
to those employees of UP assigned to, physically located at, and then
performing services for UP at the PIPP as of the date of termination.
G. Prior to the notice by WE terminating the PIPPOA, a dispute has
arisen between the parties, as to the liability of WE to UP for certain
employee benefit costs for PIPP employees.
H. The parties have negotiated a resolution of this dispute and all
outstanding issues relating to the termination of the PIPPOA and now desire
to memorialize the full final and complete settlement they have reached.
WITNESSETH:
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In consideration of the foregoing and the mutual promises herein
contained, the parties agree as follows:
1. Upon execution of this agreement, WE shall pay UP the sum of
$1,500,000.
2. UP shall have the sole responsibility, except as expressly
provided in paragraph 8 herein with regard to medical benefits and paragraph
9 herein with regard to benefits under UP's Supplemental Retirement Pay Plan
for Select Employees, for funding, and providing, in accordance with the
terms and conditions of the relevant UP benefit plan as from time to time
amended and in effect, any and all employee benefits, including without
limitation because of enumeration, pension, retiree life, retiree medical,
and vacation and/or sick leave benefits associated with its operation of the
PIPP for WE through December 31, 1997 under the PIPPOA.
3. Attached hereto as Exhibit "A" is a roster of persons employed
by the PIPP by UP who retired or terminated employment prior to December 31,
1997, indicating the UP health and/or life benefits to which they are or may
become entitled. UP warrants and represents that such roster is complete
and accurate and lists all former PIPP employees entitled or that may
become entitled to such benefits.
4. Attached hereto as Exhibit "B" is a roster of persons employed
at the PIPP by UP as of December 31, 1997 indicating the health and/or
benefits to which they are or may become entitled based on employment by UP
through December 31, 1997. UP warrants and represents that such roster is
complete and accurate and lists all employees who are entitled to or may
become entitled to such benefits.
5. UP will fund and continue to be responsible for administering
and paying all benefits due under the Restated Pension Plan for Employees of
Upper Peninsula Power Company as from time to time amended and in effect, or
any successor to such plan (collectively, the "Pension Plan"). UP shall be
solely responsible for funding the Pension Plan and for all benefit payments
to retirees and all other obligations under the Pension Plan, and shall
indemnify and hold WE harmless from any liability for funding such plan or
for such payments, obligations, or for any promises made by UP to its former
employees with respect to the Pension Plan.
6. UP shall be responsible for funding, administering and paying
all accrued but unused vacation and sick pay benefits due under its vacation
and sick pay plans. UP will be responsible for all administration and other
costs of paying accrued but unpaid vacation and sick pay benefits under the
UP vacation and sick leave plans, and shall indemnify and hold WE harmless
from any liability for such benefits or any of the administration or other
costs, or any promises made by UP to its former employees with respect to
UP"s vacation and sick leave plans.
7. With respect to retiree life insurance benefits for UP's former
PIPP employees:
(a) UP shall be responsible for funding, administering and
paying all benefits due under its retiree life insurance plan to its former
employees indicated on Exhibits "A" and "B" to the extent that such
employees are or become eligible to receive such benefits under the terms of
the UP retiree life insurance plan. UP will be responsible for all
administration and other costs of providing retiree life insurance benefits
under the UP retiree life insurance plan and shall indemnify and hold WE
harmless from any liability for such benefits or any of the administration
or other costs, or any promises made by UP to its former employees with
respect to benefits under the UP retiree life insurance plan.
(b) WE shall give those former employees of UP indicated on
Exhibit "B" and who become employed by WE on January 1, 1998, service credit
under the WE retiree life insurance plan for their years of service with UP
for purposes of determining whether the employee has completed the service
requirement for retiree life insurance benefits under the WE plan.
8. With respect to UP's medical benefits plan for its former PIPP
employees:
(a) UP will continue to fund and administer the plan and shall
be responsible for paying benefits due its former employees who are
indicated on Exhibits "A" and "B" to the extent that such employees are or
become eligible for medical benefits thereunder. UP will be responsible for
all administration and other costs of providing medical benefits, and shall
indemnify and hold WE harmless from any liability for funding such plan and
for benefits or any of the administration or other costs, or any promises
made by UP to its former employees with respect to benefits, under such
plan, except as provided in paragraphs 8(b) and (c) of this Agreement.
