DIRECTORS' DEFERRED COMPENSATION PLAN PLAN DOCUMENT

Exhibit 10.4

 

 

WISCONSIN ENERGY CORPORATION

 

 

 

DIRECTORS' DEFERRED COMPENSATION PLAN
PLAN DOCUMENT

Amended and Restated as of January 1, 2004

 

 

 

TABLE OF CONTENTS

PURPOSE

ARTICLE 1      DEFINITIONS

1.1        Account Balance

1.2        "Deferral Amount

1.3        Annual Installment Method

1.4        Annual Restricted Stock Amount

1.5        Annual Stock Option

1.6        Beneficiary

1.7        Beneficiary Designation Form

1.8        Board

1.9        Change in Control

1.10      Chairman

1.11      Claimant

1.12      Committee

1.13      Company

1.14      Deferral Account

1.15      Director

1.16      Election Form

1.17      Eligible Stock Option

1.18      In Service Payout

1.19      Inactive Participant

1.20      Participant

1.21      Plan

1.22      Plan Year

1.23      Pre-Retirement Survivor Benefit

1.24      Qualifying Gain

1.25      Restricted Stock

1.26      Restricted Stock Account

1.27      Restricted Stock Amount

1.28      Retirement, Retire(s) or Retired

1.29      Retirement Benefit

1.30      Stock

1.31      Stock Option Account

1.32      Stock Option Amount

1.33      Trust

1.34      Unforeseeable Financial Emergency

ARTICLE 2      ELECTION FORM FOR DEFERRAL OF DIRECTOR FEES

2.1        Deferral of Fees

2.2        Termination of Deferral of Fees

ARTICLE 3      DEFERRAL COMMITMENTS/CREDITING/TAXES

3.1        Stock Option and Restricted Stock Deferral

3.2        Withholding of Fee Deferral Amounts

3.3        Stock Option Amount

3.4        Restricted Stock Amount

3.5        Account Balances of Inactive Participants and other Participants as of July 1, 2002

3.6        Investment of Trust Assets

3.7        Sources of Stock

3.8        Vesting

3.9        Crediting/Debiting of Account Balances

3.10      Distributions

ARTICLE 4      IN SERVICE PAYOUT; UNFORESEEABLE FINANCIAL EMERGENCIES; WITHDRAWAL ELECTION

4.1        In Service Payout

4.2        Other Benefits Take Precedence Over In Service

4.3        Withdrawal Payout/Suspensions for Unforeseeable Financial Emergencies

4.4        Withdrawal Election

ARTICLE 5      RETIREMENT BENEFIT

5.1        Retirement Benefit

5.2        Payment of Retirement Benefit

5.3        Death Prior to Completion of Retirement Benefit

ARTICLE 6      PRE-RETIREMENT SURVIVOR BENEFIT

6.1        Pre-Retirement Survivor Benefit

6.2        Payment of Pre-Retirement Survivor Benefit

ARTICLE 7      BENEFICIARY DESIGNATION

7.1        Beneficiary

7.2        Beneficiary Designation; Change

7.3        Acknowledgment

7.4        No Beneficiary Designation

7.5        Doubt as to Beneficiary

7.6        Discharge of Obligations

ARTICLE 8      TERMINATION, AMENDMENT OR MODIFICATION

8.1        Termination

8.2        Amendment

8.3        Effect of Payment

ARTICLE 9      ADMINISTRATION

9.1        Committee Duties

9.2        Administration Upon Change In Control

9.3        Agents

9.4        Binding Effect of Decisions

9.5        Indemnity of Committee

9.6        Company and Participating Subsidiary Information

9.7        Coordination with Other Benefits

ARTICLE 10    CLAIMS PROCEDURES

10.1      Presentation of Claim

10.2      Notification of Decision

10.3      Review of a Denied Claim

10.4      Decision on Review

10.5      Legal Action

ARTICLE 11    TRUST

11.1      Establishment of the Trust

11.2      Interrelationship of the Plan and the Trust

11.3      Distributions From the Trust

ARTICLE 12    MISCELLANEOUS

12.1      Unsecured General Creditor

12.2      Liability

12.3      Nonassignability

12.4      Furnishing Information

12.5      Terms

12.6      Captions

12.7      Governing Law

12.8      Notice

12.9      Successors

12.10    Validity

12.11    Incompetent

12.12    Court Order

12.13    Distribution in the Event of Taxation

12.14    Insurance

12.15    Legal Fees To Enforce Rights After Change in Control

12.16    Payout Under Special Circumstances

 

 

 

WISCONSIN ENERGY CORPORATION
DIRECTORS' DEFERRED COMPENSATION PLAN

Purpose

The purpose of the Wisconsin Energy Corporation Directors' Deferred Compensation Plan (the "Plan") is to establish a method of paying directors' compensation which will aid Wisconsin Energy Corporation and its subsidiaries in attracting and retaining as members of their Boards of Directors persons whose abilities, experience and judgment can contribute to the continued progress of the Company and its subsidiaries. The Plan is hereby amended and restated effective as of January 1, 2004.

