<PAGE>
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) June 27, 1999
______________________
WICOR, INC.
(Exact name of registrant as specified in its charter)
1-7951
(Commission file number)
Wisconsin 39-1346701
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
626 East Wisconsin Avenue, Milwaukee, Wisconsin 53202
(Address of principal executive offices)
(Zip Code)
(414) 291-7026
(Registrant's telephone number, including area code)
===============================================================================
<PAGE>
ITEM 5. OTHER EVENTS.
MERGER AGREEMENT WITH WISCONSIN ENERGY CORPORATION
On June 28, 1999, Wisconsin Energy Corporation, a Wisconsin corporation
("Wisconsin Energy"), and WICOR, Inc., a Wisconsin corporation ("WICOR"), issued
a joint press release announcing that they had entered into an Agreement and
Plan of Merger, dated as of June 27, 1999 (the "Merger Agreement"), by and among
Wisconsin Energy, WICOR and CEW Acquisition, Inc., a Wisconsin corporation and a
wholly owned subsidiary of Wisconsin Energy ("Acquisition"). The Merger
Agreement provides for a strategic business combination of Wisconsin Energy and
WICOR through a merger of WICOR and Acquisition (the "Merger"). The Merger
Agreement has been approved by the boards of directors of Wisconsin Energy and
WICOR.
Subject to the terms of the Merger Agreement, at the time of the Merger,
each outstanding share of WICOR common stock, par value $1.00 per share ("WICOR
Common Stock") (together with the associated common stock purchase right issued
pursuant to WICOR's Rights Agreement) will be converted into the right to
receive cash, common stock, par value $.01 per share of Wisconsin Energy
("Wisconsin Energy Common Stock"), or a combination of cash and shares of
Wisconsin Energy Common Stock (the "Merger Consideration") having a value of
$31.50 per share of WICOR Common Stock if the Closing occurs by July 1, 2000,
increased by an amount equivalent to daily simple interest on $31.50 at the rate
of six percent per annum for each day after July 1, 2000 through the closing
date if the closing occurs after July 1, 2000 (the "Exchange Value"). Prior to
the closing date, Wisconsin Energy will select the percentage of the Merger
Consideration to be paid in Wisconsin Energy Common Stock, which may be not less
than 40% or more than 60%; the balance will be paid in cash. The exchange ratio
for each share of WICOR Common Stock converted into Wisconsin Energy Common
Stock will be determined by dividing the Exchange Value by the average of the
closing prices of the Wisconsin Energy Common Stock on the New York Stock
Exchange for the 10 trading days ending with the fifth trading day prior to the
closing date (the "Average Wisconsin Energy Price"). Each WICOR shareholder
will be entitled to elect to receive cash, Wisconsin Energy Common Stock or a
combination thereof, subject to proration if the cash or stock elections exceed
the maximum amounts permitted. Cash will be paid in lieu of any fractional
shares of Wisconsin Energy Common Stock which holders of WICOR Common Stock
would otherwise receive. If the Average Wisconsin Energy Price is less than
$22.00 per share, Wisconsin Energy may elect to pay the entire Merger
Consideration in cash.
Consummation of the Merger is subject to the satisfaction of certain
closing conditions set forth in the Merger Agreement, including approval by the
shareholders of Wisconsin Energy and WICOR, approval by the Public Service
Commission of Wisconsin, approval by the Securities and Exchange Commission
under the Public Utility Holding Company Act of 1935, as amended, and expiration
or termination of the waiting period applicable to the Merger under the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended. The regulatory
approval process is expected to take approximately 9 to 12 months.
The Merger Agreement provides that upon the consummation of the Merger,
Richard A. Abdoo will continue as the Chairman of the Board, President and Chief
Executive Officer of Wisconsin Energy and that George E. Wardeberg, the Chairman
and Chief Executive Officer of WICOR, will become the Vice Chairman of the Board
of Wisconsin Energy for a two-year term, after which Mr. Wardeberg intends to
retire as Vice Chairman but remain a member of the Wisconsin Energy Board of
Directors. The Merger Agreement also provides that, in addition to Mr.
Wardeberg, one other member of the current WICOR Board of Directors selected by
Wisconsin Energy will join the Wisconsin Energy Board of Directors after the
consummation of the Merger.
The Merger is intended to qualify as a tax-free reorganization under the
Internal Revenue Code of 1986, as amended, to the extent that shares of WICOR
Common Stock are exchanged for shares of Wisconsin Energy Common Stock, and will
be accounted for as a purchase transaction. The Merger Agreement provides that
if the Merger Agreement is terminated under certain circumstances and WICOR
enters into a competing transaction with another party within 21 months after
the termination, WICOR will pay a termination fee of $30 million to Wisconsin
Energy.
The Merger Agreement and the joint press release announcing the Merger
Agreement are filed as exhibits to this report. The above description of the
Merger Agreement is qualified by reference to the provisions of the Merger
Agreement.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits:
--------
See Exhibit Index following the Signatures page of this report, which is
incorporated herein by reference.
-2-
<PAGE>
FORM 8-K
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.
WICOR, INC.
By: /s/ Joseph P. Wenzler
-------------------------------------------
Joseph P. Wenzler, Senior Vice President and
Chief Financial Officer
Date: June 29, 1999
<PAGE>
WICOR, INC.
(Commission File No. 1-7951)
EXHIBIT INDEX
to
CURRENT REPORT ON FORM 8-K
Date of Report: June 27, 1999
<TABLE>
<CAPTION>
Incorporated Herein Filed
Exhibit Description by Reference to Herewith
- -------------- ------------------------ ------------------- --------
<S> <C> <C> <C>
Exhibit 2.1 Agreement and Plan of X
Merger, dated as of
June 27, 1999, by and
among Wisconsin Energy
Corporation, WICOR, Inc.
and CEW Acquisition, Inc.
Exhibit 99.1 Joint Press Release of X
Wisconsin Energy
Corporation and WICOR,
Inc., dated June 28, 1999
</TABLE>
<PAGE>
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
WISCONSIN ENERGY CORPORATION
AND
WICOR, INC.
AND
CEW ACQUISITION, INC.
DATED AS OF JUNE 27, 1999
<PAGE>
TABLE OF CONTENTS
Page
----
RECITALS..................................................................... 1
ARTICLE I DEFINITIONS........................................................ 2
1.1 Acquisition........................................................ 2
1.2 Agreement.......................................................... 2
1.3 Closing............................................................ 2
1.4 Closing Date....................................................... 2
1.5 Code............................................................... 2
1.6 Confidentiality Agreement.......................................... 2
1.7 Disclosure Schedule................................................ 2
1.8 ERISA.............................................................. 2
1.9 Exchange Act....................................................... 2
1.10 HSR Act............................................................ 2
1.11 Knowledge of WICOR................................................. 3
1.12 Knowledge of Wisconsin Energy...................................... 3
1.13 Law................................................................ 3
1.14 Merger............................................................. 3
1.15 Person............................................................. 3
1.16 Proxy Statement.................................................... 3
1.17 PSCW............................................................... 3
1.18 PUHCA.............................................................. 3
1.19 Registration Statement............................................. 3
1.20 SEC................................................................ 3
1.21 Securities Act..................................................... 3
1.22 Subsidiary......................................................... 4
1.23 WBCL............................................................... 4
1.24 WICOR.............................................................. 4
1.25 WICOR Certificates................................................. 4
1.26 WICOR Common Stock................................................. 4
1.27 WICOR Companies.................................................... 4
1.28 WICOR Material Adverse Effect...................................... 4
1.29 WICOR Right........................................................ 4
1.30 WICOR Rights Agreement............................................. 4
1.31 WICOR Shareholders................................................. 4
1.32 WICOR Special Meeting.............................................. 4
1.33 Wisconsin Electric................................................. 4
1.34 Wisconsin Energy................................................... 4
1.35 Wisconsin Energy Common Stock...................................... 5
1.36 Wisconsin Energy Companies......................................... 5
1.37 Wisconsin Energy Material Adverse Effect........................... 5
1.38 Wisconsin Energy Shareholders...................................... 5
ii
<PAGE>
1.39 Wisconsin Energy Special Meeting................................. 5
1.40 Wisconsin Gas.................................................... 5
ARTICLE II THE MERGER..................................................... 5
2.1 The Merger....................................................... 5
2.2 Effective Time of Merger......................................... 5
2.3 Corporate Matters................................................ 6
2.4 Conversion of WICOR Common Stock................................. 6
2.5 Acquisition Common Stock......................................... 11
2.6 Exchange of WICOR Certificates................................... 11
2.7 Reorganization................................................... 15
2.8 No Dissenting Shares............................................. 15
2.9 WICOR Options and WICOR Awards................................... 15
ARTICLE III OTHER AGREEMENTS............................................... 16
3.1 Proxy Statement and Registration Statement....................... 16
3.2 Approval of Shareholders......................................... 17
3.3 HSR Act.......................................................... 18
3.4 Access........................................................... 18
3.5 Disclosure Schedule.............................................. 18
3.6 Conditions to Merger............................................. 19
3.7 Deliveries of Information; Consultation.......................... 19
3.8 Affiliates....................................................... 20
3.9 Other Transactions; Expenses; Other Remedies..................... 20
3.10 Letter of WICOR's Accountants.................................... 24
3.11 Letter of Wisconsin Energy's Accountants......................... 24
3.12 Stock Exchange Listing........................................... 24
3.13 Public Announcements............................................. 24
3.14 Indemnification; Directors' and Officers' Insurance.............. 25
3.15 Employee and Employee Benefit Plan Matters....................... 26
3.16 Directors........................................................ 28
3.17 WICOR DRIP....................................................... 28
3.18 Acknowledgments.................................................. 29
3.19 Other Workforce Matters.......................................... 29
3.20 Payment of Dividends............................................. 29
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF WICOR......................... 29
4.1 Organization; Business........................................... 30
4.2 Capitalization................................................... 31
4.3 Authorization; Enforceability.................................... 31
4.4 No Violation or Conflict......................................... 31
4.5 Litigation....................................................... 31
4.6 WICOR SEC Reports and Financial Statements....................... 32
4.7 Absence of Certain Changes....................................... 32
4.8 Contracts........................................................ 32
iii
<PAGE>
4.9 Employee Benefit Plans............................................ 33
4.10 No Violation of Law............................................... 34
4.11 Brokers........................................................... 34
4.12 Taxes............................................................. 34
4.13 Governmental Approvals............................................ 35
4.14 No Pending Other Transactions..................................... 36
4.15 Labor Matters..................................................... 36
4.16 Disclosure........................................................ 36
4.17 Information Supplied.............................................. 36
4.18 Vote Required..................................................... 36
4.19 Opinion of Financial Advisor...................................... 36
4.20 Environmental Protection.......................................... 37
4.21 Year 2000 Compliance.............................................. 39
4.22 Takeover Provisions............................................... 39
4.23 Rights Agreement.................................................. 39
4.24 Ownership of Wisconsin Energy Common Stock........................ 39
ARTICLE V REPRESENTATIONS AND WARRANTIES OF
WISCONSIN ENERGY AND ACQUISITION.................................. 40
5.1 Organization...................................................... 40
5.2 Capitalization.................................................... 40
5.3 Authorization; Enforceability..................................... 41
5.4 No Violation or Conflict.......................................... 41
5.5 Litigation........................................................ 41
5.6 Wisconsin Energy SEC Reports and Financial Statements............. 41
5.7 Brokers........................................................... 42
5.8 Governmental Approvals............................................ 42
5.9 Disclosure........................................................ 42
5.10 Information Supplied.............................................. 42
5.11 Vote Required..................................................... 43
5.12 Opinion of Financial Advisor...................................... 43
5.13 Ownership of WICOR Common Stock................................... 43
5.14 Year 2000 Compliance.............................................. 43
ARTICLE VI COVENANTS PENDING THE MERGER..................................... 43
6.1 Covenants of WICOR................................................ 43
6.2 Covenants of Wisconsin Energy..................................... 47
ARTICLE VII CONDITIONS PRECEDENT TO THE OBLIGATIONS OF
WISCONSIN ENERGY AND ACQUISITION................................ 48
7.1 Compliance with Agreement......................................... 48
7.2 No Litigation..................................................... 48
7.3 Representations and Warranties of WICOR........................... 48
7.4 No WICOR Material Adverse Effect.................................. 49
iv
<PAGE>
7.5 Approval of WICOR Shareholders and Wisconsin Energy
Shareholders; Articles of Merger................................... 49
7.6 Closing Certificate................................................ 49
7.7 Governmental Approvals............................................. 49
7.8 Listing............................................................ 49
7.9 Accountant Letter.................................................. 50
7.10 Affiliate Letters.................................................. 50
ARTICLE VIII CONDITIONS PRECEDENT TO THE OBLIGATIONS OF WICOR................ 50
8.1 Compliance with Agreement.......................................... 50
8.2 No Litigation...................................................... 50
8.3 Representations and Warranties of Wisconsin Energy and Acquisition. 50
8.4 No Wisconsin Energy Material Adverse Effect........................ 50
8.5 Approval of WICOR Shareholders and Wisconsin Energy
Shareholders; Articles of Merger................................... 50
8.6 Closing Certificate................................................ 51
8.7 Governmental Approvals............................................. 51
8.8 Listing............................................................ 51
8.9 Tax Opinion........................................................ 51
ARTICLE IX TERMINATION; MISCELLANEOUS........................................ 52
9.1 Termination........................................................ 52
9.2 Rights on Termination; Waiver...................................... 54
9.3 Survival of Representations, Warranties and Covenants.............. 54
9.4 Entire Agreement; Amendment........................................ 54
9.5 Expenses........................................................... 55
9.6 Governing Law...................................................... 55
9.7 Assignment......................................................... 55
9.8 Notices............................................................ 55
9.9 Counterparts; Headings............................................. 56
9.10 Interpretation..................................................... 56
9.11 Severability....................................................... 57
9.12 Specific Performance............................................... 57
9.13 No Reliance........................................................ 57
9.14 Exhibits and Disclosure Schedule................................... 57
9.15 Further Assurances................................................. 57
9.16 Waiver of Jury Trial............................................... 57
SIGNATURES................................................................... 58
v
<PAGE>
EXHIBITS:
1. Form of Affiliate Letter
2. Form of Employment Agreement of George E. Wardeberg
3. Form of Wisconsin Energy Special Executive Severance Policy
4. Form of Wisconsin Energy Executive Severance Policy
vi
<PAGE>
INDEX TO DEFINED TERMS
----------------------
<TABLE>
<CAPTION>
TERM SECTION
---- -------
<S> <C>
Acquisition 1.1
Affiliates 3.8(a)
Affiliate Letter 3.8(b)
Agreement 1.2
Articles of Merger 2.2
Average Wisconsin Energy Price 2.4(a)(i)
Cash Election 2.4(e)
Cash Election Shares 2.4(f)
Cash Fraction 2.4(f)(ii)(A)
Cash Percentage 2.4(a)(ii)
Closing 1.3
Closing Date 1.4
Code 1.5
Confidentiality Agreement 1.6
Conversion Notice 2.4(b)
CERCLA 4.20(f)
Disclosure Schedule 1.7
Disclosure Schedule Change 3.5(b)
Effective Time of Merger 2.2
Election Deadline 2.4(l)
Employee Benefit Plans 4.9(a)
Environmental Claim 4.20(a)(i)
Environmental Hazardous Material 4.20(a)(ii)
Environmental Laws 4.20(a)(iii)
Environmental Permits 4.20(c)
Environmental Release 4.20(a)(iv)
ERISA 1.8
Exchange Act 1.9
Exchange Agent 2.6(a)
Exchange Fund 2.6(a)
Exchange Ratio 2.4(a)(iii)
Exchange Value 2.4(a)(iv)
Existing Contracts 4.8(a)
Existing Litigation 4.5
Existing Plans 4.9(b)
Form of Election 2.4(e)
HSR Act 1.10
Indebtedness 4.8(a)(iii)
Indemnified Liabilities 3.14(a)(i)
Indemnified Party 3.14(a)
Indemnified Parties 3.14(a)
</TABLE>
vii
<PAGE>
<TABLE>
<CAPTION>
TERM SECTION
---- -------
<S> <C>
Initial Mailing Record Date 2.4(i)
Initial Termination Date 9.1(b)(ii)
Insurance Amount 3.14(c)
Knowledge of WICOR 1.11
Knowledge of Wisconsin Energy 1.12
Law 1.13
Letter of Transmittal 2.6(b)(i)(A)
Maximum Cash Number 2.4(a)(v)
Maximum Stock Number 2.4(a)(vi)
Merger 1.14
Merger Consideration 2.4(a)(vii)
Minimum Average Wisconsin Energy Price 2.4(a)(viii)
Non-Election 2.4(e)
Non-Election Shares 2.4(f)(i)
Other Proposal 3.9(a)(i)
Other Transaction 3.9(a)(ii)
Person 1.15
Proxy Statement 1.16
PSCW 1.17
PUHCA 1.18
Registration Statement 1.19
Representative 2.4(e)
SEC 1.20
Securities Act 1.21
Special Date 3.9(a)(iii)
Special Event 3.9(a)(iv)
Special Fee 3.9(e)
Stock Election 2.4(e)
Stock Election Shares 2.4(f)(i)
Stock Fraction 2.4(g)(ii)(A)
Stock Percentage 2.4(a)(viii)
Subsidiary 1.22
Superior Proposal 3.9(a)(v)
Surviving Corporation 2.1
WBCL 1.23
WICOR 1.24
WICOR Advisors 3.9(c)
WICOR Award 2.9(b)
WICOR Certificates 1.25
WICOR Common Stock 1.26
WICOR Companies 1.27
WICOR Director Option Plan 2.9(a)
WICOR DRIP 3.17
</TABLE>
viii
<PAGE>
<TABLE>
<CAPTION>
TERM SECTION
---- -------
<S> <C>
WICOR ESOP 3.15(e)
WICOR Material Adverse Effect 1.28
WICOR New Restricted Stock 6.1(j)(iii)
WICOR Option 2.9(a)
WICOR Option Plans 2.9(a)
WICOR Performance Plan 2.9(a)
WICOR Right 1.29
WICOR Rights Agreement 1.30
WICOR SEC Reports 4.6(a)
WICOR Shareholders 1.31
WICOR Special Meeting 1.32
Wisconsin Electric 1.33
Wisconsin Energy 1.34
Wisconsin Energy Common Stock 1.35
Wisconsin Energy Companies 1.36
Wisconsin Energy Designee 3.16(b)
Wisconsin Energy Material Adverse Effect 1.37
Wisconsin Energy SEC Reports 5.6(a)
Wisconsin Energy Severance Policies 3.15(f)
Wisconsin Energy Shareholders 1.38
Wisconsin Energy Special Meeting 1.39
Wisconsin Gas 1.40
Year 2000 Compliant 4.21
</TABLE>
ix
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is made as of this 27th day of June, 1999
by and among WISCONSIN ENERGY CORPORATION, WICOR, INC. AND CEW ACQUISITION, INC.
RECITALS
WHEREAS, the respective Boards of Directors of Wisconsin Energy, WICOR and
Acquisition have: (a) determined that the merger of WICOR and Acquisition
pursuant to, and subject to all of the terms and conditions of, this Agreement
is advisable, fair and in the best interests of Wisconsin Energy, WICOR and
Acquisition and their respective shareholders; and (b) approved the Merger, this
Agreement and the transactions contemplated by this Agreement; and
WHEREAS, the Board of Directors of WICOR has directed that this Agreement
and the transactions described in this Agreement be submitted for approval at
the WICOR Special Meeting; and
WHEREAS, the Board of Directors of Wisconsin Energy has directed that the
issuance of Wisconsin Energy Common Stock pursuant to this Agreement and the
transactions described in this Agreement be submitted for approval at the
Wisconsin Energy Special Meeting; and
WHEREAS, Wisconsin Energy, WICOR and Acquisition desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger; and
WHEREAS, if any Wisconsin Energy Common Stock is to be issued pursuant to
this Agreement, Wisconsin Energy, WICOR and Acquisition intend, by executing
this Agreement, to adopt a plan of reorganization within the meaning of Section
368 of the Code and to cause the Merger to qualify as a reorganization under the
provisions of Sections 368(a) of the Code to the extent that shares of WICOR
Common Stock are exchanged for shares of Wisconsin Energy Common Stock; and
NOW, THEREFORE, in consideration of the Recitals and of the mutual
covenants, conditions and agreements set forth herein and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, it is hereby agreed that:
1
<PAGE>
ARTICLE I
DEFINITIONS
When used in this Agreement, the following terms shall have the meanings
specified:
1.1 Acquisition. "Acquisition" shall mean CEW Acquisition, Inc., a
-----------
Wisconsin corporation and a wholly-owned Subsidiary of Wisconsin Energy.
1.2 Agreement. "Agreement" shall mean this Agreement and Plan of Merger,
---------
together with the Exhibits attached hereto and together with the Disclosure
Schedule, as the same may be amended from time to time in accordance with the
terms hereof.
1.3 Closing. "Closing" shall mean the conference to be held at 10:00
-------
A.M., Central Time, on the Closing Date at the offices of Quarles & Brady LLP,
411 East Wisconsin Avenue, Milwaukee WI 53202, or such other time and place as
the parties may mutually agree to in writing, at which the transactions
contemplated by this Agreement shall be consummated.
1.4 Closing Date. "Closing Date" shall mean:
------------
(a) that date which is two (2) business days after satisfaction or
waiver of all of the conditions set forth in Article VII and Article VIII of
this Agreement; or
(b) such other date as the parties may mutually agree to in
writing.
1.5 Code. "Code" shall mean the Internal Revenue Code of 1986, as
----
amended, and the regulations promulgated thereunder, as the same may be in
effect from time to time.
1.6 Confidentiality Agreement. "Confidentiality Agreement" shall mean
-------------------------
the Confidentiality Agreement between Wisconsin Energy and WICOR dated January
14, 1999.
1.7 Disclosure Schedule. "Disclosure Schedule" shall mean the Disclosure
-------------------
Schedule dated the date of this Agreement delivered by WICOR to Wisconsin Energy
contemporaneously with the execution and delivery of this Agreement and as the
same may be amended or updated from time to time after the date of this
Agreement and prior to the Closing Date in accordance with the terms of this
Agreement.
1.8 ERISA. "ERISA" shall mean the Employee Retirement Income Security Act
-----
of 1974, as the same may be in effect from time to time.
1.9 Exchange Act. "Exchange Act" shall mean the Securities Exchange Act
------------
of 1934, as the same may be in effect from time to time.
1.10 HSR Act. "HSR Act" shall mean the Hart-Scott-Rodino Antitrust
-------
Improvements Act of 1976, as the same may be in effect from time to time.
2
<PAGE>
1.11 Knowledge of WICOR. "Knowledge of WICOR" shall mean, for
------------------
purposes of this Agreement, when any fact or matter is stated to be "to the
Knowledge of WICOR" or words of similar import, the actual knowledge of the
existence or nonexistence of such fact or matter by the officers and employees
of the WICOR Companies listed on the Disclosure Schedule.
1.12 Knowledge of Wisconsin Energy. "Knowledge of Wisconsin Energy" shall
-----------------------------
mean, for purposes of this Agreement, when any fact or matter is stated to be
"to the Knowledge of Wisconsin Energy" or words of similar import, the actual
knowledge of the existence or nonexistence of such fact or matter by the
executive officers of Wisconsin Energy and that of the Person holding the
position of Law Director - Regulatory of Wisconsin Electric.
1.13 Law. "Law" shall mean any federal, state, local, foreign, or
---
other law, rule, regulation or governmental requirement of any kind, judicial
interpretations thereof, and the rules, regulations and orders promulgated
thereunder by any regulatory agencies.
1.14 Merger. "Merger" shall mean the merger of WICOR and Acquisition
------
pursuant to this Agreement.
1.15 Person. "Person" shall mean a natural person, corporation, trust,
------
partnership, limited liability company, joint venture, association,
unincorporated organization, governmental entity, agency or branch or department
thereof, or any other legal entity.
1.16 Proxy Statement. "Proxy Statement" shall mean the joint proxy
---------------
statement of Wisconsin Energy and WICOR to be filed with the SEC and to be
distributed to the WICOR Shareholders in connection with the WICOR Special
Meeting and the approval of the Merger by the WICOR Shareholders and to be
distributed to the Wisconsin Energy Shareholders in connection with the
Wisconsin Energy Special Meeting, which shall also constitute the prospectus of
Wisconsin Energy filed as a part of the Registration Statement.
1.17 PSCW. "PSCW" shall mean the Public Service Commission of
----
Wisconsin.
1.18 PUHCA. "PUHCA" shall mean the Public Utility Holding Company Act
-----
of 1935, as the same may be in effect from time to time.
1.19 Registration Statement. "Registration Statement" shall mean a
----------------------
registration statement on Form S-4 to be filed under the Securities Act by
Wisconsin Energy in connection with the Merger for purposes of registering any
shares of Wisconsin Energy Common Stock to be issued in the Merger pursuant to
Article II of this Agreement.
1.20 SEC. "SEC" shall mean the Securities and Exchange Commission.
---
1.21 Securities Act. "Securities Act" shall mean the Securities Act of
--------------
1933, as the same may be in effect from time to time.
3
<PAGE>
1.22 Subsidiary. "Subsidiary" of any Person shall mean another
----------
Person, an amount of the voting securities, other voting ownership or voting
partnership interests of which is sufficient to elect at least a majority of its
board of directors or other governing body (or, if there are no such voting
interests, 50% or more of the equity interests of which) is owned directly or
indirectly by such first Person.
1.23 WBCL. "WBCL" shall mean the Wisconsin Business Corporation Law,
----
as the same shall be in effect from time to time.
1.24 WICOR. "WICOR" shall mean WICOR, Inc., a Wisconsin corporation.
-----
1.25 WICOR Certificates. "WICOR Certificates" shall mean a
------------------
certificate or certificates which represent outstanding shares of WICOR Common
Stock on the relevant date.
1.26 WICOR Common Stock. "WICOR Common Stock" shall mean shares of the
------------------
common stock, $1.00 par value, of WICOR.
1.27 WICOR Companies. "WICOR Companies" shall mean WICOR and all
---------------
Subsidiaries of WICOR.
1.28 WICOR Material Adverse Effect. "WICOR Material Adverse Effect" shall
-----------------------------
mean any event, condition or fact which is, or reasonably may be expected to be,
materially adverse to the aggregate financial condition, properties, business,
results of operations or prospects of the WICOR Companies taken as a whole.
1.29 WICOR Right. "WICOR Right" shall mean a right to purchase shares
-----------
of WICOR Common Stock issued by WICOR pursuant to the WICOR Rights Agreement.
1.30 WICOR Rights Agreement. "WICOR Rights Agreement" shall mean the
-----------------------
Rights Agreement dated as of August 29, 1989 between WICOR and Manufacturers
Hanover Trust Company (now The Chase Manhattan Bank) as Rights Agent, as
amended, and any successor or replacement agreements thereto.
1.31 WICOR Shareholders. "WICOR Shareholders" shall mean all Persons
------------------
owning shares of WICOR Common Stock on the relevant date.
1.32 WICOR Special Meeting. "WICOR Special Meeting" shall mean a special
---------------------
meeting of the WICOR Shareholders for the purpose of approving the Merger, this
Agreement and the transactions contemplated by this Agreement.
1.33 Wisconsin Electric. "Wisconsin Electric" shall mean Wisconsin
------------------
Electric Power Company, a Wisconsin corporation and a Subsidiary of Wisconsin
Energy.
1.34 Wisconsin Energy. "Wisconsin Energy" shall mean Wisconsin Energy
----------------
Corporation, a Wisconsin corporation.
4
<PAGE>
1.35 Wisconsin Energy Common Stock. "Wisconsin Energy Common Stock" shall
-----------------------------
mean shares of the common stock, $.01 par value, of Wisconsin Energy.
1.36 Wisconsin Energy Companies. "Wisconsin Energy Companies" shall mean
--------------------------
Wisconsin Energy and all Subsidiaries of Wisconsin Energy.
1.37 Wisconsin Energy Material Adverse Effect. "Wisconsin Energy Material
----------------------------------------
Adverse Effect" shall mean any event, condition or fact which is, or reasonably
may be expected to be, materially adverse to the aggregate financial condition,
properties, business, results of operations or prospects of the Wisconsin Energy
Companies taken as a whole.
1.38 Wisconsin Energy Shareholders. "Wisconsin Energy Shareholders"
-----------------------------
shall mean all Persons owning shares of Wisconsin Energy Common Stock on the
relevant date.
1.39 Wisconsin Energy Special Meeting. "Wisconsin Energy Special Meeting"
--------------------------------
shall mean a special meeting of the Wisconsin Energy Shareholders for the
purpose of approving the issuance of Wisconsin Energy Common Stock pursuant to
this Agreement and the transactions contemplated by this Agreement.
1.40 Wisconsin Gas. "Wisconsin Gas" shall mean Wisconsin Gas Company,
-------------
a Wisconsin corporation and a Subsidiary of WICOR.
ARTICLE II
THE MERGER
2.1 The Merger. At the Effective Time of Merger and upon and
----------
subject to the terms and conditions of this Agreement, WICOR and Acquisition
will be merged as follows: (a) if the Stock Percentage is zero (0), then
Acquisition shall be merged with and into WICOR, which will be the surviving
corporation in the Merger and shall continue to be governed by the Laws of the
State of Wisconsin and the separate existence of Acquisition shall thereupon
cease; or (b) if the Stock Percentage is any percentage other than zero (0),
then WICOR shall be merged with and into Acquisition, which will be the
surviving corporation in the Merger and shall continue to be governed by the
Laws of the State of Wisconsin and the separate existence of WICOR shall
thereupon cease. The corporation which is the surviving corporation in the
Merger pursuant to Section 2.1(a) or 2.1(b) of this Agreement is referred to in
this Agreement as the "Surviving Corporation". The Merger shall be pursuant to
the provisions of, and shall be with the effects provided in, the WBCL.
2.2 Effective Time of Merger. Subject to the terms and conditions of this
------------------------
Agreement, on the Closing Date, Acquisition and WICOR will cause Articles of
Merger in a form approved for filing in accordance with the WBCL (the "Articles
of Merger") to be executed, delivered and filed as provided in the WBCL. The
Merger shall become effective at the time of the receipt of the Articles of
Merger by the Wisconsin Department of Financial Institutions or at such later
time as
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Wisconsin Energy and WICOR may agree and as may be set forth in the Articles of
Merger. The date and time on which the Merger shall become effective is referred
to in this Agreement as the "Effective Time of Merger".
2.3 Corporate Matters.
-----------------
(a) Articles of Incorporation of Surviving Corporation. (i) If WICOR
--------------------------------------------------
is the Surviving Corporation in the Merger, the Restated Articles of
Incorporation of WICOR as in effect immediately prior to the Effective Time of
Merger shall be the Restated Articles of Incorporation of the Surviving
Corporation until amended in accordance with Law. (ii) If Acquisition is the
Surviving Corporation in the Merger, the Articles of Incorporation of
Acquisition shall, by virtue of the Merger, be amended and restated at the
Effective Time of Merger to be in the form of the Restated Articles of
Incorporation of WICOR as in effect immediately prior to the Effective Time of
Merger until amended in accordance with Law.
(b) Bylaws of Surviving Corporation. (i) If WICOR is the Surviving
-------------------------------
Corporation in the Merger, the Bylaws of WICOR as in effect immediately prior to
the Effective Time of Merger shall be the Bylaws of the Surviving Corporation
until amended in accordance with Law. (ii) If Acquisition is the Surviving
Corporation in the Merger, the Bylaws of Acquisition shall, by virtue of the
Merger, be amended and restated at the Effective Time of Merger to be in the
form of the Bylaws of WICOR as in effect immediately prior to the Effective Time
of Merger until amended in accordance with Law.
(c) Directors and Officers of Surviving Corporation. The duly
-----------------------------------------------
qualified and acting directors and officers of WICOR immediately prior to the
Effective Time of Merger shall be the directors and officers of the Surviving
Corporation, to hold office as provided in the Bylaws of the Surviving
Corporation. Immediately after the Effective Time of Merger, Wisconsin Energy
and the Surviving Corporation shall take all action necessary to: (i) elect as
directors of the Surviving Corporation designees of Wisconsin Energy so that
such designees constitute a majority in number of the Board of Directors of the
Surviving Corporation; and (ii) elect Mr. Richard A. Abdoo as Chairman of the
Board of the Surviving Corporation.