(b) Claims incurred by UP's former PIPP employees for services
rendered prior to January 1, 1998 and paid by UP in accordance with UP's
medical plan applicable to the PIPP employees shall be reimbursed by WE in
accordance with section 4.03(a) of the PIPPOA.
(c) For claims incurred by UP's fomer PIPP employees identified
on Exhibits "A" and "B" as being eligible for UP retiree medical benefits
for services rendered during a ten (10) year period beginning January 1,
1998 and ending December 31, 2007 and paid by UP in accordance with UP's
retiree medical plan applicable to such employees, WE shall reimburse UP for
claims incurred and actually paid by UP with respect to any year in
accordance with its retiree medical plan applicable thereto, in an amount
equal to 50% of the total amount of such claims, or the total amount by
which such claims exceed a fixed amount for that year, whichever is greater.
In either case the total amount of such claims shall be net of any premiums
received by UP from its former PIPP employees identified on Exhibits "A" and
"B". The fixed amount shall be $200,000 in 1998. Each year thereafter
through 2007 the fixed amount shall be increased to an amount equal to 105%
of the fixed amount for the previous year. Up shall invoice WE on a monthly
basis for WE's share of such claims, and WE shall pay such amount within ten
(10) business days following WE's receipt of UP's invoice. Interest on
unpaid and overdue amounts will accrue at the prime rate of interest as from
time to time established by M & I Marshal & Iisley Bank of Milwaukee,
Wisconsin. WE will not be responsible to UP for any reimbursement of claims
made and paid for services rendered after December 31, 2007 under UP's
retiree medical benefits plan.
(d) UP agrees that during the ten year period WE is obligated
to make payments under paragraph 8(c) above, UP shall maintain in force a
policy of stop loss insurance at its sole cost and expense but subject to
the reimbursement provisions of paragraph 8(c) and the remainder of this
paragraph 8(d), providing coverage for retiree medical claims for the former
PIPP employees as long as it maintains such insurance for its retiree
medical claims generally. The portion of the premium prorated on a per
capita basis attributable to the former PIPP employees identified on
Exhibits "A" and "B" shall be treated as a retiree medical claim paid by UP
that is subject to reimbursement by WE in accordance with paragraph 8(c)
above. Any amounts received by UP in accordance with any such stop-loss
policy shall be treated as a reduction in the amount of benefits paid by UP
for purposes of calculating the amount of WE's reimbursement obligation
under paragraph 8(c) above.
(e) UP shall offer former PIPP employees who are eligible for
UP retiree medical benefits and who are employed by WE beginning on January
1, 1998 the option to defer commencement of their UP retiree medical
benefits from the date on which such benefits otherwise would commence under
the UP retiree medical benefits plan to the employee's termination of his or
her employment with WE.
(f) At its expense, UP may attempt to reach an agreement with
Local Union 510 of the International Brotherhood of Electrical Workers AFL-
CIO ("Union") or with some or all of the former PIPP employees who were
represented by the Union, providing that those employees who retire from WE
after December 31, 2007, will not be eligible for UP retiree medical
benefits. WE will not interfere with UP's effort to obtain such agreement.
(g) UP agrees for itself and its successors not to enhance its
retiree medical plan as it relates to its former employees at the PIPP.
9. WE shall assume all obligations and pay the benefits due to
Stanley C. Rajala under UP's Supplemental Retirement Pay Plan for Select
Employees.
