Exhibit 10.1
SENIOR OFFICER,
CHANGE IN CONTROL, SEVERANCE AND NON-COMPETE AGREEMENT
THIS AGREEMENT is made as of July 28, 2005 between WISCONSIN
ENERGY CORPORATION (the "Company") and Kristine A. Rappé (the
"Executive").
NOW, THEREFORE, in consideration of their mutual promises, the
parties agree as follows:
1.
Defined Terms . All of the capitalized terms not otherwise
defined in this Agreement are defined in the attached Appendix.
2.
Purpose of Agreement . This Agreement is intended to set
forth certain terms and conditions of the Executive's employment
with the Company, to provide the Executive with certain minimum
compensation rights in the event of her termination of employment
under certain circumstances as set forth herein and to provide for
a non compete agreement from the Executive.
3.
Employment . The Executive is currently the Senior Vice
President and Chief Administrative Officer of the Company. The
Executive's employment is not for any fixed term and the Executive
acknowledges that she is an employee at-will. The Executive's
annual base salary is hereby established at an annual rate of
$345,000. The Executive's target bonus opportunity under the
Company's Short-Term Performance Plan (the "STPP") for the
remainder of 2005 and subsequent years will not be less than 60% of
base salary, except under circumstances described in the next
sentence. Circumstances under which an adjustment below the 60%
target could take place would be limited to a general "Board
Action" resulting in the lowering of targets for the entire senior
executive group.
4.
Other Benefits and Special Additional Pension Benefit . The
Executive will be entitled to participate in all retirement and
welfare benefit plans and programs generally available to employees
in accordance with the terms of such plans and programs and to
participate on a basis commensurate with other senior officers of
the Company in any benefit plans and programs available to such
officers, including the opportunity to participate in the Company's
Executive Deferred Compensation Plan (the "EDCP"). Additionally,
and provided the Executive's retirement occurs at or after age 60,
the Executive shall be entitled to participate in the Company's
Supplemental Executive Retirement Plan (the "SERP"), which shall
include (i) the monthly SERP benefit "A," which is designed to make
up for any limitations imposed on the amount of Executive's accrued
benefit under the Company's tax-qualified defined benefit plan (the
"Retirement Account Plan") because of statutory or regulatory
limits relating to the Internal Revenue Code, and which shall be
calculated without regard to applicable early retirement reduction
factors, and (ii) the SERP benefit "B," which provides a life
annuity equal to a percentage of the Executive's eligible earnings
over her highest 36-month earnings period, as both benefit "A" and
"B" shall be calculated under the SERP.
5.
Covered Termination Not Associated with a Change in Control
. In the event of a Covered Termination Not Associated with a
Change in Control, then the Company shall provide the Executive
with the following compensation and benefits:
a)
General Compensation and Benefits . The Company shall pay
the Executive's full salary to the Executive from the time notice
of termination is given through the date of termination of
employment at the rate then in effect, and all compensation and
benefits payable to the Executive through the date of termination
of employment under the terms of any compensation or benefit plan,
program or arrangement maintained by the Company during such
period. The Company shall also pay the Executive's normal
post-termination compensation and benefits to the Executive as such
payments become due in accordance with the Company's retirement,
insurance and other compensation or benefit plans, programs and
arrangements, except that any normal cash severance benefits shall
be superseded and replaced entirely by the benefits provided under
this Agreement.
b)
Incentive Compensation . Notwithstanding any provision of
any cash bonus or incentive compensation plan of the Company, the
Company shall pay to the Executive, within the next pay period
after the Executive's termination of employment, a lump sum amount,
in cash, equal to the sum of (i) any bonus or incentive
compensation which has been allocated or awarded to the Executive
for a fiscal year or other measuring period under the plan that
ends prior to the date of termination of employment, but which has
not yet been paid, and (ii) a pro rata portion of the Target
Bonus Amount for all uncompleted periods under any bonus or
incentive compensation plan.
c)
Special Compensation . The Company shall pay to the
Executive a lump sum equal to two times the sum of (a) the highest
per annum base rate of salary in effect with respect to the
Executive during the three-year period immediately prior to the
termination of employment plus (b) the Target Bonus Amount. Such
lump sum shall be paid by the Company to the Executive within the
next available pay period after the Executive's termination of
employment, unless the provisions of Section 5 (e) below apply. The
amount of the aggregate lump sum provided by this Section 5 (c),
whether paid immediately or deferred, shall not be counted as
compensation for purposes of any other benefit plan or program
applicable to the Executive.