2.4 Conversion of WICOR Common Stock.
--------------------------------
(a) Definitions. As used in this Agreement:
-----------
(i) "Average Wisconsin Energy Price" shall mean the average of
the closing sale price per share of Wisconsin Energy Common Stock as reported on
the New York Stock Exchange Composite Tape on each of the ten (10) consecutive
trading days ending with the fifth trading day immediately preceding the Closing
Date.
(ii) "Cash Percentage" shall mean that percentage equal to: (A)
100%; minus (B) the Stock Percentage.
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(iii) "Exchange Ratio" shall mean that number (carried to the
fourth decimal place) obtained by dividing: (A) the Exchange Value; by (B) the
Average Wisconsin Energy Price.
(iv) "Exchange Value" shall mean:
(A) if the Closing occurs on or prior to July 1, 2000,
$31.50; or
(B) if the Closing occurs after July 1, 2000: (1)
$31.50; plus (2) the amount (carried to the fourth decimal place) obtained by
multiplying $31.50 by .0001644 for each calendar day after July 1, 2000 through
and including the Closing Date.
(v) "Maximum Cash Number" shall mean that number equal to:
(A) (1) the Cash Percentage; multiplied by (2) the
number of shares of WICOR Common Stock issued and outstanding immediately prior
to the Effective Time of Merger; minus
(B) the number of shares of WICOR Common Stock to be
exchanged for cash in lieu of fractional shares pursuant to Section 2.6(e) of
this Agreement.
(vi) "Maximum Stock Number" shall mean that number equal to:
(A) the Stock Percentage; multiplied by (B) the number of shares of WICOR Common
Stock issued and outstanding immediately prior to the Effective Time of Merger.
(vii) "Merger Consideration" shall mean the shares of
Wisconsin Energy Common Stock issuable pursuant to this Section 2.4 of this
Agreement and cash payable pursuant to this Section 2.4 of this Agreement.
(viii) "Stock Percentage" shall mean that percentage selected
by Wisconsin Energy in the Conversion Notice which shall be (at the option of
Wisconsin Energy) any percentage between and including 40% and 60%; provided
that, if the Average Wisconsin Energy Price is less than $22.00 (the "Minimum
Average Wisconsin Energy Price"), then Wisconsin Energy may select zero (0) as
the Stock Percentage.
(b) Conversion Notice. At least three (3) business days prior to the
------------------
Closing Date, Wisconsin Energy shall send a notice to WICOR (the "Conversion
Notice") which specifies Wisconsin Energy's election as to the amounts of the
Cash Percentage and the Stock Percentage. The parties shall then proceed to
close the transactions described in this Agreement on the basis of the election
made by Wisconsin Energy in the Conversion Notice.
(c) Conversion. At the Effective Time of Merger, by virtue of the
----------
Merger and without any action on the part of Acquisition, WICOR, Wisconsin
Energy or the holders of WICOR Common Stock, each share of WICOR Common Stock
(together with the associated WICOR Right) issued and outstanding at the
Effective Time of Merger (except for treasury stock which shall be
7
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canceled as described in Section 2.4(m) of this Agreement and except for WICOR
New Restricted Stock which shall be converted as described in Section 2.9(b) of
this Agreement) shall be converted into and become the right to receive:
(i) if the Stock Percentage is zero (0), cash in the amount of
the Exchange Value; or
(ii) if the Stock Percentage is any percentage other than zero
(0) and subject to the election and allocation procedures set forth in this
Section 2.4 of this Agreement:
(A) cash in the amount of the Exchange Value; or
(B) that number of shares of Wisconsin Energy Common
Stock equal to the Exchange Ratio; or
(C) a combination of cash and shares of Wisconsin Energy
Common Stock determined in accordance with the provisions of this Section 2.4 of
this Agreement.
(d) Maximum Numbers. The number of shares of WICOR Common Stock to be
---------------
converted into the right to receive Wisconsin Energy Common Stock in the Merger
shall equal the Maximum Stock Number. The number of shares of WICOR Common Stock
to be converted into the right to receive cash in the Merger shall equal the
Maximum Cash Number. Notwithstanding any other provisions of this Agreement, if
the Stock Percentage is a percentage other than zero (0), at least 40% of the
number of shares of WICOR Common Stock issued and outstanding immediately prior
to the Effective Time of Merger shall be converted into whole shares of
Wisconsin Energy Common Stock exclusive of fractional share interests to be paid
in cash pursuant to Section 2.6(e) of this Agreement.
(e) Elections. If the Stock Percentage is a percentage other than
---------
zero (0) and subject to the allocation and election procedures set forth in this
Section 2.4 of this Agreement, each record holder immediately prior to the
Effective Time of Merger of shares of WICOR Common Stock will be entitled in
respect to each share of WICOR Common Stock owned by such holder: (i) to elect
to receive cash for such share (a "Cash Election"); (ii) to elect to receive
Wisconsin Energy Common Stock for such share (a "Stock Election"); or (iii) to
indicate that such record holder has no preference as to the receipt of cash or
Wisconsin Energy Common Stock for such share (a "Non-Election"). All such
elections shall be made on a form designed by Wisconsin Energy, which is
reasonably satisfactory to WICOR, for that purpose (a "Form of Election").
Holders of record of shares of WICOR Common Stock who hold such shares as
nominees, trustees or in other representative capacities (a "Representative")
may submit multiple Forms of Election, provided that such Representative
certifies that each such Form of Election covers all the shares of WICOR Common
Stock held by each Representative for a particular beneficial owner.
(f) Cash Elections in Excess of Maximum Cash Number. If the aggregate
-----------------------------------------------
number of shares covered by Cash Elections (the "Cash Election Shares") exceeds
the Maximum Cash Number:
8
<PAGE>
(i) each share of WICOR Common Stock covered by a Stock
Election (the "Stock Election Shares") and each share of WICOR Common Stock
covered by a Non-Election (the "Non-Election Shares") shall be converted into
the right to receive a number of shares of Wisconsin Energy Common Stock equal
to the Exchange Ratio; and
(ii) each Cash Election Share shall be converted into the right
to receive:
(A) an amount in cash, without interest, equal to: (1)
the Exchange Value; multiplied by (2) a fraction (the "Cash Fraction"), the
numerator of which shall be the Maximum Cash Number and the denominator of which
shall be the total number of Cash Election Shares; and
(B) a number of shares of Wisconsin Energy Common Stock
equal to: (1) the Exchange Ratio; multiplied by (2) a fraction equal to one
minus the Cash Fraction.
(g) Stock Elections in Excess of Maximum Stock Number. If the
-------------------------------------------------
aggregate number of Stock Election Shares exceeds the Maximum Stock Number:
(i) each Cash Election Share and each Non-Election Share shall
be converted into the right to receive cash in the amount of the Exchange Value;
and
(ii) each Stock Election Share shall be converted into the right
to receive:
(A) a number of shares of Wisconsin Energy Common Stock
equal to: (1) the Exchange Ratio; multiplied by (2) a fraction (the "Stock
Fraction"), the numerator of which shall be the Maximum Stock Number and the
denominator of which shall be the total number of Stock Election Shares, and
(B) an amount in cash, without interest, equal to: (1)
the Exchange Value; multiplied by (2) a fraction equal to one minus the Stock
Fraction.
(h) Other. In the event that neither Section 2.4(f) or 2.4(g) of
-----
this Agreement is applicable: (i) each Cash Election Share shall be converted
into the right to receive cash in the amount of the Exchange Value; (ii) each
Stock Election Share shall be converted into the right to receive a number of
shares of Wisconsin Energy Common Stock equal to the Exchange Ratio; and (iii)
each Non-Election Share shall be converted into the right to receive shares of
Wisconsin Energy Common Stock and the right to receive cash on a proportionate
basis so that the total number of shares of WICOR Common Stock converted into
the right to receive shares of Wisconsin Energy Common Stock and cash,
respectively, approximate the Maximum Stock Number and the Maximum Cash Number,
respectively, as closely as possible.
(i) Initial Mailing. Wisconsin Energy and WICOR will mail a Form of
---------------
Election to all holders of record of shares of WICOR Common Stock as of a date
mutually agreed to by WICOR and Wisconsin Energy (the "Initial Mailing Record
Date") which shall be approximately 45 calendar days prior to the anticipated
Effective Time of Merger. Elections shall be made by
9
<PAGE>
holders of WICOR Common Stock by mailing to the Exchange Agent a Form of
Election. To be effective, a Form of Election must be properly completed, signed
and submitted to the Exchange Agent and accompanied by the certificates
representing the shares of WICOR Common Stock as to which the election is being
made (or by an appropriate guarantee of delivery of such certificates as set
forth in such Form of Election from a member of any registered national
securities exchange or of the National Association of Securities Dealers, Inc.
or a commercial bank or trust company having an office or correspondent in the
United States, provided such certificates are in fact delivered by the time set
forth in such guarantee of delivery). Wisconsin Energy will have the discretion,
which it may delegate in whole or in part to the Exchange Agent, to determine
whether Forms of Election have been properly completed, signed and submitted or
revoked and to disregard immaterial defects in Forms of Election. The decision
of Wisconsin Energy (or the Exchange Agent) in such matters shall be conclusive
and binding. Neither Wisconsin Energy nor the Exchange Agent will be under any
obligation to notify any Person of any defect in a Form of Election submitted to
the Exchange Agent. The Exchange Agent shall also make all computations
contemplated by this Section 2.4 of this Agreement and all such computations
shall be conclusive and binding on the holders of WICOR Common Stock absent
manifest error in any such computation.
(j) Nonsubmittal. For the purposes hereof, a holder of WICOR Common
------------
Stock who does not submit a Form of Election which is received by the Exchange
Agent prior to the Election Deadline shall be deemed to have made a Non-
Election. If Wisconsin Energy or the Exchange Agent shall determine that any
purported Cash Election or Stock Election was not properly made, such purported
Cash Election or Stock Election shall be deemed to be of no force and effect and
the Person making such purported Cash Election or Stock Election shall, for all
purposes hereof, be deemed to have made a Non-Election.
(k) Subsequent Mailings. Wisconsin Energy and WICOR shall each use
-------------------
its reasonable best efforts to promptly mail the Form of Election to all Persons
who become holders of WICOR Common Stock during the period between the Initial
Mailing Record Date and 10:00 a.m. New York time, on the date ten calendar days
prior to the anticipated Effective Time of Merger and to make the Form of
Election available to all Persons who become holders of WICOR Common Stock
subsequent to such day and no later than the close of business on the third
business day prior to the Effective Time of Merger.
(l) Election Deadline. A Form of Election must be received by the
-----------------
Exchange Agent by the close of business on the third business day prior to the
Effective Time of Merger (the "Election Deadline") in order to be effective.
All elections will be irrevocable.
(m) Treasury Stock. Any shares of WICOR Common Stock (together with
--------------
the associated WICOR Right) that are owned by any of the WICOR Companies at the
Effective Time of Merger shall be canceled and retired and cease to exist and no
cash or shares of Wisconsin Energy Common Stock shall be issued or delivered in
exchange therefor.
(n) Adjustment. In the event that, prior to the Effective Time of
----------
Merger, there is a reclassification, stock split or stock dividend with respect
to outstanding Wisconsin Energy Common Stock or outstanding WICOR Common Stock,
an appropriate and proportionate
10
<PAGE>
adjustment, if any, shall be made to any or one or more of the Exchange Value,
the Exchange Ratio or the Minimum Average Wisconsin Energy Price.
2.5 Acquisition Common Stock.
------------------------
(a) WICOR as Surviving Corporation. If WICOR is the Surviving
------------------------------
Corporation in the Merger, each outstanding share of capital stock of
Acquisition issued and outstanding at the Effective Time of Merger, by virtue of
the Merger and without any action on the part of Acquisition, WICOR or Wisconsin
Energy, shall be converted into and become one share of WICOR Common Stock.
(b) Acquisition as Surviving Corporation. If Acquisition is the
------------------------------------
Surviving Corporation in the Merger, all outstanding shares of capital stock of
Acquisition issued and outstanding at the Effective Time of Merger shall remain
issued and outstanding and not be affected in any way by the Merger.
2.6 Exchange of WICOR Certificates.
------------------------------
(a) Exchange Agent. As of the Effective Time of Merger, Wisconsin
--------------
Energy shall deposit, or shall cause to be deposited, with a bank or trust
company designated by Wisconsin Energy and reasonably acceptable to WICOR (the
"Exchange Agent"), for the benefit of the holders of shares of WICOR Common
Stock, for exchange in accordance with this Article II of this Agreement through
the Exchange Agent: (i) certificates representing the aggregate number of shares
of Wisconsin Energy Common Stock issuable pursuant to Section 2.4 of this
Agreement; and (ii) cash representing the aggregate amount of cash payable
pursuant to Section 2.4 of this Agreement; (such certificates for shares of
Wisconsin Energy Common Stock, together with any dividends or distributions with
respect thereto, such cash and any cash for fractional share interests paid
pursuant to Section 2.6(e) of this Agreement, being hereinafter referred to as
the "Exchange Fund").
(b) Exchange Procedures.
-------------------
(i) At or promptly after the Effective Time of Merger, Wisconsin
Energy shall cause the Exchange Agent to mail to each holder of record of a
WICOR Certificate which immediately prior to the Effective Time of Merger
represented outstanding shares of WICOR Common Stock and which was not submitted
to the Exchange Agent with a duly executed and completed Form of Election: (A)
a letter of transmittal ("Letter of Transmittal") which shall specify that
delivery shall be effected, and risk of loss and title to the WICOR Certificates
shall pass, only upon delivery of the WICOR Certificates to the Exchange Agent
and which shall be in such form and have such other customary provisions as
Wisconsin Energy may reasonably specify and which are reasonably acceptable to
WICOR; and (B) instructions to effect the surrender of the WICOR Certificates in
exchange for cash or shares of Wisconsin Energy Common Stock, or both, as
described in this Agreement.
(ii) Upon surrender of a WICOR Certificate for cancellation to the
Exchange Agent together with either a Form of Election or a Letter of
Transmittal, in each case duly
11
<PAGE>
executed, and with such other documents as the Exchange Agent may reasonably
require, the holder of such WICOR Certificate shall be entitled to receive, and
Wisconsin Energy shall cause the Exchange Agent to promptly deliver in exchange
therefor after the Effective Time of Merger: (A) a certificate representing that
number of whole shares of Wisconsin Energy Common Stock to which such holder is
entitled to receive in respect of such WICOR Certificate pursuant to Section 2.4
of this Agreement; and (B) a check representing the cash that such holder is
entitled to receive in respect of such WICOR Certificate pursuant to Section 2.4
of this Agreement; and (C) a check for any cash in lieu of any fractional share
interest in accordance with Section 2.6(e) of this Agreement. The WICOR
Certificate so surrendered shall forthwith be canceled; provided, however, that
fractional share interests of any one holder shall be aggregated to maximize the
number of whole shares of Wisconsin Energy Common Stock to be issued and
minimize the fractional interests to be paid in cash as provided in Section
2.6(e) of this Agreement.
(iii) In the event of a transfer of ownership of shares of WICOR
Common Stock which is not registered in the transfer records of WICOR, a
certificate representing the proper number of shares of Wisconsin Energy Common
Stock, a check for the proper amount of cash that such holder is entitled to
receive in respect of such WICOR Certificate pursuant to Section 2.4 of this
Agreement and any cash in lieu of any fractional share interests in accordance
with Section 2.6(e) of this Agreement, shall be delivered to the transferee if
the WICOR Certificate which represented such shares of WICOR Common Stock is
presented to the Exchange Agent, accompanied by all documents required to
evidence and effect such transfer and by evidence that any applicable stock
transfer taxes have been paid.
(iv) No interest will be paid or accrued on the cash and shares
of Wisconsin Energy Common Stock to be issued pursuant to this Agreement, the
cash in lieu of fractional shares, if any, and unpaid dividends and
distributions on the shares of Wisconsin Energy Common Stock, if any, payable to
WICOR Shareholders.
(v) If any WICOR Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person claiming
such WICOR Certificate to be lost, stolen or destroyed and, if required by
Wisconsin Energy in its reasonable discretion, the posting by such Person of a
bond in such reasonable amount as Wisconsin Energy may direct as indemnity
against any claim that may be made against it with respect to such WICOR
Certificate, the Exchange Agent will deliver in exchange for such lost, stolen
or destroyed WICOR Certificate, a certificate representing the proper number of
shares of Wisconsin Energy Common Stock and a check for the cash, in each case
that such WICOR Shareholder has the right to receive pursuant to Section 2.4 of
this Agreement, and the cash to be paid in lieu of fractional shares, if any,
with respect to the shares of WICOR Common Stock formerly represented thereby,
and unpaid dividends and distributions on the shares of Wisconsin Energy Common
Stock, if any, as provided in this Article II of this Agreement.
(vi) Until surrendered as contemplated by this Section 2.6 of
this Agreement, each WICOR Certificate shall be deemed at all times after the
Effective Time of Merger to represent only the right to receive upon surrender
only the cash or shares of Wisconsin Energy
12
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Common Stock, or both, and cash in lieu of any fractional share interest as
contemplated by this Agreement.
(c) Distributions with Respect to Unexchanged Shares. If any Wisconsin
------------------------------------------------
Energy Common Stock is issued pursuant to the Merger, no dividends or other
distributions declared or made after the Effective Time of Merger with respect
to Wisconsin Energy Common Stock with a record date after the Effective Time of
Merger shall be paid to the holder of any unsurrendered WICOR Certificate with
respect to the shares of Wisconsin Energy Common Stock represented thereby, and
no cash payment in lieu of a fractional share shall be paid to any such holder
pursuant to Section 2.6(e) of this Agreement, until the holder of such WICOR
Certificate has surrendered such WICOR Certificate to the Exchange Agent.
Subject to the effect of any applicable Law, following the surrender of any such
WICOR Certificate, there shall be paid to the holder of the surrendered WICOR
Certificate, without interest: (i) promptly, the amount of any cash payable with
respect to a fractional share interest to which such holder is entitled pursuant
to Section 2.6(e) of this Agreement and the amount of dividends or other
distributions with a record date after the Effective Time of Merger theretofore
paid with respect to such whole shares of Wisconsin Energy Common Stock; and
(ii) at the appropriate payment date, the amount of dividends or other
distributions with a record date after the Effective Time of Merger but prior to
surrender and a payment date occurring after surrender payable with respect to
such whole shares of Wisconsin Energy Common Stock.
(d) No Further Rights in WICOR Common Stock. All shares of Wisconsin
---------------------------------------
Energy Common Stock issued and cash paid upon conversion of the WICOR Common
Stock in accordance with the terms of this Agreement (and any cash paid pursuant
to Section 2.6(e) of this Agreement) shall be deemed to have been issued and
paid in full satisfaction of all rights pertaining to the WICOR Common Stock.
(e) No Fractional Shares. No fractional shares of Wisconsin Energy
--------------------
Common Stock shall be issued in the Merger. All fractional share interests of a
holder of more than one WICOR Certificate at the Effective Time of Merger shall
be aggregated. If a fractional share interest results after such aggregation,
each holder of a fractional share interest shall be paid an amount in cash equal
to the product obtained by multiplying such fractional share interest by the
Exchange Value. Promptly after the determination of the amount of cash, if any,
to be paid to holders of fractional share interests, the Exchange Agent shall
notify Wisconsin Energy and Wisconsin Energy shall deliver such amounts to such
holders subject to and in accordance with the terms of Section 2.6(c) of this
Agreement.
(f) Investment of Exchange Fund. The Exchange Agent shall invest any
---------------------------
cash included in the Exchange Fund, as directed by Wisconsin Energy, on a daily
basis. Any interest and other income resulting from such investments shall be
paid to Wisconsin Energy upon termination of the Exchange Fund pursuant to
Section 2.6(g) of this Agreement. In the event the cash in the Exchange Fund
shall be insufficient to fully satisfy all of the payment obligations to be made
by the Exchange Agent hereunder, then Wisconsin Energy shall promptly deposit
cash into the Exchange Fund in an amount which is equal to the deficiency in the
amount of cash required to fully satisfy such payment obligations.
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(g) Termination of Exchange Fund. Any portion of the Exchange Fund
----------------------------
which remains undistributed to the WICOR Shareholders after twelve (12) months
after the Effective Time of Merger shall be delivered to Wisconsin Energy, upon
demand, and any WICOR Shareholders who have not theretofore complied with this
Article II of this Agreement shall thereafter look only to Wisconsin Energy for
payment of their claim for cash or shares of Wisconsin Energy Common Stock, or
both, any cash in lieu of fractional share interests and any dividends or
distributions with respect thereto.
(h) No Liability. Neither the Exchange Agent nor any party to this
------------
Agreement shall be liable to any WICOR Shareholder for any shares of WICOR
Common Stock or Wisconsin Energy Common Stock (or dividends or distributions
with respect thereto) or cash delivered in accordance with applicable Law to a
public official pursuant to any abandoned property, escheat or similar Law. If
any WICOR Certificates shall not have been surrendered prior to seven years
after the Effective Time of Merger (or immediately prior to such earlier date on
which any shares of Wisconsin Energy Common Stock, cash, any cash in lieu of
fractional shares of Wisconsin Energy Common Stock in respect of such WICOR
Certificates would otherwise escheat to or become the property of any
governmental Person), any shares of Wisconsin Energy Common Stock, cash and
dividends or distributions in respect of such WICOR Certificates shall, to the
extent permitted by applicable Laws, become the property of Wisconsin Energy,
free and clear of all claims or interest of any Person previously entitled
thereto.
(i) Withholding Rights. Wisconsin Energy shall be entitled to deduct
------------------
and withhold from the consideration otherwise payable pursuant to this Agreement
to any WICOR Shareholder such amounts as Wisconsin Energy is required to deduct
and withhold with respect to the making of such payment under the Code, or any
provision of state, local or foreign tax Law. To the extent that amounts are so
withheld by Wisconsin Energy, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the WICOR Shareholder in
respect of which such deduction and withholding was made by Wisconsin Energy.
(j) Book Entry. Notwithstanding any other provision of this
----------
Agreement, the Form of Election and the Letter of Transmittal may, at the option
of Wisconsin Energy, provide for the ability of a holder of one or more WICOR
Certificates to elect that the Wisconsin Energy Common Stock to be received in
exchange for the WICOR Common Stock formerly represented by such surrendered
WICOR Certificates be issued in uncertificated form or to elect that such
Wisconsin Energy Common Stock be credited to an account established for the
holder under the dividend reinvestment and stock purchase plan of Wisconsin
Energy.
(k) Stock Transfer Books. At the Effective Time of Merger, the stock
--------------------
transfer books of WICOR shall be closed and there shall be no further
registration of transfers of shares of WICOR Common Stock thereafter on the
records of WICOR. From and after the Effective Time of Merger, the holders of
WICOR Certificates outstanding immediately prior to the Effective Time of Merger
shall cease to have any rights with respect to such shares of WICOR Common Stock
except as otherwise provided in this Agreement or by Law.
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2.7 Reorganization. If any Wisconsin Energy Common Stock is to be issued
--------------
pursuant to the Merger, the parties intend that this Agreement be a plan of
reorganization within the meaning of Section 368(a) of the Code and that the
Merger be a tax-free reorganization under Section 368(a) of the Code to the
extent that shares of WICOR Common Stock are exchanged for shares of Wisconsin
Energy Common Stock as described in this Agreement.
2.8 No Dissenting Shares. The parties acknowledge that under the WBCL,
--------------------
the WICOR Shareholders are not entitled to dissent from the Merger and are not
entitled to require appraisal of their WICOR Common Stock.
2.9 WICOR Options and WICOR Awards.
------------------------------
(a) Stock Options. At the Effective Time of Merger, each then
-------------
outstanding option to purchase shares of WICOR Common Stock (a "WICOR Option")
under WICOR's 1987 Stock Option Plan, 1992 Director Stock Option Plan (the
"WICOR Director Option Plan") or 1994 Long-Term Performance Plan (the "WICOR
Performance Plan"), each as amended (collectively, the "WICOR Option Plans"),
whether vested or not vested, shall be deemed assumed by Wisconsin Energy and
shall thereafter be deemed to constitute an option to acquire shares of
Wisconsin Energy Common Stock, on the same terms and conditions as were
applicable under such WICOR Option immediately prior to the Effective Time of
Merger except that:
(i) the number (rounded to the nearest whole number) of shares
of Wisconsin Energy Common Stock covered by such WICOR Option shall be equal to:
(A) the number of shares of WICOR Common Stock subject to such WICOR Option
immediately prior to the Effective Time of Merger; multiplied by (B) the
Exchange Ratio;
(ii) the price per share (rounded to the nearest whole cent) of
Wisconsin Energy Common Stock covered by such WICOR Option shall be equal to:
(A) the exercise price per share of WICOR Common Stock formerly purchasable
pursuant to such WICOR Option; divided by (B) the Exchange Ratio; and
(iii) with respect only to the WICOR Options that were
outstanding on the date of this Agreement, such WICOR Options shall be fully
vested notwithstanding any vesting requirement otherwise applicable thereto.
(b) Equity-Based Awards. At the Effective Time of Merger, each then
-------------------
outstanding equity-based award or account (including shares of WICOR New
Restricted Stock awarded after the date of this Agreement as described in
Section 6.1(j)(iii) of this Agreement and stock equivalents and stock units
relating to WICOR Common Stock, but excluding WICOR Options) (individually a
"WICOR Award") shall be deemed assumed by Wisconsin Energy and shall thereafter
be deemed to constitute an award or account, on the same terms and conditions as
were applicable under such WICOR Award immediately prior
15
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to the Effective Time of Merger, except that the number (rounded to the nearest
whole number) of shares or phantom shares of Wisconsin Energy Common Stock
subject thereto shall be equal to: (i) the number of shares or phantom shares,
as the case may be, of WICOR Common Stock subject to such WICOR Award
immediately prior to the Effective Time of Merger; multiplied by (ii) the
Exchange Ratio. With respect only to awards of restricted stock existing on the
date of this Agreement and outstanding at the Effective Time of Merger, the
restrictions applicable thereto shall immediately cease with respect to 100% of
the number of shares of WICOR Common Stock subject to such awards and such
unrestricted shares shall be converted in the Merger in accordance with Section
2.4 of this Agreement.
(c) Assumption. At the Effective Time of Merger, Wisconsin Energy
----------
shall assume each WICOR Option and WICOR Award in accordance with the terms of
the WICOR Option Plan or other plan or arrangement under which it was granted
and all the terms and conditions of the stock option, restricted stock or other
agreement by which it is evidenced, as adjusted as provided in this Agreement.
At or prior to the Effective Time of Merger, Wisconsin Energy shall take all
corporate action necessary to reserve for issuance a sufficient number of shares
of Wisconsin Energy Common Stock for delivery pursuant to the terms set forth in
this Section 2.9 of this Agreement. As soon as practicable after the Effective
Time of Merger, Wisconsin Energy shall file a registration statement on an
appropriate form or a post-effective amendment to a previously filed
registration statement under the Securities Act to register the shares of
Wisconsin Energy Common Stock subject to the options and awards assumed pursuant
to this Section 2.9 of this Agreement where such registration is necessary to
permit the issuance of such shares free of restrictive legends under the
Securities Act, and shall use its reasonable best efforts to maintain the
effectiveness of such registration statement (and the current status of the
prospectus or prospectuses relating thereto) for so long as such options or
awards remain outstanding.
(d) Other. WICOR represents that there are no options, awards or
-----
accounts relating to WICOR Common Stock outstanding at the date of this
Agreement other than those reflected in Sections 4.1(d) and 4.2(a) of this
Agreement. Prior to the Effective Time of Merger, WICOR shall make all
necessary arrangements to permit the assumption of the WICOR Options and WICOR
Awards by Wisconsin Energy pursuant to this Section 2.9 of this Agreement.
WICOR represents that no consents are necessary to give effect to the
transactions contemplated by this Section 2.9 of this Agreement.
ARTICLE III
OTHER AGREEMENTS
3.1 Proxy Statement and Registration Statement. Wisconsin Energy and
------------------------------------------
WICOR will prepare and file with the SEC the Registration Statement and the
Proxy Statement as soon as reasonably practicable after the date of this
Agreement. Wisconsin Energy and WICOR shall use reasonable best efforts to
cause the Registration Statement to be declared effective under the Securities
Act as promptly as practicable after such filing. Wisconsin Energy and WICOR
shall also take such action as may be reasonably required to cause any shares of
Wisconsin Energy Common Stock issuable pursuant to the Merger to be registered
or to obtain an exemption from registration or qualification under applicable
state "blue sky" or securities Laws; provided, however, that Wisconsin Energy
shall not be required to qualify as a foreign corporation or to file any general
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consent to service of process under the Laws of any jurisdiction. Each party to
this Agreement will furnish to the other parties all information concerning
itself as each such other party or its counsel may reasonably request and which
is required or customary for inclusion in the Proxy Statement and the
Registration Statement.
3.2 Approval of Shareholders.
-------------------------
(a) WICOR Shareholders.
-------------------
(i) WICOR shall, as soon as reasonably practicable: (A) take all
steps necessary duly to call, give notice of, convene and hold the WICOR Special
Meeting; (B) distribute the Proxy Statement, which shall also constitute the
prospectus of Wisconsin Energy included in the Registration Statement, to the
WICOR Shareholders in accordance with applicable Federal and state Law and its
Articles of Incorporation and Bylaws; (C) subject to the provisions of Section
3.2(a)(ii) of this Agreement, recommend to the WICOR Shareholders the approval
of this Agreement and the transactions contemplated by this Agreement and such
other matters as may be submitted to the WICOR Shareholders in connection with
this Agreement; and (D) fully cooperate and consult with Wisconsin Energy with
respect to each of the foregoing matters.
(ii) The Board of Directors of WICOR shall be permitted to not
recommend to the WICOR Shareholders that the WICOR Shareholders approve this
Agreement and the transactions contemplated by this Agreement or withdraw or
modify in a manner adverse to Wisconsin Energy the recommendation of the Board
of Directors of WICOR if and only if: (A) the Board of Directors of WICOR
determines in its good faith judgment that it is advisable to so withdraw or
modify its recommendation to comply with its fiduciary duties under applicable
Law after consultation with outside legal counsel; and (B) WICOR and the WICOR
Advisors have complied with their obligations and agreements set forth in
Section 3.9(c) of this Agreement.
(b) Wisconsin Energy Shareholders. Wisconsin Energy shall, as soon as
------------------------------
reasonably practicable: (i) take all steps necessary duly to call, give notice
of, convene and hold the Wisconsin Energy Special Meeting; (ii) distribute the
Proxy Statement to the Wisconsin Energy Shareholders in accordance with
applicable Federal and state Law and its Articles of Incorporation and Bylaws;
(iii) recommend to the Wisconsin Energy Shareholders the approval of the
issuance of Wisconsin Energy Common Stock pursuant to this Agreement and the
transactions contemplated by this Agreement and such other matters as may be
submitted to the Wisconsin Energy Shareholders in connection with this
Agreement; and (iv) fully cooperate and consult with WICOR with respect to each
of the foregoing matters.
(c) Meeting Dates. The WICOR Special Meeting and the Wisconsin Energy
-------------
Special Meeting shall be held on such dates as are mutually determined by WICOR
and Wisconsin Energy.
(d) Fairness Opinions. It shall be a condition to the mailing of the
-----------------
Proxy Statement to the WICOR Shareholders and to the Wisconsin Energy
Shareholders that: (i) Wisconsin Energy shall have received an opinion from
Chase Securities Inc., dated the date of the Proxy
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Statement, to the effect that, as of the date thereof, the Merger Consideration
to be paid in the Merger is fair to Wisconsin Energy from a financial point of
view; and (ii) WICOR shall have received an opinion from Merrill Lynch, Pierce,
Fenner & Smith Incorporated, dated the date of the Proxy Statement, to the
effect that, as of the date thereof, the Merger Consideration is fair to the
WICOR Shareholders from a financial point of view.
3.3 HSR Act. Each party shall: (a) file or cause to be filed with the
-------
Federal Trade Commission and the Department of Justice any notifications
required to be filed under the HSR Act; and (b) use reasonable best efforts to
make such filings promptly and to respond promptly to any request for additional
information made by either of such agencies.