10. Except as to obligations created or modified by this Agreement,
any workers' compensation insurance adjustments made pursuant to the
agreement executed by WE on November 12, 1997 and by UP on November 17,
1997, and any payroll, sick pay and vacation payments (and related tax
obligations) made to or on behalf of PIPP employees for work performed or
paid time off through December 31, 1997, or other amounts due or to become
due under sections 4.01, 4.03 (except amounts due for Accrual Benefits),
7.01, 7.02, 7.03 or 11.05, or continuing obligations under sections 2.01,
8.02, 8.03, 10.01, 10.02 and 10.03, of the PIPPOA as of the date hereof, the
parties hereto hereby mutually release one another from any and all claims,
obligations or liabilities arising under or relating to PPOA or PIPPOA
specifically as follows:
(a) UP hereby releases WE, its affiliates, parent and
subsidiaries, and successors from and of any and all claims, obligations or
liabilities of whatever kind or nature, whether known or unknown arising
under or relating to the PPOA or PIPPOA, including but not limited to all
claims or obligations arising under UP employee benefit plans and
reimbursement of employee benefit payments under such plans, and arising
from and relating to any promises, express or implied, made by UP to its
former employees at the PIPP with respect to any employee benefits; and,
(b) WE hereby releases UP, its affiliates, parent and
subsidiaries, and successors, jointly and severally, from and of any and all
claims, obligations or liabilities of whatever kind or nature whether known
or unknown, arising under or relating to the PPOA or PIPPOA, including, but
not limited to, all claims or obligations arising from and relating to any
promises, express or implied, made by WE to PIPP employees with respect to
any employee benefits. WE hereby agrees to indemnify and hold UP harmless
from any liability or expense arising from or related to any promises,
express or implied, made by WE to PIPP employees with respect to any
employee benefits.
11. In its sole discretion WE shall have the right at all reasonable
times and at its expense to audit, inspect and examine the books and records
of UP relating to the employee benefits which are the subject of this
agreement, the payment of such benefits, and any reimbursement claim for
such payments. UP shall provide access to such books and records at all
reasonable times to any officer, employee, agent, or auditor designated by
WE to perform such audit, inspection or examination.
12. Nothing in this Agreement is intended, nor shall it be
construed, to confer any rights or benefits upon any person (including, but
not limited to, any employee or former employee at PIPP or any beneficiary
or dependent of any such employee or former employee) other than WE and UP
and their successors and assigns. The UP benefits that will or may be
provided to eligible former PIPP employees are subject to the terms and
conditions of the applicable employee benefit plans. Except as provided in
paragraphs 8(e) and 8(g) hereof, nothing in this Agreement limits UP's
authority and discretion with respect to the employee benefit plans that it
maintains, including, without limitation, UP's authority to amend, modify or
terminate any such plan.
13. Each of the parties acknowledges and represents to the other
that it has been fully advised by its own legal counsel and actuaries with
respect to this Agreement and that its approval is based solely upon its own
review of the terms and conditions hereof, and its own analysis of the
circumstances giving rise to this Agreement.
14. This Agreement and the enforcement thereof shall be governed by
the laws of the State of Michigan. The invalidity or unenforceability of
any provision of the Agreement shall not affect the validity or
enforceability of the remaining provisions thereof.
15. The parties represent and warrant to one another that their
respective approvals of the terms and conditions of this Agreement have been
duly authorized, and that this Agreement has been executed on their
respective behalves by persons acting in their official capacity and with
full authority.
16. This Agreement shall be binding upon each of the parties and any
successor to either of them by merger, consolidation, sale of assets or
otherwise.
17. For purposes of paragraphs 2,5,6,7 and 8 hereof, UP's obligation
to "fund" relevant UP benefits plans is not intended and shall not be
construed to limit UP's right, to the extent consistent with applicable law,
to pay plan benefits from general corporate assets without having
established a trust fund or other separate funding mechanism for the
provision of such benefits.
EXECUTED as of the day and year first written above.
