<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
- ----- OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
- ----- OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
------------- -------------
Commission file number 1-9057
WISCONSIN ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
Wisconsin 39-1391525
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
231 West Michigan Street, P.O. Box 2949, Milwaukee, Wisconsin 53201
(Address of principal executive offices) (Zip Code)
(414) 221-2345
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at July 28, 1995
--------------------------- ----------------------------
$.01 Par Value Common Stock 109,936,834 Shares
<PAGE> 2
<TABLE>
FORM 10-Q
WISCONSIN ENERGY CORPORATION
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WISCONSIN ENERGY CORPORATION
CONSOLIDATED CONDENSED INCOME STATEMENT
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
------------------ ------------------
1995 1994 1995 1994
---- ---- ---- ----
(Thousands of Dollars)
<S> <C> <C> <C> <C>
Operating Revenues
Electric $347,277 $339,275 $691,196 $694,514
Gas 55,175 58,502 176,275 206,081
Steam 2,641 2,563 8,744 9,426
-------- -------- -------- --------
Total Operating Revenues 405,093 400,340 876,215 910,021
Operating Expenses
Fuel 71,611 71,485 139,430 143,961
Purchased power 8,130 10,040 27,206 21,634
Cost of gas sold 32,536 37,285 105,339 128,438
Other operation expenses 97,859 100,197 195,619 207,670
Maintenance 30,840 30,420 59,212 63,936
Revitalization - - - 73,900
Depreciation 45,436 43,350 90,148 87,389
Taxes other than income taxes 17,158 19,347 36,537 40,415
Federal income tax 23,376 21,414 53,011 44,157
State income tax 5,528 5,077 12,628 10,584
Deferred income taxes - net 1,530 (985) 1,906 (17,065)
Investment tax credit - net (1,759) (1,144) (2,241) (2,288)
-------- -------- -------- --------
Total Operating Expenses 332,245 336,486 718,795 802,731
Operating Income 72,848 63,854 157,420 107,290
Other Income and Deductions
Interest income 4,153 3,216 7,767 7,940
Allowance for other funds used
during construction 829 1,508 1,654 2,761
Miscellaneous - net 1,513 1,469 2,863 1,879
Income taxes 2 331 307 454
-------- -------- -------- --------
Total Other Income and Deductions 6,497 6,524 12,591 13,034
Income Before Interest Charges and Preferred
Dividend 79,345 70,378 170,011 120,324
Interest Charges
Interest expense 28,658 27,950 57,730 55,844
Allowance for borrowed funds used
during construction (1,209) (1,362) (2,450) (2,521)
-------- -------- -------- --------
Total Interest Charges 27,449 26,588 55,280 53,323
Preferred Dividend Requirement of
Subsidiary 301 360 602 749
-------- -------- -------- --------
Net Income $ 51,595 $ 43,430 $114,129 $ 66,252
======== ======== ======== ========
Average Shares Outstanding (Thousands) 109,569 107,808 109,352 107,525
Earnings Per Share of Common Stock $ 0.47 $ 0.40 $ 1.04 $ 0.62
======== ======== ======== ========
Dividends Per Share of Common Stock $ 0.3675 $ 0.3525 $ 0.72 $0.69125
======== ======== ======== ========
<FN>
See accompanying notes to consolidated financial statements.
- 2 -
</TABLE>
<PAGE> 3
<TABLE>
WISCONSIN ENERGY CORPORATION FORM 10-Q
CONSOLIDATED CONDENSED BALANCE SHEET
(Unaudited)
<CAPTION>
June 30, 1995 December 31, 1994
------------- -----------------
(Thousands of Dollars)
Assets
------
<S> <C> <C>
Utility Plant
Electric $4,473,238 $4,304,925
Gas 474,795 467,732
Steam 39,700 40,103
Accumulated provision for depreciation (2,222,972) (2,134,469)
---------- ----------
2,764,761 2,678,291
Construction work in progress 125,888 205,835
Nuclear fuel - net 56,873 56,606
---------- ----------
Net Utility Plant 2,947,522 2,940,732
Other Property and Investments 618,972 596,719
Current Assets
Cash and cash equivalents 14,424 8,976
Accounts receivable 124,606 114,657
Accrued utility revenues 98,360 128,107
Materials, supplies and fossil fuel 155,320 158,946
Prepayments and other assets 90,150 68,272
---------- ----------
Total Current Assets 482,860 478,958
Deferred Charges and Other Assets
Accumulated deferred income taxes 137,514 139,927
Other 254,176 251,923
---------- ----------
Total Deferred Charges and Other Assets 391,690 391,850
---------- ----------
Total Assets $4,441,044 $4,408,259
========== ==========
Capitalization and Liabilities
------------------------------
Capitalization
Common stock $ 649,879 $ 625,657
Retained earnings 1,154,373 1,118,909
---------- ----------
Total Common Stock Equity 1,804,252 1,744,566
Preferred stock - redemption not required 30,451 30,451
Long-term debt 1,253,148 1,283,686
---------- ----------
Total Capitalization 3,087,851 3,058,703
Current Liabilities
Long-term debt due currently 52,879 32,531
Short-term debt 240,821 252,055
Accounts payable 70,039 91,795
Accrued liabilities 61,433 68,234
Other 51,845 29,822
---------- ----------
Total Current Liabilities 477,017 474,437
Deferred Credits and Other Liabilities
Accumulated deferred income taxes 480,367 475,541
Other 395,809 399,578
---------- ----------
Total Deferred Credits and Other Liabilities 876,176 875,119
---------- ----------
Total Capitalization and Liabilities $4,441,044 $4,408,259
========== ==========
<FN>
See accompanying notes to consolidated financial statements.
- 3 -
</TABLE>
<PAGE> 4
<TABLE>
FORM 10-Q
WISCONSIN ENERGY CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<CAPTION>
Six Months Ended June 30
------------------------
1995 1994
---- ----
(Thousands of Dollars)
<S> <C> <C>
Operating Activities:
Net income $114,129 $ 66,252
Reconciliation to cash:
Depreciation 90,148 87,389
Nuclear fuel expense - amortization 11,129 10,706
Conservation expense - amortization 10,554 11,942
Debt premium, discount & expense - amortization 6,029 7,352
Revitalization - net (5,447) 57,878
Deferred income taxes - net 1,906 (17,065)
Investment tax credit - net (2,241) (2,288)
Allowance for other funds used during construction (1,654) (2,761)
Change in: Accounts receivable (9,949) 3,040
Inventories 3,626 25,962
Accounts payable (21,756) (33,253)
Other current assets 7,869 11,364
Other current liabilities 15,222 21,071
Other 5,235 (7,021)
-------- --------
Cash Provided by Operating Activities 224,800 240,568
Investing Activities:
Construction expenditures (118,865) (117,425)
Allowance for borrowed funds used during construction (2,450) (2,521)
Nuclear fuel (12,627) (16,426)
Nuclear decommissioning trust (5,102) (5,080)
Conservation investments - net 2,312 (7,459)
Other (6,085) (19,464)
-------- --------
Cash Used in Investing Activities (142,817) (168,375)
Financing Activities:
Sale of common stock 24,215 28,800
Sale of long-term debt 11,960 20,369
Retirement of preferred stock - (5,250)
Retirement of long-term debt (22,818) (21,812)
Change in short-term debt (11,234) (18,413)
Dividends on stock - common (78,658) (74,264)
-------- --------
Cash Used in Financing Activities (76,535) (70,570)
-------- --------
Change in Cash and Cash Equivalents $ 5,448 $ 1,623
======== ========
Supplemental Information Disclosures:
Cash Paid for -
Interest (net of amount capitalized) $ 50,418 $ 46,403
Income taxes 82,965 79,012
<FN>
See accompanying notes to consolidated financial statements.
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</TABLE>
<PAGE> 5
FORM 10-Q
WISCONSIN ENERGY CORPORATION
--------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. The accompanying unaudited consolidated financial statements should be
read in conjunction with the company's 1994 Annual Report on Form 10-K.
In the opinion of management, all adjustments, normal and recurring in
nature, necessary to a fair statement of the results of operations and
financial position of the company have been included in the accompanying
income statement and balance sheet. The results of operations for the
three months and the six months ended June 30, 1995 are not, however,
necessarily indicative of the results which may be expected for the year
1995 because of seasonal and other factors.
2. On April 28, 1995, Wisconsin Energy Corporation ("WEC") and Northern
States Power Company, Minnesota ("NSP") entered into an Agreement and Plan
of Merger, which was amended and restated as of July 26, 1995 ("Merger
Agreement"). The Merger Agreement provides for a strategic business
combination involving NSP and WEC in a "merger-of-equals" transaction. As
a result, a registered utility holding company, which will be known as
Primergy Corporation ("Primergy"), will be the parent of NSP and the
current operating subsidiaries of NSP and WEC. The business combination
is intended to be tax-free for income tax purposes and to be accounted for
as a "pooling of interests".
The Merger Agreement is subject to various conditions, including approval
of the stockholders of WEC and NSP and the approval of various regulatory
agencies. On July 10, 1995 WEC and NSP filed an application and
supporting testimony with the Federal Energy Regulatory Commission seeking
approval of the proposed merger. Similar filings will be made later this
year with regulatory agencies in states where WEC and NSP provide utility
services. The Merger Agreement and certain related matters will be
submitted to shareholders of WEC and NSP for their consideration at
meetings scheduled for September 13, 1995. WEC and NSP anticipate
completing this business combination late in 1996. ITEM 5. OTHER
INFORMATION in Part II of this report contains further information
concerning the proposed transaction and provides pro forma combined
condensed financial information for Primergy.
3. WEC intends to merge its gas utility subsidiary, Wisconsin Natural Gas
Company, into its electric utility subsidiary, Wisconsin Electric Power
Company to form a single combined utility subsidiary. All required
regulatory approvals for the merger have been received. Completion of the
planned merger is expected to occur by January 1, 1996.
- 5 -
<PAGE> 6
FORM 10-Q
WISCONSIN ENERGY CORPORATION
------------------------------
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Wisconsin Energy Corporation ("Wisconsin Energy" or "WEC") has entered into an
agreement with Northern States Power Company ("NSP") which provides for a
strategic business combination involving the two companies in a "merger-of-
equals" transaction. Further information concerning such agreement and
proposed transaction and pro forma financial information with respect thereto
is included in ITEM 5. OTHER INFORMATION in Part II of this report.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by Wisconsin Energy's consolidated operating activities totaled
$225 million during the six months ended June 30, 1995. This compares to $241
million provided during the same period in 1994.
Wisconsin Energy's consolidated investing activities totaled $143 million for
the six months ended June 30, 1995 compared to $168 million during the same
period in 1994. Investments during the first half of 1995 include $119
million for the construction of new or improved facilities, $13 million for
acquisition of nuclear fuel, and $5 million for payments to an external trust
for the eventual decommissioning of Wisconsin Electric Power Company's
("Wisconsin Electric") Point Beach Nuclear Plant.