3.4 Access.
------
(a) Access to WICOR Companies. Upon reasonable notice and subject to
-------------------------
applicable Laws, WICOR shall, and shall cause the other WICOR Companies to,
afford to the officers, employees, investment bankers, agents, accountants,
attorneys and representatives of Wisconsin Energy reasonable access to all of
its books, records, financial information, facilities, key personnel and other
documents and materials; provided that such access shall be during normal
business hours of the WICOR Companies.
(b) Confidentiality Agreement. Wisconsin Energy and WICOR agree that
-------------------------
the provisions of the Confidentiality Agreement shall remain in full force and
effect; provided that at the Effective Time of Merger, the Confidentiality
Agreement shall be deemed to have terminated without further action by the
parties.
3.5 Disclosure Schedule.
-------------------
(a) Disclosure Schedule. Contemporaneously with the execution and
-------------------
delivery of this Agreement, WICOR is delivering to Wisconsin Energy the
Disclosure Schedule. The Disclosure Schedule is deemed to constitute an
integral part of this Agreement and to be incorporated into and to modify the
representations, warranties, covenants or agreements of WICOR contained in this
Agreement to the extent that such representations, warranties, covenants or
agreements expressly refer to the Disclosure Schedule.
(b) Updates. WICOR shall update the Disclosure Schedule on a monthly
-------
basis by written notice to Wisconsin Energy to reflect any matters which have
occurred from and after the date of this Agreement which, if existing on the
date of this Agreement, would have been required to be described in the
Disclosure Schedule. If requested by Wisconsin Energy within 14 calendar days
after receipt by Wisconsin Energy of an update to the Disclosure Schedule, WICOR
shall meet and discuss with Wisconsin Energy any update to the Disclosure
Schedule which, in the reasonable judgment of Wisconsin Energy, has or may
reasonably be expected to have a WICOR Material Adverse Effect or which may in
any manner be materially adverse to Wisconsin Energy (a "Disclosure Schedule
Change").
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<PAGE>
3.6 Conditions to Merger. Each party to this Agreement shall use
--------------------
reasonable best efforts to: (a) to the extent within its control, cause all of
its representations and warranties contained in this Agreement to be true and
correct in all respects on the Closing Date with the same force and effect as if
such representations and warranties had been made on the Closing Date; (b) take
all reasonable actions necessary to comply promptly with all legal requirements
which may be imposed on it with respect to the Merger (including making all
filings and requests in connection with approvals of or filings with any
governmental entity as described in Sections 7.7 and 8.7 of this Agreement and
furnishing all information required in connection therewith); (c) promptly
cooperate with and furnish information to the other parties in connection with
any such requirements imposed upon any of them in connection with the Merger;
(d) contest any legal proceedings seeking to restrain, enjoin or frustrate the
Merger, subject, in the case of WICOR, to the provisions of Section 3.9(c) of
this Agreement concerning Superior Proposals; (e) execute any additional
documents or instruments and take any additional actions reasonably necessary to
consummate the transactions contemplated by this Agreement; and (f) take all
reasonable actions necessary to obtain (and cooperate with the other parties in
obtaining) any consent, authorization, order or approval of, or any exemption
by, any governmental entity or other public or private Person, required to be
obtained by the parties to this Agreement in connection with the Merger or the
taking of any action contemplated thereby or by this Agreement.
3.7 Deliveries of Information; Consultation. From time to time prior to
---------------------------------------
the Effective Time of Merger:
(a) Deliveries by WICOR. WICOR shall furnish promptly to Wisconsin
-------------------
Energy: (i) a copy of each report, schedule and other document filed by WICOR
with the SEC pursuant to the requirements of federal securities Laws promptly
after such documents are available; (ii) the monthly consolidated and
consolidating financial statements of the WICOR Companies (as prepared by WICOR
in accordance with its normal accounting procedures) promptly after such
financial statements are available; (iii) a summary of any action taken by the
Board of Directors, or any committee thereof, of WICOR; and (iv) subject to the
reasonable approval of WICOR, all other information of WICOR concerning the
business, properties and personnel of any of the WICOR Companies as Wisconsin
Energy may request.
(b) Deliveries by Wisconsin Energy. Wisconsin Energy shall promptly
------------------------------
furnish to WICOR a copy of each report, schedule and other document filed by
Wisconsin Energy with the SEC pursuant to the requirements of federal securities
Laws promptly after such documents are available.
(c) Consultation. WICOR shall, and shall cause the other WICOR
------------
Companies to, confer and consult with representatives of the Wisconsin Energy
Companies on a regular basis to report on operational matters and the general
status of ongoing business operations of the WICOR Companies.
(d) Litigation. Each party to this Agreement shall provide prompt
----------
notice to the other parties of any litigation, arbitration, proceeding,
governmental investigation, citation or action of any kind which is commenced,
threatened or proposed by any Person concerning the legality,
19
<PAGE>
validity or propriety of the transactions contemplated by this Agreement. If any
such litigation or other proceeding is commenced against any party to this
Agreement, the parties shall cooperate in all respects in connection therewith.
(e) Regulatory Matters. Subject to applicable Law, WICOR shall cause
------------------
those of the WICOR Companies that are public utilities to discuss with Wisconsin
Energy any changes in the rates, charges, standards of service or accounting of
such WICOR Companies from those in effect on the date of this Agreement and
consult with Wisconsin Energy prior to making any filing (or amendment thereto),
or effecting any agreement, commitment, arrangement or consent, whether written
or oral, formal or informal, with respect thereto.
(f) Franchises, etc. Except as otherwise agreed to in writing by
---------------
Wisconsin Energy, WICOR shall cause those of the WICOR Companies that are public
utilities to use all reasonable best efforts to maintain in effect and renew all
existing franchises, certificates of authority, certificates of public
convenience and necessity and other permits, as the case may be, pursuant to
which any of the WICOR Companies operates in its service territories. WICOR
shall notify Wisconsin Energy promptly in the event that it becomes aware of any
problem, complaint or proceeding which could reasonably be expected to result in
the termination or non-renewal of any such franchise, certificate or permit.
(g) Transition Matters. Wisconsin Energy and WICOR shall, subject to
------------------
applicable Laws, consult on a regular basis regarding the combined operations
of Wisconsin Energy and WICOR after the Closing Date and discuss the status and
timing of the integration of Wisconsin Energy and WICOR after the Closing Date.
The scope of such consultation shall be determined, and any decisions made on
such matters shall be made, by Wisconsin Energy's Chief Executive Officer on
behalf of Wisconsin Energy and WICOR's Chief Executive Officer on behalf of
WICOR.
3.8 Affiliates. Not later than 10 calendar days after the date of the
----------
WICOR Special Meeting, WICOR shall deliver to Wisconsin Energy a letter
identifying, to the best of WICOR's knowledge, all Persons who were Affiliates
at the date of the WICOR Special Meeting. WICOR shall furnish such information
and documents as Wisconsin Energy may reasonably request for the purposes of
reviewing such list. If any Wisconsin Energy Common Stock is to be issued
pursuant to the Merger, WICOR shall advise the Affiliates of the resale
restrictions imposed by applicable securities Laws and shall use reasonable best
efforts to obtain from the Affiliates an executed Affiliate Letter for delivery
to Wisconsin Energy prior to or at the Closing. As used in this Agreement the
following terms shall have the meanings specified: (a) "Affiliates" shall mean
all Persons who are affiliates of WICOR for purposes of Rule 145 under the
Securities Act; and (b) "Affiliate Letter" shall mean a letter from each
Affiliate substantially in the form of Exhibit 1 attached to this Agreement.
3.9 Other Transactions; Expenses; Other Remedies.
--------------------------------------------
(a) Definitions. As used in this Agreement, the following terms shall
-----------
have the meanings specified:
20
<PAGE>
(i) "Other Proposal" shall mean any request for information,
expression of interest, inquiry, proposal or offer relating in any manner to an
Other Transaction.
(ii) "Other Transaction" shall mean any of the following on or
prior to the Special Date, other than the Merger as contemplated by this
Agreement:
(A) a merger, consolidation, share exchange, exchange of
securities, reorganization, business combination or other similar transaction
involving WICOR;
(B) a sale, lease, transfer or other disposition of all or
substantially all of the assets, in a single transaction or series of related
transactions: (1) of the WICOR Companies, taken as a whole, or (2) of Wisconsin
Gas, or (3) of WICOR Industries, Inc.;
(C) a sale of, or tender offer or exchange offer for, or
acquisition by any Person or group of beneficial owners of, 20% or more of the
outstanding shares of capital stock of WICOR, Wisconsin Gas or WICOR Industries,
Inc. in a single transaction or series of related transactions; or
(D) a public announcement of a proposal, plan, intention
or agreement to do any of the foregoing.
(iii) "Special Date" shall mean that date which is twenty one
(21) months after the date of termination of this Agreement if such termination
is pursuant to any of the following Sections of this Agreement (and if this
Agreement is terminated pursuant to any other Section of this Agreement, there
shall be no Special Date):
(A) Section 9.1(c)(v) or 9.1(d)(v) of this Agreement;
(B) Section 9.1(c)(i) or 9.1(c)(ii) of this Agreement if,
at the time of such termination or prior thereto, there has been an Other
Proposal or Other Transaction that has not been withdrawn prior to such
termination; or
(C) Section 9.1(c)(iv) or 9.1(d)(iv) of this Agreement if,
at the time of such termination or prior to the WICOR Special Meeting, there has
been an Other Proposal or Other Transaction that has not been withdrawn prior to
such termination.
(iv) "Special Event" shall mean any of the following to occur on
or prior to the Special Date (and if there is no Special Date there will be no
Special Event): (A) a Person unrelated to Wisconsin Energy has consummated an
Other Transaction, or has publicly announced or publicly proposed an Other
Transaction and subsequently consummates such Other Transaction after the
Special Date (in which event a Special Event for such Other Transaction shall be
deemed to have occurred at the earlier of the events specified in clauses (B) or
(C) of this Section 3.9(a)(iv) of this Agreement with reference to such Other
Transaction); or (B) WICOR has entered into an agreement with respect to an
Other Transaction; or (C) WICOR shall have terminated this Agreement for the
purpose of pursuing an Other Proposal or Other Transaction.
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(v) "Superior Proposal" shall mean a written bona fide
unsolicited Other Proposal by any Person (other than Wisconsin Energy) which the
Board of Directors of WICOR determines in good faith, and in the exercise of
reasonable judgment (based, among other factors, on the advice of its
independent nationally recognized financial advisors) to be more favorable to
the WICOR Shareholders than the Merger from a financial point of view, which
proposal is capable of being consummated without undue delay taking into account
all relevant factors in connection with such Other Proposal, including the
financial ability of the other parties to consummate such Other Proposal and the
likelihood of regulatory approvals for such Other Proposal.
(b) Termination of Discussions. WICOR shall immediately cease and
--------------------------
cause to be terminated all existing discussions and negotiations, if any, with
any Persons with respect to any Other Transaction, except that WICOR may notify
such other Persons that the discussions and negotiations are terminated. WICOR
will not release any Person from, or waive any provision of, any standstill
agreement to which it is a party or any confidentiality agreement between it and
another Person.
(c) Non Solicitation. Except as expressly permitted by this Section
----------------
3.9(c) or by Section 6.1(j)(ii) or by Section 6.1(o)(ii) of this Agreement,
WICOR shall not, and shall not permit its Subsidiaries or officers, directors,
employees, agents or other representatives of any of the WICOR Companies
(including, without limitation, any investment banker, attorney or accountant
retained or engaged by any of the WICOR Companies) (the "WICOR Advisors") to
directly or indirectly solicit, initiate, facilitate, encourage, negotiate with
respect to, discuss or agree to, any Other Proposal or any Other Transaction.
Notwithstanding the foregoing: (i) the Board of Directors of WICOR may furnish
information about the WICOR Companies to the Person making a Superior Proposal
pursuant to a confidentiality agreement in customary form and may participate in
discussions and negotiations regarding such Superior Proposal if the Board of
Directors of WICOR determines to do so in good faith, after consultation with
outside legal counsel, because such action is consistent with its fiduciary
duties under applicable Law; and (ii) WICOR will be permitted to take and
disclose to WICOR Shareholders a position contemplated by Rules 14d-9 and 14e-
2(a) under the Exchange Act with respect to an Other Proposal by means of a
tender offer. If WICOR receives an Other Proposal that is not a Superior
Proposal and such Other Proposal becomes public information, WICOR shall use
reasonable best efforts to resist such Other Proposal, including taking all
appropriate steps to have the WICOR Board of Directors approve defensive
measures, including, but not limited to a shareholders rights plan or amendments
to existing shareholder rights plans. WICOR shall notify Wisconsin Energy orally
and in writing within twenty-four (24) hours following receipt by WICOR of any
Other Proposal, including the terms and conditions of any such Other Proposal
and the Person making such Other Proposal, and shall give Wisconsin Energy at
least five (5) calendar days advance notice of any agreement proposed to be
entered into by WICOR with any Person making an Other Proposal.
(d) Termination. WICOR may, by notice to Wisconsin Energy at any time
-----------
prior to the Effective Time of Merger, terminate this Agreement if WICOR enters
into, executes or agrees to an Other Transaction following a good faith
determination by the Board of Directors of WICOR (after compliance by WICOR with
the provisions of Section 3.9(c) of this Agreement) after
22
<PAGE>
consulting with outside legal counsel, that entering into, executing or agreeing
to such Other Transaction is consistent with its fiduciary duties under
applicable Law.
(e) Special Fee. In order to induce Wisconsin Energy to enter into
-----------
this Agreement and to compensate Wisconsin Energy for the time and expenses
incurred in connection with this Agreement and the Merger and the losses
suffered by Wisconsin Energy from foregone opportunities, WICOR shall pay a
"Special Fee" equal to $30,000,000 to Wisconsin Energy in immediately available
funds within five (5) business days after the occurrence of a Special Event. If
WICOR fails to pay the Special Fee when due: (i) the unpaid portion of the
Special Fee (including accrued interest thereon) shall accrue interest at the
annual rate of 12%, compounding monthly, from the date the Special Fee was due
until the date the Special Fee and all accrued interest thereon is paid in full;
and (ii) WICOR shall pay all costs and expenses of Wisconsin Energy (including
the fees and expenses of attorneys and other advisors) in connection with any
action (including the filing of any lawsuit or other legal action) taken by
Wisconsin Energy to collect payment of the Special Fee and accrued interest
thereon. The agreements contained in this Section 3.9 (e) of this Agreement are
an integral part of this Agreement and constitute liquidated damages and not a
penalty. Notwithstanding anything contained in this Agreement, there shall not
be a Special Fee required with respect to an Other Transaction described in
Section 3.9(a)(ii)(A) of this Agreement unless:
(i) if WICOR is the actual party to such Other Transaction: (A)
the WICOR Shareholders immediately prior to such Other Transaction own 50% or
less of the outstanding common stock of the surviving or resulting Person
immediately after such Other Transaction; and (B) those individuals who were
directors of WICOR immediately prior to such Other Transaction do not constitute
a majority of the directors of the surviving or resulting Person immediately
after such Other Transaction; or
(ii) if a direct or indirect Subsidiary of WICOR is the actual
party to such Other Transaction: (A) the WICOR Shareholders immediately prior to
such Other Transaction own 50% or less of the outstanding WICOR Common Stock
immediately after such Other Transaction; (B) WICOR, either directly or
indirectly, owns 50% or less of the surviving or resulting Person; and (C) those
individuals who were directors of WICOR immediately prior to such Other
Transaction do not constitute a majority of the directors of WICOR immediately
after such Other Transaction.
(f) Certain Terminations by WICOR. If this Agreement is terminated by
------------------------------
WICOR pursuant to Section 9.1(d)(i) or 9.1(d)(ii) of this Agreement, then
Wisconsin Energy shall promptly (but not later than five business days after
receipt of notice from WICOR) pay to WICOR in cash an amount equal to all
documented out of pocket expenses and fees incurred by WICOR (including, without
limitation, fees and expenses payable to all legal, accounting, financial,
public relations and other professional advisors arising out of or in connection
with or related to the Merger or the transactions contemplated by this
Agreement) not in excess of $3,000,000; provided that if this Agreement is so
terminated by WICOR as a result of a willful breach by Wisconsin Energy, WICOR
may pursue any remedies available to WICOR at law or in equity and shall, in
addition to its out of pocket expenses (which shall be paid as specified above
in this Section 3.9(f) of this Agreement and shall not be limited to $3,000,000)
be entitled to retain such additional amounts as WICOR may be entitled to
receive at law or in equity.
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(g) Certain Terminations by Wisconsin Energy. If this Agreement is
-----------------------------------------
terminated by Wisconsin Energy pursuant to Section 9.1(c)(i) or 9.1(c)(ii) of
this Agreement, then: (i) WICOR shall promptly (but not later than five business
days after receipt of notice from Wisconsin Energy) pay to Wisconsin Energy in
cash an amount equal to all documented out of pocket expenses and fees incurred
by Wisconsin Energy (including, without limitation, fees and expenses payable to
all legal, accounting, financial, public relations and other professional
advisors arising out of or in connection with or related to the Merger or the
transactions contemplated by this Agreement) not in excess of $3,000,000;
provided that if this Agreement is so terminated by Wisconsin Energy as a result
of a willful breach by WICOR, Wisconsin Energy may pursue any remedies available
to Wisconsin Energy at law or in equity and shall, in addition to its out of
pocket expenses (which shall be paid as specified above in this Section 3.9(g)
of this Agreement and shall not be limited to $3,000,000) be entitled to retain
such additional amounts as Wisconsin Energy may be entitled to receive at law or
in equity; and (ii) Wisconsin Energy shall be entitled to receive the Special
Fee if such termination is a termination described in Section 3.9(a)(iii)(B) of
this Agreement.
3.10 Letter of WICOR's Accountants. WICOR shall use reasonable best
-----------------------------
efforts to cause to be delivered a letter of Arthur Andersen LLP, WICOR's
independent auditors, dated within two business days before the effective date
of the Registration Statement and addressed to WICOR and Wisconsin Energy, in
form and substance reasonably satisfactory to Wisconsin Energy and customary in
scope and substance for cold comfort letters delivered by independent public
accountants in connection with registration statements similar to the
Registration Statement.
3.11 Letter of Wisconsin Energy's Accountants. Wisconsin Energy shall use
----------------------------------------
reasonable best efforts to cause to be delivered a letter of
PricewaterhouseCoopers LLP, Wisconsin Energy's independent auditors, dated
within two business days before the effective date of the Registration Statement
and addressed to Wisconsin Energy and WICOR, in form and substance reasonably
satisfactory to WICOR and customary in scope and substance for cold comfort
letters delivered by independent public accountants in connection with
registration statements similar to the Registration Statement.
3.12 Stock Exchange Listing. Wisconsin Energy shall use reasonable best
----------------------
efforts to cause any shares of Wisconsin Energy Common Stock to be issued or
reserved for issuance pursuant to this Agreement to be approved for listing on
the New York Stock Exchange, subject to official notice of issuance.
3.13 Public Announcements. Subject to each party's disclosure obligations
--------------------
imposed by Law, WICOR, Acquisition and Wisconsin Energy will cooperate with each
other in the development and distribution of all news releases and other public
information disclosures with respect to this Agreement or any of the
transactions contemplated by this Agreement and, except as may be required by
Law, shall not issue any public announcement or statement with respect thereto
without the prior consent of the other parties to this Agreement.
3.14 Indemnification; Directors' and Officers' Insurance.
---------------------------------------------------
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(a) Indemnity Obligations. From and after the Effective Time of
---------------------
Merger, Wisconsin Energy shall cause (including, to the extent required, by
providing sufficient funding to enable the Surviving Corporation to satisfy all
of its obligations under this Section 3.14(a) of this Agreement), the Surviving
Corporation to indemnify, defend and hold harmless each Person who is now, or
has been at any time prior to the date of this Agreement, or who becomes prior
to the Effective Time of Merger, an officer, director or employee of any of the
WICOR Companies (each an "Indemnified Party" and collectively, the "Indemnified
Parties") against:
(i) all losses, expenses (including reasonable attorney's fees
and expenses), claims, damages or liabilities or, subject to the provisions of
Section 3.14(b) of this Agreement, amounts paid in settlement, arising out of
actions or omissions occurring at or prior to the Effective Time of Merger (and
whether asserted or claimed prior to, at or after the Effective Time of Merger)
that are, in whole or in part, based on or arising out of the fact that such
Person is or was a director, officer or employee of any of the WICOR Companies
(the "Indemnified Liabilities"); and
(ii) all Indemnified Liabilities to the extent that they are
based on or arise out of or pertain to the transactions contemplated by this
Agreement.
(b) Fees and Expenses. In the event of any such loss, expense, claim,
-----------------
damage or liability (whether or not arising before the Effective Time of
Merger):
(i) the Surviving Corporation shall pay the reasonable fees and
expenses of counsel selected by the Indemnified Parties, which counsel shall be
reasonably satisfactory to Wisconsin Energy, promptly after statements therefor
are received and otherwise advance to such Indemnified Party upon request
reimbursement of documented expenses incurred, provided that the Indemnified
Parties as a group may retain only one law firm with respect to each related
matter except to the extent that there is, in the opinion of counsel to an
Indemnified Party, under applicable standards of professional conduct, a
conflict on any significant issue between positions of such Indemnified Party
and any other Indemnified Party or Indemnified Parties;
(ii) Wisconsin Energy and the Surviving Corporation will
cooperate in the defense of any such matter; and
(iii) any determination required to be made with respect to
whether an Indemnified Party's conduct complies with the standards set forth
under Sections 180.0850 through 180.0859 of the WBCL and the Articles of
Incorporation or Bylaws of WICOR (as the same shall be amended from time to
time) shall be made by independent counsel mutually acceptable to Wisconsin
Energy and the Indemnified Party; provided, however, that the Surviving
Corporation shall not be liable for any settlement effected without its written
consent (which consent shall not be unreasonably withheld).
(c) Insurance. Wisconsin Energy shall cause the individuals serving
---------
as officers and directors of the WICOR Companies immediately prior to the
Effective Time of Merger to be covered for a period of six years from the
Effective Time of Merger (or the period of the applicable statute of
limitations, if longer) by the directors' and officers' liability insurance
policies maintained
25
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by WICOR (provided that Wisconsin Energy may substitute therefor policies of at
least the same coverage and amounts containing terms and conditions that are not
less advantageous than such policies) with respect to acts or omissions
occurring prior to the Effective Time of Merger which were committed by such
officers and directors in their capacity as such; provided, however, that in no
event shall Wisconsin Energy be required to expend more than 200% of the current
amount expended by WICOR (the "Insurance Amount") to maintain or procure
insurance coverage pursuant hereto and provided further that if Wisconsin Energy
is unable to maintain or obtain the insurance called for by this Section 3.14 of
this Agreement, Wisconsin Energy shall use its reasonable best efforts to obtain
as much comparable insurance as available for the Insurance Amount.
(d) Successors. In the event Wisconsin Energy or the Surviving
----------
Corporation or any of their respective successors or assigns: (i) consolidates
with or merges into any other Person and shall not be the continuing or
surviving corporation or entity of such consolidation or merger; or (ii)
transfers all or substantially all of its properties and assets to any Person;
then and in either such case, proper provisions shall be made so that the
successors and assigns of Wisconsin Energy or the Surviving Corporation, as
applicable, shall assume the obligations set forth in this Section 3.14 of this
Agreement.
(e) Survival of Indemnification. To the fullest extent permitted by
---------------------------
Law, from and after the Effective Time of Merger, all rights to indemnification
as of the date of this Agreement in favor of the officers, directors and
employees of the WICOR Companies with respect to their activities as such prior
to the Effective Time of Merger, as provided in their respective Articles of
Incorporation and Bylaws in effect on the date of this Agreement, or otherwise
in effect on the date of this Agreement, shall survive the Merger and shall
continue in full force and effect for a period of six years from the Effective
Time of Merger (or the period of the applicable statute of limitations, if
longer).
(f) Benefit. The provisions of this Section 3.14 of this Agreement
-------
are intended to be for the benefit of, and shall be enforceable by, each
Indemnified Party and his or her heirs and representatives.
3.15 Employee and Employee Benefit Plan Matters.
------------------------------------------
(a) General Agreement. Subject to the provisions of this Section 3.15
-----------------
of this Agreement, Wisconsin Energy shall cause the WICOR Companies to honor all
employment agreements, consulting agreements, severance agreements and
collective bargaining agreements to which any of the WICOR Companies is a party,
including the Existing Plans but excluding the WICOR ESOP. Wisconsin Energy
acknowledges that for purposes of certain of the Employee Benefit Plans
described on the Disclosure Schedule, the consummation of the Merger will
constitute a "Change in Control" (as such term or any similar term is defined in
such plans, contracts and agreements) and that following the Effective Time of
Merger the employees listed on the Disclosure Schedule may be entitled to
terminate employment under their employment agreements and receive change of
control severance benefits thereunder.
26
<PAGE>
(b) Employee Benefit Plans. Wisconsin Energy understands and agrees
----------------------
that (except for the WICOR ESOP) all Existing Plans or plans substantially
comparable in the aggregate shall be maintained for individuals who are
employees and former employees of the WICOR Companies on the Closing Date for a
period of at least one year after the Closing Date. For purposes of determining
comparability, even though the WICOR ESOP is excluded from consideration, the
employees of the WICOR Companies covered by the WICOR ESOP on the Closing Date
will be deemed to have been covered by a 401(k) plan that provides for an
employer matching contribution of 50% of the first 6% of employee compensation.
(c) Eligibility. For purposes of all employee benefit plans
-----------
maintained or contributed to by any of the Wisconsin Energy Companies after the
Effective Time of Merger in which employees of any of the WICOR Companies at the
Effective Time of Merger participate, Wisconsin Energy shall cause each such
plan to treat the prior service with the WICOR Companies as service rendered to
the Wisconsin Energy Companies for purposes of eligibility and vesting under
such plan, but, unless otherwise determined by Wisconsin Energy, not for
purposes of benefit accrual under such plan.
(d) Employment Agreement. Wisconsin Energy shall, as of or prior to
--------------------
the Effective Time, enter into an employment agreement with Mr. George E.
Wardeberg in the form of Exhibit 2 attached to this Agreement.
(e) ESOP. At the Effective Time of Merger, the Wisconsin Gas Company
----
Employee Stock Ownership Plan (the "WICOR ESOP") shall be terminated and the
WICOR Common Stock held by the WICOR ESOP shall be exchanged for cash or shares
of Wisconsin Energy Common Stock, or both, as described in Section 2.4 of this
Agreement and distributed to participants in the WICOR ESOP. Such termination
shall occur in a manner determined by WICOR that is reasonably acceptable to
Wisconsin Energy, and in accordance with a favorable determination letter from
the Internal Revenue Service requested on a proposed basis by WICOR prior to the
Effective Time of Merger.
(f) Wisconsin Energy Severance Policies. Prior to the Closing Date,
-----------------------------------
Wisconsin Energy shall adopt severance policies substantially in the forms
attached to this Agreement as Exhibits 3 and 4 (the "Wisconsin Energy Severance
Policies"). WICOR shall notify Wisconsin Energy at least three (3) calendar
days prior to the Closing Date of the identity of those employees of the WICOR
Companies that are to be "Participants" under each of the Wisconsin Energy
Severance Policies (not to exceed 4 individuals as Participants who are to
receive "Tier 1 Benefits", 4 individuals as Participants who are to receive
"Tier 2 Benefits", 10 individuals as Participants who are to receive "Tier 3
Benefits" and 30 individuals as Participants who are to receive "Tier 4
Benefits"). Wisconsin Energy shall then take all appropriate actions prior to
the Closing Date to designate such Persons as "Participants" under the Wisconsin
Energy Severance Policies as indicated in such notice.
(g) Benefit. The provisions of Sections 3.15(a). 3.15(b), 3.15(c),
-------
3.15(e) and 3.15(f) are for the benefit of the various Persons described therein
and may be enforced for the benefit of such Persons only by Mr. Wardeberg or by
the Wisconsin Energy Designee.
27
<PAGE>
3.16 Directors.
---------
(a) Mr. Wardeberg. Wisconsin Energy shall take all action necessary
-------------
to elect Mr. George E. Wardeberg as Vice Chairman of the Board of Directors of
Wisconsin Energy as of the Effective Time of Merger to hold office until his
successor is duly appointed or elected in accordance with the Bylaws of
Wisconsin Energy and applicable Law. Thereafter, Wisconsin Energy shall
nominate and solicit proxies in good faith to elect Mr. Wardeberg as a director
of Wisconsin Energy at each annual meeting at which Mr. Wardeberg's term expires
held after the Effective Time of Merger so that Mr. Wardeberg will be a director
of Wisconsin Energy until the annual meeting in the year in which Mr. Wardeberg
attains age 70.
(b) Other Director. Wisconsin Energy shall take all action necessary
--------------
to elect the Wisconsin Energy Designee as a member of the Board of Directors of
Wisconsin Energy as of the Effective Time of Merger in the class of directors of
Wisconsin Energy whose term will expire at the first annual meeting of Wisconsin
Energy Shareholders after the Effective Time of Merger, and to hold office until
his successor is duly appointed or elected in accordance with the Bylaws of
Wisconsin Energy and applicable Law. Wisconsin Energy shall nominate and
solicit proxies in good faith to elect the Wisconsin Energy Designee for a full
term as a director of Wisconsin Energy at the first annual meeting of Wisconsin
Energy Shareholders after the Effective Time of Merger. As used in this
Agreement, "Wisconsin Energy Designee" shall mean a Person (other than Mr.
Wardeberg) selected by Wisconsin Energy, and reasonably acceptable to WICOR, who
is a director of WICOR at the Effective Time of Merger.
(c) Benefit. The provisions of Sections 3.16(a) of this Agreement
-------
are intended to be for the benefit of, and shall be enforceable by, Mr.
Wardeberg and the provisions of Section 3.16(b) of this Agreement are intended
to be for the benefit of, and shall be enforceable by, the Wisconsin Energy
Designee.
3.17 WICOR DRIP. Through the Effective Time of Merger WICOR will continue
----------
to cause WICOR's direct stock purchase and dividend reinvestment plan (the
"WICOR DRIP") to use market purchases of shares of WICOR Common Stock instead of
original issue as the source of shares of WICOR Common Stock for the WICOR DRIP.
The WICOR DRIP will be terminated at the Effective Time of Merger. All shares of
WICOR Common Stock held in the WICOR DRIP have been or will be properly
allocated to the accounts of Persons who were participants in the WICOR DRIP.
All shares of WICOR Common Stock held in the WICOR DRIP at the Effective Time of
Merger shall be converted into cash and shares of Wisconsin Energy Common Stock
as provided in Section 2.4 of this Agreement. If Wisconsin Energy provides an
election pursuant to Section 2.6(j) of this Agreement, and subject to the
allocation and election procedures in Section 2.4 of this Agreement,
participants in the WICOR DRIP who elect to have shares of Wisconsin Energy
Common Stock credited to accounts established for them under Wisconsin Energy's
dividend reinvestment and stock purchase plan shall have their shares of WICOR
Common Stock held in the WICOR DRIP converted into the number of whole shares
and any fractional share of Wisconsin Energy Common Stock resulting from the
application of the Exchange Ratio, instead of having any such fractional share
paid in cash as provided in Section 2.6(e) of this Agreement.
28
<PAGE>
3.18 Acknowledgments. Wisconsin Energy and WICOR acknowledge that they
---------------
recognize the value of the business franchises, structures, organizations,
employees and operations of Wisconsin Gas and the gas distribution business of
Wisconsin Electric. Wisconsin Energy and WICOR each recognize that it may prove
advantageous for the customers and employees of Wisconsin Energy and WICOR, and
the Wisconsin Energy Shareholders, at some point after the Effective Time of
Merger, for Wisconsin Energy to combine in some manner the gas distribution
business of Wisconsin Electric with the business and operations of Wisconsin
Gas, subject to all applicable Laws and collective bargaining agreements. In
that event, Wisconsin Energy shall, in good faith, make reasonable efforts to
maintain the name of Wisconsin Gas as the principal operating name of such
combined businesses and shall appropriately consider other relevant business and
regulatory factors in making such decisions.