WISCONSIN ELECTRIC POWER COMPANY
By: /s/ Kristine M Krause
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Kristine M. Krause
Vice President-Fossil Operations
UPPER PENINSULA POWER COMPANY
By: /s/ Burton C. Arola
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Burton C. Arola
Vice President-Finance, Treasurer
and Secretary
EXHIBIT A
Presque Isle Retirees as of 12-31-97
These retirees are drawing their pension as well as retiree life and medical
insurance benefits unless noted
1 Baker, Harold J.
2 Baker, Orville
3 Balbierz, John
4 Balzarini, Sally (1)
5 Barr, Donald J.
6 Belmore, Edward C.
7 Bianchi, Eugene
8 Brady, Stanely W. (2)
9 Brown, John T. Jr. (2)
10 Burns, Forrest A.
11 Cain, Clyde
12 Carlson, Judith (3)
13 Christian, Robert J.
14 Deegan, Gerard W.
15 DesJardins, Raymond J.
16 Engel, Norma A.
17 Gauthier, Jerry J.
18 Havel, Henry A. Jr.
19 Hughes, Timothy P. (2)
20 Johnson, Glenn M.
21 Kyllonen, Alex H.
22 Larson, Oscar E.
23 Mahalic, Thomas
24 Maki, Sulo A. (2)
25 McFadden, Cora A.
26 Pederson, Ronald G. (2)
27 Peterson, Signe (3)
28 Polini, Edmund
29 Prudom, Daryl T. (2)
30 Rajala, Stanley C.
31 Ranta, Donald L.
32 Rose, Francis W.
33 Saatio, Fred R.
34 Schneider, Karl M.
35 Scott, Elizabeth (1)
36 Sherbinow, Donald L.
37 Smart, Ronald (1)
38 Smith, Warren J. (1)
39 York, Charles M.
(1) Pensioner with no life or medical insurance;
(2) Pensioner with life benefit but no medical;
(3) Pensioner with medical but no life insurance.
Presque Isle
Terminated Vested Employees as of 12-31-97
These are terminated employees who will be eligible for retiree health care
if they wait until they reach their 85 points to begin drawing their pension
benefit.
1 Balzarini, Michael
2 Benckendorf, Roger A.
3 Heidtman, Gary
4 Morris, James
5 Smith, Richard S.
6 Stevenson, Paul B.
7 Surface, Lee A.
EXHIBIT B
Presque Isle Employees as of 12-31-97
These employees are terminated as of 12-31-97 and eligible for retiree
health and life insurance only if retired on 1-01-98. All others will be
eligible for health care only if they wait until they reach their 85 points
to begin drawing their pension.
1 Aho, Gene E.
2 Beauchaine, Joseph R.
3 Bedore, Raymond J.
4 Bocklund, Dennis
5 Boyer, Michael R.
6 Campeau, J.G. Bruce
7 Drysdale, James J., Jr.
8 DuBord, Michael
9 Gobert, Gary P.
10 Hauswirth, Wesley
11 Kangas, Stephen R.
12 Kovala, James E.
13 LaForais, Louis B.
14 Michaelson, Bruce E.
15 Miller, Michael J.
16 Mueller, David A.
17 Niemi, David N.
18 Olsen, David J. (Retiring 1-01-98)
19 Paveglio, Edward J.
20 Pekkala, Dennis E.
21 Peterson, Dennis A. (Retiring 1-01-98)
22 Racine, David G.
23 Rodgers, Richard
24 Roe, Albert
25 Rogers, Michael J.
26 Sheppard John
27 Thompson, David (Retiring 1-01-98)
These employees are laid-off as of 12-31-97 and eligible for retiree health
and life insurance only if they elect immediate retirement on or before 7-
01-98.
All others will be eligible for retiree health care only if they wait until
they reach their 85 points to begin drawing their pension.