d) Special Retirement Plans Lump
Sum . The Company shall pay to the Executive an aggregate lump
sum equal to the total of the amounts described in (a) and (b)
herein. Amount (a) is a lump sum equal to the difference between
(i) the actuarial equivalent of the benefit under the Retirement
Account Plan, the SERP monthly benefit "A" which the Executive
would receive if her employment continued for a two-year period
following termination of employment, assuming that the Executive's
compensation during such two-year period would have
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been equal to the Executive's salary as in effect immediately
before the termination or, if higher, as in effect at any time
during the 180--day period immediately preceding the termination
date, and the Target Bonus Amount and waiving the requirement that
Executive have attained age 60, and (ii) the actuarial equivalent
of the Executive's actual benefit (paid or payable) under the
Retirement Account Plan, the SERP monthly benefit "A". Actuarial
equivalency for this purpose shall be determined using an interest
rate equal to a 36 consecutive month (or shorter period, as
explained in the next sentence) average, using the rates as of the
last business day of each month starting with January 31, 2002 (the
"Month End Rate") of the five year United States Treasury Note
yields (the "36 Month Average Rate") in effect ending with the
Month End Rate immediately prior to the Effective Date, as such
yield is reported in the Wall Street Journal or comparable
publication, and the mortality table used for purposes of
determining lump sum amounts then in use under the Retirement
Account Plan. Prior to January 31, 2005, the 36 Month Average Rate
shall mean only the average of the Month End Rates which have
occurred since January 31, 2002, even though less than 36. Amount
(b) is a lump sum equal to the total of (i) the additional
contributions which would have been made to the Executive's account
by the Company under the Company's tax-qualified 401(k) plan, plus
(ii) the additional contributions which would have been credited to
the bookkeeping account balance of the Executive attributable to
the 401(k) match feature of the EDCP, had the Executive continued
in employment for a two-year period following termination of
employment and assuming that the Executive's compensation would
have been the same as set forth above and that the Executive had
made maximum utilization of the pre-tax and after-tax opportunity
in the qualified 401(k) plan and obtained the maximum matching
contributions in such plan. The amount of the aggregate lump sum
under this Section 5(d) shall be paid by the Company to the
Executive within the next pay period after the Executive's
termination of employment, unless the provisions of Section 5(e)
below apply. The amount of the lump sum provided by this Section
5(d) shall not be treated as compensation for purposes of any other
benefit plan or program applicable to the Executive.
e) Deferral Option .
Notwithstanding any other provision of this Agreement, the
Executive may file a written irrevocable deferral election form
with the Company to defer all or part of the special compensation
provided by Section 5(c) and the special retirement plans lump sum
otherwise provided for in Section 5(d). The deferral election form
shall be filed with the Company prior to the expiration of thirty
days from the date this Agreement is signed by the Executive,
except as may otherwise be permitted under Section 409A of the
Internal Revenue Code. Such form shall specify a method of payment
for such compensation from among the methods allowable under the
EDCP, and may be modified or revoked only as permitted under
Section 409A of the Internal Revenue Code. Any deferred amounts
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shall be credited with earnings in the manner as elected by the
Executive under the terms of the EDCP and the EDCP provisions shall
apply to deferrals made hereunder except that, to the extent
permitted under Section 409A of the Internal Revenue Code, (i) any
provisions for a mandatory lump sum payment upon a "Change in
Control" as defined in the EDCP shall not apply to deferrals made
hereunder, (ii) any amounts which become payable under this Section
5(e) shall be deemed for purposes of the EDCP to have become
payable on account of the Executive's "retirement" under the EDCP,
and (iii) the entire amount deferred under this Section 5(e) shall
be paid in a lump sum by the Company immediately prior to the
occurrence of a Change in Control to such grantor or "rabbi" trust
as the Company shall have established as a vehicle to hold such
amount pending payment, but with such trust designed so that the
Executive's rights to payment of such benefits are no greater than
those of an unsecured creditor.
f)
Welfare Benefits . Subject to Section 5(g) below, for a
two-year period following termination of employment, the Company
shall provide the Executive (and her family) with health, life and
other welfare benefits (but excluding disability benefits)
substantially similar to the benefits received by the Executive
(and her family) pursuant to welfare benefit programs of the
Company or its affiliates as in effect immediately during the 180
days preceding the Effective Date (or, if more favorable to the
Executive, as in effect at any time thereafter until the
termination of employment); provided, however, that no compensation
or benefits provided hereunder shall be treated as compensation for
purposes of any of the programs or shall result in the crediting of
additional service thereunder. For purposes of determining the
amount of such welfare benefits, any part of which shall be based
on compensation, the Executive's compensation during the relevant
two-year period shall be deemed to be equal to the Executive's
salary as in effect immediately before the termination of
employment or, if higher, as in effect at any time during the
180-day period immediately preceding the termination date, and the
Target Bonus Amount. To the extent that any of the welfare benefits
covered by this Section 5(f) cannot be provided pursuant to the
plan or program maintained by the Company or its affiliates, the
Company shall provide such benefits outside the plan or program at
no additional cost (including, without limitation, tax cost) to the
Executive and her family.
