<PAGE>
<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1994
or
/ / TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-7530
Wisconsin Gas Company
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Wisconsin 39-0476515
------------------------------------------------- -------------------
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
626 East Wisconsin Avenue, Milwaukee, Wisconsin 53202
--------------------------------------------------- -----------
(Address of principal executive office) (Zip Code)
(414) 291-7000
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
----- ------
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Class Outstanding at June 30, 1994
-------------------------- ----------------------------
Common Stock, $8 Par Value 1,125
<PAGE>
<PAGE> 2
INTRODUCTION
--------------
Wisconsin Gas Company ("Wisconsin Gas" or "Company"), a natural gas
distribution public utility, is a Wisconsin corporation and a wholly owned
subsidiary of WICOR, Inc. ("WICOR"), a diversified holding company.
CONTENTS
----------
PAGE
------
PART I. Financial Information.......................... 1
Management's Discussion and Analysis of
Interim Financial Statements................. 2-4
Financial Statements of Wisconsin Gas Company (Unaudited):
----------------------------------------------------------
Statement of Operations for the Three and Six
Months Ended June 30, 1994 and 1993.......... 5
Balance Sheet as of June 30, 1994 and
December 31, 1993............................ 6-7
Statement of Cash Flows - Six Months Ended
June 30, 1994 and 1993....................... 8
Notes to Financial Statements.................. 9
PART II. Other Information.............................. 10
Signatures............................................... 11
<PAGE>
<PAGE> 3
Part I - Financial Information
Financial Statements
--------------------
The following financial statements have been prepared without audit
pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules
and regulations, although management believes that the disclosures are
adequate to make the information presented not misleading. These condensed
financial statements should be read in conjunction with the audited financial
statements and the notes thereto included in the latest Wisconsin Gas annual
report on Form 10-K and quarterly report on Form 10-Q.
In the opinion of management, the information furnished reflects all
adjustments, which in all circumstances were normal and recurring, necessary
for a fair statement of the results of operations for the interim periods.
Because of seasonal factors, the results of operations for the interim
periods presented are not indicative of the results to be expected for the
full calendar year.<PAGE>
<PAGE> 4
Management's Discussion and Analysis
of Interim Financial Statements of
Wisconsin Gas Company
Results of Operations
- ---------------------
The net loss for the second quarter of 1994 increased by $1.0 million,
however, net income for the six months ended June 30, 1994 increased by
$2.2 million or 12%, compared to the same periods of last year. The
following factors have had a significant effect on the results of
operations during the three- and six-month periods ended June 30, 1994.
The increase in the net loss for the second quarter resulted from increased
operating expenses(excluding cost of gas sold) which were not offset by an
increase in gas margins. Warmer weather for the second quarter was the
primary factor affecting margins. The increase in 1994 year-to-date net
income was due primarily to colder than normal weather in the first quarter
of 1994.
Revenues, margins and volumes are summarized below. Margin, defined as
revenues less cost of gas sold, is a better comparative performance
indicator than revenues because the mix of volumes between sales and
transportation service affects revenues but not margin. In addition,
changes in the cost of gas sold are flowed through to revenue under a gas
adjustment clause with no resulting effect on margin.
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
-------------- % -------------- %
1994 1993 Change 1994 1993 Change
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
(Millions of Dollars)
- ---------------------
Gas Sales Revenues $ 97.8 $110.2 (11) $337.9 $312.4 8
Cost of Gas Sold 65.5 78.7 (17) 218.8 207.7 5
------ ------ ------ ------
Gas Sales Margin 32.3 31.5 3 119.1 104.7 14
Gas Transport Margin 1.5 2.3 (35) 3.6 5.5 (35)
------ ------ ------ ------
Total Margin $ 33.8 $ 33.8 - $122.7 $110.2 11
====== ====== ====== ======
(Millions of Therms)
- --------------------
Sales Volumes
Firm 12.7 127.1 (11) 514.0 494.3 4
Interruptible 61.3 42.5 44 146.8 101.6 44
Transportation Volume 26.4 42.6 (38) 61.1 103.6 (41)
------ ------ ------ ------
Total Throughput 200.4 212.2 (6) 721.9 699.5 3
====== ====== ====== ======
Degree Days (Normal:
2nd Qtr. = 977
Six Months = 4,426) 843 1,003 (16) 4,506 4,350 4
====== ====== ====== ======
/TABLE
<PAGE>
<PAGE> 5
The decrease in firm sales volumes for the second quarter of 1994 from last
year was caused principally by warmer weather (14% warmer than normal).
A 2.9% annual rate increase, which became effective on November 12, 1993,
helped to offset the impact of the warmer weather resulting in no change
in margin for the quarter. For the six-months ended June 30, 1994, the
total margin increase was primarily due to the rate increase and growth in
firm sales. For both the second quarter and year-to-date, the changes in
volumes for interruptible sales and transportation services represent a
transfer of customers between the two classes of service.
Operations and maintenance expenses increased by $1.5 million, or 6%, and
$7.6 million, or 14%, for the three- and six-month periods ended June 30,
1994, respectively, compared with the same periods of 1993. Included in
year-to-date operations expenses is a first quarter, one-time charge of
$2.7 million relating to the election by 131 employees of an early
retirement option. It is estimated that the related savings from the
retirements during the last three quarters of the year will substantially
offset this first quarter charge. Increases in the provision for
uncollectible accounts and software amortization were additional
significant factors in the overall increase in operations and maintenance
expenses for both the quarter and year-to-date. These increased expenses
are being recovered in rates under the November 1993 rate order.