28 Aho, Timothy A.
29 Amo, John D.
30 Anderson, Kenneth W.
31 Bannan, Robert (Retiring 1-01-98)
32 Barnhart, Paul T.
33 Beauchaine, Paul
34 Beerman, Gerald L. Jr. (Retiring 1-01-98)
35 Beltrame, Gary
36 Berry, Joseph W.
37 Bonanni, Michael P.
38 Borg, Terrance V. (Retiring 1-01-98)
39 Bourdage, George (Retiring 1-01-98)
40 Bower, Arthur C.
41 Brisson, William J., Jr.
42 Brunsman, John R.
43 Bucholtz, James H.
44 Carlson, William J.(Terminated as of 1-01-98)
45 Chaput, Michael B. (Retiring 1-01-98)
46 Chetto, Nicholas L.
47 Christian, Robert A.
48 Contois, Michael
49 Crnkovich, Anthony E.
50 Davey, James
51 Dore, Steven W.
52 Doucette, Milton G.
53 Drobny, James B.
54 Duquette, John W.
55 Fletcher, Edwin J. (Retiring 1-01-98)
56 Foster, Keith C.
57 Fradette, James L.
58 Frazee, Robert F.
59 Fredin, Raymond T. (Retiring 1-01-98)
60 Granroth, Russell J. (Retiring 1-01-98)
61 Grawn, Fredrick J. (Retiring 1-01-98)
62 Grutt, DuWayne K.
63 Gutzman, Gary W. (Retiring 5-01-98)
64 Hamalainen, Mary Gail
65 Hanner, James A. (Retiring 1-01-98)
66 Harris, Harold B., Jr. (Retiring 1-01-98)
67 Hart, Roger
68 Haupt, Michael S.
69 Hawes, Richard J. (Retiring 1-01-98)
70 Hokenson, Theodore H.
71 Holman, Peter R.
72 Hudson, Robert S. (Retiring 1-01-98)
73 Jacobson, Kenneth G. (Retiring 1-01-98)
74 Johns, Paul (Retiring 3-01-98)
75 Kapeller, William T.
76 Karna, David W.
77 Kauppila, Raymond P. (Retiring 1-01-98)
78 Kerekes, Joseph E. Jr. (Retiring 1-01-98)
79 Kipling, James A.
80 Kivisto, Elvin J.
81 Koski, Kevin J.
82 LaBine, Jerome
83 LaFave, Robert L., Jr. (Retiring 7-01-98)
84 Langford, Larry L.
85 Larsen, Richard R.
86 Larson, Paul D. (Retiring 1-01-98)
87 LaValley, William J.
88 Lawrence, John K.
89 LeSage, Gerald A. (Retiring 1-01-98)
90 Lillie, Philip W.
91 Lucas, Michael B.
92 Madosh, Peter J., Jr. (Retiring 1-01-98)
93 Marier, John
94 McAlpine, William H.
95 Miller, James I. (Retiring 1-01-98)
96 Morton, Richard (Retiring 2-01-98)
97 Nason, Stephen
98 Nomellini, Ross A.
99 Nosal, Charles J. (Retiring 1-01-98)
100 Nummela, Raymond
101 Parent, Leon J.
102 Parolini, Grace K. (Retiring 1-01-98)
103 Paveglio, Terry L.
104 Pompo, Danny L.
105 Provost, James
106 Renaud, James (Retiring 1-01-98)
107 Rosenlund, Geraldine L. (Retiring 1-01-98)
108 Schinella, Steven
109 Schneider, Theodore A.
110 Scott, Elizabeth
111 Serfas, Robert H.
112 Sheldon, Donald
113 Skutley, Ronald N. (Retiring 1-01-98)
114 Smith, Paul A.
115 Soli, Cynthia
116 Spencer, Russell W.
117 Steele, Roger
118 Sunne, Craig J. (Retiring 1-01-98)
119 Terzaghi, Louis M.
120 Trotochaud, James W.
121 Truscott, Terry C. (Retiring 1-01-98)
122 VanAbel, Roger
123 White, Duncan C.
124 Wiley, Janet M.
125 Williams, Gerald E.
126 Worthington, Robert T.
127 Zorza, Greg
PLEASE NOTE:
(1) All laid-off employees must pay a premium to UPPCO and retire on or
before 7-01-98 in order to have a life insurance benefit at retirement.
(2) All retired employees electing UPPCO's retiree health care will have
premiums to UPPCO waived for a maximum period of three years. At the end of
that period, retirees must pay premiums to UPPCO or coverage will be
terminated.
ARTICLE IX
AMENDMENTS
The shareholders entitled to vote may alter, amend, add to or repeal these
Bylaws.