Capital requirements for the remainder of 1995 are expected to be principally
for construction expenditures, purchase of nuclear fuel, and payments to the
external trust for the eventual decommissioning of the Point Beach Nuclear
Plant. Depending upon market conditions, Wisconsin Electric, the principal
utility subsidiary of Wisconsin Energy, may refund some issues of its current
debt and issue approximately $100 million of additional long-term debt in a
public offering later in 1995. The specific form, amount and timing of debt
securities which may be issued have not yet been determined and will depend,
to a large extent, on market conditions.
Beginning June 1, 1992, Wisconsin Energy began issuing new shares of common
stock through the company's stock plans. Previously, shares required for
these plans were purchased on the open market. From January 1, 1995 to June
30, 1995, cash investments and reinvested dividends aggregating $24.2 million
were used to purchase 876,935 new issue shares.
RESULTS OF OPERATIONS
Second Quarter Results:
Net Income increased 18.8% or by approximately $8.2 million during the second
quarter of 1995 compared to the same period during 1994.
Total revenues increased 1.2% during the second quarter of 1995 compared to
the second quarter of 1994. Electric revenues increased 2.4%. Primarily due
to warm weather in June 1995, total electric retail revenues increased 3.5% in
these comparative periods. In the second quarter of 1995, gas revenues
decreased 5.7% from the same period in 1994. However, gas margins (operating
revenue less cost of gas sold) increased 6.7% in these comparative periods as
a result of an increase in gas deliveries.
- 6 -
<PAGE> 7
FORM 10-Q
WISCONSIN ENERGY CORPORATION
------------------------------
PART I - FINANCIAL INFORMATION (Cont'd)
RESULTS OF OPERATIONS - Cont'd
With the additional peaking capacity at the Paris Generating Station, the need
for firm purchase power contracts was eliminated, resulting in a decrease of
19% in purchased power expenses between the three months ended June 30, 1995
and 1994. For the same periods, other operation and maintenance expenses also
decreased 1.5%.
The annualized $16,179,000 or 1.3% Wisconsin retail electric fuel adjustment
rate decrease that became effective on August 4, 1994 for Wisconsin Electric
customers remains effective in 1995.
ELECTRIC SALES
Three Months Ended June 30
---------------------------
Electric Sales - Megawatt Hours 1995 1994 % Change
- ------------------------------- ---------- ---------- --------
Residential 1,609,772 1,472,750 9.3
Small Commercial and Industrial 1,702,127 1,661,575 2.4
Large Commercial and Industrial 2,644,998 2,611,826 1.3
Other 376,125 396,838 (5.2)
---------- ----------
Total Retail and Municipal 6,333,022 6,142,989 3.1
Resale-Utilities 240,058 408,691 (41.3)
---------- ----------
Total Sales 6,573,080 6,551,680 0.3
- -------------------------------
Total electric kilowatt-hour sales during the second quarter of 1995 were flat
compared to 1994. As measured by cooling degree days, the month of June 1995
was 6% warmer than June 1994, helping to push residential electric kilowatt-
hour sales 9.3% higher in the second quarter of 1995 compared to the same
period in 1994.
Electric energy sales to the Empire and Tilden iron ore mines, Wisconsin
Electric's two largest customers, decreased 2.4% during the quarter ended
June 30, 1995 compared to the same period during 1994. Excluding the mines,
total electric sales increased 0.6% and sales to the remaining large
commercial and industrial customers increased 2.3% during the second quarter
of 1995 compared to the same period in 1994.
GAS DELIVERIES
Three Months Ended June 30
---------------------------
Therms Delivered - Thousands 1995 1994 % Change
- ------------------------------- ---------- ---------- --------
Residential 49,845 42,982 16.0
Commercial and Industrial 30,652 28,495 7.6
Interruptible 11,900 10,612 12.1
---------- ----------
Total Sales 92,397 82,089 12.6
Transported Customer Owned Gas 59,967 55,365 8.3
---------- ----------
Total Gas Delivered 152,364 137,454 10.8
- -------------------------------
- 7 -
<PAGE> 8
FORM 10-Q
WISCONSIN ENERGY CORPORATION
------------------------------
PART I - FINANCIAL INFORMATION (Cont'd)
GAS DELIVERIES - Cont'd
Natural gas therm deliveries during the second quarter of 1995 increased
10.8%, primarily due to cooler weather. As measured by heating degree days,
the second quarter of 1995 weather was 4.9% cooler compared to the same period
in 1994.
SOURCES OF NATURAL GAS
Wisconsin Natural Gas Company ("Wisconsin Natural") purchases gas for
injection into storage for future withdrawal during the heating season under
various arrangements with gas storage facilities. At June 30, 1995, the cost
of natural gas stored for future use was $18.1 million, representing a $6.4
million decrease from the cost of natural gas stored at June 30, 1994. Gas
stored at these facilities is purchased by Wisconsin Natural from a number of
suppliers.
For additional information regarding matters pertaining to gas operations,
refer to ITEM 1. BUSINESS - GAS UTILITY OPERATIONS in PART I of Wisconsin
Energy's Annual Report on Form 10-K for the year ended December 31, 1994.
Year-to-Date Results:
Net Income increased 72% or by approximately $47.9 million during the six
months ended June 30, 1995 compared to the same period in 1994, reflecting a
non-recurring charge in the first quarter of 1994 of approximately $45 million
(net of tax) associated with Wisconsin Electric's and Wisconsin Natural's
restructuring program. This charge included the cost of severance and early
retirement packages, elements of a "revitalization" program designed to better
position Wisconsin Electric and Wisconsin Natural in a changing market place.
It is anticipated that this charge will be offset by the end of 1995 through
savings in operation and maintenance costs.
Excluding the non-recurring charge in 1994, net income increased approximately
$2.9 million during the six month period ended June 30, 1995 compared to the
same period during 1994.
During the first six months of 1995 compared to the first six months of 1994,
total revenues decreased 3.7%. Electric revenues were down 0.5% as a result
of lower total electric energy sales. Gas revenues decreased 14.5% and gas
margins (operating revenues less cost of gas sold) were down 8.6% as a result
of lower natural gas deliveries.
Because of unscheduled outages during the first quarter of 1995 at two of
Wisconsin Electric's most efficient power plants, Pleasant Prairie Power Plant
and Point Beach Nuclear Plant, Wisconsin Electric purchased replacement energy
on the spot market, resulting in increased purchased power costs of 25.8%
during the six months ended June 30, 1995 compared to 1994. This was
partially offset by a 3.1% decrease in fuel expenses between these same two
periods such that total costs for fuel and purchased power was up only 0.6%.
In the first six months of 1995, other operation and maintenance expenses
decreased 6.2% compared to the first six months of 1994, reflecting among
other things, the effects of the company's "revitalization" program.
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<PAGE> 9
FORM 10-Q
WISCONSIN ENERGY CORPORATION
------------------------------
PART I - FINANCIAL INFORMATION (Cont'd)
ELECTRIC SALES
Six Months Ended June 30
---------------------------
Electric Sales - Megawatt Hours 1995 1994 % Change
- ------------------------------- ---------- ---------- --------
Residential 3,299,128 3,268,195 0.9
Small Commercial and Industrial 3,416,854 3,319,361 2.9
Large Commercial and Industrial 5,187,352 5,074,258 2.2
Other 757,035 836,259 (9.5)
---------- ----------
Total Retail and Municipal 12,660,369 12,498,073 1.3
Resale-Utilities 442,190 800,149 (44.7)
---------- ----------
Total Sales 13,102,559 13,298,222 (1.5)
- -------------------------------
Total electric kilowatt-hour sales during the first six months of 1995
declined 1.5% compared to 1994 primarily to lower sales to other utilities.
Retail electric sales increased 2% during the period.
Electric energy sales to the Empire and Tilden iron ore mines decreased 1.6%
during the six months ended June 30, 1995 compared to the same period during
1994. Excluding the mines, total electric sales decreased 1.5% but sales to
the remaining large commercial and industrial customers increased 3.3% during
the six months ended June 30, 1995 compared to the same period during 1994.
GAS DELIVERIES
Six Months Ended June 30
---------------------------
Therms Delivered - Thousands 1995 1994 % Change
- ------------------------------- ---------- ---------- --------
Residential 195,048 210,651 (7.4)
Commercial and Industrial 120,978 126,385 (4.3)
Interruptible 25,999 27,590 (5.8)
---------- ----------
Total Sales 342,025 364,626 (6.2)
Transported Customer Owned Gas 141,834 124,628 13.8
---------- ----------
Total Gas Delivered 483,859 489,254 (1.1)
- -------------------------------
Natural gas therm deliveries during the first six months of 1995 also
decreased primarily due to mild weather in the first quarter of 1995. As
measured by heating degree days, the first quarter of 1995 was 14.7% warmer
compared to the same period in 1994. The warmer winter weather reduced
residential and commercial sales which have higher margins. Interruptible and
transportation deliveries combined showed an increase over the same period.
However, the margin on these deliveries is lower than for residential and
commercial customers.
For certain other information which may impact Wisconsin Energy's future
financial condition or results of operations, see ITEM 1. LEGAL PROCEEDINGS
and ITEM 5. OTHER INFORMATION in Part II.
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<PAGE> 10
FORM 10-Q
WISCONSIN ENERGY CORPORATION
------------------------------
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The following information should be read in conjunction with ITEM 3. LEGAL
PROCEEDINGS in PART I of Wisconsin Energy's Annual Report on Form 10-K for the
year ended December 31, 1994 and ITEM 1. LEGAL PROCEEDINGS in PART II of
Wisconsin Energy's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1995.
RATE MATTERS
Wisconsin Retail Electric and Steam Jurisdictions
1996 Test Year: On March 27, 1995, Wisconsin Electric and Wisconsin Natural
sent a letter to the Public Service Commission of Wisconsin ("PSCW") proposing
a one year deferral of their scheduled rate case filing. On May 1, 1995,
Wisconsin Electric and Wisconsin Natural filed with the PSCW required data
related to the 1996 test year. This was an abbreviated filing since no
increase in rates was requested. The Citizens Utility Board ("CUB") filed a
petition seeking a reduction in rates of $100 million and a hearing on the
companies' request for a freeze on rates in 1996. Other parties filed in
support of CUB's petition. The companies are opposing the petition. The PSCW
staff has reviewed the companies' data and has developed a preliminary
recommendation for an electric rate decrease of between 2% and 3%, a gas rate
decrease of approximately 2.5%, and a steam rate decrease of about 5%. The
PSCW staff recommendation is based upon a regulatory return on equity of
11.3%. This matter is expected to come before the PSCW in mid-August or
September 1995. Any change in rates would likely not take effect until after
January 1, 1996.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At Wisconsin Energy's 1995 Annual Meeting of Stockholders held on May 17,
1995, all of the board of directors' nominees named below were elected as
directors of the class whose term expires in 1998 by the indicated votes cast
for and withheld with respect to each nominee. There was no solicitation in
opposition to the nominees proposed in the proxy statement and there were no
abstentions or broker non-votes with respect to the election of directors.