Depreciation expense increased for both the quarter and year-to-date due
to recent capital additions. For the second quarter and year-to-date, when
compared to 1993, interest expense on long-term debt decreased primarily
as a result of lower interest rates achieved through a $45 million long-
term debt refinancing in September 1993. Other interest expenses decreased
in the second quarter primarily from lower levels of short-term debt. The
increase in year-to-date other interest expense is due to the amortization
of previously deferred interest related to the financing of gas in storage.
Income tax expense for the year-to-date increased primarily due to higher
pre-tax income and a 1% increase in the federal income tax rate which was
not reflected until the third quarter of 1993.
Wisconsin Gas received its most recent rate increase from the Public
Service Commission of Wisconsin (PSCW) in November 1993. In July 1993
Wisconsin Gas proposed an alternative method of ratemaking which provided
for an indexed rate cap and a weather adjustment mechanism (WAM). The PSCW
has given initial approval to an alternative approach with a three year
rate freeze (without the WAM) based on the rates approved in November 1993.
The PSCW has given Wisconsin Gas the option of either accepting the
modified proposal or filing a traditional rate case in March 1995 with new
rates becoming effective in November 1995. Wisconsin Gas will not make a
decision until after the final PSCW Order is received later this year.
Financial Condition
- -------------------
Cash flow from operations increased to $121.8 million in the first six
months of 1994 as compared to $50.4 million for the comparable 1993 period.
A main reason for the increase in cash flow was the impact of drawing down
gas in storage during the first six months of 1994 and the build up of gas
in storage during the first six months of 1993. Gas in storage was $44.7
million and $6.6 million at the beginning of the year for 1994 and 1993,
respectively. Gas in storage was $22.8 million and $21.5 million at
June 30, 1994 and 1993, respectively. The impact of the gas in storage
activity increased cash flow $36.7 million in the first six months of<PAGE>
<PAGE> 6
1994 over the comparable period of 1993. The increase in gas in storage
from the beginning of 1993 to the beginning of 1994 was due to FERC Order
636 which requires local gas distribution companies, like Wisconsin Gas,
to manage their own gas supplies including seasonal gas in storage.
Cash flow from operations also increased due to a change in the method of
recovering certain fixed gas costs (refundable gas costs) from the
Company's ratepayers. These costs are now recovered over the heating season
instead of over the whole year. This increase will reverse in the last two
quarters of 1994.
Receivables also contributed to the improved cash flow from operations.
Higher beginning receivables balances in 1994 versus 1993 resulted in
greater cash collections for the period over the prior year.
Accrued taxes reduced cash from operations in 1994 while providing
additional cash in 1993. This was due to the use in 1993 of higher than
normal prepaid tax balances as of the end of 1992.
The increase in cash from other non-current assets and liabilities was a
result of increased amortization of the deferred provision for
uncollectible accounts, recognition of a deferred regulatory liability for
environmental clean-up cost recoveries, and a net increase in the
liability for postretirement benefits.
More short-term borrowings were repaid in the first six months of 1994 than
in 1993 because of the higher level of short-term debt at December 31, 1993
versus December 31, 1992. The higher lever of short-term debt was needed
to finance gas in storage.
Cash flow from operations exceeded capital expenditures and dividend
requirements for the first six months in both 1993 and 1994.
Capital expenditures through June 1994 amounted to $16.3 million and
additional capital expenditures of approximately $39.1 million are expected
for the remainder of 1994. Cash flow from operations should be sufficient
to fund the remaining capital expenditures for 1994. Most of the
expenditures will be for expansion and renewal of the gas distribution
system.
<PAGE>
<PAGE> 7
WISCONSIN GAS COMPANY
Statement of Operations (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ----------------------
1994 1993 1994 1993
---------- ---------- ---------- ----------
(Thousands of Dollars)
<S> <C> <C> <C> <C>
Operating Revenues............... $ 99,349 $ 112,448 $ 341,497 $ 317,874
---------- ---------- ---------- ----------
Operating Expenses:
Cost of gas sold............... 65,468 78,671 218,759 207,668
Operations..................... 25,989 24,354 59,622 52,086
Maintenance.................... 1,854 2,020 3,704 3,620
Depreciation................... 7,359 6,668 14,650 13,662
Taxes, other than income taxes. 2,359 2,189 5,111 4,645
---------- ---------- ---------- ----------
103,029 113,902 301,846 281,681
---------- ---------- ---------- ----------
Operating Income (Loss).......... (3,680) (1,454) 39,651 36,193
---------- ---------- ---------- ----------
Other Income and (Deductions).... (9) (2) 71 (132)
---------- ---------- ---------- ----------
Income (Loss) Before
Interest Expense............... (3,689) (1,456) 39,722 36,061
---------- ---------- ---------- ----------
Interest Expense:
Long-term debt................. 2,929 3,259 5,872 6,570
Other.......................... 303 325 1,073 861
---------- ---------- ---------- ----------
3,232 3,584 6,945 7,431
---------- ---------- ---------- ----------
Income (Loss) Before
Income Taxes................... (6,921) (5,040) 32,777 28,630
Income Taxes (Benefit)........... (2,629) (1,787) 12,191 10,222
---------- ---------- ---------- ----------
Net Income (Loss)................ $ (4,292) $ (3,253) $ 20,586 $ 18,408
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE>
<PAGE> 8
WISCONSIN GAS COMPANY
Balance Sheet
<TABLE>
<CAPTION>
June 30,
1994 December 31,
(Unaudited) 1993
----------- ------------
(Thousands of Dollars)
<S> <C> <C>
Assets
- ------
Property, Plant and Equipment, at cost.............. $ 694,736 $ 679,968
Less - Accumulated depreciation................... 344,047 330,259
----------- ------------
350,689 349,709
----------- ------------
Current Assets:
Cash and cash equivalents......................... 2,309 9,680
Accounts receivable, less allowance for
doubtful accounts of $8,864,000 and
$7,365,000, respectively........................ 68,011 64,006
Accounts receivable - intercompany, net........... 2,917 (5,720)
Accrued utility revenues.......................... 6,877 53,483
Materials and supplies, at weighted average cost.. 2,965 3,255
Gas in storage, at weighted average cost.......... 22,825 44,697
Deferred income taxes............................. 9,460 8,280
Prepaid taxes..................................... 6,274 6,090
Other............................................. 2,471 2,128
----------- ------------
124,109 185,899
----------- ------------
Deferred Charges and Other:
Gas transition costs.............................. 11,208 15,485
Deferred environmental costs...................... 42,005 41,641
Deferred systems development costs................ 36,398 38,808
Other regulatory assets........................... 54,557 57,211
Prepaid pension costs............................. 25,136 24,418
Other............................................. 16,624 18,321
----------- ------------
185,928 195,884
----------- ------------
$ 660,726 $ 731,492
=========== ============
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE>
<PAGE> 9
WISCONSIN GAS COMPANY
Balance Sheet
<TABLE>
<CAPTION>
June 30,
1994 December 31,
(Unaudited) 1993
----------- ------------
(Thousands of Dollars)
<S> <C> <C>
Capitalization and Liabilities
- ------------------------------
Capitalization:
Common stock................................ $ 9 $ 9
Other paid-in capital....................... 118,300 113,300
Retained earnings........................... 73,923 61,337
Long-term debt.............................. 145,735 147,644
----------- ------------
337,967 322,290
----------- ------------
Current Liabilities:
Accounts payable............................ 31,899 45,828
Refundable gas costs........................ 40,902 15,596
Short-term borrowings....................... - 108,000
Current portion of long-term debt........... 2,000 2,000
Accrued payroll and benefits................ 10,714 7,560
Accrued taxes............................... 1,970 2,462
Other....................................... 3,911 3,715
----------- ------------
91,396 185,161
----------- ------------
Deferred Credits and Other:
Deferred income taxes....................... 46,486 43,590
Unamortized investment tax credit........... 8,240 8,654
Environmental remediation costs............. 39,450 40,000
Gas transition costs........................ 11,208 15,485
Other regulatory liabilities................ 56,583 50,179
Postretirement benefit obligation........... 56,377 53,895
Other....................................... 13,019 12,238
----------- ------------
231,363 224,041
----------- ------------
$ 660,726 $ 731,492
=========== ============
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE>
<PAGE> 10
WISCONSIN GAS COMPANY
Statement of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-----------------------
1994 1993
---------- ----------
(Thousands of Dollars)
<S> <C> <C>
Operations:
Net income................................... $ 20,586 $ 18,408
Adjustments to reconcile net income to
net cash flows:
Depreciation and amortization.............. 18,707 16,872
Deferred income taxes...................... 1,716 594
Change in:
Receivables.............................. 42,601 34,036
Gas inventory in storage................. 21,872 (14,850)
Other current assets..................... (53) (440)
Systems development costs................ (403) (3,690)
Accounts payable......................... (13,929) (14,483)
Accrued taxes............................ (9,596) 5,458
Refundable gas costs..................... 25,306 11,360
Accrued payroll and benefits............. 3,154 3,876
Other current liabilities................ 479 (376)
Other non-current assets and liabilities. 11,342 (6,356)
---------- ----------
121,782 50,409
---------- ----------
Investment Activities:
Capital expenditures......................... (16,279) (17,127)
Other, net................................... 126 51
---------- ----------
(16,153) (17,076)
---------- ----------
Financing Activities:
Change in short-term borrowings.............. (108,000) (19,000)
Reduction of long-term debt.................. (2,000) (2,211)
Cash dividends paid to WICOR, Inc............ (8,000) (8,000)
Donated capital from WICOR, Inc.............. 5,000 2,000
---------- ----------
(113,000) (27,211)
---------- ----------
Change in Cash and Cash Equivalents............ (7,371) 6,122
Cash and Cash Equivalents at beginning
of period.................................... 9,680 6,493
---------- ----------
Cash and Cash Equivalents at end of period..... $ 2,309 $ 12,615
========== ==========
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE>
<PAGE> 11
Notes to Financial Statements (Unaudited):
- ------------------------------------------
1) At June 30, 1994, Wisconsin Gas had total unsecured lines of credit
available from several banks of $30 million. As of June 30, 1994, no
short-term borrowings were outstanding under these credit agreements.
2) For purposes of the Statement of Cash Flows, income taxes paid, net
of refunds, and interest paid (excluding capitalized interest) were
as follows:
<TABLE>
<CAPTION>
For the six months
ended June 30,
------------------------
1994 1993
---------- ----------
(Thousands of Dollars)
<S> <C> <C>
Income taxes paid $ 21,503 $ 6,104
Interest paid $ 6,850 $ 7,242
</TABLE>
3) In July 1993, Wisconsin Gas submitted an incentive rate making
proposal to the Public Service Commission of Wisconsin ("PSCW"). In
its April 1994 initial decision, the PSCW significantly modified the
Company's proposal. Under the modified proposal, the Company's rates
will be subject to a three year rate freeze based on the rates
approved in November, 1993. The Company will also be required to
reduce its rates by $10.1 million, to reflect a reduction in certain
non-cash expenses. This rate reduction will result in no net income
impact, but will reduce cash flow. The PSCW has given the Company
the option of either accepting the modified proposal or filing a
traditional rate case in March 1995 with new rates becoming effective
in November, 1995. Wisconsin Gas will not make a decision until after
the final PSCW Order is received later this year.