3.19 Other Workforce Matters. Subject to applicable collective bargaining
-----------------------
agreements, any reductions in workforce in respect of employees of the Wisconsin
Energy Companies or the WICOR Companies, or both, shall be made on a fair and
equitable basis, in light of the circumstances and the objectives to be
achieved, giving consideration to previous work history, job experience, and
qualifications without regard to whether employment was with the WICOR Companies
or the Wisconsin Energy Companies, and any employees whose employment is
terminated or jobs eliminated shall be entitled to participate on a fair and
equitable basis in the job opportunity and employment placement programs offered
by the Wisconsin Energy Companies. Any workforce reductions carried out
following the Effective Time of Merger by the Wisconsin Energy Companies shall
be done in accordance with all applicable collective bargaining agreements and
all Laws.
3.20 Payment of Dividends. From the date of this Agreement through the
--------------------
Effective Time of Merger, WICOR and Wisconsin Energy shall cooperate with each
other regarding the declaration of dividends with the intention of WICOR and
Wisconsin Energy being that holders of WICOR Common Stock will not receive two
dividends, or fail to receive one dividend, for any single calendar quarter with
respect to their WICOR Common Stock and the shares, if any, of Wisconsin Energy
Common Stock any holder of WICOR Common Stock receives in exchange therefor in
connection with the Merger.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF WICOR
WICOR hereby represents and warrants to Wisconsin Energy and Acquisition
that, except as set forth in the relevant section of the Disclosure Schedule
(which exception shall apply to all Sections of this Article IV of this
Agreement other than Section 4.16):
29
<PAGE>
4.1 Organization; Business.
----------------------
(a) Organization. Each of the WICOR Companies is a corporation duly
------------
organized, validly existing and in good standing (or equivalent status) under
the Laws of its respective jurisdiction of incorporation. Each of the WICOR
Companies is qualified to do business as a foreign corporation and is in good
standing (or equivalent status) in all other jurisdictions where the ownership
or leasing of property or the conduct of its business requires qualification as
a foreign corporation by it, except where the failure to so qualify would not
have a WICOR Material Adverse Effect.
(b) Corporate Power and Authority. Each of the WICOR Companies has:
-----------------------------
(i) full corporate power and authority necessary to carry on its business as it
is now conducted and to own, lease and operate its assets and properties; and
(ii) all franchises, permits, licenses, approvals, authorizations, certificates
and registrations necessary to carry on its business as it is now conducted and
to own, lease and operate its assets and properties, except where the absence of
any such franchises, permits, licenses, approvals, authorizations, certificates
or registrations would not have a WICOR Material Adverse Effect.
(c) Regulation. WICOR is an exempt holding company under Section
----------
3(a)(1) of PUHCA. Wisconsin Gas is regulated as a public utility in the State of
Wisconsin and is not subject to regulation in any other state. The other WICOR
Companies are not regulated as public utilities or subject to such regulation by
any state.
(d) Disclosure Schedule. The Disclosure Schedule sets forth a brief
-------------------
description of each of the Subsidiaries of WICOR, including the name of each
such Subsidiary, the state or other jurisdiction of incorporation of each such
Subsidiary, the address of the principal place of business of such Subsidiary, a
brief description of the principal line or lines of business conducted by each
such Subsidiary, the names and percentage ownership of the owners of all
outstanding shares of capital stock or other ownership or equity interests of
such Subsidiary and, if directly owned by WICOR, a description of the
capitalization of such Subsidiary. Except as set forth on the Disclosure
Schedule, there are no options, warrants, conversion rights or other rights to
subscribe for or purchase, or other contracts with respect to, or equity-based
awards or accounts (including restricted stock, stock equivalents and stock
units) with respect to, any capital stock of any of the WICOR Companies.
(e) Articles of Incorporation and Bylaws. Copies of the Articles of
------------------------------------
Incorporation and Bylaws of each of the WICOR Companies, as amended, certified
by the Secretary of WICOR as of the date of this Agreement, are being delivered,
or will be delivered promptly after the date of this Agreement, by WICOR to
Wisconsin Energy contemporaneously with the execution and delivery of this
Agreement and such copies are complete and correct copies of such documents in
effect as of the date of this Agreement.
30
<PAGE>
4.2 Capitalization.
--------------
(a) Capitalization of WICOR. As of the date of this Agreement, the
-----------------------
entire authorized capital stock of WICOR consists of: (i) 120,000,000 shares of
Common Stock, $1.00 par value, of which 37,502,034 shares are issued and
outstanding, (including 75,300 shares of outstanding restricted stock awarded
under the WICOR Performance Plan), no shares are held in treasury by WICOR,
2,972,210 shares are subject to outstanding WICOR Options granted under the
WICOR Option Plans (of which options to purchase an aggregate of 1,753,832
shares are exercisable) and 45,632,143 shares are reserved for issuance pursuant
to the WICOR Rights Agreement; and (ii) 1,500,000 shares of Cumulative Preferred
Stock, $1.00 par value, none of which are issued and outstanding. As of the date
of this Agreement, there are outstanding equity-based awards or accounts (other
than outstanding restricted stock) with respect to an aggregate of 86,641 shares
or phantom shares of WICOR Common Stock.
(b) Outstanding Capital Stock. All of the outstanding capital stock
-------------------------
of each of the WICOR Companies is duly authorized, validly issued, fully paid
and nonassessable, except as provided in Section 180.0622(2)(b) of the WBCL, as
judicially interpreted.
4.3 Authorization; Enforceability. The execution, delivery and
-----------------------------
performance of this Agreement by WICOR and all of the documents and instruments
required by this Agreement to be executed and delivered by WICOR are within the
corporate power of WICOR and: (a) have been duly authorized by the Board of
Directors of WICOR; and (b) upon the approval of the WICOR Shareholders, shall
be duly authorized by all necessary corporate action by WICOR. This Agreement
is, and the other documents and instruments required by this Agreement to be
executed and delivered by WICOR will be, when executed and delivered by WICOR,
the valid and binding obligations of WICOR, enforceable against WICOR in
accordance with their respective terms, except as the enforcement thereof may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar Laws generally affecting the rights of creditors and subject to general
equity principles.
4.4 No Violation or Conflict. Subject to the receipt of the approvals and
------------------------
consents described in Section 8.7 of this Agreement or as set forth in the
Disclosure Schedule, the execution, delivery and performance of this Agreement
by WICOR do not and will not conflict with or violate: (a) any Law or the
Articles of Incorporation or Bylaws of any of the WICOR Companies; or (b) any
Existing Contract, except where such conflict or violation would not have a
WICOR Material Adverse Effect.
4.5 Litigation. Except for the litigation identified in the WICOR SEC
----------
Reports filed prior to the date of this Agreement or on the Disclosure Schedule
as "Existing Litigation"as of the date of this Agreement: (a) there is no
material litigation, arbitration, proceeding, governmental investigation,
citation or action of any kind pending or, to the Knowledge of WICOR, proposed
or threatened, against or relating to any of the WICOR Companies; and (b) there
are no actions, suits or proceedings pending or, to the Knowledge of WICOR,
proposed or threatened, against any of the WICOR Companies by any Person which
question the legality, validity or propriety of the transactions contemplated by
this Agreement.
31
<PAGE>
4.6 WICOR SEC Reports and Financial Statements.
------------------------------------------
(a) Definition. As used in this Agreement, "WICOR SEC Reports"
----------
shall mean all reports, registration statements, definitive proxy statements,
prospectuses and amendments thereto filed by WICOR with the SEC since January 1,
1996 or filed by WICOR with the SEC after the date of this Agreement and prior
to the Effective Time of Merger.
(b) WICOR SEC Reports. The WICOR SEC Reports: (i) complied or will
-----------------
comply, as the case may be, in all material respects with the then applicable
requirements of the Exchange Act and the Securities Act, as the case may be, and
the rules and regulations of the SEC issued thereunder; and (ii) did not or will
not, as the case may be, contain as of their respective filing dates any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(c) Financial Statements. The audited consolidated financial
--------------------
statements and unaudited consolidated interim financial statements of WICOR
included in the WICOR SEC Reports have been or will be, as the case may be,
prepared in accordance with generally accepted accounting principles applied on
a consistent basis (except as may be indicated therein or in the notes thereto
and except with respect to the absence of notes in the case of any unaudited
interim financial statements) and fairly present in all material respects the
consolidated financial position of the WICOR Companies as of the dates thereof
and the results of their operations and changes in financial position for the
periods then ended, subject, in the case of the unaudited consolidated interim
financial statements, to normal year-end and audit adjustments and any other
adjustments described therein.
(d) Undisclosed Liabilities. The WICOR Companies, taken as a whole,
-----------------------
do not have any material liabilities of any nature except as disclosed in the
WICOR SEC Reports or which do not, individually or in the aggregate, have a
WICOR Material Adverse Effect.
4.7 Absence of Certain Changes. Except as set forth in the Disclosure
--------------------------
Schedule or in the WICOR SEC Reports, since March 31, 1999 and through the date
of this Agreement there has not been any: (a) WICOR Material Adverse Effect; or
(b) declaration or payment or setting aside the payment of any dividend or any
distribution in respect of the capital stock of WICOR (except for regular
quarterly cash dividends on outstanding shares of WICOR Common Stock which have
been publicly announced by WICOR) or any direct or indirect redemption, purchase
or other acquisition of any such stock by any of the WICOR Companies.
4.8 Contracts.
---------
(a) Existing Contracts. The contracts identified on the Disclosure
------------------
Schedule as the "Existing Contracts" or which are described in the WICOR SEC
Reports are the only contracts as of the date of this Agreement to which any of
the WICOR Companies is a party or by which any of the WICOR Companies is bound
and which constitute: (i) any union labor contracts; (ii) any management or
employment contract which: (A) is in writing; or (B) creates other than an at-
will
32
<PAGE>
employment relationship; or (iii) any agreements or notes evidencing any
Indebtedness; as used in this Agreement, the term "Indebtedness" shall mean any
liability or obligation of any of the WICOR Companies, whether primary or
secondary or absolute or contingent: (A) for borrowed money; or (B) evidenced by
notes, bonds, debentures or similar instruments.
(b) Insurance Policies. The WICOR Companies currently maintain such
------------------
valid insurance as is reasonably prudent for the WICOR Companies and their
businesses. Except as set forth on the Disclosure Schedule, no material
property damage, personal injury or liability claims have been made, or are
pending, against any of the WICOR Companies that are not covered by insurance.
Within the past two (2) years, no insurance company has canceled any material
insurance (of any type) maintained by any of the WICOR Companies.
4.9 Employee Benefit Plans.
----------------------
(a) Definition. As used in this Agreement, the term "Employee Benefit
----------
Plans" shall mean any pension plan, restricted stock plan, profit sharing plan,
bonus plan, incentive compensation plan, stock ownership plan, stock purchase
plan, stock option plan, stock appreciation plan, employee welfare plan,
retirement plan, deferred compensation plan, fringe benefit program, insurance
plan, severance plan, disability plan, health care plan, sick leave plan, death
benefit plan, defined contribution plan, or any other plan or program to provide
retirement income, fringe benefits or other benefits to former or current
employees or directors of any of the WICOR Companies.
(b) Existing Plans. Except for the Employee Benefit Plans of the
--------------
WICOR Companies identified as the "Existing Plans" on the Disclosure Schedule,
none of the WICOR Companies maintain, nor is bound by, any Employee Benefit
Plan. Except as set forth on the Disclosure Schedule, all of the Existing Plans
are, to the extent applicable, in compliance in all material respects with
ERISA, the Code and all other applicable Laws. Except as set forth on the
Disclosure Schedule, all of the Existing Plans which are intended to meet the
requirements of Section 401(a) or 403(a) of the Code have been determined to be
"qualified" within the meaning of the Code, and there are no facts which would
adversely affect the qualified status of any of such Existing Plans. Except as
set forth on the Disclosure Schedule, each Existing Plan has been administered
in all material respects in accordance with its terms and is in compliance in
all material respects with all applicable Laws. Any Employee Benefit Plan that
is not an Existing Plan that has been terminated was done so in compliance in
all material respects with all applicable Laws, and there is no basis for
further liability or obligation of any WICOR Company pursuant to any past
Employee Benefit Plan.
(c) Certain Matters. Except as set forth on the Disclosure Schedule,
---------------
with respect to each Existing Plan which is subject to either Title IV of ERISA
or Section 412 of the Code, there is no amount of unfunded benefit liabilities
as defined in Section 4001(a)(18) of ERISA, there has occurred no failure to
meet the minimum funding standards of Section 412 of the Code, there is no
"accumulated funding deficiency" (whether or not waived) within the meaning of
Section 412 of the Code, no such Existing Plan has terminated or has filed a
Notice of Intent to terminate, the Pension Benefit Guaranty Corporation has not
instituted proceedings to terminate any such Existing Plan and there is no
outstanding liability under Section 4062 of ERISA.
33
<PAGE>
(d) Prohibited Transactions; Reportable Events. Except as set forth
------------------------------------------
on the Disclosure Schedule, no nonexempt prohibited transaction within the
meaning of Section 4975 of the Code or Section 406 of ERISA or reportable event
as described in Section 4043 of ERISA for which the reporting required is not
waived has occurred with respect to any of the Employee Benefit Plans.
(e) Multiemployer Plans. Except as set forth on the Disclosure
-------------------
Schedule, none of the WICOR Companies is contributing to, nor has any of the
WICOR Companies contributed to since September 2, 1974, any "multiemployer plan"
as defined in Section 4001(a)(3) of ERISA.
(f) Claims. There are no pending, or to the Knowledge of WICOR,
------
threatened claims with respect to any of the Employee Benefit Plans, other than
claims for benefits arising in the ordinary course of business.
(g) COBRA. With respect to each Existing Plan, each WICOR Company
-----
has complied in all material respects with the applicable health care
continuation and notice provisions of the Consolidated Omnibus Budget
Reconciliation Act of 1985 and the proposed regulations thereunder, and the
applicable requirements of the Family and Medical Leave Act of 1993 and the
regulations thereunder.
(h) The Merger. Except as set forth in the Disclosure Schedule, the
----------
Merger and the consummation of the transactions contemplated by this Agreement
will not entitle any current or former employee of any WICOR Company to
severance benefits or any other payment or accelerate the time of paying or
vesting, or increase the amount of compensation due any such employee.
(i) Copies. Correct and complete copies of all Existing Plans,
------
together with recent summary plan descriptions, have been delivered, or will be
delivered promptly after execution of this Agreement, by WICOR to Wisconsin
Energy.
4.10 No Violation of Law. Neither any of the WICOR Companies nor any of
-------------------
the assets of any of the WICOR Companies violate or conflict in any material
respect with any Law.
4.11 Brokers. Except for fees to Merrill Lynch, Pierce, Fenner & Smith
-------
Incorporated, none of the WICOR Companies has incurred any brokers', finders' or
any similar fee in connection with the transactions contemplated by this
Agreement.
4.12 Taxes. Except as set forth in the Disclosure Schedule:
-----
(a) Tax Returns. Each of the WICOR Companies has timely and properly
-----------
filed all federal, state, local and foreign tax returns (including but not
limited to income, business, franchise, sales, payroll, employee withholding and
social security and unemployment) which were required to be filed. Each of the
WICOR Companies has paid or made adequate provision, in reserves reflected in
its financial statements included in the WICOR SEC Reports in accordance with
generally accepted accounting principles, for the payment of all taxes
(including interest and
34
<PAGE>
penalties) and withholding amounts owed by it or assessable against it. No tax
deficiencies have been proposed or assessed against any of the WICOR Companies
and, to the Knowledge of WICOR, there is no basis in fact for the assessment of
any material tax or material penalty tax against any of the WICOR Companies
after giving effect to all reserves for tax matters reflected in the financial
statements included in the WICOR SEC Reports. To the Knowledge of WICOR, no
material issue has been raised in any prior tax audit which, by application of
the same or similar principles, could reasonably be expected upon a future tax
audit to result in a proposed material deficiency for any period.
(b) Extensions. None of the WICOR Companies has consented to any
----------
extension of the statute of limitation with respect to any open federal tax
returns.
(c) Tax Liens. There are no tax Liens upon any property or assets of
---------
any of the WICOR Companies except for Liens for current taxes not yet due and
payable.
(d) Tax Examinations. No examination or audit of any tax return or
----------------
report for any period not barred by the applicable statute of limitations has
occurred, no such examination is in progress and, to the Knowledge of WICOR, no
such examination or audit is planned.
(e) Employment Taxes. Each of the WICOR Companies has properly
----------------
withheld and timely paid all withholding and employment taxes which it was
required to withhold and pay relating to salaries, compensation and other
amounts heretofore paid to its employees or other Persons. All Forms W-2 and
1099 required to be filed with respect thereto have been timely and properly
filed.
(f) Tax Sharing Agreements. None of the WICOR Companies is a party
----------------------
to any agreement relating to allocating or sharing any taxes.
(g) Excess Parachute Payments. None of the WICOR Companies is a
-------------------------
party to any contract that could result, on account of the Merger, separately or
in the aggregate, in the payment of any "excess parachute payments" within the
meaning of Section 280G of the Code.
(h) Liabilities of Other Persons. None of the WICOR Companies has
----------------------------
any liability for taxes of any kind of any Person other than the WICOR Companies
under any contract or under Treasury Regulations Section 1.1502-6 (or any
similar provision of Law) as a transferee or successor or otherwise.
4.13 Governmental Approvals. No permission, approval, determination,
----------------------
consent or waiver by, or any declaration, filing or registration with, any
United States or foreign governmental or United States or foreign regulatory
authority is required in connection with the execution, delivery and performance
of this Agreement by WICOR and the consummation of the Merger, except for: (a)
the approvals described in Section 8.7 of this Agreement; and (b) the filing of
the Articles of Merger as described in this Agreement.
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<PAGE>
4.14 No Pending Other Transactions. Except for this Agreement, none of the
-----------------------------
WICOR Companies is a party to or bound by any agreement, undertaking or
commitment with respect to an Other Transaction.
4.15 Labor Matters.
-------------
(a) Employee Claims. As of the date of this Agreement and except as
---------------
set forth in the Disclosure Schedule, there are no pending and unresolved claims
by any Person against any of the WICOR Companies arising out of any statute,
ordinance or regulation relating to discrimination against employees or employee
practices or occupational or safety and health standards. There is no pending
or, to the Knowledge of WICOR, threatened, labor dispute, strike or work
stoppage.
(b) NLRB Matters. As of the date of this Agreement and except as set
------------
forth in the Disclosure Schedule, there is not now pending or, to the Knowledge
of WICOR, threatened, any charge or complaint against any of the WICOR Companies
by or before the National Labor Relations Board or any representative thereof,
or any comparable state agency or authority. To the Knowledge of WICOR, no union
organizing activities are in process or contemplated and no petitions have been
filed for union organization or representation of employees of any of the WICOR
Companies not presently organized.
4.16 Disclosure. No statement of fact by WICOR contained in this Agreement
----------
or in the Disclosure Schedule contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact necessary in order
to make the statements herein or therein contained, in the light of the
circumstances under which they were made, not misleading as of the date to which
it speaks.
4.17 Information Supplied. None of the information supplied or to be
--------------------
supplied by WICOR for inclusion or incorporation by reference in: (a) the
Registration Statement will, at the time the Registration Statement is filed
with the SEC and at the time it becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading; and (b) the Proxy Statement will, at the date mailed to the
WICOR Shareholders and at the time of the WICOR Special Meeting, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading. The Proxy
Statement will comply as to form in all material respects with the provisions of
the Exchange Act and the rules and regulations thereunder.
4.18 Vote Required. The affirmative vote of the holders of a majority of
-------------
the outstanding shares of WICOR Common Stock entitled to vote thereon is the
only vote of the holders of any class or series of capital stock or other
securities of WICOR necessary to approve the Merger, this Agreement and the
transactions contemplated by this Agreement.
4.19 Opinion of Financial Advisor. WICOR has received the opinion of
----------------------------
Merrill Lynch, Pierce, Fenner & Smith Incorporated, dated the date of this
Agreement, to the effect that the Merger
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Consideration is fair to the WICOR Shareholders from a financial point of view,
and a copy of such opinion has been delivered to Wisconsin Energy.
4.20 Environmental Protection.
------------------------
(a) Definitions. As used in this Agreement:
-----------
(i) "Environmental Claim" shall mean any and all
administrative, regulatory or judicial actions, suits, demands, demand letters,
directives, claims, Liens, investigations, proceedings or notices of
noncompliance or violation (written or oral) by any Person alleging potential
liability (including, without limitation, potential liability for enforcement,
investigatory costs, cleanup costs, governmental response costs, removal costs,
remedial costs, natural resources damages, property damages, personal injuries,
or penalties) arising out of, based on or resulting from: (A) the presence, or
release into the environment, of any Environmental Hazardous Materials at any
location, whether or not owned by any of the WICOR Companies; or (B)
circumstances forming the basis of any violation or alleged violation, of any
Environmental Law; or (C) any and all claims by any Person seeking damages,
contribution, indemnification, cost, recovery, compensation or injunctive relief
resulting from the presence or Environmental Release of any Environmental
Hazardous Materials.
(ii) "Environmental Hazardous Materials" shall mean: (A) any
petroleum or petroleum products, radioactive materials, asbestos in any form
that is or could become friable, urea formaldehyde foam insulation, and
transformers, compressors or other equipment that contain dielectric fluid
containing levels of polychlorinated biphenyls (PCBs) and radon gas; and (B) any
chemicals, materials or substances which are now defined as or included in the
definition of "hazardous substances," "hazardous wastes," "hazardous materials,"
"extremely hazardous wastes," "restricted hazardous wastes," "toxic substances,"
"toxic pollutants," or words of similar import, under any Environmental Law; and
(C) any products or byproducts related to the manufacture of gas or related to
gas manufacturing; and (D) any other chemical, material, substance or waste,
exposure to which is now prohibited, limited or regulated by any governmental
authority under any Environmental Law.
(iii) "Environmental Laws" shall mean all federal, state, local
or foreign statutes, Laws, rules, ordinances, codes, policies, rules of common
law and regulations relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water, ground
water, land surface or subsurface strata), including, without limitation, Laws
and regulations relating to Environmental Releases or threatened Environmental
Releases of Environmental Hazardous Materials, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Environmental Hazardous Materials.
(iv) "Environmental Release" shall mean any release, spill,
emission, leaking, injection, deposit, disposal, discharge, dispersal, leaching
or migration into the atmosphere, soil, surface water, groundwater or property
which would be likely to result in an Environmental Claim.
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(b) Environmental Laws. Except as set forth in the Disclosure
------------------
Schedule or in the WICOR SEC Reports, each of the WICOR Companies: (i) is in
compliance in all respects with all applicable Environmental Laws, except where
the failure to so comply would not in the aggregate be reasonably expected to
have a WICOR Material Adverse Effect; and (ii) has not received any written
communication from a governmental authority that alleges that it is not in
compliance with applicable Environmental Laws.
(c) Environmental Permits. To the Knowledge of WICOR, except as set
---------------------
forth in the Disclosure Schedule or in the WICOR SEC Reports, each of the WICOR
Companies has obtained all environmental, health and safety permits and
governmental authorizations (collectively, the "Environmental Permits")
necessary for its operations, and all such permits are in good standing and it
is in compliance with all terms and conditions of the Environmental Permits
except where the failure to so comply would not in the aggregate be reasonably
expected to have a WICOR Material Adverse Effect.
(d) Environmental Claims. Except as set forth in the Disclosure
--------------------
Schedule or in the WICOR SEC Reports, there is no Environmental Claim pending
or, to the Knowledge of WICOR, threatened, against any of the WICOR Companies
or, to the Knowledge of WICOR, against any Person whose liability for any
Environmental Claim any of the WICOR Companies has or may have retained or
assumed either contractually or by operation of Law, or against any real or
personal property or operations which any of the WICOR Companies owns, leases or
manages.
(e) Environmental Hazardous Materials. To the Knowledge of WICOR,
---------------------------------
except as set forth in the Disclosure Schedule or in the WICOR SEC Reports,
there have been no Environmental Releases of any Environmental Hazardous
Material by any of the WICOR Companies or by any Person on real property owned,
used, leased or operated by any of the WICOR Companies.
(f) Owned Properties. To the Knowledge of WICOR, except as set forth
----------------
in the Disclosure Schedule or in the WICOR SEC Reports, no real property at any
time owned, operated, used or controlled by any of the WICOR Companies is
currently listed on the National Priorities List promulgated under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended ("CERCLA"), or on any comparable state list, and none of the WICOR
Companies has received any written notice from any Person of potential or actual
liability or a request for information from any Person under or relating to
CERCLA or any comparable state or local Law.
(g) Off-Site Properties. To the Knowledge of WICOR, except as set
-------------------
forth on the Disclosure Schedule, no off-site location at which any of the WICOR
Companies has disposed or arranged for the disposal of any waste is listed on
the National Priorities List or on any comparable state list and none of the
WICOR Companies has received any written notice from any Person with respect to
any off-site location, of potential or actual liability or a written request for
information from any Person under or relating to CERCLA or any comparable state
or local Law.
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<PAGE>
4.21 Year 2000 Compliance. All of the material computer hardware and
--------------------
software systems of the WICOR Companies (including, without limitation, those
related to their facilities, equipment, manufacturing processes, quality control
activities, accounting and bookkeeping records and record keeping activities)
are presently or will be prior to December 31, 1999, Year 2000 Compliant. As
used in this Agreement, the phrase "Year 2000 Compliant" shall mean with respect
to material hardware and software systems, that such hardware and software is
designed to be used prior to, during, and after the calendar Year 2000 A.D., and
such hardware and software used during each such time period will accurately
receive, provide and process date/time data from, into and between the twentieth
and twenty-first centuries, and will not malfunction, cease to function, or
provide invalid or incorrect results as a result of date/time data, to the
extent that other hardware and software, used in combination with the hardware
and software of the affected Person, properly exchanges date/time data with the
hardware and software of the affected Person.
4.22 Takeover Provisions. Assuming that the representation and
-------------------
warranty of Wisconsin Energy in Section 5.13 of this Agreement is correct, and
in light of the nature of this Agreement and the transactions contemplated by
this Agreement and the approval thereof by the Board of Directors of WICOR, none
of the supermajority vote/fair price provisions of Sections 180.1130 to 180.1134
of the WBCL, the business combination provisions of Sections 180.1140 to
180.1144 of the WBCL, the control share acquisition provisions of Section
180.1150 of the WBCL or any similar provisions of the WBCL or the Restated
Articles of Incorporation or Bylaws of WICOR, as amended, are applicable to the
transactions contemplated by this Agreement.
4.23 Rights Agreement. The Board of Directors of WICOR has resolved
----------------
to, and WICOR promptly after the execution of this Agreement will, take any
actions necessary to render the WICOR Rights issued pursuant to the terms of the
WICOR Rights Agreement inapplicable to the Merger, this Agreement and the other
transactions contemplated by this Agreement, and will take such actions with
respect to any extension or renewal of the WICOR Rights Agreement or any
successor shareholder rights plan.
4.24 Ownership of Wisconsin Energy Common Stock. WICOR does not
------------------------------------------
"beneficially own" (as such term is defined for purposes of Section 13(d) of the
Exchange Act) any shares of Wisconsin Energy Common Stock.
39
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ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF WISCONSIN ENERGY AND ACQUISITION
Wisconsin Energy and Acquisition hereby represent and warrant to WICOR
that:
5.1 Organization.
------------
(a) Organization. Each of the Wisconsin Energy Companies and
------------
Acquisition is a corporation, limited liability company or statutory business
trust duly organized, validly existing and in good standing (or equivalent
status) under the Laws of its respective jurisdiction of organization and is
qualified to do business and is in good standing (or equivalent status) in all
other jurisdictions where the ownership or leasing of property or the conduct of
its business requires such qualification, except where the failure to so qualify
would not have a Wisconsin Energy Material Adverse Effect.
(b) Corporate Power and Authority. Each of the Wisconsin Energy
-----------------------------
Companies and Acquisition has: (i) full corporate power and authority necessary
to carry on its business as it is now conducted and to own, lease and operate
its assets and properties; and (ii) all material franchises, permits, licenses,
approvals, authorizations and registrations necessary to carry on its business
as it is now conducted and to own, lease and operate its assets and properties,
except where the absence of any such franchises, permits, licenses, approvals,
authorizations or registrations would not have a Wisconsin Energy Material
Adverse Effect.
(c) Regulation. Wisconsin Energy is an exempt holding company under
----------
Section 3(a)(1) of PUHCA. Wisconsin Electric is regulated as a public utility
in the States of Wisconsin and Michigan and is not subject to regulation in any
other state. Edison Sault Electric Company, a Subsidiary of Wisconsin Energy,
is regulated as a public utility in the State of Michigan and is not subject to
regulation in any other state. The other Wisconsin Energy Companies are not
regulated as public utilities or subject to such regulation by any state.
5.2 Capitalization.
--------------
(a) Capitalization of Wisconsin Energy. As of the date of this
----------------------------------
Agreement, the entire authorized capital stock of Wisconsin Energy consists of:
(i) 325,000,000 shares of Common Stock, $.01 par value, of which 116,970,367
shares were issued and outstanding on June 22, 1999; and (ii) 15,000,000 shares
of Preferred Stock, $.01 par value, none of which are issued and outstanding.
(b) Outstanding Capital Stock. All of the outstanding shares of
-------------------------
Wisconsin Energy Common Stock are, and any shares of Wisconsin Energy Common
Stock to be issued pursuant to this Agreement will be when issued: (i) duly
authorized, validly issued and fully paid; and (ii) nonassessable, except as
provided in Section 180.0622(2)(b) of the WBCL, as judicially interpreted.
40
<PAGE>
5.3 Authorization; Enforceability. The execution, delivery and
-----------------------------
performance of this Agreement by Wisconsin Energy and Acquisition and all of the
documents and instruments required by this Agreement to be executed and
delivered by Wisconsin Energy and Acquisition are within the corporate power of
Wisconsin Energy and Acquisition and: (a) have been duly authorized by the
Boards of Directors of Wisconsin Energy and Acquisition; and (b) if required,
upon the approval of the Wisconsin Energy Shareholders of the issuance of the
Wisconsin Energy Common Stock pursuant to this Agreement, shall be duly
authorized by all necessary corporate action by Wisconsin Energy and
Acquisition. This Agreement is, and the other documents and instruments
required by this Agreement to be executed and delivered by Wisconsin Energy and
Acquisition will be, when executed and delivered by Wisconsin Energy and
Acquisition, the valid and binding obligations of Wisconsin Energy and
Acquisition, enforceable against Wisconsin Energy and Acquisition in accordance
with their respective terms, except as the enforcement thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar Laws
generally affecting the rights of creditors and subject to general equity
principles.
5.4 No Violation or Conflict. Subject to the receipt of the approvals and
------------------------
consents described in Section 7.7 of this Agreement, the execution, delivery and
performance of this Agreement by Wisconsin Energy and Acquisition do not and
will not conflict with or violate: (a) any Law or the Restated Articles of
Incorporation or Bylaws of Wisconsin Energy or the Articles of Incorporation or
Bylaws of Acquisition; or (b) any material contract or agreement to which any of
the Wisconsin Energy Companies or Acquisition is a party or by which any of them
is bound, except where such conflict or violation would not have a Wisconsin
Energy Material Adverse Effect.
5.5 Litigation. Except as disclosed in the Wisconsin Energy SEC Reports
----------
filed prior to the date of this Agreement, as of the date of this Agreement,
there is no litigation, arbitration, proceeding, governmental investigation,
citation or action of any kind pending or, to the Knowledge of Wisconsin Energy,
proposed or threatened against or relating to any of the Wisconsin Energy
Companies which, if adversely determined against any of the Wisconsin Energy
Companies, individually or in the aggregate, would or would be reasonably likely
to result in a Wisconsin Energy Material Adverse Effect. There are no actions,
suits or proceedings pending or, to the Knowledge of Wisconsin Energy, proposed
or threatened, against any of the Wisconsin Energy Companies by any Person which
question the legality, validity or propriety of the transactions contemplated by
this Agreement.
5.6 Wisconsin Energy SEC Reports and Financial Statements.
-----------------------------------------------------
(a) Definition. As used in this Agreement, "Wisconsin Energy SEC
-----------
Reports" shall mean all reports, registration statements, definitive proxy
statements, prospectuses and amendments thereto filed by Wisconsin Energy with
the SEC since January 1, 1996 or filed by Wisconsin Energy with the SEC after
the date of this Agreement and prior to the Effective Time of Merger.