Name of Nominee For Withheld
--------------------- ---------- ----------
Robert A. Cornog 87,069,522 2,151,111
Richard R. Grigg, Jr. 87,063,256 2,157,376
Frederick P. Stratton, Jr. 87,137,447 2,083,186
The appointment of Price Waterhouse LLP as independent public accountant for
1995 was approved by the stockholders by a vote of 87,815,612 votes for and
810,472 votes against such approval. There were no abstentions and no broker
non-votes with respect to such approval.
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<PAGE> 11
FORM 10-Q
WISCONSIN ENERGY CORPORATION
------------------------------
PART II - OTHER INFORMATION (Cont'd)
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - Cont'd
Three additional proposals, including two stockholder proposals, were
presented to the meeting for a vote. The results of the voting of such
proposals are as follows:
Broker
Proposal For Against Abstain Non-Votes
- -------------------------- ---------- ---------- --------- ----------
Approve Amendment and
Restatement of WEC's Restated
Articles of Incorporation 65,491,666 11,691,369 1,354,262 10,683,335
Stockholder Proposal #1
To Declassify the
Board of Directors 23,661,578 52,578,704 2,297,015 10,683,335
Stockholder Proposal #2
To Amend the Bylaws to
Prohibit Certain Individuals
From Serving as a WEC
Director 9,239,670 66,305,795 2,991,832 10,683,335
Further information concerning these matters, including the complete text of
the proposals presented for a vote and the name of each other director whose
term of office as a director continued after the meeting to expire in 1996 or
1997, is contained in Wisconsin Energy's Proxy Statement dated April 10, 1995
with respect to the 1995 Annual Meeting of Stockholders.
ITEM 5. OTHER INFORMATION
PARIS GENERATING STATION
In June 1995, two units, or approximately 150 megawatts of peaking capacity,
were placed in-service marking the completion of the new Paris Generating
Station. Previously in March 1995, two units, or another approximately 150
megawatts of peaking capacity, were placed in-service at this facility.
Capital expenditures associated with the four units at this facility total
approximately $105 million. The 300 megawatt natural gas-fired combustion
turbine facility, located near Union Grove, Wisconsin is expected to run less
than 500 hours per year, helping meet electric peak demand requirements.
RECORD ELECTRIC PEAK DEMAND
On July 31, 1995, Wisconsin Electric reached a new all-time electric peak
demand of 5,368 megawatts, during a period of unusually hot and humid weather.
The previous record peak demand prior to the summer of 1995 of 4,950 megawatts
was set on June 14, 1994.
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<PAGE> 12
FORM 10-Q
WISCONSIN ENERGY CORPORATION
------------------------------
PART II - OTHER INFORMATION (Cont'd)
PURCHASED GAS ADJUSTMENT MECHANISM
On June 30, 1995, Wisconsin Natural filed with the PSCW a proposal to replace
the current Purchased Gas Adjustment ("PGA") mechanism with a new market-based
pricing mechanism. The proposed gas pricing mechanism would link gas
commodity prices to market indices and incorporate all other gas supply costs
such as transportation and storage, under a price cap. The price cap would be
designed to provide balanced financial incentives and risks for Wisconsin
Natural based on performance standards, while ensuring a reliable gas supply
for consumers. On July 25, 1995, the PSCW decided to analyze and review this
proposal as part of a generic PGA docket that will review alternatives for gas
cost recovery. The matter is pending.
MERGER AGREEMENT WITH NORTHERN STATES POWER COMPANY
On April 28, 1995, WEC entered into an Agreement and Plan of Merger with NSP
which provides for a strategic business combination involving the two
companies in a "merger-of-equals" transaction, as previously reported in WEC's
Current Report on Form 8-K dated as of April 28, 1995 and in its Quarterly
Report on Form 10-Q for the quarter ended March 31, 1995 ("WEC's
3/31/95 10-Q"). The Agreement and Plan of Merger was amended and restated as
of July 26, 1995 to make certain nonsubstantive changes. The Amended and
Restated Agreement and Plan of Merger, dated as of April 28, 1995, as amended
and restated as of July 26, 1995, is referred to herein as the "Merger
Agreement." Further information concerning such agreement and proposed
transaction is included in ITEM 1. FINANCIAL STATEMENTS, Notes to Financial
Statements, in Part I of this report, and detailed information with respect
thereto will be included in the Joint Proxy Statement/Prospectus which will be
sent to shareholders of NSP and WEC in connection with their respective
shareholder meetings to vote on the Merger Agreement and certain related
matters.
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
The following unaudited pro forma financial information combines the
historical consolidated balance sheets and statements of income of Wisconsin
Energy and NSP after giving effect to the proposed business combination
transaction ("Transaction") to form Primergy Corporation ("Primergy"). This
pro forma financial information updates through the second quarter of 1995 pro
forma financial information included in ITEM 5. OTHER INFORMATION in Part II
of WEC's 3/31/95 10-Q. (WEC's 3/31/95 10-Q also contains unaudited pro forma
combined condensed statements of income of Primergy for each of the three
years in the period ended December 31, 1994, which are not repeated herein.)
The unaudited pro forma combined condensed balance sheet at June 30, 1995
gives effect to the Transaction as if it had occurred at June 30, 1995. The
unaudited pro forma combined condensed statements of income for the six months
ended June 30, 1995 and 1994 and the twelve months ended June 30, 1995, give
effect to the Transaction as if it had occurred at January 1, 1994. These
statements are prepared on the basis of accounting for the Transaction as a
pooling of interests and are based on the assumptions set forth in the notes
thereto.
- 12 -
<PAGE> 13
FORM 10-Q
WISCONSIN ENERGY CORPORATION
------------------------------
PART II - OTHER INFORMATION (Cont'd)
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION (Cont'd)
The Wisconsin Energy income statement for the six months ended June 30, 1994
includes a significant one-time pretax charge of $73.9 million for
revitalization costs recorded in the first quarter of 1994. To provide a more
representative recent twelve-month period summarizing combined operating
results, a pro forma combined condensed statement of income for the twelve
months ended June 30, 1995 is also presented.
The following pro forma financial information has been prepared from, and
should be read in conjunction with, the historical consolidated financial
statements and related notes thereto of Wisconsin Energy and NSP. The
following information is not necessarily indicative of the financial position
or operating results that would have occurred had the Transaction been
consummated on the date, or at the beginning of the periods, for which the
Transaction is being given effect nor is it necessarily indicative of future
operating results or financial position.
- 13 -
<PAGE> 14
<TABLE>
PRIMERGY CORPORATION FORM 10-Q
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
JUNE 30, 1995
(In thousands)
<CAPTION>
NSP WEC Pro Forma Pro Forma
Pro Forma Balance Sheet (As Reported) (As Reported) Adjustments Combined
------------------------------------------ -------------- -------------- -------------- --------------
Assets
<S> <C> <C> <C> <C>
Utility Plant
Electric $ 6,456,240 $ 4,598,068 $ - $ 11,054,308
Gas 687,963 475,853 - 1,163,816
Other 287,969 39,700 - 327,669
------------- ------------- ------------- -------------
Total 7,432,172 5,113,621 - 12,545,793
Accumulated provision for depreciation (3,258,535) (2,222,972) - (5,481,507)
Nuclear fuel - net 86,016 56,873 - 142,889
------------- ------------- ------------- -------------
Net Utility Plant 4,259,653 2,947,522 - 7,207,175
Current Assets
Cash and cash equivalents 58,371 14,424 - 72,795
Accounts receivable - net 289,612 124,606 - 414,218
Accrued utility revenues 93,545 98,360 - 191,905
Fossil fuel inventories 41,836 84,466 - 126,302
Material & supplies inventories 105,379 70,854 - 176,233
Prepayments and other 50,083 90,150 - 140,233
------------- ------------- ------------- -------------
Total Current Assets 638,826 482,860 - 1,121,686
Other Assets
Regulatory Assets 357,328 287,654 - 644,982
External decommissioning fund 173,881 253,657 - 427,538
Investments in non-regulated projects
and other investments 266,021 116,746 - 382,767
Non-regulated property - net 177,398 101,457 - 278,855
Intangible assets and other (Note 4) 130,772 251,148 (137,514) 244,406
------------- ------------- ------------- -------------
Total Other Assets 1,105,400 1,010,662 (137,514) 1,978,548
------------- ------------- ------------- -------------
Total Assets $ 6,003,879 $ 4,441,044 $ (137,514) $ 10,307,409
============= ============= ============= =============
Liabilities and Equity
Capitalization
Common stock equity:
Common stock (Note 1) $ 168,767 $ 1,098 $ (167,669) $ 2,196
Other stockholders' equity (Note 1) 1,774,940 1,803,154 167,669 3,745,763
------------- ------------- ------------- -------------
Total Common Stock Equity 1,943,707 1,804,252 - 3,747,959
Cumulative preferred stock and premium 240,469 30,451 - 270,920
Long-term debt 1,465,599 1,253,148 - 2,718,747
------------- ------------- ------------- -------------
Total Capitalization 3,649,775 3,087,851 - 6,737,626
Current Liabilities
Current portion of long-term debt 168,324 52,879 - 221,203
Short-term debt 309,929 240,821 - 550,750
Accounts payable 181,631 70,039 - 251,670
Taxes accrued 145,761 10,104 - 155,865
Other accrued liabilities 136,424 103,174 - 239,598
------------- ------------- ------------- -------------
Total Current Liabilities 942,069 477,017 - 1,419,086
Other Liabilities
Deferred income taxes (Note 4) 856,503 480,367 (137,514) 1,199,356
Deferred investment tax credits 168,599 91,913 - 260,512
Regulatory liabilities 214,495 167,638 - 382,133
Other liabilities and deferred credits 172,438 136,258 - 308,696
------------- ------------- ------------- -------------
Total Other Liabilities 1,412,035 876,176 (137,514) 2,150,697
------------- ------------- ------------- -------------
Total Capitalization and Liabilities $ 6,003,879 $ 4,441,044 $ (137,514) $ 10,307,409
============= ============= ============= =============
<FN>
See accompanying notes to pro forma combined condensed financial statements.