4) WICOR invested $5 million and $2 million in Wisconsin Gas in the first
quarter of 1994 and 1993, respectively.
5) In January 1994, Wisconsin Gas offered a voluntary early retirement
incentive plan to employees age 55 and over. A total of 131 employees
elected to retire under the provisions of this incentive plan. The
Company recorded a charge, which includes the impact on the pension
and postretirement benefit plans, to operating expense of $2.7 million
in the first quarter of 1994.<PAGE>
<PAGE> 12
Part II - Other Information
- ---------------------------
Item 1. Legal Proceedings
During the first quarter of 1994, Wisconsin Gas initiated suit against
certain of its liability insurance carriers for coverage for
environmental property damage associated with former manufactured gas
plants. On June 16, 1994, the Supreme Court of Wisconsin issued a
decision in a matter (to which Wisconsin Gas is not a party) which
holds in general that comprehensive general liability insurance
policies may not provide coverage for response costs under Federal or
State environmental clean-up statutes in certain circumstances.
The insurance carriers named as defendants in the suit instituted by
Wisconsin Gas have recently moved to dismiss the case, contending that
the decision of the Supreme Court makes it questionable as to whether
they will be obligated to reimburse Wisconsin Gas for such costs.
Wisconsin Gas has opposed the motion. In addition, on July 5, 1994,
Wisconsin Gas joined more than 50 other Wisconsin businesses, the
Wisconsin Department of Justice, the Wisconsin Department of Natural
Resources and several other groups and individual firms in urging the
Supreme Court to reconsider its decision.
Wisconsin Gas is continuing to litigate its claims and is in various
stages of negotiations with its insurance carriers regarding
settlement of the litigation. A trial in the matter is scheduled for
January 9, 1995. Based on recent PSCW orders, the Company currently
believes that any cleanup costs not recoverable from its insurance
carriers will be allowed full recovery in rates (net of carrying
costs).
Item 4. Results of Votes of Security Holders
- --------------------------------------------
On April 28, 1994, the following persons were elected as directors of
Wisconsin Gas Company to serve one-year terms: George E. Wardeberg,
Stuart W. Tisdale, Wendell F. Bueche, Willie D. Davis, James L.
Forbes, Jere D. McGaffey, Daniel F. McKeithan, Jr., Guy A. Osborn,
Thomas F. Schrader, Essie M. Whitelaw and William B. Winter. All of
the issued and outstanding shares of common stock, $8 par value, of
Wisconsin Gas Company (1,125 shares) were voted in favor of the
election of the foregoing persons.
Item 6. Exhibits and Reports on FORM 8-K
- ----------------------------------------
(a) Exhibits
10.1 WICOR, Inc. 1994 Long-Term Performance Plan.
(b) Reports on Form 8-K - There were no reports on Form 8-K filed
for the second quarter of 1994.<PAGE>
<PAGE> 13
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WISCONSIN GAS COMPANY
Dated: August 12, 1994 By: /s/ Joseph P. Wenzler
----------------------------
Joseph P. Wenzler
Vice President and Chief
Financial Officer <PAGE>
<PAGE>
<PAGE> 1
EXHIBIT 10.1
WICOR, INC.
1994 LONG-TERM PERFORMANCE PLAN
Section 1. Purpose
- -------------------
The purpose of the WICOR, Inc. 1994 Long-Term Performance Plan (the
"Plan") is to enhance the ability of WICOR, Inc. (together with any
successor thereto, the "Company") and its Affiliates (as defined below)
to attract, retain and motivate key salaried employees upon whom, in
large measure, the sustained growth and profitability of the Company
depend and to provide incentives to such key salaried employees which
are more directly linked to the profitability of the Company's
businesses and increases in shareholder value.
Section 2. Definitions
- -----------------------
As used in the Plan, the following terms shall have the respective
meanings set forth below:
(a) "Affiliate" shall mean any entity that, directly or through
one or more intermediaries, is controlled by, controls, or is under
common control with, the Company.
(b) "Award" shall mean any Option, Stock Appreciation Right or
Restricted Stock granted under the Plan.
(c) "Award Agreement" shall mean any written agreement, contract,
or other instrument or document evidencing any Award granted under the
Plan.
(d) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
(e) "Commission" shall mean the United States Securities and
Exchange Commission or any successor agency.
(f) "Committee" shall mean a committee of the Board of Directors
of the Company designated by such Board to administer the Plan and
composed of not less than two directors, each of whom is a
"disinterested person" within the meaning of Rule 16b-3.
(g) "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended from time to time.
(h) "Fair Market Value" shall mean, with respect to any property
(including, without limitation, any Shares or other securities), the
fair market value of such property determined by such methods or
procedures as shall be established from time to time by the Committee.
(i) "Incentive Stock Option" shall mean an Option granted under
Section 6(a) of the Plan that is intended to meet the requirements of
Section 422 of the Code, or any successor provision thereto.<PAGE>
<PAGE> 2
(j) "Key Salaried Employee" shall mean any officer or other key
salaried employee of the Company or of any Affiliate who is responsible
for or contributes to the management, growth or profitability of the
business of the Company or any Affiliate as determined by the Committee.