ARTICLE 1

Definitions

For purposes of this Plan, unless otherwise clearly apparent from the context, the following phrases or terms shall have the following indicated meanings:

1.1     "Account Balance" shall mean, with respect to a Participant, a credit on the records of the Company equal to the sum of (i) the Deferral Account balance, (ii) the Stock Option Account balance and (iii) the Restricted Stock Account balance. The Account Balance shall be a bookkeeping entry only and shall be utilized solely as a device for the measurement and determination of the amounts to be paid to a Participant, or his or her designated Beneficiary, pursuant to this Plan.

1.2     "Deferral Amount" shall mean that portion of a Participant's fees for services as a Director a Participant elects to have, and is deferred, in accordance with Article 2.

1.3     "Annual Installment Method" shall be an annual installment payment over the number of years selected by the Participant, not to exceed 20, in accordance with this Plan, as set forth below. In each case, the Account Balance of the Participant shall be calculated as of the close of business on the last business day of the year. Each annual installment, regardless of the method selected, shall be payable within 60 days after February 1st of each year. The alternative methods allowable are as follows:

(a)      Fractional Method . The annual installment shall be calculated by multiplying this balance by a fraction, the numerator of which is one, and the denominator of which is the remaining number of annual payments due the Participant. By way of example, if the Participant elects a 10 year Annual Installment Method, the first payment shall be 1/10 of the Account Balance, calculated as described in this definition. The following year, the payment shall be 1/9 of the Account Balance, calculated as described in this definition.

(b)      Percentage or Fixed Dollar Method . The annual installment shall be calculated by multiplying this balance in the case of the percentage method, by the percentage selected by the Participant and paying out the resulting amount, or in the case of the fixed dollar method, by paying out the fixed dollar amount selected by the Participant, for the number of years selected by the Participant. However, in the event the dollar amount selected is greater than the Account Balance in any given year, the entire Account Balance will be distributed. Further, regardless of the method selected by the Participant, the final installment payment will include 100% of the then remaining Account Balance.

(c)      Special Installment Method . Under this alternative method, the Participant selects both the number of years and a specified interest rate, which is then used to calculate a level fixed dollar amount of annual payouts which would exhaust the Account Balance over such number of years, if actual performance of the elected Measurement Funds were identical to the specified interest rate. However, in recognition of the fact that such exact conformity is unlikely, in the event the calculated level fixed dollar amount is greater than the Account Balance in any given year, the entire Account Balance will be distributed. Further, the final installment payment will include 100% of the then remaining Account Balance.

1.4     "Annual Restricted Stock Amount" shall mean, with respect to a Participant for any one Plan Year, the portion of the Restricted Stock Amount attributable to Restricted Stock which would otherwise vest during that year and which is deferred in accordance with Section 3.1(c) of this Plan.

1.5     "Annual Stock Option Amount" shall mean, with respect to a Participant for any one Plan Year, the portion of the Stock Option Amount which is attributable to Eligible Stock Option exercise during that year and which is deferred in accordance with Section 3.1(a) and (b) of this Plan.

1.6     "Beneficiary" shall mean one or more persons, trusts, estates or other entities, designated in accordance with Article 7, that are entitled to receive benefits under this Plan upon the death of a Participant.

1.7     "Beneficiary Designation Form" shall mean the form established from time to time by the Committee that a Participant completes, signs and returns to the Committee to designate one or more Beneficiaries.

1.8     "Board" shall mean the board of directors of the Company and the Board of any subsidiary of the Company that the Company has authorized to participate in the plan.

1.9     "Change in Control" with respect to the Company shall mean the occurrence of any one of the events set forth below:

(a)     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 (i) of paragraph (c) below; or

(b)     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

(c)     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 (i) 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 (ii) 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

(d)     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

(e)     the Board of Directors of the Company 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 the stock of the Company.

1.10     "Chairman" shall mean the Chairman of the Board of the Company.