g) New Employment . If the
Executive secures new employment during the two-year period
following termination of employment, the level of any benefit being
provided pursuant to Section 5(f) hereof shall be reduced to the
extent that any such benefit is being provided by the Executive's
new employer. The Executive, however, shall be under no obligation
to seek new employment and, in any event, no other amounts payable
pursuant to this Agreement shall be reduced or offset by any
compensation received from new employment or by any
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amounts claimed to be owed by the Executive to the Company or its
affiliates.
h)
Equity Incentive Awards . Notwithstanding the provisions in
any stock option award, restricted stock award, performance shares
or other equity incentive compensation award (the "Awards"), the
Executive shall become fully vested in all outstanding Awards and
all otherwise applicable restrictions shall lapse and for purposes
of determining the length of time the Executive has to exercise
rights, if applicable under any such Award, the Executive shall be
treated as if she had retired from the service of the Company at or
after age 55 and completion of ten years of service.
i)
Outplacement and Financial Planning . The Company shall, at
its sole expense as incurred, provide the Executive with
outplacement services, the scope and provider of which shall be
selected by the Executive in her sole discretion (but at a cost to
the Company of not more than $30,000) or, at the Executive's
option, the use of office space, office supplies and equipment and
secretarial services for a period not to exceed one year. The
Company shall also continue to provide the Executive with financial
planning counseling benefits through the second anniversary of the
date of the Executive's termination of employment, on the same
terms and conditions as were in effect immediately before the
termination or, if more favorable, on the Effective Date.
6.
Obligation of the Company on a Covered Termination of Employment
Associated with a Change in Control of the Company . In the
event of a Covered Termination of Employment Associated with a
Change in Control of the Company, then the Company shall provide
the Executive with the same compensation and benefits and subject
to the same terms and conditions as are specified in Section 5
above; provided, however that (i) the special compensation provided
for in Section 5(c) shall be three times (rather than two times)
the sum of the amounts specified in subsection (a) and (b) of
Section 5(c), (ii) the special retirement plans lump sum provided
for in Section 5(d) shall be calculated as if the Executive's
employment has continued for a three-year period (rather than a
two-year period) following her termination of employment and (iii)
the welfare benefits provision of Section 5(f) shall be provided
for a three-year period (rather than a two-year period). Further,
to the extent permitted under Section 409A of the Internal Revenue
Code, the deferral election for the Executive described in Section
5(e) above shall apply, but only if the written irrevocable
deferral form is filed with the Company prior to the first date on
which a change in Control of the Company occurs.
7. Certain Reduction of Payments
by the Company . Notwithstanding any other provision of this
Agreement, if any portion of the compensation and benefits under
this Agreement or any other payment under any other agreement with
or plan of the Company or its affiliates (in the aggregate "Total
Payments"), would constitute an "excess parachute payment," then
the Total Payments to be made to the Executive shall be reduced
such that the value of the aggregate Total Payments that the
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Executive is entitled to receive shall be One Dollar ($1) less than
the maximum amount which the Executive may receive without becoming
subject to the tax imposed by Section 4999 of the Internal Revenue
Code (the "Code") (or any successor provision) or which the Company
may pay without loss of deduction under Section 280G(a) of the Code
(or any successor provision). For purposes of this Agreement, the
terms "excess parachute payment" and "parachute payments" shall
have the meaning assigned to them in Section 280G of the Code (or
any successor provision), and such "parachute payments" shall be
valued as provided therein. Present value for purposes of this
Agreement shall be calculated in accordance with Section 1274(b)(2)
of the Code (or any successor provision). Within 60 days following
delivery of a notice by the Company to the Executive of its belief
that there is a payment or benefit due the Executive which will
result in an excess parachute payment as defined in Section 280G of
the Code (or any successor provision), the Executive and the
Company, at the Company's expense, shall obtain the opinion (which
need not be unqualified) of the Company's independent auditors
which sets forth (A) the amount of the Base Period Income, (B) the
amount and present value of Total Payments and (C) the amount and
present value of any excess parachute payments without regard to
the limitations of this Section 7. As used in this Section 7, "Base
Period Income" means the Executive's "annualized includible
compensation for the base period" as defined in Section 280G(d)(1)
of the Code (or any successor provision). For purposes of such
opinion, the value of any noncash benefits or any deferred payment
or benefit shall be determined by the Company's independent
auditors in accordance with the principles of Sections 280G(d)(3)
and (4) of the Code (or any successor provisions), which
determination shall be evidenced in a certificate of such auditors
addressed to the Company and the Executive. Such opinion shall be
dated as of the Executive's date of termination of employment and
addressed to the Company and the Executive and shall be binding,
absent manifest error, upon the Company and the Executive. If such
opinion determines that there would be an excess parachute payment,
the compensation and benefits hereunder or any other payment
determined by such auditors to be includible in Total Payments
shall be reduced or eliminated as specified by the Executive in
writing delivered to the Company within 30 days of the Executive's
receipt of