(k) "Non-Qualified Stock Option" shall mean an Option granted
under Section 6(a) of the Plan that is not intended to be an Incentive
Stock Option.
(l) "Option" shall mean an Incentive Stock Option or a Non-
Qualified Stock Option.
(m) "Participant" shall mean a Key Salaried Employee designated to
be granted an Award under the Plan.
(n) "Person" shall mean any individual, corporation, partnership,
association, limited liability company, joint-stock company, trust,
unincorporated organization, or government or political subdivision
thereof.
(o) "Released Securities" shall mean Shares of Restricted Stock
with respect to which all applicable restrictions have expired, lapsed,
or been waived.
(p) "Restricted Securities" shall mean Awards of Restricted Stock
or other Awards under which issued and outstanding Shares are held
subject to certain restrictions.
(q) "Restricted Stock" shall mean any Shares granted under Section
6(c) of the Plan.
(r) "Rule 16b-3" shall mean Rule 16b-3 as promulgated by the
Commission under the Exchange Act, or any successor rule or regulation
thereto.
(s) "Shares" shall mean shares of common stock of the Company and
such other securities or property as may become subject to Awards
pursuant to an adjustment made under Section 4(b) of the Plan.
(t) "Stock Appreciation Right" shall mean any right granted under
Section 6(b) of the Plan.
(u) "Total Shareholder Return" shall mean the appreciation of the
price of a share of common stock of the Company, plus the value of
dividends paid thereon assuming reinvestment in common stock of the
Company.
Section 3. Administration
- --------------------------
The Plan shall be administered by the Committee; provided, however,
that if at any time the Committee shall not be in existence, the
functions of the Committee as specified in the Plan shall be exercised
by those members of the Board of Directors of the Company who qualify as
"disinterested persons" under Rule 16b-3. Subject to the terms of the
Plan and applicable law, the Committee shall have full power and
authority to: (i) designate Participants; (ii) determine the type or <PAGE>
<PAGE> 3
types of Awards to be granted to each Participant under the Plan; (iii)
determine the number of Shares to be covered by (or with respect to
which payments, rights, or other matters are to be calculated in
connection with) Awards granted to Participants; (iv) determine the
terms and conditions of any Award granted to a Participant; (v)
determine whether, to what extent, and under what circumstances Awards
granted to Participants may be settled or exercised in cash, Shares,
other securities, other Awards, or other property, or canceled,
forfeited, or suspended to the extent permitted in Section 7 of the
Plan, and the method or methods by which Awards may be settled,
exercised, canceled, forfeited, or suspended; (vi) determine whether, to
what extent, and under what circumstances cash, Shares, other
securities, other Awards, other property, and other amounts payable with
respect to an Award granted to Participants under the Plan shall be
deferred either automatically or at the election of the holder thereof
or of the Committee; (vii) interpret and administer the Plan and any
instrument or agreement relating to, or Award made under, the Plan
(including, without limitation, any Award Agreement); (viii) establish,
amend, suspend, or waive such rules and regulations and appoint such
agents as it shall deem appropriate for the proper administration of the
Plan; and (ix) make any other determination and take any other action
that the Committee deems necessary or desirable for the administration
of the Plan. Unless otherwise expressly provided in the Plan, all
designations, determinations, interpretations, and other decisions under
or with respect to the Plan or any Award shall be within the sole
discretion of the Committee, may be made at any time, and shall be
final, conclusive, and binding upon all Persons, including the Company,
any Affiliate, any Participant, any holder or beneficiary of any Award,
any shareholder, and any employee of the Company or of any Affiliate.
The Committee shall solicit and consider the recommendations of the
Chief Executive Officer of the Company with regard to, among other
things, the designation of Participants, the type of Awards to be
granted under the Plan to such Participants and the number of Shares to
be subject thereto, and the other terms and conditions of Awards granted
to Participants, subject to the limitations of Rule 16b-3.
Section 4. Shares Available for Award
- --------------------------------------
(a) Shares Available --- Subject to adjustment as provided in
Section 4(b):
(i) Number of Shares Available --- The total number of
Shares with respect to which Awards may be granted under the Plan shall
be 820,000. If, after the effective date of the Plan, any Shares
covered by an Award granted under the Plan, or to which any Award
relates, are forfeited or if an Award otherwise terminates, expires or
is canceled prior to the delivery of all of the Shares or of other
consideration issuable or payable pursuant to such Award and if such
forfeiture, termination, expiration or cancellation occurs prior to the
payment of dividends or the exercise by the holder of other indicia of
ownership of the Shares to which the Award relates, then the number of
Shares counted against the number of Shares available under the Plan in
connection with the grant of such Award, to the extent of any such
forfeiture, termination, expiration or cancellation, shall again be
available for granting of additional Awards under the Plan; provided, <PAGE>
<PAGE> 4
however, that if an Award covering additional Shares is granted to a
Participant in connection with such forfeiture, termination, expiration
or cancellation, then the Shares subject to the forfeiture, termination,
expiration or cancellation shall be counted against the total number of
Shares with respect to which Awards may be granted under the Plan and
the maximum number of Shares that may be the subject of Awards granted
to individual Participants under the Plan in an amount equal to the
number of Shares to which such additional grant relates.
(ii) Limitation on Awards to Individual Participants --- No
Participant shall be granted Awards that could result in such
Participant exercising Options for, or Stock Appreciation Rights with
respect to, more than 125,000 Shares or receiving more than 25,000
Shares of Restricted Stock under the Plan.