1.11     "Claimant" shall have the meaning set forth in Section 10.1.

1.12     "Committee" shall mean an internal administrative committee appointed by the Chairman to administer the Plan described in Article 9.

1.13     "Company" shall mean Wisconsin Energy Corporation, a Wisconsin corporation, and any successor to all or substantially all of the Company's assets or business

1.14     "Deferral Account" shall mean (i) the sum of all of a Participant's Deferral Amounts, plus (ii) amounts credited in accordance with all the applicable crediting provisions of this Plan that relate to the Participant's Deferral Account, less (iii) all distributions made to the Participant or his or her Beneficiary pursuant to this Plan that relate to his or her Deferral Account.

1.15     "Director" solely for purposes of this Plan shall mean any director of the Company or a participating subsidiary who is not also an officer or employee of the Company or any of its subsidiaries. This plan is solely for "outside" Directors.

1.16     "Election Form" shall mean the form established from time to time by the Committee that a Participant completes, signs and returns to the Committee to make an election under the Plan. To the extent authorized by the Committee, such form may be electronic or set forth in some other media and need not be signed by a Participant.

1.17     "Eligible Stock Option" shall mean one or more non-qualified stock option(s) selected by the Committee in its sole discretion and exercisable under a plan or arrangement of any Company permitting a Participant under this Plan to defer gain with respect to such option.

1.18     "In Service Payout" shall mean the payout set forth in Section 4.1.

1.19     "Inactive Participant" shall mean an individual who at one point was a Participant in the Plan or a predecessor non-qualified deferred compensation plan and has an undistributed Account Balance, but is no longer eligible to make deferral elections under the Plan.

1.20     "Participant" shall mean any Director who chooses to participate in the Plan. A spouse or former spouse of a Participant shall not be treated as a Participant in the Plan or have an account balance under the Plan, even if he or she has an interest in the Participant's benefits under the Plan as a result of applicable law or property settlements resulting from legal separation or divorce.

1.21     "Plan" shall mean the Company's Directors' Deferred Compensation Plan.

1.22     "Plan Year" shall mean a period beginning on January 1 of each calendar year and continuing through December 31 of such calendar year.

1.23     "Pre-Retirement Survivor Benefit" shall mean the benefit set forth in Article 6.

1.24     "Qualifying Gain" shall mean the value accrued upon exercise of an Eligible Stock Option (i) using a Stock-for-Stock payment method and (ii) having an aggregate fair market value in excess of the total Stock purchase price necessary to exercise the option. In other words, the Qualifying Gain upon exercise of an Eligible Stock Option equals the total market value of the shares (or share equivalent units) acquired minus the total stock purchase price. For example, assume a Participant elects to defer the Qualifying Gain accrued upon exercise of an Eligible Stock Option to purchase 1000 shares of Stock at an exercise price of $20 per share, when Stock has a current fair market value of $25 per share. Using the Stock-for-Stock payment method, the Participant would deliver 800 shares of Stock (worth $20,000) to exercise the Eligible Stock Option and receive, in return, 800 shares of Stock plus a Qualifying Gain (in this case, in the form of an unfunded and unsecured promise to pay money or property in the future) equal to $5,000 (i.e., the current value of the remaining 200 shares of Stock).

1.25     "Restricted Stock" shall mean unvested shares of Stock which is restricted stock selected by the Committee in its sole discretion and awarded to the Participant under any Company stock incentive plan or arrangement.

1.26     "Restricted Stock Account" shall mean (i) the sum of the Participant's Annual Restricted Stock Amounts, plus (ii) amounts credited/debited in accordance with all the applicable crediting/debiting provisions of this Plan that relate to the Participant's Restricted Stock Account, less (iii) all distributions made to the Participant or his or her Beneficiary pursuant to this Plan that relate to the Participant's Restricted Stock Account.

1.27     "Restricted Stock Amount" shall mean, for any grant of Restricted Stock, an amount equal to the value of such Restricted Stock, calculated using the average of the reported high and low prices for the Stock as of the day such Restricted Stock would otherwise vest (if a business day) or as of the next following business day.

1.28     "Retirement", "Retire(s)" or "Retired" shall mean, with respect to a Director and solely for the purposes of this Plan, the date when the Director's service as a director for the Company and all of the Company's subsidiaries has ceased for any reason other than death.

1.29     "Retirement Benefit" shall mean the benefit set forth in Article 5.

1.30     "Stock" shall mean Wisconsin Energy Corporation common stock.