(b) Wisconsin Energy SEC Reports. The Wisconsin Energy SEC Reports:
----------------------------
(i) complied or will comply, as the case may be, in all material respects with
the then applicable requirements of the Exchange Act and the Securities Act, as
the case may be, and the rules and
41
<PAGE>
regulations of the SEC issued thereunder; and (ii) did not or will not, as the
case may be, contain as of their respective filing dates any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(c) Financial Statements. The audited consolidated financial
--------------------
statements and unaudited consolidated interim financial statements of Wisconsin
Energy included in the Wisconsin Energy SEC Reports have been or will be, as the
case may be, prepared in accordance with generally accepted accounting
principles applied on a consistent basis (except as may be indicated therein or
in the notes thereto and except with respect to the absence of notes in the case
of any unaudited interim financial statements) and fairly present in all
material respects the consolidated financial position of the Wisconsin Energy
Companies as of the dates thereof and the consolidated results of their
operations and changes in financial position for the periods then ended,
subject, in the case of the unaudited consolidated interim financial statements,
to normal year-end and audit adjustments and any other adjustments described
therein.
(d) Undisclosed Liabilities. The Wisconsin Energy Companies, taken as
-----------------------
a whole, do not have any material liabilities of any nature except as disclosed
in the Wisconsin Energy SEC Reports or which do not, individually or in the
aggregate, have a Wisconsin Energy Material Adverse Effect.
(e) Absence of Certain Changes. Since March 31, 1999 and through the
--------------------------
date of this Agreement, there has not been any Wisconsin Energy Material Adverse
Effect.
5.7 Brokers. Except for fees to Chase Securities Inc., neither Wisconsin
-------
Energy nor Acquisition has incurred any brokers', finders' or any similar fee in
connection with the transactions contemplated by this Agreement.
5.8 Governmental Approvals. No permission, approval, determination,
----------------------
consent or waiver by, or any declaration, filing or registration with, any
United States or foreign governmental or regulatory authority is required in
connection with the execution, delivery and performance of this Agreement by
Wisconsin Energy and Acquisition and the consummation of the Merger, except for:
(a) the approvals described in Section 7.7 of this Agreement; and (b) the filing
of the Articles of Merger as described in this Agreement.
5.9 Disclosure. No statement of fact by Wisconsin Energy or Acquisition
----------
contained in this Agreement contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact necessary in order
to make the statements herein, in the light of the circumstances under which
they were made, not misleading as of the date to which it speaks.
5.10 Information Supplied. None of the information supplied or to be
--------------------
supplied by Wisconsin Energy for inclusion or incorporation by reference in:
(a) the Registration Statement will, at the time the Registration Statement is
filed with the SEC and at the time it becomes effective under the Securities
Act, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading; and
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<PAGE>
(b) the Proxy Statement will, at the date mailed to the Wisconsin Energy
Shareholders and at the time of the Wisconsin Energy Special Meeting, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. The Proxy Statement will comply as to form in all material respects
with the provisions of the Exchange Act and the rules and regulations
thereunder, and the Registration Statement, including the Proxy Statement
insofar as it constitutes the prospectus of Wisconsin Energy, will comply as to
form in all material respects with the provisions of the Securities Act and the
rules and regulations thereunder.
5.11 Vote Required. The approval of the issuance of shares of Wisconsin
-------------
Energy Common Stock pursuant to this Agreement by a majority of the votes cast
by the holders of the shares of Wisconsin Energy Common Stock represented at the
Wisconsin Energy Special Meeting and entitled to vote thereon, provided that the
total vote cast represents over 50% of all outstanding shares entitled to vote
thereon, is the only vote of the holders of any class or series of capital stock
or other securities of Wisconsin Energy necessary to approve this Agreement and
the transactions contemplated by this Agreement.
5.12 Opinion of Financial Advisor. Wisconsin Energy has received the
----------------------------
opinion of Chase Securities Inc., dated the date of this Agreement, to the
effect that the Merger Consideration to be paid in the Merger is fair to
Wisconsin Energy from a financial point of view, and a copy of such opinion has
been delivered to WICOR.
5.13 Ownership of WICOR Common Stock. Wisconsin Energy does not
-------------------------------
"beneficially own" (as such term is defined for purposes of Section 13(d) of the
Exchange Act) any shares of WICOR Common Stock.
5.14 Year 2000 Compliance. All of the material computer hardware and
--------------------
software systems of the Wisconsin Energy Companies (including, without
limitation, those related to their facilities, equipment, manufacturing
processes, quality control activities, accounting and bookkeeping records and
record keeping activities) are presently or will be prior to December 31, 1999,
Year 2000 Compliant.
ARTICLE VI
COVENANTS PENDING THE MERGER
Except as otherwise provided in this Agreement, from and after the date of
this Agreement and until the Effective Time of Merger:
6.1 Covenants of WICOR. Except as provided in the Disclosure Schedule or
------------------
with the written consent of Wisconsin Energy, WICOR shall, and shall cause each
of the other WICOR Companies to:
43
<PAGE>
(a) Carry on in Regular Course. Diligently carry on its business only
--------------------------
in the regular course and in substantially the same manner as heretofore and
shall not make or institute any unusual or novel methods of purchase, sale,
lease, management, accounting or operation.
(b) Use of Assets. Use, operate, maintain and repair all of its
-------------
assets and properties in a normal business manner.
(c) No Default. Not do any act or omit to do any act, or permit any
----------
act or omission to act, which will cause a breach of any of the Existing
Contracts.
(d) Employment Matters. Not: (i) except as consistent with its
------------------
normal past business practices or as permitted under WICOR's bonus and incentive
compensation plans existing on the date of this Agreement, grant any increase in
the rate of pay of any of its employees, directors or officers; (ii) institute
or, except as required by Law, amend any Employee Benefit Plan; or (iii) enter
into or modify any written employment arrangement with any Person.
(e) Indebtedness. Not create, incur or assume any Indebtedness,
------------
except for: (i) Indebtedness incurred in the ordinary course of business by the
WICOR Companies consistent with past practice (such as the issuance of
commercial paper or the use of existing credit facilities); (ii) Indebtedness
incurred to refinance or replace Indebtedness existing on the date of this
Agreement; (iii) Indebtedness of up to $50,000,000 in original principal amount
to cover the cost of certain acquisitions by the WICOR Companies closed prior to
the date of this Agreement; and (iv) Indebtedness of up to $125,000,000 in
original principal amount incurred in connection with acquisitions by the WICOR
Companies as described in Section 6.1(o)(ii) of this Agreement.
(f) Preservation of Relationships. Use reasonable best efforts to
-----------------------------
preserve its business organization intact, to retain the services of its present
officers and key employees and to preserve the goodwill of suppliers, customers,
creditors and others having business relationships with it.
(g) Compliance with Laws. Comply in all material respects with all
--------------------
applicable Laws.
(h) Taxes. Timely and properly file all federal, state, local and
-----
foreign tax returns which are required to be filed, and shall pay or make
provision for the payment of all taxes owed by it.
(i) Amendments. Not amend its Articles of Incorporation or Bylaws.
----------
(j) Issuance of Stock. Not issue any additional shares of stock of
-----------------
any class (including any shares of preferred stock) except for:
(i) issuances of shares of WICOR Common Stock upon the exercise
of options outstanding on the date of this Agreement, or granted after the date
of this Agreement as described in Section 6.1(k) of this Agreement, under the
WICOR Option Plans;
44
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(ii) issuances of shares of WICOR Common Stock in acquisitions
described in Section 6.1(o)(ii) of this Agreement, provided that: (A) the
aggregate fair market value of the WICOR Common Stock issued in all such
acquisitions does not exceed $10,000,000, calculated in each case at the date of
issuance of such WICOR Common Stock; and (B) the per share value of the WICOR
Common Stock issued in any such acquisition shall be valued at not less than
$31.50 per share of WICOR Common Stock; and
(iii) issuances of restricted shares of WICOR Common Stock from
and after January 1, 2000 through awards granted under the WICOR Performance
Plan (the "WICOR New Restricted Stock") provided that each such award shall:
(A) be consistent with the past practices of WICOR,
including the point in time during each fiscal year of WICOR when such awards
are made;
(B) not exceed, in the aggregate, 38,000 restricted
shares of WICOR Common Stock during each fiscal year of WICOR;
(C) except as described in Section 6.1(j)(iii)(D) of this
Agreement, include a provision in each related agreement to the effect that the
Merger and the transactions described in this Agreement shall not result in any
acceleration of vesting of such restricted shares of WICOR Common Stock;
(D) subject to the provisions of Section 2.9(b) of this
Agreement, provide that the restrictions applicable to such restricted shares of
WICOR Common Stock shall be lifted:
(i) prior to the Effective Time of Merger, in
accordance with applicable performance standards established by WICOR in
accordance with the WICOR Performance Plan; and
(ii) from and after the Effective Time of Merger, at
the earliest of: (1) one third (1/3rd) of the restricted shares of Wisconsin
Energy Common Stock covered by each such award, as assumed by Wisconsin Energy
pursuant to Section 2.9 of this Agreement, shall vest on each of the first,
second and third annual anniversary of the grant date of the award (but in no
event earlier than the Effective Time of Merger); or (2) a termination of the
employment with the WICOR Companies of the recipient of such restricted shares
by the WICOR Companies without "Cause" as defined in the Wisconsin Energy
Severance Policies or by such recipient under circumstances where such recipient
is entitled to "Separation Benefits" under Section 4.2(a) of the Severance
Policies (other than Section 4.2(a)(i) of the Severance Policies); or (3) a
"change in control" of Wisconsin Energy after the Effective Time of Merger; and
(E) provide that such restricted shares of WICOR Common
Stock then outstanding shall, at the Effective Time of Merger, be converted into
restricted shares of Wisconsin Energy Common Stock as described in Section 2.9
of this Agreement.
45
<PAGE>
(k) Options. Not grant any warrants, options or rights to subscribe
-------
for or acquire any additional shares of stock of any class, except that WICOR
may, from and after January 1, 2000, issue options under the WICOR Stock Option
Plans provided that the grant of each such option shall:
(i) be consistent with the past practices of WICOR, including
the point in time during each fiscal year of WICOR when such grants are made;
(ii) not exceed, in the aggregate, 630,000 shares of WICOR
Common Stock during each fiscal year of WICOR;
(iii) except as described in Section 6.1(k)(v) of this Agreement
include a provision in each related agreement to the effect that the Merger and
the transactions described in this Agreement shall not result in any
acceleration of vesting under such option;
(iv) provide for a per share exercise price equal to the per
share fair market value of the WICOR Common Stock on the date of grant of each
such option; and
(v) except with respect to options granted under the WICOR
Director Option Plan, provide that each such option shall vest at the earliest
of: (A) one third (1/3rd) of the shares of WICOR Common Stock (or, after the
Effective Time of Merger, Wisconsin Energy Common Stock) covered by each such
option shall vest on each of the first, second and third annual anniversary of
the date of the grant of such option; or (B) a termination of the employment
with the WICOR Companies of the recipient of such option by the WICOR Companies
without "Cause" as defined in the Wisconsin Energy Severance Policies or by such
recipient under circumstances where such recipient is entitled to "Separation
Benefits" under Section 4.2(a) of the Severance Policies (other than Section
4.2(a)(i) of the Severance Policies); or (C) a "change in control" of Wisconsin
Energy after the Effective Time of Merger;
(vi) provide that each such option granted under the WICOR
Director Option Plan shall be immediately vested; and
(vii) provide that each such option then outstanding shall, at
the Effective Time of Merger, be converted into an option to purchase shares of
Wisconsin Energy Common Stock as described in Section 2.9 of this Agreement.
(l) Dividends. Not declare or pay any dividend or make any capital or
---------
surplus distributions of any nature, except for: (i) cash dividends by
Subsidiaries of WICOR to WICOR; and (ii) regular quarterly cash dividends by
WICOR on the outstanding WICOR Common Stock with usual record and payment dates
not exceeding, during any fiscal year of WICOR, 102.3% of the cash dividends
paid by WICOR on the WICOR Common Stock during the immediately preceding fiscal
year of WICOR.
(m) Redemptions. Not directly or indirectly redeem, purchase or
-----------
otherwise acquire any of its capital stock, except for market purchases of WICOR
Common Stock: (i) by the
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WICOR DRIP; (ii) for distribution pursuant to the terms of the WICOR, Inc.
Deferred Compensation Plan for Directors and the Wisconsin Gas Company Deferred
Compensation Plan for Directors; (iii) for issuance upon the exercise of options
granted under the WICOR Director Option Plan; and (iv) to satisfy the needs or
requirements for shares of WICOR Common Stock of the 401(k) plans maintained by
the WICOR Companies.
(n) Recapitalization. Not recapitalize or reclassify any of its
----------------
capital stock or liquidate in whole or in part.
(o) No Dispositions or Acquisitions. Not:
-------------------------------
(i) sell, lease, license, encumber or otherwise dispose of, or
agree to sell, lease, license, encumber or otherwise dispose of, any of its
assets: (A) except in the ordinary course of business consistent with past
practice; and (B) except for transactions which: (1) individually involve a
purchase price of less than $10,000,000; and (2) collectively involve an
aggregate purchase price of less than $25,000,000; or
(ii) acquire, or publicly propose to acquire or agree to
acquire, by merger or consolidation with, or by purchase or otherwise, an equity
interest in, or all or any portion of the assets of, any Person: (A) except as
disclosed on the Disclosure Schedule; and (B) except for transactions which: (1)
do not include any utility assets or a public utility; (2) individually involve
a purchase price of less than $30,000,000; and (3) collectively involve an
aggregate purchase price of less than $100,000,000.
(p) Capital Expenditures. Not make capital expenditures in any fiscal
--------------------
year of WICOR in excess of the amounts by WICOR for capital expenditures as set
forth in the Disclosure Schedule.
(q) Power Marketing Authorization. (i) Not enter into any
-----------------------------
transactions involving electric power marketing under the authorization from the
Federal Energy Regulatory Commission for certain of the WICOR Companies. (ii)
Promptly apply for, and thereafter use reasonable best efforts to obtain, the
cancellation of the authorization from the Federal Energy Regulatory Commission
for the WICOR Companies to engage in electric power marketing.
(r) Agreement. Not agree in writing or otherwise to take any of the
---------
actions described in Section 6.1(c), 6.1(d), 6.1(e), 6.1(i), 6.1(j), 6.1(k),
6.1(l), 6.1(m), 6.1(n), 6.1(o), 6.1(p) or 6.1(q)(i) of this Agreement.
6.2 Covenants of Wisconsin Energy. Except with the written consent of
-----------------------------
WICOR, Wisconsin Energy shall, and shall cause each of the other Wisconsin
Energy Companies to:
(a) Preservation of Business. Use reasonable best efforts to preserve
------------------------
intact its business organization, to keep available the services of its current
officers and key employees and preserve its material business relationships with
customers and suppliers and to preserve goodwill, except as described in the
Wisconsin Energy SEC Reports filed prior to the date of this Agreement,
47
<PAGE>
except for the possible transfers of transmission assets or nuclear assets, or
both, of Wisconsin Electric for capital stock or equity interests of another
Person and except as described in Section 9.7(b) of this Agreement.
(b) Articles of Incorporation. Not amend its Restated Articles of
-------------------------
Incorporation in a manner that changes the fundamental attributes of the
Wisconsin Energy Common Stock or amend in any material respect the Articles of
Incorporation of Acquisition.
(c) Dividends. Not make, declare or pay any extraordinary cash
---------
dividends, except for extraordinary cash dividends by a Subsidiary of Wisconsin
Energy to Wisconsin Energy.
(d) Other. Not take any action that is material and adverse to WICOR
-----
and the WICOR Shareholders as prospective shareholders of Wisconsin Energy in a
manner that affects the WICOR Shareholders disproportionately as compared to the
current Wisconsin Energy Shareholders.
(e) Agreement. Not agree in writing or otherwise to take any of the
---------
actions described in Section 6.2(b), 6.2(c) or 6.2(d) of this Agreement.
ARTICLE VII
CONDITIONS PRECEDENT TO THE OBLIGATIONS
OF WISCONSIN ENERGY AND ACQUISITION
Each and every obligation of Wisconsin Energy and Acquisition to be
performed on the Closing Date shall be subject to the satisfaction prior to or
at the Closing of the following express conditions precedent:
7.1 Compliance with Agreement. WICOR shall have performed and complied in
-------------------------
all material respects with all of its obligations under this Agreement which are
to be performed or complied with by it prior to or on the Closing Date.
7.2 No Litigation. No suit, action or other proceeding shall be pending
-------------
before any court in which the consummation of the transactions contemplated by
this Agreement is restrained or enjoined.
7.3 Representations and Warranties of WICOR The representations and
---------------------------------------
warranties made by WICOR in this Agreement shall be true and correct in all
respects (when read without any exception or qualification as to materiality or
a WICOR Material Adverse Effect) when made and as of the Closing Date with the
same force and effect as though said representations and warranties had been
made on the Closing Date, except where the effect of any breaches of the
representations and warranties of WICOR made in this Agreement, individually or
in the aggregate, would not or would not be reasonably likely to result in a
WICOR Material Adverse Effect.
48
<PAGE>
7.4 No WICOR Material Adverse Effect. During the period from the date of
--------------------------------
this Agreement to the Closing Date there shall not have occurred, and be
continuing on the Closing Date, any WICOR Material Adverse Effect, whether
relating to a matter, event or state of facts which is a Disclosure Schedule
Change or otherwise.
7.5 Approval of WICOR Shareholders and Wisconsin Energy Shareholders;
-----------------------------------------------------------------
Articles of Merger. This Agreement, the Merger and the transactions
- ------------------
contemplated by this Agreement shall have received the requisite approval and
authorization of the WICOR Shareholders and the issuance of shares of Wisconsin
Energy Common Stock pursuant to this Agreement shall have received the requisite
approval and authorization of the Wisconsin Energy Shareholders. The Articles
of Merger shall have been executed and delivered by WICOR.
7.6 Closing Certificate. WICOR shall have delivered to Wisconsin Energy a
-------------------
certificate signed on behalf of WICOR by the Chief Executive Officer and Chief
Financial Officer of WICOR, dated the Closing Date, to the effect that the
conditions set forth in Sections 7.1 and 7.3 of this Agreement have been
satisfied.
7.7 Governmental Approvals.
----------------------
(a) Regulatory Approvals. There shall have been secured such
--------------------
permissions, approvals, determinations, consents and waivers from all
appropriate state and federal regulatory authorities, including PSCW and SEC, as
may be required by Law or by such Persons: (i) in order for Wisconsin Energy to
consummate the Merger and the transactions described in this Agreement; and (ii)
so that Wisconsin Energy continues to be an exempt holding company under PUHCA
except for Section 9(a)(2) of PUHCA.
(b) Registration Statement. The Registration Statement shall have
----------------------
been declared effective under the Securities Act and shall not be the subject of
any stop order or proceedings to effect a stop order. Any Wisconsin Energy
Common Stock issuable pursuant to the Merger shall have been registered or shall
be exempt from registration or qualification under applicable state "blue sky"
or securities Laws.
(c) HSR Act. All necessary requirements of the HSR Act shall have
-------
been complied with and any "waiting periods" applicable to the Merger and to the
transactions described in this Agreement which are imposed by the HSR Act shall
have expired prior to the Closing Date or shall have been terminated by the
appropriate agency.
(d) Effect of Approvals. No permission, approval, determination,
-------------------
consent or waiver received pursuant to Sections 7.7(a), 7.7(b) or 7.7(c) of this
Agreement shall contain any condition applicable to the WICOR Companies, the
Wisconsin Energy Companies or Acquisition, or any one or more of them, which is,
in the reasonable judgment of Wisconsin Energy, materially adverse in any manner
to the WICOR Companies, the Wisconsin Energy Companies or Acquisition.
7.8 Listing. Wisconsin Energy shall have received notice from the New
-------
York Stock Exchange that any shares of Wisconsin Energy Common Stock to be
issued or reserved for issuance
49
<PAGE>
pursuant to this Agreement are approved for listing on the New York Stock
Exchange subject to official notice of issuance.
7.9 Accountant Letter. Wisconsin Energy shall have received a copy of a
-----------------
letter from Arthur Andersen LLP, which shall be in form and substance reasonably
satisfactory to Wisconsin Energy and shall contain information concerning the
financial condition of WICOR, dated the Closing Date, similar to the letter
described in Section 3.10 of this Agreement.
7.10 Affiliate Letters. If any Wisconsin Energy Common Stock is to be
-----------------
issued pursuant to the Merger, Wisconsin Energy shall have received an Affiliate
Letter from each Person who is an Affiliate of WICOR.
ARTICLE VIII
CONDITIONS PRECEDENT TO THE
OBLIGATIONS OF WICOR
Each and every obligation of WICOR to be performed on the Closing Date
shall be subject to the satisfaction prior to or at the Closing of the following
express conditions precedent:
8.1 Compliance with Agreement. Wisconsin Energy and Acquisition shall
-------------------------
have performed and complied in all material respects with all of their
obligations under this Agreement which are to be performed or complied with by
them prior to or on the Closing Date.
8.2 No Litigation. No suit, action or other proceeding shall be pending
-------------
before any court in which the consummation of the transactions contemplated by
this Agreement is restrained or enjoined.
8.3 Representations and Warranties of Wisconsin Energy and Acquisition.
------------------------------------------------------------------
The representations and warranties made by Wisconsin Energy and Acquisition in
this Agreement shall be true and correct in all respects (when read without any
exception or qualification as to materiality or a Wisconsin Energy Material
Adverse Effect) when made and as of the Closing Date with the same force and
effect as though such representations and warranties had been made on the
Closing Date, except where the effect of any breaches of the representations and
warranties of Wisconsin Energy and Acquisition made in this Agreement,
individually or in the aggregate, would not or would not be reasonably likely to
result in a Wisconsin Energy Material Adverse Effect.
8.4 No Wisconsin Energy Material Adverse Effect. If any Wisconsin Energy
-------------------------------------------
Common Stock is to be issued pursuant to the Merger, during the period from the
date of this Agreement to the Closing Date there shall not have occurred, and be
continuing on the Closing Date, any Wisconsin Energy Material Adverse Effect.
8.5 Approval of WICOR Shareholders and Wisconsin Energy Shareholders;
-----------------------------------------------------------------
Articles of Merger. This Agreement, the Merger and the transactions
- ------------------
contemplated by this Agreement shall have received the requisite approval and
authorization of the WICOR Shareholders and the issuance
50
<PAGE>
of shares of Wisconsin Energy Common Stock pursuant to this Agreement shall have
received the requisite approval and authorization of the Wisconsin Energy
Shareholders. The Articles of Merger shall have been executed and delivered by
Acquisition.
8.6 Closing Certificate. Wisconsin Energy shall have delivered to WICOR a
-------------------
certificate signed on behalf of Wisconsin Energy by the Chief Executive Officer
and Chief Financial Officer of Wisconsin Energy, dated the Closing Date, to the
effect that the conditions set forth in Sections 8.1 and 8.3 of this Agreement
have been satisfied.
8.7 Governmental Approvals.
----------------------
(a) Regulatory Approvals. There shall have been secured such
--------------------
permissions, approvals, determinations, consents and waivers from all
appropriate state and federal regulatory authorities, including PSCW and SEC, as
may be required by Law or by such Persons in order for WICOR to consummate the
Merger and the transactions described in this Agreement.
(b) Registration Statement. The Registration Statement shall have
----------------------
been declared effective under the Securities Act and shall not be the subject of
any stop order or proceedings to effect a stop order. Any Wisconsin Energy
Common Stock issuable pursuant to the Merger shall have been registered or shall
be exempt from registration or qualification under applicable state "blue sky"
or securities Laws.
(c) HSR Act. All necessary requirements of the HSR Act shall have
-------
been complied with and any "waiting periods" applicable to the Merger and to the
transactions described in this Agreement which are imposed by the HSR Act shall
have expired prior to the Closing Date or shall have been terminated by the
appropriate agency.
8.8 Listing. Wisconsin Energy shall have received notice from the New
-------
York Stock Exchange that any shares of Wisconsin Energy Common Stock to be
issued or reserved for issuance pursuant to this Agreement are approved for
listing on the New York Stock Exchange subject to official notice of issuance.
8.9 Tax Opinion. If any Wisconsin Energy Common Stock is to be issued
-----------
pursuant to the Merger, WICOR shall have received an opinion of Foley & Lardner,
counsel to WICOR, dated on or about the date that is two (2) business days prior
to the date that the Proxy Statement is first mailed to WICOR Shareholders, to
the effect that the Merger will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code, and that
Wisconsin Energy, Acquisition and WICOR will each be a party to that
reorganization within the meaning of Section 368(b) of the Code and such opinion
shall not have been withdrawn or modified in any material respect as of the
Closing Date.
51
<PAGE>
ARTICLE IX
TERMINATION; MISCELLANEOUS
9.1 Termination. This Agreement may be terminated and the transactions
-----------
contemplated by this Agreement may be abandoned at any time prior to the Closing
(whether before or after approval of this Agreement by the WICOR Shareholders or
the Wisconsin Energy Shareholders or both), as follows:
(a) by mutual written agreement of Wisconsin Energy and WICOR, duly
authorized by the Boards of Directors of Wisconsin Energy and WICOR;
(b) by either Wisconsin Energy or WICOR by written notice to the
other party if:
(i) any court of competent jurisdiction shall have issued an
order, judgment or decree permanently restraining, enjoining or otherwise
prohibiting the Merger and such order, judgment or decree shall have become
final and nonappealable; or
(ii) if the Effective Time of Merger has not occurred on or
before July 1, 2000 (the "Initial Termination Date"), provided, however, that:
(A) if on the Initial Termination Date the conditions to Closing set forth in
Sections 7.7 and 8.7 of this Agreement shall not have been fulfilled, then the
Initial Termination Date shall be automatically extended to January 1, 2001; and
(B) the right to terminate this Agreement under this Section 9.1(b)(ii) of this
Agreement shall not be available to any party whose failure to fulfill any
obligation under this Agreement has been the cause of, or resulted in, the
failure of the Effective Time of Merger to occur on or before that date;
(c) by Wisconsin Energy by written notice to WICOR if:
(i) there exists one or more breaches of the representations
and warranties of WICOR made in this Agreement which breaches, individually or
in the aggregate, would or would be reasonably likely to result in a WICOR
Material Adverse Effect and such breaches shall not have been remedied within 45
calendar days after receipt by WICOR of written notice from Wisconsin Energy
specifying the nature of such breaches and requesting that they be remedied;
(ii) WICOR shall have failed to perform and comply in all
respects with all of its other agreements and covenants contained in this
Agreement and such failures to perform or comply, individually or in the
aggregate, would or would be reasonably likely to result in a WICOR Material
Adverse Effect and such failures to perform or comply shall not have been
remedied within 45 calendar days after receipt by WICOR of written notice from
Wisconsin Energy specifying the nature of such failures to perform or comply and
requesting that they be remedied;
(iii) Wisconsin Energy shall have convened the Wisconsin
Energy Special Meeting to vote upon the issuance of shares of Wisconsin Energy
Common Stock pursuant to this
52
<PAGE>
Agreement and such proposal does not receive the requisite vote of the Wisconsin
Energy Shareholders for such proposal;
(iv) WICOR shall have convened the WICOR Special Meeting to vote
upon the Merger and the transactions described in this Agreement and such
proposal does not receive the requisite vote of the WICOR Shareholders for such
proposal; or
(v) the Board of Directors of WICOR, or any committee thereof,
shall: (A) withdraw or modify in any manner adverse to Wisconsin Energy its
approval or recommendation of this Agreement or the Merger, (B) fail to reaffirm
such approval or recommendation upon Wisconsin Energy's request, or (C) approve
or recommend any Other Transaction; and
(d) by WICOR by written notice to Wisconsin Energy if:
(i) there exists one or more breaches of the representations
and warranties of Wisconsin Energy made in this Agreement which breaches,
individually or in the aggregate, would or would be reasonably likely to result
in a Wisconsin Energy Material Adverse Effect and such breaches shall not have
been remedied within 45 calendar days after receipt by Wisconsin Energy of
written notice from WICOR specifying the nature of such breaches and requesting
that they be remedied;
(ii) Wisconsin Energy shall have failed to perform and comply in
all respects with all of its other agreements and covenants contained in this
Agreement and such failures to perform or comply, individually or in the
aggregate, would or would be reasonably likely to result in a Wisconsin Energy
Material Adverse Effect and such failures to perform or comply shall not have
been remedied within 45 calendar days after receipt by Wisconsin Energy of
written notice from WICOR specifying the nature of such failures to perform or
comply and requesting that they be remedied;
(iii) Wisconsin Energy shall have convened the Wisconsin Energy
Special Meeting to vote upon the issuance of shares of Wisconsin Energy Common
Stock pursuant to this Agreement and such proposal does not receive the
requisite vote of the Wisconsin Energy Shareholders for such proposal;
(iv) WICOR shall have convened the WICOR Special Meeting to vote
upon the Merger and the transactions described in this Agreement and such
proposal does not receive the requisite vote of the WICOR Shareholders for such
proposal;
(v) pursuant to Section 3.9(d) of this Agreement; or
(vi) the Board of Directors of Wisconsin Energy, or any
committee thereof, shall: (A) withdraw or modify in any manner adverse to WICOR
its approval or recommendation of this Agreement or the Merger, or (B) fail to
reaffirm such approval or recommendation upon WICOR's request.
53
<PAGE>
9.2 Rights on Termination; Waiver. If this Agreement is terminated
-----------------------------
pursuant to Section 9.1 of this Agreement, all further obligations of the
parties under or pursuant to this Agreement shall terminate without further
liability of any party (including its directors, officers, employees, agents,
legal, accounting or financial advisors or other representatives) to the others,
provided that: (a) the obligations of Wisconsin Energy and Acquisition contained
in Sections 3.4(b), 3.9(f), 9.2 and 9.5 of this Agreement shall survive any such
termination; (b) the obligations of WICOR contained in Sections 3.4(b), 3.9(e),
3.9(g), 9.2 and 9.5 of this Agreement shall survive any such termination; and
(c) each party to this Agreement shall retain any and all remedies which it may
have for breach of contract provided by Law based on another party's willful
failure to comply with the terms of this Agreement. If any of the conditions set
forth in Article VII of this Agreement have not been satisfied, Wisconsin Energy
may nevertheless elect to proceed with the consummation of the transactions
contemplated by this Agreement and if any of the conditions set forth in Article
VIII of this Agreement have not been satisfied, WICOR may nevertheless elect to
proceed with the consummation of the transactions contemplated by this
Agreement. Any such election to proceed shall be evidenced by a certificate
signed on behalf of the waiving party by an officer of that party.
9.3 Survival of Representations, Warranties and Covenants. All
-----------------------------------------------------
representations, warranties and covenants of the parties contained in this
Agreement (other than the covenants contained in Sections 2.6, 2.9, 3.14, 3.15,
3.16, 9.3, 9.13 and 9.15 of this Agreement) or made pursuant to this Agreement
shall terminate and be of no further force and effect at the Effective Time of
Merger and none of the parties shall have any liability or obligation with
respect thereto.
9.4 Entire Agreement; Amendment. This Agreement and the documents
---------------------------
referred to in this Agreement and required to be delivered pursuant to this
Agreement constitute the entire agreement among the parties pertaining to the
subject matter of this Agreement, and supersede all prior and contemporaneous
agreements, understandings, negotiations and discussions of the parties, whether
oral or written, other than the Confidentiality Agreement, and there are no
warranties, representations or other agreements between the parties in
connection with the subject matter of this Agreement, except as specifically set
forth in this Agreement and in the Confidentiality Agreement. This Agreement may
be amended by the parties at any time before or after approval of this Agreement
by the WICOR Shareholders, except that after such approval, no amendment shall
be made without the further approval of the WICOR Shareholders if any such
amendment: (a) changes the Merger Consideration; or (b) alters or changes any
of the terms or conditions of this Agreement if any of such changes,
individually or in the aggregate, materially adversely affects the rights of the
WICOR Shareholders. This Agreement may be amended by the parties at any time
before or after approval of this Agreement by the Wisconsin Energy Shareholders,
except that after such approval, no amendment shall be made without the further
approval of the Wisconsin Energy Shareholders if any such amendment: (y)
changes the Merger Consideration; or (z) alters or changes any of the terms or
conditions of this Agreement if any of such changes, individually or in the
aggregate, materially adversely affects the rights of the Wisconsin Energy
Shareholders. No amendment, supplement, modification, waiver or termination of
this Agreement shall be binding unless executed in writing by Wisconsin Energy,
WICOR and Acquisition. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provision of this
Agreement, whether or not similar, nor shall such waiver constitute a continuing
waiver unless otherwise expressly provided.