- 14 -
</TABLE>
<PAGE> 15
<TABLE>
FORM 10-Q
PRIMERGY CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
6 MONTHS ENDED JUNE 30, 1995
(In thousands, except per share amounts)
<CAPTION>
NSP WEC Pro Forma Pro Forma
(As Reported) (As Reported) Adjustments Combined
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Utility Operating Revenues
Electric $1,016,931 $ 691,196 $ - $1,708,127
Gas 233,909 176,275 - 410,184
Steam - 8,744 - 8,744
---------- ---------- ---------- ----------
Total Operating Revenues 1,250,840 876,215 - 2,127,055
Utility Operating Expenses
Electric Production-Fuel and Purchased Power 284,148 166,636 - 450,784
Cost of Gas Sold & Transported 139,613 105,339 - 244,952
Other Operation 261,621 195,619 - 457,240
Maintenance 81,025 59,212 - 140,237
Depreciation and Amortization 143,899 90,148 - 234,047
Taxes Other Than Income Taxes 124,352 36,537 - 160,889
Revitalization Charges - - - -
Income Taxes 60,322 65,304 - 125,626
---------- ---------- ---------- ----------
Total Operating Expenses 1,094,980 718,795 - 1,813,775
---------- ---------- ---------- ----------
Utility Operating Income 155,860 157,420 - 313,280
Other Income (Expense)
Equity Earnings of Unconsolidated Investees 18,470 - - 18,470
Other Income and Deductions - Net 15,696 12,591 - 28,287
---------- ---------- ---------- ----------
Total Other Income (Expense) 34,166 12,591 - 46,757
---------- ---------- ---------- ----------
Income Before Interest Charges
and Preferred Dividends 190,026 170,011 - 360,037
Interest Charges 62,024 55,280 - 117,304
Preferred Dividends of Subsidiaries 6,327 602 - 6,929
---------- ---------- ---------- ----------
Net Income $ 121,675 $ 114,129 $ - $ 235,804
========== ========== ========== ==========
Average Common Shares Outstanding (Note 1) 67,107 109,352 42,009 218,468
Earnings Per Common Share $ 1.81 $ 1.04 $ 1.08
========== ========== ==========
<FN>
See accompanying notes to pro forma combined condensed financial statements.
- 15 -
</TABLE>
<PAGE> 16
<TABLE>
FORM 10-Q
PRIMERGY CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
6 MONTHS ENDED JUNE 30, 1994
(In thousands, except per share amounts)
<CAPTION>
NSP WEC Pro Forma Pro Forma
(As Reported) (As Reported) Adjustments Combined
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Utility Operating Revenues
Electric $1,007,382 $ 694,514 $ - $1,701,896
Gas 258,044 206,081 - 464,125
Steam - 9,426 - 9,426
---------- ---------- ---------- ----------
Total Operating Revenues 1,265,426 910,021 - 2,175,447
Utility Operating Expenses
Electric Production-Fuel and Purchased Power 284,767 165,595 - 450,362
Cost of Gas Sold & Transported 163,631 128,438 - 292,069
Other Operation 259,068 207,670 - 466,738
Maintenance 81,913 63,936 - 145,849
Depreciation and Amortization 135,711 87,389 - 223,100
Taxes Other Than Income Taxes 118,376 40,415 - 158,791
Revitalization Charges - 73,900 - 73,900
Income Taxes 70,638 35,388 - 106,026
---------- ---------- ---------- ----------
Total Operating Expenses 1,114,104 802,731 - 1,916,835
---------- ---------- ---------- ----------
Utility Operating Income 151,322 107,290 - 258,612
Other Income (Expense)
Equity Earnings of Unconsolidated Investees 12,757 - - 12,757
Other Income and Deductions - Net 3,435 13,034 - 16,469
---------- ---------- ---------- ----------
Total Other Income (Expense) 16,192 13,034 - 29,226
---------- ---------- ---------- ----------
Income Before Interest Charges
and Preferred Dividends 167,514 120,324 - 287,838
Interest Charges 48,911 53,323 - 102,234
Preferred Dividends of Subsidiaries 6,113 749 - 6,862
---------- ---------- ---------- ----------
Net Income $ 112,490 $ 66,252 $ - $ 178,742
========== ========== ========== ==========
Average Common Shares Outstanding (Note 1) 66,765 107,525 41,795 216,085
Earnings Per Common Share $ 1.68 $ 0.62 $ 0.83
========== ========== ==========
<FN>
See accompanying notes to pro forma combined condensed financial statements.
- 16 -
</TABLE>
<PAGE> 17
<TABLE>
FORM 10-Q
PRIMERGY CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
12 MONTHS ENDED JUNE 30, 1995
(In thousands, except per share amounts)
<CAPTION>
NSP WEC Pro Forma Pro Forma
(As Reported) (As Reported) Adjustments Combined
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Utility Operating Revenues
Electric $2,076,194 $1,400,244 $ - $3,476,438
Gas 395,768 294,543 - 690,311
Steam - 13,599 - 13,599
---------- ---------- ---------- ----------
Total Operating Revenues 2,471,962 1,708,386 - 4,180,348
Utility Operating Expenses
Electric Production-Fuel and Purchased Power 570,257 329,526 - 899,783
Cost of Gas Sold & Transported 239,425 176,412 - 415,837
Other Operation 538,725 386,960 - 925,685
Maintenance 169,257 119,878 - 289,135
Depreciation and Amortization 281,990 180,373 - 462,363
Taxes Other Than Income Taxes 240,540 72,157 - 312,697
Revitalization Charges - - - -
Income Taxes 118,912 129,677 - 248,589
---------- ---------- ---------- ----------
Total Operating Expenses 2,159,106 1,394,983 - 3,554,089
---------- ---------- ---------- ----------
Utility Operating Income 312,856 313,403 - 626,259
Other Income (Expense)
Equity Earnings of Unconsolidated Investees 41,576 - - 41,576
Other Income and Deductions - Net 18,770 26,522 - 45,292
---------- ---------- ---------- ----------
Total Other Income (Expense) 60,346 26,522 - 86,868
---------- ---------- ---------- ----------
Income Before Interest Charges
and Preferred Dividends 373,202 339,925 - 713,127
Interest Charges 120,328 109,976 - 230,304
Preferred Dividends of Subsidiaries 12,578 1,204 - 13,782
---------- ---------- ---------- ----------
Net Income $ 240,296 $ 228,745 $ - $ 469,041
========== ========== ========== ==========
Average Common Shares Outstanding (Note 1) 67,004 108,931 41,945 217,880
Earnings Per Common Share $ 3.59 $ 2.10 $ 2.15
========== ========== ==========
<FN>
See accompanying notes to pro forma combined condensed financial statements.
- 17 -
</TABLE>
<PAGE> 18
FORM 10-Q
PRIMERGY CORPORATION
------------------------------------------
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
1. The pro forma combined condensed financial statements reflect the
conversion of each share of NSP Common Stock ($2.50 par value) outstanding
into 1.626 shares of Primergy Common Stock ($.01 par value) and the
continuation of each share of WEC Common Stock ($.01 par value)
outstanding as one share of Primergy Common Stock, as provided in the
Merger Agreement. The pro forma combined condensed financial statements
are presented as if the companies were combined during all periods
included therein.
2. The allocation between NSP and WEC and their customers of the estimated
cost savings resulting from the Transaction, net of the costs incurred to
achieve such savings, will be subject to regulatory review and approval.
Transaction costs are currently estimated to be approximately $30 million
(including fees for financial advisors, attorneys, accountants,
consultants, filings and printing). None of these estimated cost savings,
the costs to achieve such savings, or the transaction costs have been
reflected in the pro forma combined condensed financial statements.
3. Intercompany transactions (including purchased and exchanged power
transactions) between NSP and WEC during the periods presented were not
material and, accordingly, no pro forma adjustments were made to
eliminate such transactions.
4. A pro forma adjustment has been made to conform the presentation of
noncurrent deferred income taxes in the pro forma combined condensed
balance sheet into one net amount. All other financial statement
presentation and accounting policy differences are immaterial and have not
been adjusted in the pro forma combined condensed financial statements.
- 18 -
<PAGE> 19
FORM 10-Q
WISCONSIN ENERGY CORPORATION
------------------------------
PART II - OTHER INFORMATION (Cont'd)
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. The following Exhibits are filed with this report:
Exhibit No.
(3)-1 Restated Articles of Incorporation of Wisconsin Energy
Corporation, as amended and restated effective June 12, 1995.
(10)-1 Supplemental Benefits Agreement between Wisconsin Energy
Corporation and Richard A. Abdoo dated November 21, 1994, and
April 26, 1995 letter amendment.
(10)-2 Supplemental Executive Retirement Plan of Wisconsin Energy
Corporation, as amended April 26, 1995.
(10)-3 WEC Senior Executive Severance Policy, as adopted effective
April 28, 1995 and amended on July 26, 1995.
(27)-1 Wisconsin Energy Corporation Financial Data Schedule for the
six months ended June 30, 1995.
The following Exhibits are incorporated herein by reference:
(2)-1 Agreement and Plan of Merger, dated as of April 28, 1995, by
and among Northern States Power Company, Wisconsin Energy
Corporation, Northern Power Wisconsin Corp. and WEC Sub Corp.
(Exhibit (2)-1 to Wisconsin Energy Corporation's Current
Report on Form 8-K dated as of April 28, 1995, File No.
1-9057; certain other related documents were also filed as
exhibits to such report.) (The Amended and Restated Merger
Agreement, dated as of April 28, 1995, as amended and restated
as of July 26, 1995, will be filed as an exhibit to Wisconsin
Energy Corporation's Registration Statement on Form S-4 to be
filed for the registration under the Securities Act of 1933 of
the securities to be issued pursuant to the Amended and
Restated Merger Agreement.)
(99)-1 Primergy Corporation unaudited pro forma combined condensed
statements of income for each of the three years in the period
ended December 31, 1994. (Included in Wisconsin Energy's
Quarterly Report on Form 10-Q for the quarter ended March 31,
1995.)
(b) Reports on Form 8-K:
A Current Report on Form 8-K, dated as of April 28, 1995, was filed on
May 3, 1995 with respect to the Agreement and Plan of Merger, dated as
of April 28, 1995, by and among Northern States Power Company, Wisconsin
Energy Corporation, Northern Power Wisconsin Corp. and WEC Sub Corp.
- 19 -
<PAGE> 20
FORM 10-Q
WISCONSIN ENERGY CORPORATION
------------------------------
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WISCONSIN ENERGY CORPORATION
--------------------------------------
(Registrant)
/s/ R. A. Abdoo
--------------------------------------
Date: August 3, 1995 R. A. Abdoo, Chairman of the Board,
President and Chief Executive
Officer
/s/ J. G. Remmel
--------------------------------------
Date: August 3, 1995 J. G. Remmel, Vice President
and Treasurer - Principal
Financial Officer
- 20 -
<PAGE> 21
Wisconsin Energy Corporation
EXHIBIT INDEX
-------------
Form 10-Q for Quarter ended 6/30/95
Exhibit
Number
-------
The following Exhibits are filed with this report:
(3)-1 Restated Articles of Incorporation of Wisconsin Energy
Corporation, as amended and restated effective June 12, 1995.