1.31     "Stock Option Account" shall mean the sum of (i) the Participant's Annual Stock Option Amounts, plus (ii) amounts credited/debited in accordance with all the applicable crediting/debiting provisions of this Plan that relate to the Participant's Stock Option Account, less (iii) all distributions made to the Participant or his or her Beneficiary pursuant to this Plan that relate to the Participant's Stock Option Account.

1.32     "Stock Option Amount" shall mean, for any Eligible Stock Option, the amount of Qualifying Gains, calculated using the average of the reported high and low prices for the Stock as of the day of exercise (if a business day) or as of the next following business day.

1.33     "Trust" shall mean the Wisconsin Energy Corporation Rabbi Trust Agreement dated December 1, 2000 between the Company and The Northern Trust Company, and as amended from time to time.

1.34     "Unforeseeable Financial Emergency" shall mean an unanticipated emergency that is caused by an event beyond the control of the Participant that would result in severe financial hardship to the Participant resulting from (i) a sudden and unexpected illness or accident of the Participant or a dependent of the Participant, (ii) a loss of the Participant's property due to casualty, or (iii) such other extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant, all as determined in the sole discretion of the Committee.

ARTICLE 2

Election Form for Deferral of Director Fees

2.1      Deferral of Fees. The annual fees payable to a Director for any calendar year are currently payable in lump sum in January of each calendar year. All or any portion of such fees may be deferred, provided the Director elects to do so on an Election Form filed with the Committee no later than December 31 ^st of the calendar year prior to the calendar year for which such annual fees otherwise become payable. All or any portion of any additional meeting or other fees for a Director's services which have not yet been earned by the performance of such service may be deferred by a Director on an Election Form filed with the Committee, with any such Form to become effective on the first day of the calendar month following receipt of the form.

2.2      Termination of Deferral of Fees. A Director may revoke or change his or her election with request to deferral of fees by timely delivering to the Committee in accordance with its rules and procedures a new Election Form before the end of the month preceding the month for which the election will be effective. Notwithstanding any other provision of this Plan, any Election Form or revocation will be given prospective effective only and may not affect prior deferrals.

ARTICLE 3

Deferral Commitments/Crediting/Taxes

3.1      Stock Option and Restricted Stock Deferral.

(a)     For each Eligible Stock Option, a Participant may elect to defer up to 100% of his or her Stock Option Amount. Stock Option Amounts may also be limited by other terms or conditions set forth in the plan or arrangement under which such options are granted.

(b)     Stock Option Deferral. For an election to defer Stock Option Amounts to be valid: (i) a separate irrevocable Election Form must be completed and signed by the Participant with respect to the Eligible Stock Option; (ii) the Election Form must be timely delivered to the Committee and accepted by the Committee at least six (6) months prior to the date the Participant elects to exercise the Eligible Stock Option; and (iii) the Eligible Stock Option must be exercised using the Stock-for-Stock payment method (directly or by attestation).

(c)     For each grant of Restricted Stock, a Participant may elect to defer up to 100% of his or her Restricted Stock Amounts. Deferrals of Restricted Stock Amounts may also be limited by other terms or conditions as set forth in the plan or arrangement under which such Restricted Stock granted.

For an election to defer Restricted Stock Amounts to be valid: (i) a separate irrevocable Election Form must be completed and signed by the Participant, with respect to the Restricted Stock to which such amounts relate; and (ii) such Election Form must be timely delivered to the Committee and accepted by the Committee at least six (6) months prior to the date such Restricted Stock vests under the terms of the plan or arrangement pursuant to which it was granted.

3.2      Withholding of Fee Deferral Amounts . For each Plan Year, the amount of fees deferred shall be withheld and credited to the Participants Account Balance as of the date or dates the deferred fees would otherwise have been payable.

3.3      Stock Option Amount . Deferred Stock Option Amounts shall be credited to the Participant on the books of the Company at the time Stock would otherwise have been delivered to the Participant pursuant to the Eligible Stock Option exercise, but for the election to defer.

3.4      Restricted Stock Amount . Deferred Restricted Stock Amounts shall be credited to the Participant on the books of the Company at the time the Restricted Stock would otherwise vest under the terms of the plan or arrangement pursuant to which the Restricted Stock was granted, but for the election to defer.