54
<PAGE>
9.5 Expenses. All costs and expenses incurred in connection with this
--------
Agreement and the transactions contemplated by this Agreement shall be paid by
the party incurring such expenses, except: (a) Wisconsin Energy shall pay the
filing fee relating to the filing required by the HSR Act; and (b) those
expenses incurred in connection with printing the Proxy Statement and
Registration Statement, as well as the filing fee relating thereto, shall be
shared equally by WICOR, on the one hand, and Wisconsin Energy, on the other
hand; and (c) as described in Sections 3.9(f) and 3.9(g) of this Agreement.
9.6 Governing Law. This Agreement shall be construed and interpreted
-------------
according to the Laws of the State of Wisconsin.
9.7 Assignment. Prior to the Effective Time of Merger, this Agreement
----------
shall not be assigned:
(a) by WICOR except with the prior written consent of Wisconsin
Energy; and
(b) by Wisconsin Energy or Acquisition, except: (i) with the prior
written consent of WICOR; or (ii) to a Subsidiary of Wisconsin Energy; or (iii)
in connection with a sale or transfer of all or substantially all of the assets
of Wisconsin Energy or a reorganization, merger, tender offer, consolidation or
similar transaction affecting all or substantially all of the outstanding equity
interests of Wisconsin Energy, provided the successor Person to Wisconsin Energy
or Acquisition expressly assumes in a writing that WICOR is entitled to enforce
as a third party beneficiary or otherwise the due and punctual performance of
every term, condition, and covenant of Wisconsin Energy or Acquisition, as the
case may be, in this Agreement.
9.8 Notices. All communications or notices required or permitted by this
-------
Agreement shall be in writing and shall be deemed to have been given at the
earlier of the date when actually delivered to an officer of a party by personal
delivery or telephonic facsimile transmission or when deposited in the United
States mail, certified or registered mail, postage prepaid, return receipt
requested, and addressed as follows, unless and until any of such parties
notifies the others in accordance with this Section of a change of address:
If to Wisconsin Energy or Acquisition: Wisconsin Energy Corporation
Attention: Calvin H. Baker
Treasurer and Chief Financial
Officer
P. O. Box 2949
231 West Michigan Street
Milwaukee WI 53201
Fax No.: 414-221-5068
55
<PAGE>
with a copy to:
Quarles & Brady LLP
Attention:Patrick M. Ryan
411 E. Wisconsin Avenue
Milwaukee, WI 53202-4497
Fax No: 414-271-3552
If to WICOR: WICOR, Inc
Attention: Joseph P. Wenzler
Senior Vice President and Chief
Financial Officer
P.O. Box 334
626 East Wisconsin Avenue
Milwaukee, WI 53201
Fax No.: 414-291-7033
with a copy to:
Foley & Lardner
Attention: Joseph B. Tyson, Jr.
777 East Wisconsin Avenue
Milwaukee WI 53202-5367
Fax No: 414-297-4900
9.9 Counterparts; Headings. This Agreement may be executed in several
----------------------
counterparts, each of which shall be deemed an original, but such counterparts
shall together constitute but one and the same Agreement. The Table of Contents
and Article and Section headings in this Agreement are inserted for convenience
of reference only and shall not constitute a part hereof.
9.10 Interpretation. Unless the context requires otherwise, all words used
--------------
in this Agreement in the singular number shall extend to and include the plural,
all words in the plural number shall extend to and include the singular, and all
words in any gender shall extend to and include all genders. The language used
in this Agreement shall be deemed to be language chosen by the parties to this
Agreement to express their mutual intent. In the event an ambiguity or question
of intent or interpretation arises concerning the language of this Agreement,
this Agreement shall be construed as if drafted jointly by the parties to this
Agreement and no presumption or burden of proof will arise favoring or
disfavoring any party to this Agreement by virtue of the authorship of any of
the provisions of this Agreement.
56
<PAGE>
9.11 Severability. If any provision, clause, or part of this Agreement, or
------------
the application thereof under certain circumstances, is held invalid, the
remainder of this Agreement, or the application of such provision, clause or
part under other circumstances, shall not be affected thereby unless such
invalidity materially impairs the ability of the parties to consummate the
transactions contemplated by this Agreement.
9.12 Specific Performance. The parties agree that the assets and business
--------------------
of the WICOR Companies as a going concern constitute unique property. There is
no adequate remedy at Law for the damage which any party might sustain for
failure of the other parties to consummate the Merger and the transactions
contemplated by this Agreement, and accordingly, each party shall be entitled,
at its option, to the remedy of specific performance to enforce the Merger
pursuant to this Agreement.
9.13 No Reliance. Except for the parties to this Agreement, any assignees
-----------
permitted by Section 9.7 of this Agreement and as described in Sections 3.14,
3.15 and 3.16 of this Agreement: (a) no Person is entitled to rely on any of the
representations, warranties and agreements of the parties contained in this
Agreement; and (b) the parties assume no liability to any Person because of any
reliance on the representations, warranties and agreements of the parties
contained in this Agreement.
9.14 Exhibits and Disclosure Schedule. If a document or matter is
--------------------------------
disclosed in any Exhibit to this Agreement or in the Disclosure Schedule, it
shall be deemed to be disclosed for all purposes of this Agreement without the
necessity of specific repetition or cross-reference. All capitalized terms used
in any Exhibit to this Agreement or in the Disclosure Schedule shall have the
definitions specified in this Agreement.
9.15 Further Assurances. If, at any time after the Effective Time of
------------------
Merger, any further action is necessary or desirable to carry out the purposes
of this Agreement and to vest the Surviving Corporation with full right, title
and possession to all assets, properties, rights, privileges, powers and
franchises of either Acquisition or WICOR, the officers of the Surviving
Corporation are fully authorized to take any such action in the name of
Acquisition or WICOR.
9.16 Waiver of Jury Trial. WICOR, Wisconsin Energy and Acquisition hereby
--------------------
irrevocably waive any and all right to trial by jury in any legal proceeding
arising out of or relating to this Agreement or the transactions contemplated by
this Agreement.
57
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement and Plan of
Merger to be duly executed as of the day and year first above written.
WISCONSIN ENERGY CORPORATION
By /s/ Richard A. Abdoo
--------------------------------------
Richard A. Abdoo,
Chairman of the Board, President
and Chief Executive Officer
WICOR, INC.
By /s/ George E. Wardeberg
--------------------------------------
George E. Wardeberg,
Chairman and Chief Executive Officer
CEW ACQUISITION, INC.
By /s/ Richard A. Abdoo
---------------------------------------
Richard A. Abdoo,
Chairman of the Board, President
and Chief Executive Officer
58
<PAGE>
EXHIBIT 1
AFFILIATE LETTER
__________________,_______
__________________________
Name of Affiliate
Wisconsin Energy Corporation
231 W. Michigan Street
P. O. Box 2949
Milwaukee WI 53201
Ladies and Gentlemen:
I have been advised that as of the date of the meeting of shareholders of
WICOR, Inc. ("WICOR") to vote on the transaction described below, and as of the
date hereof, I may be deemed an "affiliate" (as that term is defined for
purposes of Rule 145(c) and (d) under the Securities Act of 1933, as amended
(the "Act")) of WICOR. Pursuant to the terms of the Agreement and Plan of
Merger dated as of June 27, 1999 (the "Merger Agreement") among Wisconsin Energy
Corporation ("Wisconsin Energy"), WICOR and CEW Acquisition, Inc.
("Acquisition"), Acquisition and WICOR will merge in a transaction (the
"Merger") in which I will or may receive shares of $.01 par value common stock
of Wisconsin Energy (the "Shares") in exchange for shares of common stock of
WICOR which I own at the "Effective Time of Merger" (as that term is defined in
the Merger Agreement).
In connection with the Merger, I represent and warrant to, and agree with,
Wisconsin Energy that:
1. I have carefully read this Affiliate Letter and the Merger Agreement
and, to the extent I felt necessary, discussed the requirements of such
documents and other applicable limitations upon my ability to sell, transfer or
otherwise dispose of the Shares with my counsel or counsel for WICOR.
2. I have been advised that the issuance of the Shares to me pursuant to
the Merger will be registered with the Securities and Exchange Commission (the
"Commission") under the Act on a Registration Statement on Form S-4. However, I
have also been advised that, because (A) at the time the Merger is submitted for
a vote of the shareholders of WICOR, I may be deemed to be an affiliate of WICOR
and (B) the distribution by me of the Shares has not been registered under the
Act, I may not sell, transfer or otherwise dispose of the Shares issued to me in
the Merger unless (i)
<PAGE>
Wisconsin Energy Corporation
_______________,______
Page 2
such sale, transfer or other disposition has been registered under the Act, (ii)
such sale, transfer or other disposition is made in conformity with the volume
and other limitations of Rule 145 promulgated by the Commission under the Act,
or (iii) in the opinion of counsel reasonably acceptable to Wisconsin Energy, or
pursuant to a "no-action" letter obtained by me from the staff of the
Commission, such sale, transfer or other disposition is otherwise exempt from
registration under the Act.
3. I agree that I will not make any sale, transfer or other disposition
of the Shares in violation of the Act or the rules and regulations of the
Commission thereunder. In the event of a sale of Shares pursuant to Rule 145, I
will supply Wisconsin Energy with evidence of compliance with such Rule, in the
form of customary seller's and broker's Rule 145 representation letters or as
Wisconsin Energy may otherwise reasonably request.
4. I understand that Wisconsin Energy is under no obligation to register
the sale, transfer or other disposition of the Shares by me or on my behalf
under the Act or, except as provided in paragraph A below, to take any other
action necessary in order to make compliance with an exemption from such
registration available.
5. I also understand Wisconsin Energy may decline to register any
transfer of the Shares inconsistent with this Affiliate Letter, that stop
transfer instructions will be given to Wisconsin Energy's transfer agent with
respect to the Shares, and that there will be placed on the certificates for the
Shares, or any substitutions therefor, a legend stating in substance:
"The securities represented by this certificate were issued in a
transaction to which Rule 145 promulgated under the Securities
Act of 1933 applies. The securities represented by this
certificate may be sold, transferred or otherwise disposed of
only in accordance with the terms of a letter agreement between
the registered holder hereof and Wisconsin Energy Corporation, a
copy of which agreement is on file at the principal offices of
Wisconsin Energy Corporation.
6. I also understand that unless a sale or transfer of the Shares by me
has been registered under the Act or is a sale made in conformity with the
provisions of Rule 145 under the Act, Wisconsin Energy reserves the right to put
the following legend on the certificates issued to my transferee:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933 and were acquired from a
person who received such securities in a transaction to which Rule
145 promulgated under the Securities
<PAGE>
Wisconsin Energy Corporation
_____________,______
Page 3
Act of 1933 applies. The securities have not been acquired by the
holder with a view to, or for resale in connection with, any
distribution thereof within the meaning of the Securities Act of 1933
and may not be sold, transferred or otherwise disposed of except
pursuant to an effective registration statement or in accordance with
an exemption from the registration requirements of the Securities Act
of 1933."
7. I further understand and agree that my representations, warranties,
covenants and agreements set forth herein are for the benefit of Wisconsin
Energy, WICOR, and the Surviving Corporation (as defined in the Merger
Agreement) and will be relied upon by such entities and their respective counsel
and accountants.
8. I understand and agree that this letter agreement shall apply to all
Shares issued pursuant to the Merger in exchange for shares of common stock of
WICOR that are deemed to be beneficially owned by me pursuant to applicable
federal securities laws immediately prior to the Effective Time of Merger.
Execution of this letter should not be considered an admission on my part
that I am an "affiliate" of WICOR as described in the first paragraph of this
letter or as a waiver of any rights I may have to object to any claim that I am
such an affiliate on or after the date of this letter.
By Wisconsin Energy's acceptance of this letter, Wisconsin Energy hereby
agrees with me as follows:
A. For so long as and to the extent necessary to permit me to sell
the Shares pursuant to Rule 145 and, to the extent applicable, Rule 144
under the Act, Wisconsin Energy shall (a) use its reasonable efforts to (i)
file, on a timely basis, all reports required to be filed with the
Commission by it pursuant to Section 13 of the Securities Exchange Act of
1934, as amended, and (ii) furnish to me upon request a written statement
as to whether Wisconsin Energy has complied with such reporting
requirements during the 12 months preceding any proposed sale of the Shares
by me under Rule 145, and (b) otherwise use its reasonable efforts to
permit such sales pursuant to Rule 145 and Rule 144.
B. It is understood and agreed that certificates with the legends
set forth in paragraphs 5 and 6 above will be substituted by delivery of
certificates without such legend if (i) one year shall have elapsed from
the date I acquired the Shares received in the Merger and the provisions of
Rule 145(d)(2) are then available to me, (ii) two years shall have elapsed
from the date I acquired the Shares received in the Merger and the
provisions of Rule
<PAGE>
Wisconsin Energy Corporation
______________,______
Page 4
145(d)(3) are then applicable to me, or (iii) Wisconsin Energy has received
either an opinion of counsel, which opinion and counsel shall be reasonably
satisfactory to Wisconsin Energy, or a "no-action" letter obtained by me
from the staff of the Commission, to the effect that the restrictions
imposed by Rule 144 and Rule 145 under the Act no longer apply to me.
Very truly yours,
__________________________________
Name:
Accepted as of the _____ day of
_______________, _____.
WISCONSIN ENERGY CORPORATION
By:________________________________
Name:
Title:
<PAGE>
EXHIBIT 2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT by and between WISCONSIN ENERGY CORPORATION, a
Wisconsin corporation (the "Company"), and GEORGE E. WARDEBERG (the
"Executive"), dated as of the _____ day of _______________, 200__.
W I T N E S S E T H
WHEREAS, pursuant to an Agreement and Plan of Merger, dated as of June 27,
1999 (the "Merger Agreement"), among the Company, WICOR, Inc. and CEW
Acquisition, Inc., WICOR, Inc. has become a wholly-owned subsidiary of the
Company; and
WHEREAS, the Company further wishes to provide for the employment by it of
the Executive, and the Executive wishes to serve the Company, in the capacities
and on the terms and conditions set forth in this Agreement:
NOW, THEREFORE, it is hereby agreed as follows:
1. Employment Period. The Company shall employ the Executive, and the
-----------------
Executive shall serve the Company, on the terms and conditions set forth in this
Agreement, for the period (the "Employment Period") beginning at the Effective
Time of Merger as defined in the Merger Agreement (the "Effective Time") and
ending the last day of the 24th calendar month commencing on or immediately
after the Effective Time.
2. Position and Duties.
-------------------
(a) The Executive shall serve as the Vice Chairman of the Board of
Directors of the Company (the "Board") during the Employment Period, being
consulted by the Chairman of the Board and providing advice to the Chairman
with respect to the integration of the WICOR businesses with the Company
and the Company's organizational structure, staffing and future business
strategy, and with such duties and responsibilities as are customarily
assigned to such position, and such other duties and responsibilities not
inconsistent therewith as may from time to time be assigned to him by the
Board or by the Chairman. The Executive shall be a member of the Board on
the first day of the Employment Period and the Board shall propose the
Executive for re-election to the Board throughout the Employment Period.
<PAGE>
(b) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive
shall devote reasonable attention and time during normal business hours to
the business and affairs of the Company and, to the extent necessary to
discharge the responsibilities assigned to the Executive under this
Agreement, use the Executive's reasonable best efforts to carry out such
responsibilities faithfully and efficiently. It shall not be considered a
violation of the foregoing for the Executive to serve on corporate,
industry, civic or charitable boards or committees, so long as such
activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in accordance
with this Agreement.
3. Compensation.
------------
(a) Base Salary. The Executive's compensation during the Employment
-----------
Period shall be determined by the Board upon the recommendation of the
Compensation Committee of the Board (the "Compensation Committee"), subject
to the next sentence and Section 3(b). During the Employment Period, the
Executive shall receive an annual base salary ("Annual Base Salary") of not
less than the greater of (i) his annual base salary from WICOR, Inc. as in
effect immediately before the Effective Time or (ii) 90% of the base salary
paid to the Chairman of the Board of the Company during such period. The
Annual Base Salary shall be payable in accordance with the Company's
regular payroll practice for its senior executives, as in effect from time
to time. During the Employment Period, the Annual Base Salary shall be
reviewed by the Compensation Committee for possible increase at least
annually. Any increase in the Annual Base Salary shall not limit or reduce
any other obligation of the Company under this Agreement. The Annual Base
Salary shall not be reduced after any such increase, and the term "Annual
Base Salary" shall thereafter refer to the Annual Base Salary as so
increased.
(b) Incentive Compensation. During the Employment Period, the
----------------------
Executive shall participate in short-term incentive compensation plans and
long-term incentive compensation plans (the latter to consist of plans
offering stock options, restricted stock and other long-term incentive
compensation, as adopted and approved by the Board or the Compensation
Committee from time to time) providing him with an opportunity to earn
short-term and long-term incentive compensation (the "Incentive
Compensation") on a basis commensurate with other senior officers of the
Company, subject to the next sentence hereof, provided that he shall
receive an initial grant of non-qualified stock options covering 100,000
shares of Company stock as of the start of the Employment Period with an
exercise price equal to the then fair market value, vesting over a 3-year
period at the rate of one third (1/3rd) of such shares each year, based on
his continuation of service either as an officer or as a director of the
Company, to be exercisable over a 5-year period, to the extent vested,
after the later of his cessation of service as an officer or director of
the Company. The Executive shall receive an annual award under such
2
<PAGE>
short-term incentive plans at least equal to 90% of the annual award made
to the Chairman of the Board during the Employment Period (prorated for any
period of participation in such plans which is for less than one full year,
whether at the inception or on termination of the Employment Period) under
such plans; provided, however, that in no event shall the award be less
than an amount which when added to the Annual Base Salary is less on an
annualized basis than the salary and bonus actually received by the
Executive from WICOR, Inc. for the calendar year ending coincident with or
immediately prior to the Effective Time.
(c) Other Benefits. During the Employment Period and thereafter: (1)
--------------
the Executive shall be entitled to participate in all applicable savings
and retirement plans (including non-qualified supplemental executive
retirement plans and specifically including Benefits A and B under the
Company's Supplemental Executive Retirement Plan), practices, policies and
programs of the Company to the same extent as other senior executives of
the Company, (2) the Executive and/or the Executive's eligible dependents,
as the case may be, shall be eligible for participation in, and shall
receive all benefits under, all applicable welfare benefit plans,
practices, policies and programs provided by the Company, other than
severance plans, practices, policies and programs but including, without
limitation, medical, prescription, dental, disability, employee life
insurance, group life insurance, accidental death and travel accident
insurance plans and programs, and retiree welfare benefits on a basis
commensurate with other long-term senior officers of the Company and (3)
the Executive shall be entitled to past service credit under the Company's
Supplemental Executive Retirement Plan (the "SERP"), Benefit A, calculated
as if his participation in the Company's tax-qualified defined benefit
pension plan had commenced on the first day of the month following his
attainment of age 25 and as if the benefit formula under such pension plan
for all periods before December 31, 1995 was the same as that in effect on
December 31, 1995, and for all periods after December 31, 1995, pursuant to
the actual benefit formula used in such pension plan (including the
grandfathered minimum benefit provisions thereof), offset by the actuarial
equivalent of any benefits payable to the Executive at age 65 or any later
age at which such benefits commence from any qualified or non-qualified
defined benefit pension plans of WICOR, Inc. Actuarial equivalency for
this purpose shall be determined using the interest rate and mortality
table then in use for determining optional forms of annuity under the
Company's tax-qualified defined benefit pension plan, or, if Benefit A is
to be payable in a lump sum, actuarial equivalency shall be determined by
using the interest rate and mortality table referenced in Article VIII of
the SERP.
(d) Fringe Benefits. During the Employment Period, the Executive
---------------
shall be entitled to receive fringe benefits on a basis commensurate with
other senior officers of the Company.
3
<PAGE>
4. Termination of Employment.
-------------------------
(a) Death or Disability. The Executive's employment shall terminate
-------------------
automatically upon the Executive's death during the Employment Period. The
Company shall be entitled to terminate the Executive's employment because
of the Executive's Disability during the Employment Period. "Disability"
means that (i) the Executive has been unable, for the period specified in
the Company's disability plan for senior executives, but not less than a
period of 90 consecutive business days, to perform the Executive's duties
under this Agreement, as a result of physical or mental illness or injury,
and (ii) a physician selected by the Company or its insurers, and
acceptable to the Executive or the Executive's legal representative, has
determined that the Executive is disabled within the meaning of the
applicable disability plan for senior executives. A termination of the
Executive's employment by the Company for Disability shall be communicated
to the Executive by written notice, and shall be effective on the 30th day
after receipt of such notice by the Executive (the "Disability Effective
Date"), unless the Executive returns to full-time performance of the
Executive's duties before the Disability Effective Date.
(b) Termination by the Company.
--------------------------
(i) The Company may terminate the Executive's employment during
the Employment Period for Cause or without Cause. "Cause" means the
willful and continued failure of the Executive to substantially
perform his duties under this Agreement (other than as a result of
physical or mental injury) after the Board delivers to the Executive a
written demand for substantial performance that specifically
identifies the manner in which the Board believes that the Executive
has not substantially performed the Executive's duties, or illegal or
gross misconduct by the Executive in connection with his employment by
the Company, in either case that is willful and results in material
and demonstrable damage to the business or the reputation of the
Company. No act or failure to act on the part of the Executive shall
be considered "willful" unless it is done, or omitted to be done, by
the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the
Company. Any act or failure to act that is based upon authority given
pursuant to a resolution duly adopted by the Board, or the advice of
counsel for the Company, shall be conclusively presumed to be done, or
omitted to be done, by the Executive in good faith and in the best
interests of the Company.
(ii) A termination of the Executive's employment for Cause shall
not be effective unless it is accomplished in accordance with the
following procedures. The Company shall give the Executive written
notice ("Notice of Termination for Cause") of its intention to
terminate the Executive's employment for Cause, setting forth in
reasonable detail the specific conduct of the Executive
4
<PAGE>
that it considers to constitute Cause and the specific provision(s) of
this Agreement on which it relies, and stating the date, time and
place of the Special Board Meeting for Cause. The "Special Board
Meeting for Cause" means a meeting of the Board called and held
specifically for the purpose of considering the Executive's
termination for Cause, that takes place not less than 10 nor more than
20 business days after the Executive receives the Notice of
Termination for Cause. The Executive shall be given an opportunity,
together with counsel, to be heard at the Special Board Meeting for
Cause. The Executive's termination for Cause shall be effective when
and if a resolution is duly adopted at the Special Board Meeting for
Cause by affirmative vote of a majority of the entire membership of
the Board, excluding employee directors, stating that, in the good
faith opinion of the Board, the Executive is guilty of the conduct
described in the Notice of Termination for Cause and that such conduct
constitutes Cause under this Agreement.
(c) Good Reason.
-----------
(i) The Executive may terminate employment for Good Reason or
without Good Reason. "Good Reason" means:
A. the assignment to the Executive of any duties or
responsibilities inconsistent in any respect with Section 2(a) of
this Agreement, or any other action by the Company that results
in a diminution in the Executive's position, authority, duties or
responsibilities, other than an isolated, insubstantial and
inadvertent action that is not taken in bad faith and is remedied
by the Company promptly after receipt of notice thereof from the
Executive;
B. any failure by the Company to comply with any provision
of Section 3 of this Agreement, other than an isolated,
insubstantial and inadvertent failure that is not taken in bad
faith and is remedied by the Company promptly after receipt of
notice thereof from the Executive;
C. any requirement by the Company that the Executive's
services be rendered primarily at a location or locations other
than the Milwaukee, Wisconsin general metropolitan area.
D. any failure by the Company to comply with paragraph (c)
of Section 10 of this Agreement; or
E. any other substantial breach of this Agreement by the
Company that is not remedied by the Company promptly after
receipt of notice thereof from the Executive.
5
<PAGE>
(ii) A termination of employment by the Executive for Good
Reason shall be effectuated by giving the Company written notice
("Notice of Termination for Good Reason") of the termination, setting
forth in reasonable detail the specific conduct of the Company that
constitutes Good Reason and the specific provision(s) of this
Agreement on which the Executive relies. A termination of employment
by the Executive for Good Reason shall be effective on the 5th
business day following the date when the Notice of Termination for
Good Reason is given, unless the notice sets forth a later date (which
date shall in no event be later than 30 days after the notice is
given).
(iii) A termination of the Executive's employment by the
Executive without Good Reason shall be effected by giving the Company
written notice of the termination.
(d) The failure to set forth any fact or circumstance in a Notice of
Termination for Cause or a Notice of Termination for Good Reason shall not
constitute a waiver of the right to assert, and shall not preclude the
party giving notice from asserting, such fact or circumstance in an attempt
to enforce any right under or provision of this Agreement.
(e) Date of Termination. The "Date of Termination" means the date of
-------------------
the Executive's death, the Disability Effective Date, the date on which the
termination of the Executive's employment by the Company for Cause or
without Cause or by the Executive for Good Reason is effective, or the date
on which the Executive gives the Company notice of a termination of
employment without Good Reason, as the case may be.
5. Obligations of the Company Upon Termination.
-------------------------------------------
(a) Other Than For Cause, Death or Disability, or For Good Reason.
-------------------------------------------------------------
If, during the Employment Period, the Company terminates the Executive's
employment for any reason other than Cause, death or Disability, or the
Executive terminates employment for Good Reason, the Company shall continue
to provide the Executive with the compensation and benefits set forth in
paragraphs (a), (b) and (c) of Section 3 and the continuing protection of
Section 5(d) as if he had remained employed by the Company through the end
of the Employment Period and then retired. The Incentive Compensation for
such period shall be equal to the maximum Incentive Compensation that the
Executive would have been eligible to earn for such period. In lieu of
stock options, restricted stock and other stock-based awards, the Executive
shall be paid cash equal to the fair market value (without regard to any
restrictions) of the stock options, restricted stock and other stock-based
awards that would otherwise have been granted. To the extent that any
benefits described in Section 3(c) cannot be provided pursuant to the plan
or program provided by the Company for its executives, the Company shall
provide such benefits outside such plan or program at no additional cost
(including without limitation
6
<PAGE>
tax cost) to the Executive and his family. Finally, during any period when
the Executive is eligible to receive medical, prescription or dental
benefits under another employer-provided plan, the benefits provided by the
Company under this Section 5(a) may be made secondary to those provided
under such other plan. In addition to the foregoing, any restricted stock
outstanding on the Date of Termination and all options outstanding on the
Date of Termination shall be fully vested and exercisable and shall remain
in effect and exercisable until the end of the Employment Period (absent
the prior death of the Executive) as if the Executive remained employed
until then and shall thereafter remain exercisable in accordance with the
applicable terms respecting retired employees. The payments and benefits
provided pursuant to this Section 5(a) are intended as liquidated damages
for a termination of the Executive's employment by the Company other than
for Cause or Disability or for the actions of the Company leading to a
termination of the Executive's employment by the Executive for Good Reason,
and shall be the sole and exclusive remedy therefor.
(b) Death and Disability. If the Executive's employment is terminated
--------------------
by reason of the Executive's death or Disability during the Employment
Period, the Company shall pay to the Executive or, in the case of the
Executive's death, to the Executive's designated beneficiaries (or, if
there is no such beneficiary, to the Executive's estate or legal
representative), in a lump sum in cash within 30 days after the Date of
Termination, the sum of the following amounts (the "Accrued Obligations"):
(1) any portion of the Executive's Annual Base Salary through the Date of
Termination that has not yet been paid; (2) an amount equal to the product
of (A) the maximum annual bonus that the Executive would have been eligible
to earn for the period during which such termination occurs, and (B) a
fraction, the numerator of which is the number of days in such period
through the Date of Termination, and the denominator of which is the total
number of days in the relevant period; and (3) any accrued but unpaid
Incentive Compensation and vacation pay. The Company shall have no further
obligations under this Agreement, except as specified in Section 5(d) which
shall continue to apply and in Section 6 below.
(c) By the Company For Cause; By the Executive Other Than For Good
--------------------------------------------------------------
Reason. If the Executive's employment is terminated by the Company for
------
Cause during the Employment Period, the Company shall pay to the Executive
the Annual Base Salary through the Date of Termination and all compensation
and benefits payable to the Executive under the terms of the Company's
compensation and benefit plans, programs or arrangements as in effect
immediately prior to the Date of Termination. If the Executive voluntarily
terminates employment during the Employment Period other than for Good
Reason, the Executive shall have no liability to the Company for breach of
this Agreement and the Company shall pay the Accrued Obligations to the
Executive in a lump sum in cash within 30 days of the Date of Termination
and the Company shall have no further obligations under this Agreement,
except as specified in Section 6 below;
7
<PAGE>
provided that if such voluntary termination by the Executive occurs after
completion of six months of service, but not otherwise, Section 5(d) shall
also continue to apply.
(d) Certain Increase in Payments.
----------------------------
(i) Notwithstanding any other provision of this Agreement, if
any portion of any payment under this Agreement, or under any other
agreement with or plan of the Company or its affiliates (in the
aggregate "Total Payments"), would constitute an"excess parachute
payment," Executive shall be paid an additional amount (the "Gross-Up
Payment") such that the net amount retained by Executive after
deduction of any excise tax imposed under Section 4999 of the Internal
Revenue Code of 1986, as amended (the "Code"), any interest charges or
penalties in respect of the imposition of such excise tax (but not any
federal, state or local income tax, or employment tax) on the Total
Payments, any federal, state and local income tax, employment tax, and
excise tax upon the payment provided for by this paragraph (i) of
Section 5(d), shall be equal to the Total Payments. For purposes of
determining the amount of the Gross-Up Payment, Executive shall be
deemed to pay federal income tax and employment taxes at the highest
marginal rate of federal income and employment taxation in the
calendar year in which the Gross-Up Payment is to be made and state
and local income taxes at the highest marginal rate of taxation in the
state and locality of Executive's domicile for income tax purposes on
the date the Gross-Up Payment is made, net of the maximum reduction in
federal income taxes that may be obtained from the deduction of such
state and local taxes.
(ii) For purposes of this Agreement, the terms "excess parachute
payment" and "parachute payments" shall have the meanings assigned to
them in Section 280G of the Code 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 20 business days
following notice from either party to the other of the 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,
the Executive and the Company, at the Company's expense, shall obtain
the opinion (which need not be unqualified) of nationally recognized
tax counsel ("National Tax Counsel") selected by the Company's
independent auditors and reasonably acceptable to the Executive (which
may be regular outside counsel to the Company), which opinion sets
forth (i) the amount of the Base Period Income, (ii) the amount and
present value of Total Payments and (iii) the amount and present value
of any excess parachute payments. As used in this Agreement, the term
"Base Period Income" means an amount equal to the Executive's
"annualized includible compensation for the base period" as defined in
Section 280G(d)(1) of the Code. For purposes of such opinion, the
value of any
8
<PAGE>
noncash benefits or any deferred payment or benefit shall be
determined by the Company's independent auditors in accordance with
the principles of Section 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. The opinion of National Tax Counsel shall be addressed to
the Company and the Executive and shall be binding upon the Company
and the Executive. If such National Tax Counsel so requests in
connection with the opinion required by this paragraph (ii) of Section
5(d), the Executive and the Company shall obtain the advice of a firm
of recognized executive compensation consultants as to the
reasonableness of any item of compensation to be received by the
Executive solely with respect to its status under Section 280G of the
Code and the regulations thereunder. Within 5 days after the National
Tax Counsel's opinion is received by the Company and the Executive,
the Company shall pay (or cause to be paid) or distribute (or cause to
distribute) to or for the benefit of Executive such amounts as are
then due to Executive under this Agreement.
(iii) In the event that upon any audit by the Internal Revenue
Service, or by a state or local taxing authority, of the Total
Payments or Gross-Up Payment, a change is finally determined to be
required in the amount of taxes paid by Executive, appropriate
adjustments shall be made under this Agreement such that the net
amount which is payable to the Executive after taking into account the
provisions of Section 4999 of the Code shall reflect the intent of the
parties as expressed in paragraph (i) above, in the manner determined
by the National Tax Counsel.