(10)-1 Supplemental Benefits Agreement between Wisconsin Energy
Corporation and Richard A. Abdoo dated November 21, 1994, and
April 26, 1995 letter amendment.
(10)-2 Supplemental Executive Retirement Plan of Wisconsin Energy
Corporation, as amended April 26, 1995.
(10)-3 WEC Senior Executive Severance Policy, as adopted effective
April 28, 1995 and amended on July 26, 1995.
(27)-1 Wisconsin Energy Corporation Financial Data Schedule for the
six months ended June 30, 1995.
The following Exhibits are incorporated herein by reference:
(2)-1 Agreement and Plan of Merger, dated as of April 28, 1995, by
and among Northern States Power Company, Wisconsin Energy
Corporation, Northern Power Wisconsin Corp. and WEC Sub Corp.
(Exhibit (2)-1 to Wisconsin Energy Corporation's Current
Report on Form 8-K dated as of April 28, 1995, File No.
1-9057.) (The Amended and Restated Merger Agreement, dated as
of April 28, 1995, as amended and restated as of July 26,
1995, will be filed as an exhibit to Wisconsin Energy
Corporation's Registration Statement on Form S-4 to be filed
for the registration under the Securities Act of 1933 of the
securities to be issued pursuant to the Amended and Restated
Merger Agreement.)
(99)-1 Primergy Corporation unaudited pro forma combined condensed
statements of income for each of the three years in the period
ended December 31, 1994. (Included in Wisconsin Energy's
Quarterly Report on Form 10-Q for the quarter ended March 31,
1995.)
- 21 -
<PAGE> 1
EXHIBIT (3)-1
RESTATED
ARTICLES OF INCORPORATION
OF
WISCONSIN ENERGY CORPORATION
- ---------------------------------------------------
AS AMENDED AND RESTATED EFFECTIVE JUNE 12, 1995
- ---------------------------------------------------
<PAGE> 2
RESTATED
ARTICLES OF INCORPORATION
OF
WISCONSIN ENERGY CORPORATION
These Restated Articles of Incorporation of Wisconsin Energy Corporation, a
corporation incorporated under Chapter 180 of the Wisconsin Statutes, the
Wisconsin Business Corporation Law, supersede and take the place of the
existing Restated Articles of Incorporation and all prior amendments thereto.
ARTICLE I. NAME
The name of the corporation is WISCONSIN ENERGY CORPORATION.
ARTICLE II. PURPOSE
The corporation is organized for the purpose of engaging in any lawful
activity within the purposes for which corporations may be organized under the
Wisconsin Business Corporation Law.
ARTICLE III. DESCRIPTION OF CAPITAL STOCK
A. Authorized Number and Classes of Shares
The aggregate number of shares which the corporation shall have
authority to issue is Three Hundred and Forty Million (340,000,000)
shares, consisting of Three Hundred and Twenty-Five Million
(325,000,000) shares of Common Stock of the par value of One Cent ($.01)
per share (hereinafter called the "Common Stock") and Fifteen Million
(15,000,000) shares of Preferred Stock of the par value of One Cent
($.01) per share (hereinafter called the "Preferred Stock").
B. Common Stock Provisions
(1) Dividends
Subject to any rights of holders of Preferred Stock, such
dividends (payable in cash, stock or otherwise) as may be determined by
the Board of Directors may be declared and paid on the Common Stock from
time to time from any funds, property or shares legally available
therefor.
(2) Voting Rights
Subject to any rights of holders of Preferred Stock to vote on a
matter as a class or series, each outstanding share of Common Stock
shall be entitled to one vote on each matter submitted to a vote of
holders of Common Stock at a meeting of stockholders.
(3) Liquidation, Dissolution or Winding Up
In the event of any liquidation, dissolution or winding up of the
corporation, the holders of Common Stock, subject to any rights of
holders of Preferred Stock, shall be entitled to receive the net balance
of any remaining assets of the corporation.
- 1 -
<PAGE> 3
(4) No Preemptive Rights
No holder of Common Stock shall be entitled as such, as a matter
of right, to subscribe for or purchase or receive any part of any new or
additional issue of stock, or securities convertible into stock, of any
class whatever, whether now or hereafter authorized, or whether issued
for cash, property or services, by way of dividend, or in exchange for
the stock of another corporation.
C. Preferred Stock Provisions
The Board of Directors shall have authority to divide the Preferred
Stock into series, to issue shares of any such series and, within the
limitations set forth in these Articles of Incorporation or prescribed
by law, to fix and determine the relative rights and preferences of the
shares of any series so established. Each such series shall be so
designated as to distinguish the shares thereof from the shares of all
other series and classes. All shares of Preferred Stock shall be
identical except as to the following relative rights and preferences, as
to which there may be variations between different series:
(1) The rate of dividend;
(2) The price at and the terms and conditions on which shares may be
redeemed;
(3) The amount payable upon shares in the event of voluntary or
involuntary liquidation of the corporation;
(4) Sinking fund provisions for the redemption or purchase of shares;
(5) The terms and conditions on which shares may be converted, if
shares are issued with the privilege of conversion;
(6) Voting rights, if any; and
(7) Any other rights or preferences as to which the laws of the State
of Wisconsin, as in effect at the time of the determination
thereof, permit variations between different series of Preferred
Stock.
Shares of Preferred Stock shall have only such voting rights, if any,
preemptive rights, if any, and other rights as are fixed and determined
by the Board of Directors in accordance with the foregoing provisions or
as may be required by law.
D. Certain Other Provisions Affecting Stockholders
(1) Restriction on Certain Purchases of Common Stock at Market Premium
(a) The corporation shall not purchase any shares of Common
Stock from any person or other entity if more than 5% of the outstanding
shares of Common Stock are believed by the Board of Directors to be
Beneficially Owned by such person or other entity at the time the
purchase is authorized by the Board, at a price exceeding significantly
(as determined by the Board of Directors) the then current market price.
This provision shall not apply, however, to (i) any purchase of shares
believed by the Board to have been Beneficially Owned by the seller, or
by the seller and any of the seller's Affiliates consecutively, for at
- 2 -
<PAGE> 4
least the two-year period ending with the date of purchase; (ii) any
purchase of shares which has been approved by affirmative vote by a
majority of the aggregate number of votes which the holders of the then
outstanding shares of Common Stock and Preferred Stock are entitled to
cast, voting together as a class, in the election of directors; or (iii)
any purchase pursuant to a tender offer to all holders of Common Stock
on the same terms.
(b) As used in this Subsection (1):
(i) "Affiliate", with respect to any person or other
entity, means any other person or other entity that directly, or
indirectly through one or more intermediary, controls, is controlled by,
or is under common control with, such former person or other entity;
(ii) "Beneficially Owned", as of any time, means
Beneficially Owned within the meaning of Rule 13d-3 under the Securities
Exchange Act of 1934, as in effect on June 1, 1986.
(2) Shares Not Subject to Statutory Vote Reduction Provisions
The voting power of shares of Common Stock and Preferred Stock
shall not at any time be subject to Section 180.1150 of the Wisconsin
Statutes or any successor provision.
(3) Bylaw Provisions Fixing Greater Voting Requirements
The Bylaws may require a greater stockholder vote than would
otherwise be required by law or by these Articles of Incorporation for:
(i) removal of a director from office; or (ii) amending provisions of
the Bylaws relating to or in connection with taking action by the
unanimous consent of stockholders without a meeting; the number, term,
qualification, classification and election of directors; the removal of
a director from office; notice for Board of Directors' meetings;
indemnification of officers, directors and other persons by the
corporation; or Bylaw amendments. For purposes of Sections 180.1021 and
180.1706(4) of the Wisconsin Statutes, each section of the Bylaws shall
be deemed to be a separate bylaw.
ARTICLE IV. NUMBER OF DIRECTORS
The Board of Directors shall consist of such number of directors as shall be
fixed from time to time by or in the manner provided in the Bylaws, which may
provide that the directors shall be divided into three classes as contemplated
in Section 180.0806 of the Wisconsin Statutes or any successor provision.
ARTICLE V. EMERGENCY PROVISIONS
The business and affairs of the corporation shall be managed by its Board of
Directors, except as otherwise provided in this Article V after the occurrence
and during the continuance of any Emergency. During any Emergency the
provisions of this Article V shall apply to the maximum extent permitted by
the Wisconsin Business Corporation Law, particularly Sections 180.0207 and
180.0303 thereof, or any successor provisions, as at the time in effect. The
provisions of this Article V shall control during any Emergency,
notwithstanding any contrary provisions of these Articles of Incorporation or
the Bylaws of the corporation.
- 3 -
<PAGE> 5
As used in this Article V, "Emergency" means a catastrophic event that
prevents a quorum of the Board of Directors from being readily assembled.
During any Emergency, the business and affairs of the corporation shall be
managed by an interim Board of Directors consisting of so many of the
incumbent directors, if any, as are known to be alive and not incapacitated,
and whom the corporation is able to contact by normal means of communication,
together with provisional directors selected as hereinafter provided. The
total number of directors on such interim Board of Directors shall be the
lesser of the number determined in or pursuant to the Bylaws, or the number of
eligible persons who are known to be alive, are not incapacitated and can be
readily contacted by the usual means of communication. The Board of Directors
by resolution may from time to time designate a list of provisional directors
and the order of priority in which such persons shall become interim directors
in the event of Emergency, which designation shall continue in effect until
such resolution has been subsequently amended or rescinded or has by its terms
ceased to have effect. Interim directors need not be stockholders of the
corporation. In addition to the exercise, on a temporary basis, of all of the
powers of the regular Board of Directors, the interim Board of Directors shall
have the authority to declare vacancies in any positions of the regular Board
of Directors in cases where any incumbent director is incapacitated or missing
or otherwise unable to be contacted within a reasonable time, and to fill such
vacancies, as well as any vacancy resulting from the death of a director, by
electing replacements to the regular Board of Directors to serve until the
next succeeding annual meeting of stockholders.