(iii) Accounting for Awards --- The number of Shares
covered by an Award under the Plan, or to which such Award relates,
shall be counted on the date of grant of such Award against the number
of Shares available for granting Awards under the Plan; provided,
however, that if Options and Stock Appreciation Rights are granted in
tandem and the exercise of either an Option or Stock Appreciation Right
results in an offsetting reduction in the number of Options or Stock
Appreciation Rights subject to the Award, then the number of Shares to
which such Award relates shall only be counted against the number of
Shares available for granting Awards under the Plan to the extent of the
aggregate number of Shares as to which such Award may be exercised.
(iv) Sources of Shares Deliverable Under Awards --- Any
Shares delivered pursuant to an Award may consist, in whole or in part,
of authorized and unissued Shares or of treasury Shares.
(b) Adjustments --- In the event that the Company shall pay a
dividend on its common stock in Shares, effect a stock split, or effect
a similar corporate transaction or event that affects the Shares such
that an adjustment is determined by the Committee to be appropriate in
order to prevent dilution or enlargement of the benefits or potential
benefits intended to be made available under the Plan, then the number
of Shares subject to the Plan and which thereafter may be made the
subject of Awards and the number of Shares subject to outstanding Awards
under the Plan, and the exercise and grant prices thereof, shall be
equitably adjusted by the Committee/such that the number of Shares, as
adjusted, shall bear the same relation to the total number of
outstanding shares of common stock of the Company following the
transaction or event as immediately prior to such transaction or event;
provided, however, in each case, that with respect to Awards of
Incentive Stock Options no such adjustment shall be authorized to the
extent that such authority would cause the Plan to violate Section
422(b)(1) of the Code or any successor provision thereto; and provided
further, however, that the number of Shares subject to any Award payable
or denominated in Shares shall always be a whole number.
Section 5. Eligibility
- -----------------------
Any Key Salaried Employee, including any executive officer or
employee who is also a director of the Company or of any Affiliate, who
is not a member of the Committee shall be eligible to be designated<PAGE>
<PAGE> 5
a Participant.
Section 6. Awards
- ------------------
(a) Options --- The Committee is hereby authorized to grant
Options to Participants with the terms and conditions as set forth below
and with such additional terms and conditions, in either case not
inconsistent with the provisions of the Plan, as the Committee shall
determine; provided, however, that no Option shall be granted, directly
or indirectly, in connection with the forfeiture, termination,
cancellation or expiration of an Option previously granted under the
Plan prior to its normal expiration date if such forfeited, terminated,
canceled or expired Option has an exercise price higher than the Option
proposed to be granted.
(i) Exercise Price --- The exercise price per Share under
an Option shall be determined by the Committee; provided, however, that
such exercise price shall not be less than 100% of the Fair Market Value
of a Share on the date of grant of such Option; and provided further,
that such exercise price shall not be adjusted following the date of
grant of such Option except as provided in Section 4(b) hereof.
(ii) Option Term --- The term of each Option shall be fixed
by the Committee; provided, however, that in no event shall the term of
any Option exceed a period of ten years from the date of its grant.
(iii) Exercisability and Method of Exercise --- An Option
shall become exercisable in such manner and within such period or
periods and in such installments or otherwise as shall be determined by
the Committee. The Committee also shall determine the method or methods
by which, and the form or forms, including, without limitation, cash,
Shares, other securities, other Awards, or other property, or any
combination thereof, having a Fair Market Value on the exercise date
equal to the relevant exercise price, in which payment of the exercise
price with respect to any Option may be made or deemed to have been
made.
(iv) Incentive Stock Options --- The terms of any Incentive
Stock Option granted under the Plan shall comply in all respects with
the provisions of Section 422 of the Code, or any successor provision
thereto, and any regulations promulgated thereunder.
(b) Stock Appreciation Rights --- The Committee is hereby
authorized to grant Stock Appreciation Rights to Participants. Subject
to the terms of the Plan and any applicable Award Agreement, a Stock
Appreciation Right granted under the Plan shall confer on the holder
thereof a right to receive, upon exercise thereof, the excess of (i) the
Fair Market Value of one Share on the date of exercise over (ii) the
grant price of the right as specified by the Committee, which shall not
be less than the Fair Market Value of one Share on the date of grant of
the Stock Appreciation Right. Subject to the terms of the Plan, the
grant price, term, methods of exercise, methods of settlement (including
whether the Participant will be paid in cash or Shares, or a combination
thereof), and any other terms and conditions of any Stock Appreciation
Right shall be as determined by the Committee; provided, however, that<PAGE>
<PAGE> 6
the grant price of a Stock Appreciation Right may not be adjusted
following the date of grant of such Stock Appreciation Right except as
provided in Section 4(b) hereof. The Committee may impose such
conditions or restrictions on the exercise of any Stock Appreciation
Right as it may deem appropriate, including, without limitation,
restricting the time of exercise of the Stock Appreciation Right to
specified periods as may be necessary to satisfy the requirements of
Rule 16b-3.
(c) Restricted Stock Awards ---
(i) Issuance --- The Committee is hereby authorized to
grant Awards of Restricted Stock to Participants.
(ii) Restrictions --- Shares of Restricted Stock granted to
Participants shall be subject to such restrictions as the Committee may
impose, which restrictions may lapse separately or in combination at
such time or times, in such installments or otherwise, as the Committee
may deem appropriate.
(iii) Performance Criteria --- The restrictions applicable
to Company executives and the Chairman and President of each subsidiary
of the Company shall be based on the criteria of attaining over a period
of at least three years a compounded annual percentage rate of Total
Shareholder Return compared to a specified group of gas distribution
utilities. The restrictions applicable to other executives of the
subsidiaries shall be as determined by the Committee.