(iv) The Company agrees to bear all costs associated with, and
to indemnify and hold harmless, the National Tax Counsel of and from
any and all claims, damages, and expenses resulting from or relating
to its determinations pursuant to paragraphs (ii) and (iii) above,
except for claims, damages or expenses resulting from the gross
negligence or willful misconduct of such firm.
6. Non-Exclusivity of Rights. Nothing in this Agreement shall prevent or
-------------------------
limit the Executive's continuing or future participation in any plan, program,
policy or practice provided by the Company or any of its affiliated companies
for which the Executive may qualify, nor, subject to Section 11(f), shall
anything in this Agreement limit or otherwise affect such rights as the
Executive may have under any contract or agreement with the Company or any of
its affiliated companies. However, the Key Executive Employment and Severance
Agreement between WICOR, Inc. and the Executive dated as of July 1, 1997 is
expressly terminated as a result of the execution of this Agreement and the
Executive hereby waives all rights thereunder. Vested benefits and other amounts
that the Executive is otherwise entitled to receive under the Incentive
Compensation, the SERP [including the SERP benefits described in Section 3(c)(1)
and (3)], or any other plan, policy, practice or program of, or any contract or
agreement with, the
9
<PAGE>
Company or any of its affiliated companies on or after the Date of Termination
shall be payable in accordance with the terms of each such plan, policy,
practice, program, contract or agreement, as the case may be, except as
explicitly modified by this Agreement.
7. Full Settlement. The Company's obligation to make the payments
---------------
provided for in, and otherwise to perform its obligations under, this Agreement
shall not be affected by any set-off, counterclaim, recoupment, defense or other
claim, right or action that the Company may have against the Executive or
others. In no event shall the Executive be obligated to seek other employment or
take any other action by way of mitigation of the amounts payable to the
Executive under any of the provisions of this Agreement and, except as
specifically provided in Section 5(a), such amounts shall not be reduced,
regardless of whether the Executive obtains other employment.
8. Confidential Information. The Executive shall hold in a fiduciary
------------------------
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its affiliated companies and
their respective businesses that the Executive obtains during the Executive's
employment by the Company or any of its affiliated companies and that is not
public knowledge (other than as a result of the Executive's violation of this
Section 8) ("Confidential Information"). The Executive shall not communicate,
divulge or disseminate Confidential Information at any time during or after the
Executive's employment with the Company, except with the prior written consent
of the Company or as otherwise required by law or legal process. In no event
shall any asserted violation of the provisions of this Section 8 constitute a
basis for deferring or withholding any amounts otherwise payable to the
Executive under this Agreement.
9. Attorneys' Fees. The Company agrees to pay, as incurred, to the
---------------
fullest extent permitted by law, all legal fees and expenses that the Executive
may reasonably incur as a result of any contest (regardless of the outcome) by
the Company, the Executive or others of the validity or enforceability of or
liability under, or otherwise involving, any provision of this Agreement,
together with interest on any delayed payment at the applicable federal rate
provided for in Section 7872(f)(2)(A) of the Code.
10. Successors.
----------
(a) This Agreement is personal to the Executive and, without the
prior written consent of the Company, shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution.
This Agreement shall inure to the benefit of and be enforceable by the
Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
10
<PAGE>
(c) The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company expressly to
assume and agree to perform this Agreement in the same manner and to the
same extent that the Company would have been required to perform it if no
such succession had taken place. As used in this Agreement, "Company"
shall mean both the Company as defined above and any such successor that
assumes and agrees to perform this Agreement, by operation of law or
otherwise.
11. Miscellaneous.
-------------
(a) This Agreement shall be governed by, and construed in accordance
with, the laws of the State of Wisconsin, without reference to principles
of conflict of laws. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect. This Agreement may not
be amended or modified except by a written agreement executed by the
parties hereto or their respective successors and legal representatives.
(b) All notices and other communications under this Agreement shall
be in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Executive: ___________________________________
___________________________________
___________________________________
If to the Company: Wisconsin Energy Corporation
Attn: Calvin H. Baker, Treasurer
and Chief Financial Officer
P.O. Box 2949
231 West Michigan Street
Milwaukee, WI 53201
Fax No.: (414) 221-5068
With a Copy to: Quarles & Brady LLP
Attn: Patrick M. Ryan
411 East Wisconsin Avenue
Milwaukee, WI 53202
Fax No.: (414) 271-3552
or to such other address as either party furnishes to the other in writing in
accordance with this paragraph (b) of Section 11. Notices and communications
shall be effective when actually received by the addressee.
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(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement. If any provision of this Agreement shall be
held invalid or unenforceable in part, the remaining portion of such
provision, together with all other provisions of this Agreement, shall
remain valid and enforceable and continue in full force and effect to the
fullest extent consistent with law.
(d) Notwithstanding any other provision of this Agreement, the
Company may withhold from amounts payable under this Agreement all federal,
state, local and foreign taxes that are required to be withheld by
applicable laws or regulations.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provisions of, or to assert, any right under, this
Agreement (including, without limitation, the right of the Executive to
terminate employment for Good Reason pursuant to paragraph (c) of Section 4
of this Agreement) shall not be deemed to be a waiver of such provision or
right or of any other provision of or right under this Agreement.
(f) The Executive and the Company acknowledge that this Agreement
supersedes any other agreement between them concerning the subject matter
hereof.
(g) The rights and benefits of the Executive under this Agreement may
not be anticipated, assigned, alienated or subject to attachment,
garnishment, levy, execution or other legal or equitable process except as
required by law. Any attempt by the Executive to anticipate, alienate,
assign, sell, transfer, pledge, encumber or charge the same shall be void.
Payments hereunder shall not be considered assets of the Executive in the
event of insolvency or bankruptcy.
(h) This Agreement may be executed in several counterparts, each of
which shall be deemed an original, and said counterparts shall constitute
but one and the same instrument.
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IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization of its Board, the Company has caused this
Agreement to be executed in its name on its behalf, all as of the day and year
first above written.
EXECUTIVE
________________________________________
George E. Wardeberg
WISCONSIN ENERGY CORPORATION
By:_____________________________________
Richard A. Abdoo
Chairman of the Board, President and
Chief Executive Officer
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EXHIBIT 3
WISCONSIN ENERGY CORPORATION
SPECIAL EXECUTIVE SEVERANCE POLICY
Introduction
- ------------
Wisconsin Energy Corporation, a Wisconsin corporation ("Wisconsin Energy")
has entered into an Agreement and Plan of Merger dated as of June 27, 1999 (the
"Merger Agreement") among Wisconsin Energy, WICOR, Inc. and CEW Acquisition,
Inc. whereby WICOR, Inc. will become a wholly-owned subsidiary of Wisconsin
Energy (the "WICOR Transaction") and although no change of control of Wisconsin
Energy will occur in connection with such acquisition, the inevitable
adjustments that will occur following the acquisition may result in loss or
distraction of employees of Wisconsin Energy and its subsidiaries to the
detriment of Wisconsin Energy and its shareholders.
Accordingly, the Board of Directors of Wisconsin Energy (the "Board") has
determined that appropriate steps should be taken to assure Wisconsin Energy of
the continued employment and attention and dedication to duty of its employees
and to seek to ensure the availability of their continued service,
notwithstanding the closing of the WICOR Transaction.
Therefore, in order to fulfill the above purposes, the following plan has
been developed and is hereby adopted.
ARTICLE I
ESTABLISHMENT OF PLAN
As of the Effective Time of Merger (as defined in the Merger Agreement),
Wisconsin Energy hereby establishes a separation compensation plan known as the
Wisconsin Energy Special Executive Severance Policy, as set forth in this
document.
ARTICLE II
DEFINITIONS
As used herein the following words and phrases shall have the following
respective meanings unless the context clearly indicates otherwise.
(a) Annual Compensation. The sum of a Participant's Annual Salary and
-------------------
Annual Incentive Award.
(b) Annual Incentive Award. The highest annual cash incentive award
----------------------
earned by a Participant during any of the 3 years prior to a termination of
employment entitling the Participant to a Separation Benefit.
<PAGE>
(c) Annual Salary. The Participant's regular annual base salary
-------------
immediately prior to his or her termination of employment, including
compensation converted to other benefits under a flexible pay arrangement
maintained by the Corporation or deferred pursuant to a written plan or
agreement with the Corporation, but excluding overtime pay, allowances,
premium pay, compensation paid or payable under any Corporation long-term
or short-term incentive plan or any similar payment.
(d) Board. The Board of Directors of Wisconsin Energy.
-----
(e) Code. The Internal Revenue Code of 1986, as amended from time to
----
time.
(f) Committee. The Compensation Committee of the Board.
---------
(g) Corporation. Wisconsin Energy and any successor thereto.
-----------
(h) Date of Termination. The date on which a Participant ceases to be
-------------------
an Employee.
(i) Employee. Any full-time, regular-benefit, non-bargaining employee
--------
of an Employer. The term shall exclude all individuals employed as
independent contractors, temporary employees, other benefit employees, non-
benefit employees, leased employees, even if it is subsequently determined
that such classification is incorrect.
(j) Employer. The Corporation, WICOR, Inc. as of the Effective Time
--------
of Merger as defined in the Merger Agreement, or a Subsidiary which has
adopted the Plan pursuant to Article V hereof.
(k) Participant. An individual who is designated as such pursuant to
-----------
Section 3.1.
(l) Plan. The Wisconsin Energy Special Executive Severance Policy.
----
(m) Separation Benefits. The benefits described in Section 4.3 that
-------------------
are provided to qualifying Participants under the Plan. Such benefits are
also referred to as Tier 1 benefits.
(n) Separation Period. The period beginning on a Participant's Date
-----------------
of Termination and ending on the third anniversary thereof.
(o) Subsidiary. Any corporation in which the Corporation, directly or
----------
indirectly, holds a majority of the voting power of such corporation's
outstanding shares of capital stock.
(p) Target Annual Incentive. The Annual Incentive Award that the
-----------------------
Participant would have earned for the year in which his or her Date of
Termination occurs, if the target goals had been achieved.
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(q) WICOR Closing Date. The Effective Time of Merger as defined in
------------------
the Merger Agreement.
ARTICLE III
ELIGIBILITY
3.1 Participation. Each of the individuals named on Schedule 1 hereto
-------------
shall be a Participant in the Plan. Schedule 1 may be amended by the Board from
time to time to add individuals as Participants.
3.2 Duration of Participation. A Participant shall only cease to be a
-------------------------
Participant in the Plan as a result of an amendment or termination of the Plan
complying with Article VII of the Plan, or when he ceases to be an Employee of
any Employer, unless, at the time he ceases to be an Employee, such Participant
is entitled to payment of Separation Benefits as provided in the Plan or there
has been an event or occurrence described in Section 4.2(a) which would enable
the Participant to terminate his employment and receive Separation Benefits. A
Participant entitled to payment of a Separation Benefit or any other amounts
under the Plan shall remain a Participant in the Plan until the full amount of
the Separation Benefit and any other amounts payable under the Plan have been
paid to the Participant.
ARTICLE IV
SEPARATION BENEFITS
4.1 Right to Separation Benefit. A Participant shall be entitled to
---------------------------
receive Separation Benefits in accordance with Section 4.3 if the Participant
ceases to be an Employee for any reason specified in Section 4.2(a).
4.2 Termination of Employment.
-------------------------
(a) Terminations Which Give Rise to Separation Benefits Under This
--------------------------------------------------------------
Plan. Except as set forth in Section 4.2(b), a Participant shall be
----
entitled to Separation Benefits if at any time on or after the WICOR
Closing Date and before the end of a 2-year period following the WICOR
Closing Date:
(i) the Participant ceases to be an Employee by action of the
Employer or any of its affiliates (excluding any transfer to another
Employer);
(ii) the Participant's Annual Salary is reduced below the higher
of (A) the amount in effect immediately before the WICOR Closing Date
and (B) the highest amount in effect at any time thereafter, and the
Participant ceases to be an Employee by his or her own action within
90 days after the occurrence of such reduction;
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(iii) the Participant's duties and responsibilities or the
program of incentive compensation or retirement and welfare benefits
offered to the Participant are diminished in comparison to the duties
and responsibilities or the program of incentive compensation or
retirement and welfare benefits enjoyed by the Participant immediately
before the WICOR Closing Date, and the Participant ceases to be an
Employee by his or her own action within 90 days after the occurrence
after such reduction;
(iv) the Participant is required to be based at a location more
than 35 miles from the location where the Participant was based and
performed services immediately before the WICOR Closing Date, and the
Participant ceases to be an Employee by his or her own action within
90 days after such relocation;
(v) an Employer or any affiliate of an Employer sells or
otherwise distributes or disposes of the subsidiary, branch or other
business unit in which the Participant was employed before such sale,
distribution or disposition and the requirements of Section
4.2(b)(iii) are not met, and the Participant ceases to be an Employee
by action of the Employer upon or within 90 days after such sale,
distribution or disposition; or
(vi) the Participant ceases to be an Employee by his or her own
action within 6 months after completion of one year of service
following the WICOR Closing Date.
(b) Terminations Which Do Not Give Rise to Separation Benefits Under
----------------------------------------------------------------
This Plan. If a Participant's employment is terminated for Cause,
---------
disability, death, or a qualified sale of business (as those terms are
defined below), or voluntarily by the Participant (whether on account of
retirement or otherwise) in the absence of an event described in Section
4.2(a)(ii), 4.2(a)(iii), 4.2(a)(iv) or 4.2(a)(vi), the Participant shall
not be entitled to Separation Benefits under the Plan.
(i) A termination for disability shall have occurred where a
Participant is terminated because illness or injury has prevented him
or her from performing his or her duties (as they existed immediately
prior to the illness or injury) on a full time basis for 180
consecutive business days.
(ii) A termination for Cause shall have occurred where a
Participant is terminated because of:
A. the willful and continued failure of the Participant
to perform substantially the Participant's duties with the
Corporation or one of its affiliates (other than any such failure
resulting from incapacity due to physical or mental illness),
after a written demand for substantial performance is delivered
to the Participant by the Board or an elected officer of the
Corporation which specifically identifies the manner in which the
4
<PAGE>
Board or the elected officer believes that the Participant has
not substantially performed the Participant's duties, or
B. the willful engaging by the Participant in illegal
conduct or gross misconduct which is materially and demonstrably
injurious to the Corporation.
For purposes of this provision, no act or failure to act, on the
part of the Participant, shall be considered "willful" unless it is
done, or omitted to be done, by the Participant in bad faith or
without reasonable belief that the Participant's action or omission
was in the best interests of the Corporation. Any act, or failure to
act, based upon authority given pursuant to a resolution duly adopted
by the Board or upon the advice of counsel for the Corporation, shall
be conclusively presumed to be done, or omitted to be done, by the
Participant in good faith and in the best interests of the
Corporation.
(iii) A termination due to a qualified sale of business shall
have occurred where an Employer or an affiliate of an Employer has
sold, distributed or otherwise disposed of the subsidiary, branch or
other business unit in which the Participant was employed before such
sale, distribution or disposition and the Participant has been offered
employment with the purchaser of such subsidiary, branch or other
business unit or the corporation or other entity which is the owner
thereof on substantially the same terms and conditions under which he
worked for the Employer (including, without limitation, base salary,
duties and responsibilities, program of benefits and location where
based). Such terms and conditions shall also include, without
limitation, a legally binding agreement or plan covering such
Participant, providing that upon a termination of employment with the
subsidiary, branch or business unit (or the corporation or other
entity which is the owner thereof) or any successor thereto of the
kind described in Article VI of this Plan, at any time before the end
of a 2-year period following the WICOR Closing Date, the Participant's
employer or any successor will pay to each such former Participant an
amount equal to the Separation Benefit and other benefits that such
former Participant would have received under the Plan had he been a
Participant at the time of such termination. For purposes of this
subsection, the new employer plan or agreement must treat service with
any Employer (irrespective of whether the Employer was an affiliate of
the Corporation or the Employee was a Participant at the time of such
service) and the new employer as continuous service for purposes of
calculating Separation Benefits.
4.3 Separation Benefits.
-------------------
(a) If a Participant's employment is terminated in circumstances
entitling him to a separation benefit as provided in Section 4.2(a), the
Participant's Employer shall pay such Participant, within 20 days of the
Date of Termination, a cash lump sum as set forth in Section 4.3(b) and the
continued benefits set forth as Section 4.3(c). For purposes of
determining the benefits set forth in Sections 4.3(b) and 4.3(c), if the
termination of the
5
<PAGE>
Participant's employment is based upon a reduction of the Participant's
Annual Salary or benefits as described in Section 4.2(a)(ii) or
4.2(a)(iii), such reduction shall be ignored.
(b) The cash lump sum referred to in Section 4.3(a) shall equal the
aggregate of the following amounts:
(i) the sum of (A) the Participant's Annual Salary through the
Date of Termination to the extent not theretofore paid, (B) the
product of (1) the Target Incentive and (2) a fraction, the numerator
of which is the number of days in such year through the date of
Termination, and the denominator of which is 365, and (C) any accrued
vacation pay, in each case to the extent not theretofore paid and in
full satisfaction of the rights of the Participant thereto;
(ii) an amount equal to the product of (A) three, and (B) the
sum of (1) the Participant's Annual Salary and (2) the higher of the
Target Annual Incentive Award or the Annual Incentive Award; and
(iii) an amount equal to the difference between (A) the
actuarial equivalent of the benefit under the Corporation's qualified
defined benefit retirement plan (the "Retirement Plan") and any excess
or supplemental retirement plans in which the Participant participates
(together, the "SERP") which the Participant would receive if his or
her employment continued during the Separation Period, assuming that
the Participant's compensation during the Separation Period would have
been equal to his or her compensation as in effect immediately before
the termination or, if higher, immediately before the WICOR Closing
Date, and (B) the actuarial equivalent of the Participant's actual
benefit (paid or payable), if any, under the Retirement Plan and the
SERP as of the Date of Termination. The actuarial assumptions used for
purposes of determining actuarial equivalence shall be no less
favorable to the Participant than the most favorable of those in
effect under the Retirement Plan and the SERP on the Date of
Termination and the WICOR Closing Date, as the case may be.
(c) The continued benefits referred to above shall be the provision
to the Participant and his or her family during the Separation Period of
medical, dental and life insurance benefits as if the Participant's
employment had not been terminated; provided, however, that if the
Participant becomes reemployed with another employer and is eligible to
receive medical or other welfare benefits under another employer-provided
plan, the medical and other welfare benefits described herein shall be
secondary to those provided under such other plan during such applicable
period of eligibility. For purposes of determining eligibility (but not the
time of commencement of benefits) of the Participant for retiree medical,
dental and life insurance benefits under the Corporation's plans,
practices, programs and policies, the Participant shall be considered to
have remained employed during the Separation Period and to have retired on
the last day of such period.
To the extent any benefits described in this Section 4.3(c) cannot be
provided pursuant to the appropriate plan or program maintained for Employees,
the Employer shall provide such benefits
6
<PAGE>
outside such plan or program at no additional cost (including without limitation
tax cost) to the Participant.
4.4 Other Benefits Payable. The cash lump sum and continuing benefits
----------------------
described in Section 4.3 above shall be payable in addition to, and not in lieu
of, all other accrued or vested or earned but deferred compensation, rights,
options or other benefits which may be owed to a Participant upon or following
termination, including but not limited to accrued vacation or sick pay, amounts
or benefits payable under any bonus or other compensation plans, stock option
plan, stock ownership plan, stock purchase plan, restricted stock plan, life
insurance plan, health plan, disability plan or similar or successor plan, but
excluding any severance pay under any severance plan, practice or program or pay
in lieu of notice required to be paid to such Participant under applicable law.
4.5 Certain Reduction of Payments by the Corporation.
------------------------------------------------
Notwithstanding any other provision of this Plan, if any portion of the
Separation Benefits or any other payment under any other agreement with or plan
of the Corporation or the Employer (in the aggregate "Total Payments"), would
constitute an "excess parachute payment," then the Total Payments to be made to
the Participant shall be reduced such that the value of the aggregate Total
Payments that the Participant is entitled to receive shall be One Dollar ($1)
less than the maximum amount which the Participant 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 Corporation may pay without
loss of deduction under Section 280G(a) of the Code (or any successor
provision). For purposes of this Plan, 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
Corporation to the Participant of its belief that there is a payment or benefit
due the Participant which will result in an excess parachute payment as defined
in Section 280G of the Code (or any successor provision), the Participant and
the Corporation, at the Corporation's expense, shall obtain the opinion (which
need not be unqualified) of the Corporation'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 4.5. As used in this
Section 4.5, "Base Period Income" means the Participant'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
Corporation'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 Corporation and the Participant. Such opinion shall be dated as of the
Participant's date of termination of employment and addressed to the Corporation
and the Participant and shall be binding, absent manifest error, upon the
Corporation and the Participant. If such opinion determines that there would be
an excess parachute payment, the Separation 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 Participant in writing delivered to
the Corporation within 30 days of
7
<PAGE>
the Participant's receipt of such opinion or, if the Participant fails to so
notify the Corporation, then as the Corporation shall reasonably determine, so
that under the bases of calculations set forth in such opinion there will be no
excess parachute payment. If such auditors so request in connection with the
opinion required by this Section, the Participant and the Corporation shall
obtain, at the Corporation's expense, and the auditors may rely on in providing
the opinion, the advice of a firm of recognized executive compensation
consultants as to the reasonableness of any item of compensation to be received
by the Participant. Notwithstanding the foregoing, the calculations provided for
herein shall be based upon the conclusive presumption that the following are
reasonable: the compensation payments made under Section 4.3(b)(i) as well as
any other compensation, earned prior to the date of the Participant's
termination of employment pursuant to the Corporation's compensation programs if
such payments would have been made in the future in any event, even though the
timing of such payment is triggered by the Change of Control. If the provisions
of Sections 280G and 4999 of the Code (or any successor provisions) are repealed
without succession, then this Section 4.5 shall be of no further force or
effect.
The Participant shall notify the Corporation in writing of any claim by the
Internal Revenue Service that, if successful, would subject the Participant to
the tax imposed by Section 4999 of the Code. Such notification shall be given
as soon as practicable, but no later than 10 business days after the Participant
is informed in writing of such claim and shall apprise the Corporation of the
nature of the claim and the date on which such claim is requested to be paid.
The Participant shall not pay such claim prior to the expiration of the 30-day
period following the date on which he gives notice to the Corporation (or such
shorter period ending on the date that any payment of taxes with respect to the
claim is due). If the Corporation notifies the Participant in writing prior to
the expiration of such period that it desires to contest such claim, the
Participant agrees to give the Corporation any information reasonably requested
by the Corporation in writing relating to such claim, to take such action in
connection with contesting such claim as the Corporation shall reasonably
request in writing from time to time, including, without limitation, accepting
legal representation with respect to such claim by an attorney reasonably
selected by the Corporation, to cooperate with the Corporation in good faith in
order to effectively contest such claim, to permit the Corporation to control
any proceedings relating to such claim and to permit the Corporation to pursue
or forego any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority with respect to such claim. The
Corporation shall bear and pay directly all costs and expenses, including
additional interest and penalties, incurred in connection with such contest.
Further, provided only that Corporation receives timely written notification
from the Participant with respect to such claim, the Corporation will indemnify
and hold the Participant harmless, on an after-tax basis, for any excise tax
under Section 4999 of the Code (including interest and penalties thereon), such
that the net amount retained by the Participant after the deduction of any such
excise tax and any interest or penalties thereon (but not any federal, state or
local income tax) would be the same as if such excise tax had never applied.
4.6 Payment Obligations Absolute; Offset for WICOR Agreements and for
-----------------------------------------------------------------
Wisconsin Energy Senior Executive Severance Policy. Subject to Section 4.5 and
- --------------------------------------------------
except for the WICOR Agreements offset and offset for the Wisconsin Energy
Senior Executive Severance Policy described below, the obligations of the
Corporation and the Employers to pay the separation benefits described in
Section 4.3 shall be absolute and unconditional and shall not be affected by any
circumstances, including, without limitation, any set-off, counterclaim,
recoupment, defense or other right which the
8
<PAGE>
Corporation or any of its Subsidiaries may have against any Participant. In no
event shall a Participant be obligated to seek other employment or take any
other action by way of mitigation of the amounts payable to a Participant under
any of the provisions of this Plan, nor shall the amount of any payment
hereunder be reduced by any compensation earned by a Participant as a result of
employment by another employer, except as specifically provided in Section
4.3(c). The parties acknowledge that pursuant to the Merger Agreement the
Corporation (or a Subsidiary) has expressly assumed all of the obligations of
WICOR under certain Key Executive Employment and Severance Agreements between
WICOR and certain Participants dated in 1997 (the "WICOR Agreements"). The WICOR
Agreements provide for the payment of certain cash compensation (the "WICOR Cash
Amounts") and provision of certain benefits (the "WICOR Benefits") to the
Participants covered by a WICOR Agreement under certain circumstances. Should
the Corporation (or a Subsidiary) become obligated to make any WICOR Cash
Amounts or WICOR Benefits, such items shall be offset against any cash payments
or benefits otherwise due to such Participant under the terms of this Plan in
the manner provided herein. The WICOR Cash Amounts shall be offset dollar-for-
dollar against any cash payments otherwise due under this Plan. The
Corporation's obligation to such Participant with respect to the SERP referenced
in Section 4.3(b)(iii) of this Plan shall be subject to an actuarial equivalent
offset for the value of the additional pension benefit provided for in Section
8(b)(i) of the WICOR Agreement. Unless such Participant elects within 10 days
after the Date of Termination to commence pension benefits immediately, the
offset will be calculated for any such Participant who is younger than age 63 on
the Date of Termination as if such additional pension benefits were earned over
the 2-year period following such Participant's Date of Termination and became
payable at the end of such period and calculated for any such Participant who is
age 63 or older on the Date of Termination as if such additional pension
benefits were earned up until such Participant's 65th birthday and became
payable then. Actuarial equivalency for this purpose shall be determined using
the interest rate and mortality table referenced in Article VIII of the SERP.
The Corporation's obligation to such Participants under Section 4.3(c) hereof
with respect to life insurance and medical and dental benefits shall be
eliminated entirely if the Corporation (or a Subsidiary) becomes obligated under
Section 8(b)(ii) of the WICOR Agreement to provide welfare benefits of the same
type to such Participant and his or her family, for the period of time that such
welfare benefits are provided under the WICOR Agreement. However, if at the end
of such period of time, the Separation Period for welfare benefits of the same
type under Section 4.3(c) would not have expired, then the Corporation shall
extend the life insurance, medical and dental benefits under the terms of
Section 4.3(c) hereof for the remaining balance of the Separation Period. If the
Corporation (or a Subsidiary) becomes obligated to and provides outplacement
services to any such Participant under Section 8(b)(iii) of the WICOR Agreement,
the cost to the Corporation (and any Subsidiary) of such services shall be a
dollar-for-dollar offset against any cash payments otherwise due to such
Participant under this Plan. If any Participant in this Plan is also a
participant under the Wisconsin Energy Senior Executive Severance Policy adopted
by Wisconsin Energy in 1995 (the "SESP") and become entitled to any cash or
benefits under the terms of the SESP, the same shall be offset against any cash
or benefits otherwise due to such Participant under the terms of this Plan.
9
<PAGE>
ARTICLE V
PARTICIPATING EMPLOYERS
This Plan may be adopted by any Subsidiary of the Corporation. Upon such
adoption, the Subsidiary shall become an Employer hereunder and the provisions
of the Plan shall be fully applicable to the Employees of that Subsidiary who
are Participants pursuant to Section 3.1.
ARTICLE VI
SUCCESSOR TO CORPORATION
This Plan shall bind any successor of the Corporation, its assets or its
businesses (whether direct or indirect, by purchase, merger, consolidation or
otherwise) in the same manner and to the same extent that the Corporation would
be obligated under this Plan if no succession had taken place.
In the case of any transaction in which a successor would not by the
foregoing provision or by operation of law be bound by this Plan, the
Corporation shall require such successor expressly and unconditionally to assume
and agree to perform the Corporation's obligations under this Plan, in the same
manner and to the same extent that the Corporation would be required to perform
if no such succession had taken place. The term "Corporation," as used in this
Plan, shall mean the Corporation as hereinbefore defined and any successor or
assignee to the business or assets which by reason hereof becomes bound by this
Plan.
ARTICLE VII
DURATION, AMENDMENT AND TERMINATION
7.1 Duration. This Plan shall be deemed established, without the need for
--------
any further act by the Board, on the Effective Time of Merger and it shall
continue for a period of 2 years after the WICOR Closing Date, on which date it
will expire, unless extended for an additional period or periods by resolution
adopted by the Board.
However, once the WICOR Closing Date has occurred, then notwithstanding any
other provision of the Plan, the Plan shall continue in full force and effect
and shall not terminate or expire until after all Participants who become
entitled to any payments hereunder shall have received such payments in full and
all adjustments required to be made pursuant to Sections 4.5 and 4.6 have been
made.
If the Effective Time of Merger has not occurred on or prior to January 1,
2001, then this Plan will become void and of no force and effect.
7.2 Amendment. Except as provided in Section 7.1, the Plan shall not be
---------
subject to amendment, change, substitution, deletion, revocation or termination
in any respect which adversely affects the rights of Participants.
10
<PAGE>
7.3 Form of Amendment. The form of any amendment of the Plan shall be a
-----------------
written instrument signed by a duly authorized officer or officers of the
Corporation, certifying that the amendment has been approved by the Board.
ARTICLE VIII
MISCELLANEOUS
8.1 Indemnification. If a Participant institutes any legal action in
---------------
seeking to obtain or enforce or is required to defend in any legal action the
validity or enforceability of, any right or benefit provided by this Plan, the
Corporation or the Employer will pay for all actual reasonable legal fees and
expenses incurred (as incurred) by such Participant, regardless of the outcome
of such action.
8.2 Employment Status. This Plan does not constitute a contract of
-----------------
employment or impose on the Participant or the Participant's Employer any
obligation to retain the Participant as an Employee, to change the status of the
Participant's employment, or to change the Corporation's policies or those of
its Subsidiaries regarding termination of employment.
8.3 Claim Procedure. If an Employee or former Employee makes a written
---------------
request alleging a right to receive benefits under this Plan or alleging a right
to receive an adjustment in benefits being paid under the Plan, the Corporation
shall treat it as a claim for benefit. All claims for benefit under the Plan
shall be sent to the Human Resources Department of the Corporation and must be
received within 90 days after termination of employment. If the Corporation
determines that any individual who has claimed a right to receive benefits, or
different benefits, under the Plan is not entitled to receive all or any part of
the benefits claimed, it will inform the claimant in writing of its
determination and the reasons therefor in terms calculated to be understood by
the claimant. The notice will be sent within 90 days of the claim unless the
Corporation determines additional time, not exceeding 90 days, is needed. The
notice shall make specific reference to the pertinent Plan provisions on which
the denial is based, and describe any additional material or information that is
necessary. Such notice shall, in addition, inform the claimant what procedure
the claimant should follow to take advantage of the review procedures set forth
below in the event the claimant desires to contest the denial of the claim. The
claimant may within 90 days thereafter submit in writing to the Corporation a
notice that the claimant contests the denial of his or her claim by the
Corporation and desires a further review. The Corporation shall within 60 days
thereafter review the claim and authorize the claimant to appear personally and
review pertinent documents and submit issues and comments relating to the claim
to the persons responsible for making the determination on behalf of the
Corporation. The Corporation will render its final decision with specific
reasons therefor in writing and will transmit it to the claimant within 60 days
of the written request for review, unless the Corporation determines additional
time, not exceeding 60 days, is needed, and so notifies the Participant. If the
Corporation fails to respond to a claim filed in accordance with the foregoing
within 60 days or any such extended period, the Corporation shall be deemed to
have denied the claim.
11
<PAGE>
8.4 Validity and Severability. The invalidity or unenforceability of any
-------------------------
provision of the Plan shall not affect the validity or enforceability of any
other provision of the Plan, which shall remain in full force and effect, and
any prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
8.5 Governing Law. The validity, interpretation, construction and
-------------
performance of the Plan shall in all respects be governed by the laws of
Wisconsin, without reference to principles of conflict of law, except to the
extent preempted by federal law.