When an Emergency has occurred, any director or provisional director named in
any aforementioned resolution is empowered on behalf of the corporation to
declare the provisions of this Article V to be in effect, and to call a
meeting of either the regular or an interim Board of Directors on such notice,
which may be shorter than the notice provided for in the Bylaws for special
meetings of the Board of Directors, as such person may determine to be
advisable. In the case of a meeting of the interim Board of Directors,
reasonable efforts shall be made to give such notice to all persons who are or
may be eligible to serve as interim directors. At the first meeting of any
interim Board of Directors, three or more interim directors may act,
notwithstanding any other quorum requirement provided by these Articles of
Incorporation or the Bylaws of the corporation, and notwithstanding any
failure of other interim directors to receive notice of the meeting. Prior to
any initial meeting of the interim Board of Directors three or more interim
directors, and thereafter a majority of the interim directors who are deemed
to be serving as such, may take action as the Board of Directors by telephone
meeting, written instrument or other means which reasonably evidences the
assent to the action of a majority of such number of interim directors, in
lieu of action at a meeting.
ARTICLE VI. ACQUISITION OF OWN SHARES
Subject to the provisions of Section D(1) of Article III of these Articles of
Incorporation, the corporation is authorized to purchase, take, receive or
otherwise acquire shares of Common Stock or Preferred Stock of the
corporation, with the approval of the Board of Directors, with or without any
vote or consent of stockholders.
- 4 -
<PAGE> 6
ARTICLE VII. AMENDMENTS TO THE ARTICLES
Any lawful amendment of these Articles of Incorporation may be made by
affirmative vote by at least the proportion specified below of the aggregate
number of votes which the holders of the then outstanding shares of Common
Stock and Preferred Stock are entitled to cast on the amendment and, if the
shares of one or more classes or series are entitled under these Articles of
Incorporation or otherwise by law to vote thereon as a class, affirmative vote
by the same proportion of the aggregate number of votes which the holders of
the then outstanding shares of such one or more classes or series are entitled
to cast on the amendment. The proportion referred to above in this Article
VII shall be 80% in the case of any amendment of the provisions set forth in
Sections C and D(1) of Article III of these Articles of Incorporation, and in
this Article VII, and any amendment rendering inapplicable to the corporation
Sections 180.1130 through 180.1134 of the Wisconsin Business Corporation Law
or any successor provisions, and shall be a majority in all other cases.
ARTICLE VIII. EFFECT OF HEADINGS
The descriptive headings in these Articles of Incorporation were formulated,
used and inserted herein for convenience only and shall not be deemed to
affect the meaning or construction of any of the provisions hereof.
ARTICLE IX. REGISTERED OFFICE AND AGENT
The address of the registered office of the corporation is 231 West Michigan
Street, Milwaukee, Wisconsin 53201 and the name of its registered agent at
such address is J. H. Goetsch. The county of such registered office is
Milwaukee County.
- 5 -
<PAGE> 1
EXHIBIT (10)-1
November 21, 1994
Mr. R. A. Abdoo
231 West Michigan Street
Milwaukee, Wisconsin 53201
Dear Mr. Abdoo:
RE: SUPPLEMENTAL BENEFITS
---------------------
This letter agreement replaces in its entirety the letter agreement between us
dated December 14, 1990 and signed by you on December 18, 1990.
In consideration of your service with Wisconsin Energy Corporation and its
subsidiaries (hereinafter collectively called the Corporation) and your
agreement to devote your individual best efforts to the interest of said
Corporation in the future, it is agreed that supplemental benefits as
described in this Agreement will be provided on behalf of the Corporation by
Wisconsin Electric Power Company (hereinafter called the Company).
Retirement
- ----------
Upon your retirement at age 60 or older (or prior to age 60 with the approval
of the Boards of Directors of Wisconsin Energy Corporation and the Company),
the Company will pay a supplemental monthly retirement benefit equal to the
difference between (1) and (2) below, less the amount of the monthly vested
retirement benefits payable to you at age 65 under defined benefit plans from
previous employers for periods of employment prior to your employment by the
Corporation, where (1) and (2) are defined as follows:
(1) equals the monthly retirement benefit payable from the Management
Employees' Retirement Plan of the Company or such successor Plans as may
be adopted by the Company (hereinafter called the Plan) plus the amounts
of any actual "make whole" pension supplements due under the provisions
of Section IX(1) and (2) of the Wisconsin Energy Corporation Executive
Deferred Compensation Plan, plus any amount payable under Monthly
Benefit A under the Corporation's Supplemental Executive Retirement
Plan, and
(2) equals the monthly retirement benefit which would have been payable from
the Plan calculated without regard to any limitations imposed by
Section 415 of the Internal Revenue Code or any limitation on annual
compensation, as adjusted from time to time, imposed by
Section 401(a)(17) of such Code and under the assumptions that (i) your
participation in the Plan had commenced on the first day of the month
following your twenty-fifth birthday and continued uninterrupted
thereafter, (ii) any deferrals of base salary you elected under the
Corporation's Executive Deferred Compensation Plan were disregarded and
instead included in your compensation base for calculating retirement
income under the Plan, and (iii) the amount of any Performance Award,
Incentive Award or special award, calculated at the time of its
determination by the Board of Wisconsin Energy Corporation had also been
included in your compensation base for calculating retirement income
under the Plan.
<PAGE> 2
The reduction amount with respect to benefits payable to you at age 65 under
defined benefit plans from previous employers shall be converted into an
actuarial equivalent of a Life Annuity Form payable at age 65 using the
actuarial equivalency factors under the Plan, but shall be subtracted, without
any further adjustment, from any supplemental monthly retirement benefit
calculated as above set forth whenever the same commences whether before or
after your 65th birthday. Further, such reduction amount applies to any
supplemental monthly retirement benefit calculated as above set forth and
expressed as a Life Annuity Form of benefit and shall be made prior to the
application of factors applicable for any other form of benefit available
under the provisions of the Plan. Prior to the time of retirement, you will
provide the Company with certified information regarding any such defined
benefit retirement benefits payable or to be payable to you by a previous
employer.
Preretirement Spouse's Benefit
- ------------------------------
In the event of your death while in the employ of the Corporation, the Company
will pay to your surviving spouse a monthly benefit equal to the difference
between (a) and (b) below, but reduced as provided below to reflect the value
of any vested defined benefit retirement benefits attributable to prior
employment as set forth under the "Retirement" paragraph of this letter, where
(a) and (b) are defined as follows:
(a) equals the monthly spouse's benefit, if any, payable from the Plan
plus the amounts of any actual "make whole" spousal pension supplements
due under the provisions of Section IX(1) and (2) of the Wisconsin
Energy Corporation Executive Deferred Compensation Plan, plus any amount
payable under Monthly Benefit A under the Corporation's Supplemental
Executive Retirement Plan, and
(b) equals the monthly spouse's benefit which would have been payable
from the Plan calculated on all the same assumptions as set forth in
subsection (2) of the "Retirement" paragraph of this letter.
The reduction amount with respect to vested defined benefit retirement
benefits attributable to prior employment is to be applied by reducing the
monthly surviving spouse benefit calculated as above set forth by one-half of
the dollar amount of the vested benefit which would have been offset under the
"Retirement" paragraph of this letter.
Condition of Payment
- --------------------
All of the terms and conditions of the supplemental benefits provided herein
shall be subject to and shall be administered as if such supplemental benefits
were payable directly from the Plan. No supplemental benefits, other than
those specifically provided herein, shall be paid by the Company or the
Corporation upon your termination of employment with the Corporation for any
other reasons.
The form of your supplemental benefits will follow the form payable to you
from the Plan. However, notwithstanding any other provision hereof, you may
- 2 -
<PAGE> 3
at the time of your retirement make a written request to the Board of
Directors of the Corporation for a single lump sum payment of an amount equal
to the then present value of all supplemental benefits accrued under this
letter agreement, calculated using (i) an interest rate equal to the five-year
United States Treasury Note yield in effect on the last business day of the
month prior to the payment (as reported in the WALL STREET JOURNAL or
comparable publication), and (ii) the mortality tables then in use under the
Plan. The Board of Directors of the Corporation, in its sole and absolute
discretion, may grant or deny such request.
Further, upon the occurrence of a "Change in Control" of the Corporation (as
defined in Exhibit A attached to and made a part of this letter), then
notwithstanding any other provision hereof, the Corporation shall promptly pay
to you or to anyone then receiving supplemental benefits under this letter
agreement a single lump sum payment of an amount equal to the then present
value of all such supplemental benefits accrued (whether or not in pay status
and without regard to whether your employment is continuing), calculated using
the same assumptions as set forth in the immediately preceding paragraph, with
an interest rate to equal the five-year United States Treasury Note yield in
effect on the last business day of the month prior to the date when the Change
in Control occurred. If you continue in employment and the supplemental
benefits provided for in this letter continue, appropriate provisions shall be
made so that any subsequent payments under this letter agreement are reduced
to reflect the value of such lump sum payment.
All amounts payable under this letter agreement shall be subject to all
applicable withholding taxes. The Corporation may establish a grantor trust
to serve as a vehicle to hold such contributions as the Corporation may choose
to make to pre-fund its obligations hereunder, but the trust shall be designed
so that this letter agreement remains an unfunded arrangement and your rights
to benefits under this letter agreement shall be those of an unsecured
creditor.
If the terms of this agreement are satisfactory to you, please indicate your
acceptance below.
Sincerely,
WISCONSIN ENERGY CORPORATION
By: /s/John H. Goetsch
-------------------------------
Vice President and Secretary
I understand, accept and agree to all the provisions and conditions contained
in the above Agreement.
/s/R. A. Abdoo
- ----------------------------------
R. A. Abdoo
Nov. 22, 1994
- ----------------------------------
Date
- 3 -
<PAGE> 4
EXHIBIT A
CHANGE IN CONTROL DEFINITION
For purposes of this Plan, a "change in control" with respect to
Wisconsin Energy Corporation shall mean the occurrence of any of the following
events, as a result of one transaction or a series of transactions:
(a) any "person" (as such term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934, but
excluding the Company, its affiliates and any qualified or
non-qualified plan maintained by the Company or its
affiliates) becomes the "beneficial owner" (as defined in
Rule 13d-3 promulgated under such Act), directly or
indirectly, of securities of the Company representing more
than 20% of the combined voting power of the Company's then
outstanding securities;
(b) individuals who constitute a majority of the Board
immediately prior to a contested election for positions on
the Board cease to constitute a majority as a result of such
contested election;
(c) the Company is combined (by merger, share exchange,
consolidation, or otherwise) with another corporation and as
a result of such combination, less than 60% of the
outstanding securities of the surviving or resulting
corporation are owned in the aggregate by the former
shareholders of the Company;
(d) the Company sells, leases, or otherwise transfers all or
substantially all of its properties or assets not in the
ordinary course of business to another person or entity; or
(e) the Board determines in its sole and absolute discretion
that there has been a Change in Control of the Company.
These Change in Control provisions shall apply to successive Changes in
Control on an individual transaction basis.