(iv) Registration --- Any Restricted Stock granted under
the Plan to a Participant may be evidenced in such manner as the
Committee may deem appropriate. In the event any stock certificate is
issued in respect of Shares of Restricted Stock granted under the Plan
to a Participant, such certificate shall be registered in the name of
the Participant and shall bear an appropriate legend (as determined by
the Committee) referring to the terms, conditions, and restrictions
applicable to such Restricted Stock.
(v) Payment of Restricted Stock --- At the end of the
applicable restriction period relating to Restricted Stock granted to a
Participant, one or more stock certificates for the appropriate number
of Shares, free of restrictions, shall be delivered to the Participant,
or, if the Participant received stock certificates representing the
Restricted Stock at the time of grant, the legends placed on such
certificates shall be removed.
(vi) Forfeiture --- Except as otherwise determined by the
Committee, upon termination of employment of a Participant (as
determined under criteria established by the Committee) for any reason
during the applicable restriction period, all Shares of Restricted Stock
still subject to restriction shall be forfeited by the Participant and
reacquired by the Company.
(d) General ---
(i) No Consideration for Awards --- Awards shall be granted
to Participants for no cash consideration unless otherwise<PAGE>
<PAGE> 7
determined by the Committee.
(ii) Award Agreements --- Each Award granted under the Plan
shall be evidenced by an Award Agreement in such form (consistent with
the terms of the Plan) as shall have been approved by the Committee.
(iii) Awards May Be Granted Separately or Together ---
Awards to Participants under the Plan may be granted either alone or in
addition to, in tandem with, or in substitution for any other Award or
any award granted under any other plan of the Company or any Affiliate.
Awards granted in addition to or in tandem with other Awards, or in
addition to or in tandem with awards granted under any other plan of the
Company or any Affiliate, may be granted either at the same time as or
at a different time from the grant of such other Awards or awards.
(iv) Limits on Transfer of Awards --- No Award (other than
Released Securities), and no right under any such Award, shall be
assignable, alienable, saleable, or transferable by a Participant
otherwise than by will or by the laws of descent and distribution (or,
in the case of an Award of Restricted Securities, to the Company);
provided, however, that a Participant at the discretion of the Committee
may be entitled, in the manner established by the Committee, to
designate a beneficiary or beneficiaries to exercise his or her rights,
and to receive any property distributable, with respect to any Award
upon the death of the Participant. Each Award, and each right under any
Award, shall be exercisable, during the lifetime of the Participant,
only by such individual or, if permissible under applicable law, by such
individual's guardian or legal representative. No Award (other than
Released Securities), and no right under any such Award, may be pledged,
alienated, attached, or otherwise encumbered, and any purported pledge,
alienation, attachment, or encumbrance thereof shall be void and
unenforceable against the Company or any Affiliate.
(v) Term of Awards --- Except as otherwise provided in the
Plan, the term of each Award shall be for such period as may be
determined by the Committee.
(vi) Rule 16b-3 Six-Month Limitations --- To the extent
required in order to comply with Rule 16b-3 only, any equity security
offered pursuant to the Plan may not be sold for at least six months
after acquisition, except in the case of death or disability, and any
derivative security issued pursuant to the Plan shall not be exercisable
for at least six months, except in case of death or disability of the
holder thereof. Terms used in the preceding sentence shall, for the
purposes of such sentence only, have the meanings, if any, assigned or
attributed to them under Rule 16b-3.
(vii) Share Certificates; Representation by Participants --
- - In addition to the restrictions imposed pursuant to Section 6(c)
hereof, all certificates for Shares delivered under the Plan pursuant to
any Award or the exercise thereof shall be subject to such stop transfer
orders and other restrictions as the Committee may deem advisable under
the Plan or the rules, regulations, and other requirements of the
Commission, any stock exchange or other market upon which such Shares
are then listed or traded, and any applicable federal or state<PAGE>
<PAGE> 8
securities laws, and the Committee may cause a legend or legends to be
put on any such certificates to make appropriate reference to such
restrictions. The Committee may require each Participant or other
Person who acquires Shares under the Plan by means of an Award
originally made to a Participant to represent to the Company in writing
that such Participant or other Person is acquiring the Shares without a
view to the distribution thereof.
Section 7. Amendment and Termination; Waiver of Conditions
- -----------------------------------------------------------
(a) Amendments to the Plan --- The Board of Directors of the
Company may amend, alter, suspend, discontinue, or terminate the Plan at
any time; provided, however, that no amendment, alteration, suspension,
discontinuation or termination of the Plan shall in any manner (except
as otherwise provided in this Section 7) adversely affect any Award
granted and then outstanding under the Plan without the consent of the
Participant; provided further that, notwithstanding any other provision
of the Plan or any Award Agreement, without the approval of the
shareholders of the Company, no amendment, alteration, suspension,
discontinuation, or termination of the Plan shall be made that would:
(i) increase the total number of Shares available for
Awards under the Plan or the maximum number of Shares with respect to
which Awards may be made to individual Participants, except as provided
in Section 4(b) hereof;
(ii) modify the performance criteria pursuant to which
Restricted Stock vests;
(iii) materially increase the benefits accruing to
Participants under the Plan; or
(iv) materially modify the requirements as to eligibility
for participation in the Plan.