12
<PAGE>
SCHEDULE 1
Participants Eligible for Tier 1 Separation
Benefits if the Conditions Specified in
Section 4.2(a) are Satisfied:
----------------------------
<PAGE>
EXHIBIT 4
WISCONSIN ENERGY CORPORATION
EXECUTIVE SEVERANCE POLICY
Introduction
- ------------
Wisconsin Energy Corporation, a Wisconsin corporation ("Wisconsin Energy")
has entered into an Agreement and Plan of Merger dated as of June 27, 1999 (the
"Merger Agreement") among Wisconsin Energy, WICOR, Inc. and CEW Acquisition,
Inc. whereby WICOR, Inc. ("WICOR") will become a wholly-owned subsidiary of
Wisconsin Energy (the "WICOR Transaction") and although no change of control of
Wisconsin Energy will occur in connection with such acquisition, the inevitable
adjustments that will occur following the acquisition may result in loss or
distraction of employees of Wisconsin Energy and its subsidiaries to the
detriment of Wisconsin Energy and its shareholders.
Accordingly, the Board of Directors of Wisconsin Energy (the "Board") has
determined that appropriate steps should be taken to assure Wisconsin Energy of
the continued employment and attention and dedication to duty of its employees
and to seek to ensure the availability of their continued service,
notwithstanding the closing of the WICOR Transaction.
Therefore, in order to fulfill the above purposes, the following plan has
been developed and is hereby adopted.
ARTICLE I
ESTABLISHMENT OF PLAN
As of the Effective Time of Merger (as defined in the Merger Agreement),
Wisconsin Energy hereby establishes a separation compensation plan known as the
Wisconsin Energy Executive Severance Policy, as set forth in this document.
ARTICLE II
DEFINITIONS
As used herein the following words and phrases shall have the following
respective meanings unless the context clearly indicates otherwise.
(a) Annual Compensation. The sum of a Participant's Annual Salary and
-------------------
Annual Incentive Award.
<PAGE>
(b) Annual Incentive Award. The highest annual cash incentive award
----------------------
earned by a Participant during any of the 3 years prior to a termination of
employment entitling the Participant to a Separation Benefit.
(c) Annual Salary. The Participant's regular annual base salary
-------------
immediately prior to his or her termination of employment, including
compensation converted to other benefits under a flexible pay arrangement
maintained by the Corporation or deferred pursuant to a written plan or
agreement with the Corporation, but excluding overtime pay, allowances,
premium pay, compensation paid or payable under any Corporation long-term
or short-term incentive plan or any similar payment.
(d) Board. The Board of Directors of Wisconsin Energy.
-----
(e) Code. The Internal Revenue Code of 1986, as amended from time to
----
time.
(f) Committee. The Compensation Committee of the Board.
---------
(g) Corporation. Wisconsin Energy and any successor thereto.
-----------
(h) Date of Termination. The date on which a Participant ceases to be
-------------------
an Employee.
(i) Employee. Any full-time, regular-benefit, non-bargaining employee
--------
of an Employer. The term shall exclude all individuals employed as
independent contractors, temporary employees, other benefit employees, non-
benefit employees, leased employees, even if it is subsequently determined
that such classification is incorrect.
(j) Employer. The Corporation, WICOR, Inc. as of the Effective Time
--------
of Merger as defined in the Merger Agreement, or a Subsidiary which has
adopted the Plan pursuant to Article V hereof.
(k) Participant. An individual who is designated as such pursuant to
-----------
Section 3.1.
(l) Plan. The Wisconsin Energy Executive Severance Policy.
----
(m) Separation Benefits. The benefits described in Section 4.3 that
-------------------
are provided to qualifying Participants under the Plan.
(n) Separation Period. The period beginning on a Participant's Date
-----------------
of Termination and ending on the third anniversary thereof for a
Participant designated on Schedule 1 as eligible for a Tier 2 Separation
Benefit, ending on the second anniversary thereof for a Participant
designated as eligible for a Tier 3 Separation Benefit, and ending on the
first anniversary thereof for a Participant designated as eligible for a
Tier 4 Separation Benefit.
2
<PAGE>
(o) Subsidiary. Any corporation in which the Corporation, directly or
----------
indirectly, holds a majority of the voting power of such corporation's
outstanding shares of capital stock.
(p) Target Annual Incentive. The Annual Incentive Award that the
-----------------------
Participant would have earned for the year in which his or her Date of
Termination occurs, if the target goals had been achieved.
(q) WICOR Closing Date. The Effective Time of Merger as defined in
------------------
the Merger Agreement.
ARTICLE III
ELIGIBILITY
3.1 Participation. Each of the individuals named on Schedule 1 hereto
-------------
shall be a Participant in the Plan. Schedule 1 may be amended by the Board from
time to time to add individuals as Participants. All Participants will also be
designated on Schedule 1 as eligible for either a Tier 2, Tier 3 or Tier 4
Separation Benefit under the provisions of section 4.3(b)(ii) hereof.
3.2 Duration of Participation. A Participant shall only cease to be a
-------------------------
Participant in the Plan as a result of an amendment or termination of the Plan
complying with Article VII of the Plan, or when he ceases to be an Employee of
any Employer, unless, at the time he ceases to be an Employee, such Participant
is entitled to payment of Separation Benefits as provided in the Plan or there
has been an event or occurrence described in Section 4.2(a) which would enable
the Participant to terminate his employment and receive Separation Benefits. A
Participant entitled to payment of a Separation Benefit or any other amounts
under the Plan shall remain a Participant in the Plan until the full amount of
the Separation Benefit and any other amounts payable under the Plan have been
paid to the Participant.
ARTICLE IV
SEPARATION BENEFITS
4.1 Right to Separation Benefit. A Participant shall be entitled to
---------------------------
receive Separation Benefits in accordance with Section 4.3 if the Participant
ceases to be an Employee for any reason specified in Section 4.2(a).
4.2 Termination of Employment.
-------------------------
(a) Terminations Which Give Rise to Separation Benefits Under This
--------------------------------------------------------------
Plan. Except as set forth in Section 4.2(b), a Participant shall be
----
entitled to Separation Benefits if at any time on or after the WICOR
Closing Date and before the end of a 2-year period following the WICOR
Closing Date:
3
<PAGE>
(i) the Participant ceases to be an Employee by action of the
Employer or any of its affiliates (excluding any transfer to another
Employer);
(ii) the Participant's Annual Salary is reduced below the
higher of (A) the amount in effect immediately before the WICOR
Closing Date and (B) the highest amount in effect at any time
thereafter, and the Participant ceases to be an Employee by his or her
own action within 90 days after the occurrence of such reduction;
(iii) the Participant's duties and responsibilities or the
program of incentive compensation or retirement and welfare benefits
offered to the Participant are diminished in comparison to the duties
and responsibilities or the program of incentive compensation or
retirement and welfare benefits enjoyed by the Participant immediately
before the WICOR Closing Date, and the Participant ceases to be an
Employee by his or her own action within 90 days after the occurrence
after such reduction;
(iv) the Participant is required to be based at a location more
than 35 miles from the location where the Participant was based and
performed services immediately before the WICOR Closing Date, and the
Participant ceases to be an Employee by his or her own action within
90 days after such relocation; or
(v) an Employer or any affiliate of an Employer sells or
otherwise distributes or disposes of the subsidiary, branch or other
business unit in which the Participant was employed before such sale,
distribution or disposition and the requirements of Section
4.2(b)(iii) are not met, and the Participant ceases to be an Employee
by action of the Employer upon or within 90 days after such sale,
distribution or disposition.
(b) Terminations Which Do Not Give Rise to Separation Benefits Under
----------------------------------------------------------------
This Plan. If a Participant's employment is terminated for Cause,
---------
disability, death, or a qualified sale of business (as those terms are
defined below), or voluntarily by the Participant (whether on account of
retirement or otherwise) in the absence of an event described in Section
4.2 (a)(ii), 4.2(a)(iii) or 4.2(a)(iv), the Participant shall not be
entitled to Separation Benefits under the Plan.
(i) A termination for disability shall have occurred where a
Participant is terminated because illness or injury has prevented him
or her from performing his or her duties (as they existed immediately
prior to the illness or injury) on a full time basis for 180
consecutive business days.
(ii) A termination for Cause shall have occurred where a
Participant is terminated because of:
A. the willful and continued failure of the Participant to
perform substantially the Participant's duties with the
Corporation or one of its affiliates (other than any such failure
resulting from incapacity due to
4
<PAGE>
physical or mental illness), after a written demand for
substantial performance is delivered to the Participant by the
Board or an elected officer of the Corporation which specifically
identifies the manner in which the Board or the elected officer
believes that the Participant has not substantially performed the
Participant's duties, or
B. the willful engaging by the Participant in illegal
conduct or gross misconduct which is materially and demonstrably
injurious to the Corporation.
For purposes of this provision, no act or failure to act, on the
part of the Participant, shall be considered "willful" unless it is
done, or omitted to be done, by the Participant in bad faith or
without reasonable belief that the Participant's action or omission
was in the best interests of the Corporation. Any act, or failure to
act, based upon authority given pursuant to a resolution duly adopted
by the Board or upon the advice of counsel for the Corporation, shall
be conclusively presumed to be done, or omitted to be done, by the
Participant in good faith and in the best interests of the
Corporation.
(iii) A termination due to a qualified sale of business shall
have occurred where an Employer or an affiliate of an Employer has
sold, distributed or otherwise disposed of the subsidiary, branch or
other business unit in which the Participant was employed before such
sale, distribution or disposition and the Participant has been offered
employment with the purchaser of such subsidiary, branch or other
business unit or the corporation or other entity which is the owner
thereof on substantially the same terms and conditions under which he
worked for the Employer (including, without limitation, base salary,
duties and responsibilities, program of benefits and location where
based). Such terms and conditions shall also include, without
limitation, a legally binding agreement or plan covering such
Participant, providing that upon a termination of employment with the
subsidiary, branch or business unit (or the corporation or other
entity which is the owner thereof) or any successor thereto of the
kind described in Article VI of this Plan, at any time before the end
of a 2-year period following the WICOR Closing Date, the Participant's
employer or any successor will pay to each such former Participant an
amount equal to the Separation Benefit and other benefits that such
former Participant would have received under the Plan had he been a
Participant at the time of such termination. For purposes of this
subsection, the new employer plan or agreement must treat service with
any Employer (irrespective of whether the Employer was an affiliate of
the Corporation or the Employee was a Participant at the time of such
service) and the new employer as continuous service for purposes of
calculating Separation Benefits.
4.3 Separation Benefits.
-------------------
(a) If a Participant's employment is terminated in circumstances
entitling him to a separation benefit as provided in Section 4.2(a), the
Participant's Employer shall pay such
5
<PAGE>
Participant, within 20 days of the Date of Termination, a cash lump sum as
set forth in Section 4.3(b) and the continued benefits set forth as Section
4.3(c). For purposes of determining the benefits set forth in Sections
4.3(b) and 4.3(c), if the termination of the Participant's employment is
based upon a reduction of the Participant's Annual Salary or benefits as
described in Section 4.2(a)(ii) or 4.2(a)(iii), such reduction shall be
ignored.
(b) The cash lump sum referred to in Section 4.3(a) shall equal the
aggregate of the following amounts:
(i) the sum of (A) the Participant's Annual Salary through the
Date of Termination to the extent not theretofore paid, (B) the
product of (1) the Target Incentive and (2) a fraction, the numerator
of which is the number of days in such year through the date of
Termination, and the denominator of which is 365, and (C) any accrued
vacation pay, in each case to the extent not theretofore paid and in
full satisfaction of the rights of the Participant thereto;
(ii) an amount equal to the product of (A) the number specified
below for the Tier level applicable to the Participant as set forth on
Schedule 1, and (B) the sum of (1) the Participant's Annual Salary and
(2) the higher of the Target Annual Incentive Award or the Annual
Incentive Award:
Tier Level Multiplier for (1) Above
---------- ------------------------
Tier 2 3
Tier 3 2
Tier 4 1
(iii) an amount equal to the difference between (A) the
actuarial equivalent of the benefit under the Corporation's qualified
defined benefit retirement plan (the "Retirement Plan") and any excess
or supplemental retirement plans in which the Participant participates
(together, the "SERP") which the Participant would receive if his or
her employment continued during the Separation Period, assuming that
the Participant's compensation during the Separation Period would have
been equal to his or her compensation as in effect immediately before
the termination or, if higher, immediately before the WICOR Closing
Date, and (B) the actuarial equivalent of the Participant's actual
benefit (paid or payable), if any, under the Retirement Plan and the
SERP as of the Date of Termination. The actuarial assumptions used for
purposes of determining actuarial equivalence shall be no less
favorable to the Participant than the most favorable of those in
effect under the Retirement Plan and the SERP on the Date of
Termination and the WICOR Closing Date, as the case may be.
(c) The continued benefits referred to above shall be the provision
to the Participant and his or her family during the Separation Period of
medical, dental and life insurance benefits as if the Participant's
employment had not been terminated; provided, however, that if the
Participant becomes reemployed with another employer and is eligible to
6
<PAGE>
receive medical or other welfare benefits under another employer-provided
plan, the medical and other welfare benefits described herein shall be
secondary to those provided under such other plan during such applicable
period of eligibility. For purposes of determining eligibility (but not the
time of commencement of benefits) of the Participant for retiree medical,
dental and life insurance benefits under the Corporation's plans,
practices, programs and policies, the Participant shall be considered to
have remained employed during the Separation Period and to have retired on
the last day of such period.
To the extent any benefits described in this Section 4.3(c) cannot be
provided pursuant to the appropriate plan or program maintained for Employees,
the Employer shall provide such benefits outside such plan or program at no
additional cost (including without limitation tax cost) to the Participant.
4.4 Other Benefits Payable. The cash lump sum and continuing benefits
----------------------
described in Section 4.3 above shall be payable in addition to, and not in lieu
of, all other accrued or vested or earned but deferred compensation, rights,
options or other benefits which may be owed to a Participant upon or following
termination, including but not limited to accrued vacation or sick pay, amounts
or benefits payable under any bonus or other compensation plans, stock option
plan, stock ownership plan, stock purchase plan, restricted stock plan, life
insurance plan, health plan, disability plan or similar or successor plan, but
excluding any severance pay under any severance plan, practice or program or pay
in lieu of notice required to be paid to such Participant under applicable law.
4.5 Certain Reduction of Payments by the Corporation.
------------------------------------------------
Notwithstanding any other provision of this Plan, if any portion of the
Separation Benefits or any other payment under any other agreement with or plan
of the Corporation or the Employer (in the aggregate "Total Payments"), would
constitute an "excess parachute payment," then the Total Payments to be made to
the Participant shall be reduced such that the value of the aggregate Total
Payments that the Participant is entitled to receive shall be One Dollar ($1)
less than the maximum amount which the Participant 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 Corporation may pay without
loss of deduction under Section 280G(a) of the Code (or any successor
provision). For purposes of this Plan, 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
7
<PAGE>
successor provision). Within 60 days following delivery of a notice by the
Corporation to the Participant of its belief that there is a payment or benefit
due the Participant which will result in an excess parachute payment as defined
in Section 280G of the Code (or any successor provision), the Participant and
the Corporation, at the Corporation's expense, shall obtain the opinion (which
need not be unqualified) of the Corporation'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 4.5. As used in this
Section 4.5, "Base Period Income" means the Participant'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
Corporation'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 Corporation and the Participant. Such opinion shall be dated as of the
Participant's date of termination of employment and addressed to the Corporation
and the Participant and shall be binding, absent manifest error, upon the
Corporation and the Participant. If such opinion determines that there would be
an excess parachute payment, the Separation 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 Participant in writing delivered to
the Corporation within 30 days of the Participant's receipt of such opinion or,
if the Participant fails to so notify the Corporation, then as the Corporation
shall reasonably determine, so that under the bases of calculations set forth in
such opinion there will be no excess parachute payment. If such auditors so
request in connection with the opinion required by this Section, the Participant
and the Corporation shall obtain, at the Corporation's expense, and the auditors
may rely on in providing the opinion, the advice of a firm of recognized
executive compensation consultants as to the reasonableness of any item of
compensation to be received by the Participant. Notwithstanding the foregoing,
the calculations provided for herein shall be based upon the conclusive
presumption that the following are reasonable: the compensation payments made
under Section 4.3(b)(i) as well as any other compensation, earned prior to the
date of the Participant's termination of employment pursuant to the
Corporation's compensation programs if such payments would have been made in the
future in any event, even though the timing of such payment is triggered by the
Change of Control. If the provisions of Sections 280G and 4999 of the Code (or
any successor provisions) are repealed without succession, then this Section 4.5
shall be of no further force or effect.
The Participant shall notify the Corporation in writing of any claim by the
Internal Revenue Service that, if successful, would subject the Participant to
the tax imposed by Section 4999 of the Code. Such notification shall be given
as soon as practicable, but no later than 10 business days after the Participant
is informed in writing of such claim and shall apprise the Corporation of the
nature of the claim and the date on which such claim is requested to be paid.
The Participant shall not pay such claim prior to the expiration of the 30-day
period following the date on which he gives notice to the Corporation (or such
shorter period ending on the date that any payment of taxes with respect to the
claim is due). If the Corporation notifies the Participant in writing prior to
the expiration of such period that it desires to contest such claim, the
Participant agrees to give the Corporation any information reasonably requested
by the Corporation in writing relating to such claim, to take such action in
connection with contesting such claim as the Corporation shall reasonably
request in writing from time to time, including, without limitation, accepting
legal representation with respect to such claim by an attorney reasonably
selected by the Corporation, to cooperate with the Corporation in good faith in
order to effectively contest such claim, to permit the Corporation to control
any proceedings relating to such claim and to permit the Corporation to pursue
or forego any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority with respect to such claim. The
Corporation shall bear and pay directly all costs and expenses, including
additional interest and penalties) incurred in connection with such contest.
Further, provided only that Corporation receives timely written notification
from the Participant with respect to such claim, the Corporation will indemnify
and hold the Participant harmless, on an after-tax basis, for any excise tax
under Section 4999 of the Code (including interest and penalties
8
<PAGE>
thereon), such that the net amount retained by the Participant after the
deduction of any such excise tax and any interest or penalties thereon (but not
any federal, state or local income tax) would be the same as if such excise tax
had never applied.
4.6 Payment Obligations Absolute; Offset for Wisconsin Energy Senior
----------------------------------------------------------------
Executive Severance Policy. Subject to Section 4.5 and except for the Wisconsin
- --------------------------
Energy Senior Executive Severance Policy offset described below, the obligations
of the Corporation and the Employers to pay the separation benefits described in
Section 4.3 shall be absolute and unconditional and shall not be affected by any
circumstances, including, without limitation, any set-off, counterclaim,
recoupment, defense or other right which the Corporation or any of its
Subsidiaries may have against any Participant. In no event shall a Participant
be obligated to seek other employment or take any other action by way of
mitigation of the amounts payable to a Participant under any of the provisions
of this Plan, nor shall the amount of any payment hereunder be reduced by any
compensation earned by a Participant as a result of employment by another
employer, except as specifically provided in Section 4.3(c). If any of the
Participants in this Plan are also participants under the Wisconsin Energy
Senior Executive Severance Policy adopted by Wisconsin Energy in 1995 (the
"SESP") and become entitled to any cash or benefits under the terms of the SESP,
the same shall be offset against any cash or benefits otherwise due to such
Participants under the terms of this Agreement.
ARTICLE V
PARTICIPATING EMPLOYERS
This Plan may be adopted by any Subsidiary of the Corporation. Upon such
adoption, the Subsidiary shall become an Employer hereunder and the provisions
of the Plan shall be fully applicable to the Employees of that Subsidiary who
are Participants pursuant to Section 3.1.
ARTICLE VI
SUCCESSOR TO CORPORATION
This Plan shall bind any successor of the Corporation, its assets or its
businesses (whether direct or indirect, by purchase, merger, consolidation or
otherwise) in the same manner and to the same extent that the Corporation would
be obligated under this Plan if no succession had taken place.
In the case of any transaction in which a successor would not by the
foregoing provision or by operation of law be bound by this Plan, the
Corporation shall require such successor expressly and unconditionally to assume
and agree to perform the Corporation's obligations under this Plan, in the same
manner and to the same extent that the Corporation would be required to perform
if no such succession had taken place. The term "Corporation," as used in this
Plan, shall mean the Corporation as hereinbefore defined and any successor or
assignee to the business or assets which by reason hereof becomes bound by this
Plan.
ARTICLE VII
9
<PAGE>
DURATION, AMENDMENT AND TERMINATION
7.1 Duration. This Plan shall be deemed established, without the need for
--------
any further act by the Board, on the Effective Time of Merger and it shall
continue for a period of 2 years after the WICOR Closing Date, on which date it
will expire, unless extended for an additional period or periods by resolution
adopted by the Board.
However, once the WICOR Closing Date has occurred, then notwithstanding any
other provision of the Plan, the Plan shall continue in full force and effect
and shall not terminate or expire until after all Participants who become
entitled to any payments hereunder shall have received such payments in full and
all adjustments required to be made pursuant to Sections 4.5 and 4.6 have been
made.
If the Effective Time of Merger has not occurred on or prior to January 1,
2001, then this Plan will become void and of no force and effect.
7.2 Amendment. Except as provided in Section 7.1, the Plan shall not be
---------
subject to amendment, change, substitution, deletion, revocation or termination
in any respect which adversely affects the rights of Participants.
7.3 Form of Amendment. The form of any amendment of the Plan shall be a
-----------------
written instrument signed by a duly authorized officer or officers of the
Corporation, certifying that the amendment has been approved by the Board.
ARTICLE VIII
MISCELLANEOUS
8.1 Indemnification. If a Participant institutes any legal action in
---------------
seeking to obtain or enforce or is required to defend in any legal action the
validity or enforceability of, any right or benefit provided by this Plan, the
Corporation or the Employer will pay for all actual reasonable legal fees and
expenses incurred (as incurred) by such Participant, regardless of the outcome
of such action.
8.2 Employment Status. This Plan does not constitute a contract of
-----------------
employment or impose on the Participant or the Participant's Employer any
obligation to retain the Participant as an Employee, to change the status of the
Participant's employment, or to change the Corporation's policies or those of
its Subsidiaries regarding termination of employment.
8.3 Claim Procedure. If an Employee or former Employee makes a written
---------------
request alleging a right to receive benefits under this Plan or alleging a right
to receive an adjustment in benefits being paid under the Plan, the Corporation
shall treat it as a claim for benefit. All claims for benefit under the Plan
shall be sent to the Human Resources Department of the Corporation and must be
received within 90 days after termination of employment. If the Corporation
determines that any individual who has claimed a right to receive benefits, or
different benefits, under the Plan is not entitled to receive all or any part of
the benefits claimed, it will inform the claimant in writing
10
<PAGE>
of its determination and the reasons therefor in terms calculated to be
understood by the claimant. The notice will be sent within 90 days of the claim
unless the Corporation determines additional time, not exceeding 90 days, is
needed. The notice shall make specific reference to the pertinent Plan
provisions on which the denial is based, and describe any additional material or
information that is necessary. Such notice shall, in addition, inform the
claimant what procedure the claimant should follow to take advantage of the
review procedures set forth below in the event the claimant desires to contest
the denial of the claim. The claimant may within 90 days thereafter submit in
writing to the Corporation a notice that the claimant contests the denial of his
or her claim by the Corporation and desires a further review. The Corporation
shall within 60 days thereafter review the claim and authorize the claimant to
appear personally and review pertinent documents and submit issues and comments
relating to the claim to the persons responsible for making the determination on
behalf of the Corporation. The Corporation will render its final decision with
specific reasons therefor in writing and will transmit it to the claimant within
60 days of the written request for review, unless the Corporation determines
additional time, not exceeding 60 days, is needed, and so notifies the
Participant. If the Corporation fails to respond to a claim filed in accordance
with the foregoing within 60 days or any such extended period, the Corporation
shall be deemed to have denied the claim.
8.4 Validity and Severability. The invalidity or unenforceability of any
-------------------------
provision of the Plan shall not affect the validity or enforceability of any
other provision of the Plan, which shall remain in full force and effect, and
any prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
8.5 Governing Law. The validity, interpretation, construction and
-------------
performance of the Plan shall in all respects be governed by the laws of
Wisconsin, without reference to principles of conflict of law, except to the
extent preempted by federal law.
11
<PAGE>
SCHEDULE 1
Participants Eligible for Separation
Benefits if the Conditions Specified in
Section 4.2(a) are Satisfied and Tier Level
Applicable for Each Such Participant:
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EXHIBIT 99.1
[Wisconsin Energy Logo] [WICOR Logo]
FOR IMMEDIATE RELEASE
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WISCONSIN ENERGY CORPORATION AND WICOR
AGREE TO $7.3 BILLION COMBINATION
MILWAUKEE (JUNE 28, 1999) - Wisconsin Energy Corporation [NYSE: WEC] and WICOR,
Inc. [NYSE: WIC] today announced that they have signed a definitive merger
agreement under which WICOR shareholders will receive a combination of cash and
stock for their WICOR shares. The transaction has an equity value of
approximately $1.275 billion plus the assumption of approximately $230 million
of WICOR debt. This agreement creates a company with a combined market
capitalization of approximately $7.3 billion ($4.5 billion in equity and $2.8
billion in debt and preferred stock). The combination will be accounted for as
a purchase and is expected to be accretive to earnings during calendar year
2001.
Under the terms of the agreement, which was approved by both companies' boards
of directors, Wisconsin Energy will acquire all of the outstanding shares of
WICOR for a fixed price of $31.50 for each WICOR share. At least 40% of the
price will be paid in Wisconsin Energy stock, and Wisconsin Energy has the
option to increase that percentage to 60%. The exchange ratio for the Wisconsin
Energy stock will be set based on the average closing prices of Wisconsin Energy
stock immediately prior to the closing. If the average is less than $22.00 per
share, Wisconsin Energy may elect to pay all cash. Each WICOR shareholder will
be able to elect to receive cash or stock, subject to proration.
The combined company will serve approximately 921,000 gas customers and more
than one million electric customers in Wisconsin and Michigan's Upper Peninsula
and will operate more than 16,500 miles of gas main and 30,000 miles of
electrical transmission and distribution wires. The combined company will have
approximately 9,000 employees. Additionally, both companies' unregulated
businesses are expected to continue to be strong growth drivers for the combined
company. In particular, WICOR's manufacturing business, which has strong
historical earnings and an attractive growth profile, will diversify the revenue
stream of the merged company.
Richard A. Abdoo, chairman, president and CEO of Wisconsin Energy, said, "The
combination of our two companies makes perfect sense, and is good news for
shareholders, customers, employees and the state of Wisconsin. The combined
company will be one of the lowest-cost energy providers in the Midwest. We will
have the ability to take advantage of new opportunities as the gas and electric
markets converge and to enhance our commitment to service reliability. By
adding WICOR's state-wide gas customer base to Wisconsin Energy's existing gas
and electric operations, the combined company will have the size, scope and
skills needed to compete in the emerging regional energy market and a solid
platform for continued growth."
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Mr. Abdoo added, "Our two companies have long histories of outstanding customer
service and community involvement. This combination of two premier Wisconsin-
based companies creates a strong corporation that will continue to contribute to
the state's vibrant economy. We have made significant contributions to regional
economic development and we're committed to continuing this tradition of
excellence. The combination strengthens our ability to control costs, improve
reliability, and increase operating efficiencies by taking advantage of both
economies of scale and the combined experience of our two workforces. The
combination is expected to result in gas rates that will be lower over the long
term than they would have been on a stand-alone basis. Together, we will be
able to offer customers new products and services, as well as the same safe,
reliable service they have come to expect."
George E. Wardeberg, chairman and CEO of WICOR, said, "The combination offers
strategic, competitive and customer advantages, plus long-term growth and
diversification opportunities that enhance both companies' ability to compete in
a changing energy market. Shareholders, customers and employees all will benefit
from this merger. Shareholders will own a financially strong company that will
be well-positioned in the marketplace, and they'll participate in the enhanced
earnings and growth potential of the combined company. Utility customers will
continue to enjoy high-quality, reliable service, delivered by a seasoned,
capable workforce, as well as improvements fostered by the joining of best
practices from both companies. Our employees will benefit by becoming part of a
company that's better equipped to play a leading role in the rapidly growing
energy industry."
Mr. Wardeberg added, "The combination also offers additional resources to
support the growth of WICOR's manufacturing group and to further develop growth
initiatives by the WICOR energy group, such as water distribution and meter
services. The combined company will vigorously pursue new products and
services, innovation and new opportunities to build growth."
Combination-related savings are anticipated to be approximately $35 million
annually beginning in 2001. Savings are projected from lower costs for fuel,
materials and services through enhanced purchasing power, elimination of
duplication through attrition and sharing of resources. It is anticipated that
there will be cost savings that come from logical consolidation of common
functions over time. No layoffs will result from the merger. The companies
anticipate that any workforce reductions resulting from the transaction will
occur through normal attrition. All union contracts will be honored.
It is anticipated that Wisconsin Energy will maintain its normal quarterly
dividend of $0.39 and payment schedule following the completion of the
transaction. WICOR pays a quarterly dividend of $0.22 per share. Both
companies will maintain their current dividend policy until the close of the
transaction.
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Mr. Abdoo will continue as chairman of the board, president and CEO of Wisconsin
Energy and Mr. Wardeberg will become vice chairman of the board of Wisconsin
Energy at the time the transaction is closed. Mr. Wardeberg will continue in
this position for 24 months, after which he plans to retire. Following Mr.
Wardeberg's retirement, he will remain a member of the Wisconsin Energy board.
After closing, in addition to Mr. Wardeberg, one other member of the current
WICOR board will join Wisconsin Energy's board.
The combined company, Wisconsin Energy Corporation, will continue to have its
headquarters in Milwaukee. WICOR, Inc. will become a wholly owned subsidiary of
Wisconsin Energy. The WICOR headquarters building, a unique landmark in the
Milwaukee area, will be retained as part of the combination.
The merger is conditioned, among other things, upon the approval of both
companies' shareholders and upon customary regulatory approvals, including the
Public Service Commission of Wisconsin. The companies anticipate that the
transaction can be completed by the spring of 2000.
Chase Securities Inc. acted as financial advisor and provided a fairness opinion
to Wisconsin Energy Corporation. Merrill Lynch & Co. acted as financial advisor
and provided a fairness opinion to WICOR, Inc.
WICOR, Inc. is a Milwaukee-based, diversified holding company operating six
subsidiaries in two industries: energy services and pump manufacturing. The
subsidiaries are Wisconsin Gas, WICOR Energy, FieldTech, Sta-Rite Industries,
SHURflo Pump Manufacturing Company and Hypro Corporation.
Wisconsin Energy Corporation is a holding company with subsidiaries in utility
and non-utility businesses. Its principal subsidiaries are Wisconsin Electric,
Edison Sault Electric, Wisvest, Minergy and Wispark.
FORWARD-LOOKING STATEMENTS
This press release contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. The forward-looking
statements are subject to various risks and uncertainties. Actual results may
vary materially. Factors that could cause actual results to differ materially
include, but are not limited to: general economic conditions; business and
competitive conditions in the deregulating and consolidating energy industry, in
general, and in the companies' service territories; availability of the
companies' generating facilities, changes in purchased power costs; changes in
natural gas prices and supply availability; unusual weather; regulatory
decisions; timely realization of anticipated net cost savings; and the other
cautionary factors described in the Management's Discussion and Analysis of
Financial Condition and Results of Operations in both companies' Form 10-K for
the year ended Dec. 31, 1998; and other factors described from time to time in
the companies' reports to the Securities and Exchange Commission.
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Note to Editors: Today's news release, along with other news about Wisconsin
Energy and WICOR, is available on the Internet at www.wisenergy.com and
www.wicor.com
# # #
CONTACTS FOR WISCONSIN ENERGY: CONTACTS FOR WICOR:
MEDIA: MEDIA:
Michael John David Fantle
Phone: (414) 221-4444 Phone: (414) 291-6930
[email protected] [email protected]
INVESTORS: INVESTORS:
Nancy E. Frohna Kathleen Sieja
Phone: (414) 221-2592 Phone: (414) 291-6950
[email protected] [email protected]
or
Joe Wenzler
Phone: (414) 291-6550
[email protected]