<PAGE> 5
[WEC Letterhead]
April 26, 1995
Mr. Richard A. Abdoo
2413 West Range Line Terrace 99N
Mequon, WI 53092
RE: Amendment to Supplemental Benefits Letter Dated November 21, 1994
Dear Dick:
The purpose of this letter is to set forth an amendment to the above-
referenced Supplemental Benefits Letter (the "Letter Agreement").
Subject to your acceptance, set forth below, the Letter Agreement is amended
as follows:
a) The third paragraph thereof is replaced with the following:
"Upon your retirement at or after age 58 (and if your actual
retirement occurs at or after age 58 but prior to age 60, you shall
be deemed to be age 60 for purposes of all calculations under this
letter agreement), or prior to age 58 with the approval of the
Boards of Directors of Wisconsin Energy Corporation and the
Company, the Company will pay a supplemental monthly retirement
benefit equal to the difference between (1) and (2) below, less the
amount of the monthly vested retirement benefits payable to you at
age 65 under defined benefit plans from previous employers for
periods of employment prior to your employment by the Corporation,
where (1) and (2) are defined as follows:
(1) equals the sum of the monthly retirement benefits payable from
the Management Employees' Retirement Plan of the Company and
Wisconsin Natural Gas Company or such successor plans as may be
adopted by either company (hereinafter called "the Plans") plus the
amounts of any actual "make whole" pension supplements due under
the provisions of Section IX(1) and (2) of the Wisconsin Energy
Corporation Executive Deferred Compensation Plan, plus any amount
payable under Monthly Benefit A under the Corporation's
Supplemental Executive Retirement Plan, and (2) equals the sum of
the monthly retirement benefits which would have been payable from
the Plans, calculated without regard to any limitations imposed by
Section 415 of the Internal Revenue Code or any limitation on
annual compensation, as adjusted from time to time, imposed by
Section 401(a)(17) of such Code, and under the assumptions that (i)
your participation in the Plans had commenced on the first day of
the month following your twenty-fifth birthday and continued
uninterrupted thereafter, (ii) any deferrals of base salary you
elected under the Corporation's Executive Deferred Compensation
Plan were disregarded and instead included in your compensation
base for calculating retirement income under the Plans, and (iii)
the amount of any Performance Award, Incentive Award or special
award, calculated at the time of its determination by the Board of
<PAGE> 6
Mr. R. A. Abdoo
April 26, 1995
Page 2
Wisconsin Energy Corporation, had also been included in your
compensation base for calculating retirement income under the
Plans."
b) The word "Plans" is substituted for the word "Plan" wherever it
appears after the third paragraph.
If the terms of this amendment are satisfactory to you, please indicate your
acceptance below.
Sincerely,
WISCONSIN ENERGY CORPORATION
By: /s/ J. H. Goetsch
------------------------------------
J. H. Goetsch
Vice President and Secretary
I understand, accept and agree to the above amendment to the Letter Agreement.
/s/ R. A. Abdoo
- -----------------------------------
R. A. Abdoo
May 23
- -----------------------------, 1995
Date
<PAGE> 1
EXHIBIT (10)-2
WISCONSIN ENERGY CORPORATION
----------------------------
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
--------------------------------------
(As amended effective April 26, 1995)
<PAGE> 2
WISCONSIN ENERGY CORPORATION
----------------------------
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
--------------------------------------
This plan, which is retitled the Wisconsin Energy Corporation Supplemental
Executive Retirement Plan, succeeds to and constitutes an amendment and
restatement of the Wisconsin Energy Corporation Executive Deferred
Compensation Plan; such amendment and restatement was effective as of
January 1, 1994; it was subsequently amended effective April 26, 1995. All
the provisions of this amended and restated Plan, as subsequently amended,
shall apply to all Participants, active and retired, except for
Nancy R. Noeske and except as otherwise specifically provided herein. The
rights of Ms. Noeske shall be as defined in the Wisconsin Energy Corporation
Supplemental Executive Retirement Plan as restated and effective as of
January 1, 1989 (including amendments made in February of 1990 which became
effective as of January 1, 1989) and as defined in that certain Special
Employment, Retirement and Release Agreement made between Wisconsin Electric
Power Company and Ms. Noeske in 1993.
1. PURPOSE. The Supplemental Executive Retirement Plan (the "Plan") is
maintained by Wisconsin Energy Corporation (the "Company") for the
purpose of providing supplemental retirement benefits for a select group
of management or highly compensated employees (key employees) within the
meaning of Title 1 of the Employee Retirement Income Security Act.
The objective of the Plan is to provide an incentive for key employees
to remain in the service of Wisconsin Energy Corporation and/or its
subsidiaries by providing them with supplemental retirement benefits
which are payable, except for the change in control provisions hereafter
set forth, only if they remain in the service of Wisconsin Energy
Corporation and/or its subsidiaries until they die or retire.
<PAGE> 3
2. PARTICIPATION.
(A) Definition of a "Participant".
The term "Participant" as used herein refers to any key employee
of the Company and/or any of its subsidiaries who shall have
automatically or by designation become subject to this Plan and
who has not been removed from the Plan pursuant to (D) herein.
(B) Key Employees Presently Party to the Plan.
Any key employee who was a party to this Plan before
January 1, 1989, (this Plan being designated the Wisconsin Energy
Corporation Executive Deferred Compensation Plan), shall
automatically remain subject to the Plan as amended on that date,
and any Monthly Benefits payable to a Participant shall be ad-
ministered subject to the Plan as amended and all beneficiary
designations under the Plan in effect immediately before
January 1, 1989 shall remain in effect until changed by proper
notice under the Plan.
(C) Key Employees Not Presently Party to the Plan.
Key employees not presently party to the Plan who are designated
by the Chief Executive Officer of Wisconsin Energy Corporation and
whose designation is approved by the Boards of Directors of
Wisconsin Energy Corporation and the employing company or
companies shall be eligible as Participants for payments under the
Plan in accordance with the provisions hereof.
(D) Removal of a Participant.
A Participant may be removed from the Plan at any time upon the
2
<PAGE> 4
recommendation of the Chief Executive Officer of Wisconsin Energy
Corporation and with the approval of the Boards of Directors of
Wisconsin Energy Corporation and the employing company or
companies, provided no such removal may eliminate or reduce any
benefits which are protected under Section 12 hereof in the event
of termination of this Plan.
3. PAYMENTS UPON RETIREMENT. Upon the retirement of a Participant as an
employee of Wisconsin Energy Corporation and all of its subsidiaries
either:
(a) at age 60 (or in Mr. R. A. Abdoo's case, age 58, and if his
actual retirement occurs at or after age 58 but prior to age
60, he shall be deemed to be age 60 for purposes of all
calculations respecting Monthly Benefits A and B hereof) or
later, or
(b) prior to age 60 (or in Mr. R. A. Abdoo's case, age 58)
subject to approval by the Chief Executive Officer of
Wisconsin Energy Corporation with the Boards of Directors of
the Wisconsin Energy Corporation and employing company or
companies,
such Participant shall be entitled to receive Monthly Benefit A and
Monthly Benefit B described in paragraph 4 below. Further, subject to
the above conditions, Participants listed on the attached Schedule (the
"Listed Participants") shall be entitled to receive Monthly Benefit C
described in paragraph 4 below.
4. AMOUNT OF BENEFIT. Monthly Benefit A shall equal (a) less (b) where:
(a) equals the Participant's accrued benefit(s), as of the date
of determination, calculated on a straight life annuity basis
3
<PAGE> 5
under the provisions of the Company's and/or all of its
subsidiaries' applicable qualified defined benefit retirement
plan(s), without regard to any limitations on benefits imposed by
IRC Section 415 or the $200,000 limitation on annual compensation,
as adjusted from time to time, imposed by IRC Section 401(a)(17)
applicable to the qualified plan; and
(b) equals the Participant's accrued benefit(s), as of the date
of determination, calculated on a straight life annuity basis
under the provisions of the Company's and/or its subsidiaries'
applicable qualified defined benefit retirement plan(s).
For all Participants whose service with the Company or any of its
subsidiaries terminated on or before December 31, 1993, Monthly
Benefit B and post retirement death benefits with respect to Monthly
Benefit B shall be as defined in this plan as restated effective as of
January 1, 1989 (including amendments made in February, 1990 which
became effective as of January 1, 1989). For all Participants still in
the active service of the Company or any of its subsidiaries on and
after January 1, 1994, Monthly Benefit B shall equal a life annuity of
10% of the average total monthly compensation received by the
Participant from the Company and/or all of its subsidiaries during
whichever period of 36 consecutive months produces the highest average
total monthly compensation. [Solely for purposes of determining Monthly
Benefit B, average total monthly compensation during such 36-month
period includes the monthly average of (i) any Incentive Award
determined under the Company's Executive Incentive Compensation Plan,
calculated as of the date of determination as if then paid in full as
base salary and disregarding the actual date of payment of any such
Incentive Award and the amount thereof at the time of payment, (ii) the
amount of any other annual incentive salary award paid to the
4
<PAGE> 6
Participant, and (iii) any amounts of base salary that would have been
paid to the Participant during such 36-month period but are not paid
because of deferral elections made by the Participant under a savings or
other deferred compensation plan.]
Monthly Benefit C shall equal (a) less (b) where:
(a) equals the Listed Participant's accrued benefit(s), as of
the date of determination, calculated on a straight life annuity
basis under the provisions of the Wisconsin Electric Power Company
Management Employees' Retirement Plan and/or the Wisconsin Natural
Gas Company Management Employees' Retirement Plan, as in effect on
December 31, 1988 (the "1988 Management Plans", whichever such
Plan(s) applied to the Listed Participant as of December 31, 1988)
plus any benefits under any individual supplemental benefits
agreement(s) between the Company, and/or any of its subsidiaries
and any Listed Participant, all calculated without regard to any
limitations imposed by IRC Section 415 or the $200,000 limitation
on annual compensation, as adjusted from time to time, imposed by
IRC 401(a)(17), and all calculated under the further assumptions
that (i) the 1988 Management Plans continued without change until
the date of determination; (ii) any deferrals of base salary
elected by the Listed Participant under the Wisconsin Energy
Corporation Executive Deferred Compensation Plan were disregarded
and instead included in the compensation base for calculating
retirement income under the 1988 Management Plans; and (iii) the
amount of any Incentive Award or special award to the Listed
Participant, calculated at the time of its determination by the
Board, had also been included in the compensation base for
calculating retirement income under the 1988 Management Plans; and
5
<PAGE> 7
(b) equals the sum of (i) the Listed Participant's accrued bene-
fit(s), as of the date of determination, calculated on a straight
life annuity basis under the provisions of the Wisconsin Electric
Power Company Management Employees' Retirement Plan and/or the
Wisconsin Natural Gas Company Management Employees' Retirement
Plan, whichever such Plan(s) applies to the Listed Participant, as
in effect on the date of determination; plus (ii) any actual
benefits under any individual supplemental benefits agreement(s)
between the Company and/or any of its subsidiaries and any Listed
Participant, plus (iii) any actual Monthly Benefit A, and plus
(iv) any actual "make whole" pension supplements due under the
provisions of Section IX(1) and (2) of the Wisconsin Energy
Corporation Executive Deferred Compensation Plan.