3.5      Account Balances of Inactive Participants and other Participants as of July 1, 2002 . Notwithstanding any other provisions of this Plan, the Account Balance of any Inactive Participant (or beneficiary thereof) who is no longer a Director as of July 1, 2002, and whose Account Balance is in pay status under the terms of this Plan as it existed prior to July 1, 2002 (the "Prior Plan") shall continue to be administered and distributed as provided under the terms of the Prior Plan (unless and to the extent otherwise determined by the Committee in its sole discretion in a manner consistent with the terms of the relevant Prior Plan). Further, the Account Balance of any Director who was a participant in the Prior Plan and who continues as a Director on or after July 1, 2002 will remain subject to the distribution method elected under the Prior Plan unless and until a new distribution method has been elected under this Plan and become effective.

3.6      Investment of Trust Assets . The Trustee of the Trust shall be authorized, upon written instructions received from the Committee or investment manager appointed by the Committee, to invest and reinvest the assets of the Trust in accordance with the applicable Trust Agreement, including the disposition of Stock and reinvestment of the proceeds in one or more investment vehicles designated by the Committee.

3.7      Sources of Stock . If Stock is credited under the Plan in the Trust in connection with a deferral of Stock Option or Restricted Stock Amounts, the shares so credited shall be deemed to have originated, and shall be counted against the number of shares reserved, under such other plan, program or arrangement which awarded the Eligible Stock Option and Restricted Stock.

3.8      Vesting . A Participant shall at all times be 100% vested in his or her Deferral Account, Stock Option Account and Restricted Stock Account.

3.9      Crediting/Debiting of Account Balances . Subject to Section 3.9(f) and (g) below, and accordance with, and subject to, the rules and procedures that are established from time to time by the Committee in its sole discretion, amounts shall be credited or debited to a Participant's Account Balance in accordance with the following rules:

(a)      Election of Measurement Funds . Subject to Section 3.9(f) and (g) below, a Participant, in connection with his or her initial deferral election in accordance with Section 3.2 above, or in connection with the restatement of this Plan effective as of July 1, 2002, shall elect, on the Election Form, one or more Measurement Fund(s) (as described in Section 3.9(c) below) to be used to determine the additional amounts to be credited to his or her Account Balance, unless changed in accordance with the next sentence. Subject to Section 3.9(f) and (g) below, commencing with the Participant's commencement of participation in the Plan and continuing thereafter, the Participant may (but is not required to) elect, by submitting an Election Form to the Committee that is accepted by the Committee, to add or delete one or more Measurement Fund(s) to be used to determine the additional amounts to be credited to his or her Account Balance, or to change the portion of his or her Account Balance allocated to each previously or newly elected Measurement Fund. If an election is made in accordance with the previous sentence, it shall apply thereafter in accordance with the rules of the Committee for all subsequent periods in which the Participant participates in the Plan, unless changed in accordance with the previous provisions.

(b)      Proportionate Allocation . In making any election described in Section 3.9(a) above, the Participant shall specify on the Election Form, in increments of one percentage point (1%), the percentage of his or her Account Balance to be allocated to a Measurement Fund (as if the Participant was making an investment in that Measurement Fund with that portion of his or her Account Balance).

(c)      Measurement Funds . Subject to Section 3.9(f) and (g) below, the Participant may elect one or more of the following measurement funds (the "Measurement Funds"), for the purpose of crediting additional amounts to his or her Account Balance: (i) any Measurement Fund selected by the WEC Investment Trust Policy Committee from time to time; (ii) Prime Rate Fund (described as a mutual fund 100% invested in a hypothetical debt instrument which earns interest at an annualized interest rate equal to the "Prime Rate" as reported each business day by the Wall Street Journal, with interest deemed reinvested in additional units of such hypothetical debt instrument); or (iii) a Company Stock Measurement Fund (described as a mutual fund 100% invested in shares of Company Stock, with dividends deemed reinvested in additional shares of Company Stock).

Subject to Section 3.9(f) and (g) below, as necessary, the WEC Investment Trust Policy Committee may, in its sole discretion, discontinue, substitute or add a Measurement Fund, subject to such advance notice to Participants as it determines.

(d)      Crediting or Debiting Method . The performance of each elected Measurement Fund (either positive or negative) will be determined by the Committee, in its reasonable discretion, based on the performance of the Measurement Funds themselves. A Participant's Account Balance shall be credited or debited on a periodic basis based on the performance of each Measurement Fund selected by the Participant, as determined by the Committee in its sole discretion. The Participant's Annual Stock Option Amount(s) shall be credited to his or her Stock Option Account no later than the close of business on the first business day after the day on which the Eligible Stock Option was exercised or oth