(b) Adjustments of Awards Upon Certain Acquisitions --- In the
event the Company or any Affiliate shall assume outstanding employee
awards or the right or obligation to make future such awards in
connection with the acquisition of another business or another
corporation or business entity, the Committee may make such adjustments,
not inconsistent with the terms of the Plan, in the terms of Awards
granted to Participants as it shall deem appropriate in order to achieve
reasonable comparability or other equitable relationship between the
assumed awards and the Awards granted under the Plan to Participants as
so adjusted.
(c) Correction of Defects, Omissions, and Inconsistencies --- The
Committee may correct any defect, supply any omission, or reconcile any
inconsistency in any Award or Award Agreement in the manner and to the
extent it shall deem necessary or desirable to carry the Plan into
effect.<PAGE>
<PAGE> 9
Section 8. General Provisions
- -------------------------------
(a) No Rights to Awards --- No Key Salaried Employee, Participant
or other Person shall have any claim to be granted any Award under the
Plan, and there is no obligation for uniformity of treatment of Key
Salaried Employees, Participants, or holders or beneficiaries of Awards
under the Plan. The terms and conditions of Awards need not be the same
with respect to each Participant.
(b) Withholding --- No later than the date as of which an amount
first becomes includible in the gross income of a Participant for
federal income tax purposes with respect to any Award under the Plan,
the Participant shall pay to the Company, or make arrangements
satisfactory to the Company regarding the payment of, any federal,
state, local or foreign taxes of any kind required by law to be withheld
with respect to such amount. Unless otherwise determined by the
Committee, withholding obligations arising with respect to Awards to
Participants under the Plan may be settled with Shares (other than
Restricted Securities), including Shares that are part of, or are
received upon exercise of, the Award that gives rise to the withholding
requirement. The obligations of the Company under the Plan shall be
conditional on such payment or arrangements, and the Company and any
Affiliate shall, to the extent permitted by law, have the right to
deduct any such taxes from any payment otherwise due to the Participant.
The Committee may establish such procedures as it deems appropriate for
the settling of withholding obligations with Shares, including, without
limitation, the establishment of such procedures as may be necessary to
satisfy the requirements of Rule 16b-3.
(c) No Limit on Other Compensation Arrangements --- Nothing
contained in the Plan shall prevent the Company or any Affiliate from
adopting or continuing in effect other or additional compensation
arrangements, and such arrangements may be either generally applicable
or applicable only in specific cases.
(d) Rights and Status of Recipients of Awards --- The grant of an
Award shall not be construed as giving a Participant the right to be
retained in the employ of the Company or any Affiliate. Further, the
Company or any Affiliate may at any time dismiss a Participant from
employment, free from any liability, or any claim under the Plan.
Except for rights accorded under the Plan and under any applicable Award
Agreement, Participants shall have no rights as holders of Shares as a
result of the granting of Awards hereunder.
(e) Unfunded Status of the Plan --- Unless otherwise determined by
the Committee, the Plan shall be unfunded and shall not create (or be
construed to create) a trust or a separate fund or funds. The Plan
shall not establish any fiduciary relationship between the Company and
any Participant or other Person. To the extent any Person holds any
right by virtue of a grant under the Plan, such right (unless otherwise
determined by the Committee) shall be no greater than the right of an
unsecured general creditor of the Company.
(f) Governing Law --- The validity, construction, and effect of
the Plan and any rules and regulations relating to the Plan shall be
determined in accordance with the internal laws of the State of<PAGE>
<PAGE> 10
Wisconsin and applicable federal law.
(g) Severability --- If any provision of the Plan or any Award
Agreement or any Award is or becomes or is deemed to be invalid,
illegal, or unenforceable in any jurisdiction, or as to any Person or
Award, or would disqualify the Plan, any Award Agreement or any Award
under any law deemed applicable by the Committee, such provision shall
be construed or deemed amended to conform to applicable laws, or if it
cannot be so construed or deemed amended without, in the determination
of the Committee, materially altering the intent of the Plan, any Award
Agreement or the Award, such provision shall be stricken as to such
jurisdiction, Person, or Award, and the remainder of the Plan, any such
Award Agreement and any such Award shall remain in full force and
effect.
(h) No Fractional Shares --- No fractional Shares or other
securities shall be issued or delivered pursuant to the Plan, any Award
Agreement or any Award, and the Committee shall determine (except as
otherwise provided in the Plan) whether cash, other securities, or other
property shall be paid or transferred in lieu of any fractional Shares
or other securities, or whether such fractional Shares or other
securities or any rights thereto shall be canceled, terminated, or
otherwise eliminated.
(i) Headings --- Headings are given to the Sections and
subsections of the Plan solely as a convenience to facilitate reference.
Such headings shall not be deemed in any way material or relevant to the
construction or interpretation of the Plan or any provision thereof.
Section 9. Effective Date of the Plan
- --------------------------------------
The Plan shall be effective as of March 1, 1994, subject, however,
to the approval of the Plan by the shareholders of the Company at the
next annual meeting of shareholders, or any adjournment thereof, within
twelve months following the date of adoption of the Plan by the Board of
Directors of the Company.
Section 10. Term of the Plan
- -----------------------------
No Award shall be granted under the Plan after March 1, 2004.
However, unless otherwise expressly provided in the Plan or in an
applicable Award Agreement, any Award theretofore granted may extend
beyond such date, and, to the extent set forth in the Plan, the
authority of the Committee to amend, alter, adjust, suspend,
discontinue, or terminate any such Award, or to waive any conditions or
restrictions with respect to any such Award, and the authority of the
Board of Directors of the Company to amend the Plan, shall extend beyond
such date.
<PAGE>