5. FORM OF PAYMENT. Monthly Benefits A, B and C shall be paid in the same
form as the benefit(s) paid from the Company's and/or its subsidiaries'
applicable qualified defined benefit retirement plan(s). If a form
other than a straight life annuity is applicable, the same option and
actuarial equivalent factors that apply in such qualified defined
benefit retirement plans(s) shall apply to Monthly Benefits A, B and C.
Monthly Benefits A, B and C shall be administered in the same manner as
the provisions of the applicable qualified retirement plan(s) are
administered. Notwithstanding any other provision hereof, a Participant
who is entitled to begin receiving payments under any or all of Monthly
Benefits A, B or C may make a written request to the Board of Directors
of Wisconsin Energy Corporation for a lump sum payment of an amount
equal to the then present value of all benefits then accrued under this
plan, calculated using (i) an interest rate equal to the five-year
United States Treasury Note yield in effect on the last business day of
the month prior to payment as such yield is reported in the WALL STREET
6
<PAGE> 8
JOURNAL or comparable publication and (ii) the mortality tables then in
use under the qualified defined benefit plan of the Company or its
subsidiaries applicable to the Participant. The Board of Directors, in
its sole and absolute discretion, may grant or deny such request.
6. PRERETIREMENT DEATH BENEFITS RESPECTING MONTHLY BENEFITS A AND C.
Provided that a Participant is entitled to preretirement spouse's
benefits under the Company's and/or its subsidiaries' applicable
qualified defined benefit retirement plan(s), payments of Monthly
Benefits A and C (reduced according to the same ratio as the spouse's
benefit(s) under the qualified plan(s) bears to the Participant's
accrued benefit(s) as of his/her date of death) shall become payable
upon the death of the Participant before retirement to the spouse of
such Participant for the balance of his/her lifetime.
7. PRE- AND POST-RETIREMENT DEATH BENEFITS RESPECTING MONTHLY BENEFIT B.
If a Participant dies before payments of Monthly Benefit B commence, the
beneficiary or beneficiaries designated by the Participant shall become
entitled to receive a lump sum amount equal to the then present value of
Monthly Benefit B, calculated using (i) an interest rate equal to the
five-year United States Treasury Note yield in effect on the last
business day of the month prior to the date of death as such yield is
reported in the WALL STREET JOURNAL or comparable publication, and
(ii) the mortality tables then in use under the qualified defined
benefit plan of the Company or its subsidiaries applicable to the
Participant. If a retired Participant receiving Monthly Benefit B dies,
whether any payments continue thereafter will depend upon the form of
payment such Participant had elected.
8. PAYMENTS UPON CHANGE IN CONTROL. For purposes of this paragraph 8, a
"Change in Control" with respect to the Company shall mean the
7
<PAGE> 9
occurrence of any of the following events, as a result of one
transaction or a series of transactions:
(a) any "person" (as such term is used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934, but
excluding the Company, its affiliates and any qualified or
non-qualified plan maintained by the Company or its
affiliates) becomes the "beneficial owner" (as defined in
Rule 13d-3 promulgated under such Act), directly or
indirectly, of securities of the Company representing more
than 20% of the combined voting power of the Company's then
outstanding securities;
(b) individuals who constitute a majority of the Board
immediately prior to a contested election for positions on
the Board cease to constitute a majority as a result of such
contested election;
(c) the Company is combined (by merger, share exchange,
consolidation, or otherwise) with another corporation and as
a result of such combination, less than 60% of the
outstanding securities of the surviving or resulting
corporation are owned in the aggregate by the former
shareholders of the Company;
(d) the Company sells, leases, or otherwise transfers all or
substantially all of its properties or assets not in the
ordinary course of business to another person or entity; or
(e) the Board determines in its sole and absolute discretion
that there has been a Change in Control of the Company.
8
<PAGE> 10
These Change in Control provisions shall apply to successive Changes in
Control on an individual transaction basis.
Upon the occurrence of a Change in Control, then notwithstanding
any other provision of this plan, the Company shall promptly cause
to be paid to each active and retired Participant or beneficiary
receiving benefits under this plan a lump sum amount equal to the
then present value of all benefits then accrued under this plan,
calculated using (i) an interest rate equal to the five-year
United States Treasury Note yield in effect on the last business
day of the month prior to the date when a Change in Control event
described in subparagraphs (a) through (e) above has occurred as
such yield is reported in the WALL STREET JOURNAL or comparable
publication, and (ii) the mortality tables then in use under the
qualified defined benefit plan of the Company or its subsidiaries
applicable to the Participant. Such payments shall be made
without regard to whether the Participant's employment with the
Company or any of its subsidiaries is continuing. However, if the
Participant in fact so continues and this plan continues,
appropriate provisions shall be made so that any subsequent
payments made from this plan are reduced to reflect the value of
such lump sum payments.
9. GOVERNMENT REGULATIONS. It is intended that the Plan will comply with
all applicable laws and governmental regulations, and the Company and/or
its subsidiaries shall not be obligated to perform an obligation
hereunder in any case where, in the opinion of the Company's Counsel,
such performance would result in violation of any law or regulation.
All amounts payable under this plan shall be subject to all applicable
withholding taxes.
9
<PAGE> 11
10. NONASSIGNMENT. No benefit(s) under the Plan, nor any other interest
hereunder of any Participant or beneficiary shall be assignable,
transferable, or subject to sale, mortgage, pledge, hypothecation,
anticipation, garnishment, attachment, execution, or levy of any kind.
11. PROVISION OF BENEFITS. The Company may establish a grantor trust (a
"rabbi trust") to serve as a vehicle to hold such contributions as the
Company may choose to make to pre-fund its obligation for benefits
hereunder, but the trust shall be designed so that all assets therein
are subject to the claims of the creditors of the Company or any of its
subsidiaries which have used such rabbi trust in the event of
insolvency, consistent with the provisions of Revenue Procedure 92-64.
Notwithstanding the existence of such a rabbi trust, the plan shall
remain an unfunded plan. A Participant's rights to benefits under the
plan shall be those of an unsecured creditor of the Company and/or its
subsidiaries.
12. TERMINATION OR MODIFICATION OF PLAN. The Board of Directors of
Wisconsin Energy Corporation shall have the right to terminate or modify
the Plan at any time and from time to time, provided that no such action
may eliminate or reduce or change the time or manner of payment of any
benefits which: (i) have already become payable hereunder to any
Participant or beneficiary; or (ii) would have become payable to any
Participant without the need for any approval under the terms of
Section 3 hereof if he or she had retired immediately before such action
is taken.
13. CLAIM PROCEDURES. A Participant or beneficiary (a 'Claimant') may file
a written request for benefits or claim with the Company under the Plan.
In the event of any dispute with respect to such a claim, the following
claim procedures shall apply:
10
<PAGE> 12
(a) The Company, acting as the administrator for this Plan,
shall notify the Claimant within 90 days of receipt by the
Company of a written claim of its allowance or denial,
unless the Claimant receives written notice from the Company
prior to the end of the initial 90-day period indicating
that special circumstances require an extension of time for
decision. A written notice of decision shall be provided to
the Claimant and if the claim is denied in whole or in part,
the notice shall contain the following information: the
specific reasons for the denial; specific reference to
pertinent provisions of the Plan on which the denial is
based; if applicable, a description of any additional
material information necessary to perfect the claim and an
explanation of why such information is necessary; and an ex-
planation of the claim review procedure.
(b) A Claimant is entitled to request a review of any denial of
his/her claim by the Board of Directors of the Company or
Committee thereof. The request for review must be submitted
in writing within 60 days of mailing of notice of the
denial. Absent a request for review within the 60-day pe-
riod, the claim will be deemed to be conclusively denied.
The Claimant or his/her representative shall be entitled to
review all pertinent documents, and to submit issues and
comments orally and in writing. The Board of Directors of
the Company or Committee thereof shall render a review
decision in writing, within 60 days after receipt of a
request for a review, provided that, in special
circumstances (such as the necessity of holding a hearing)
the Board of Directors of the Company or Committee thereof
11
<PAGE> 13
may extend the time for decision by not more than 60 days
upon written notice to the Claimant. The Claimant shall
receive notice of the separate review decision of the Board
of Directors or Committee, together with specific reasons
for the decision and reference to the pertinent provisions
of this plan.
(c) The Company as the administrator of this Plan shall have
full and complete discretionary authority to determine
eligibility for benefits, to construe the terms of the Plan
and to decide any matter presented through the claims review
procedure. Any final determination by the Company shall be
binding on all parties. If challenged in court, such
determination shall not be subject to DE NOVO review and
shall not be overturned unless proven to be arbitrary and
capricious upon the evidence considered by the Company at
the time of such determination.
12
<PAGE> 14
Schedule to the
Wisconsin Energy Corporation
Supplemental Executive Retirement Plan
- -----------------------------------------------------------------------------
The following is a list of the Company officers who have been designated
as eligible for Monthly Benefit C:
T. J. Cassidy
K. E. Wolters
R. W. Britt
C. S. McNeer
C. W. Fay
R. E. Skogg
H. R. Platz
J. E. Speaker
J. G. Remmel
R. H. Gorske
R. K. Espe
J. W. Boston
J. H. Goetsch
13
<PAGE> 1
EXHIBIT (10)-3
WEC
-------
SENIOR EXECUTIVE SEVERANCE POLICY
----------------------------------------------------------
Introduction
-----------------
Northern States Power Company, a Minnesota corporation ("NSP") and
Wisconsin Energy Corporation, a Wisconsin corporation ("WEC") have entered
into an Agreement and Plan of Merger dated as of April 28, 1995 (the "Merger
Agreement"), whereby the NSP and WEC organizations will merge with WEC as the
surviving parent (the "Combination"). The Board of Directors of WEC
recognizes that the pendency of the Combination, and the inevitable
adjustments that will occur during the transition period following the
Combination, may result in the loss or distraction of employees of WEC and its
Subsidiaries to the detriment of WEC and its shareholders.
The Board considers the avoidance of such loss and distraction to
be essential to protecting and enhancing the best interests of WEC and its
shareholders. The Board also believes that during the pendency of the
Combination and the transition period thereafter, the Board should be able to
receive and rely on disinterested service from employees without concern that
employees might be distracted or concerned by personal uncertainties and
risks.
In addition, the Board believes that it is consistent with WEC's
employment practices and policies and in the best interests of WEC and its
shareholders to treat fairly its employees whose employment terminates in
connection with or following the Combination.
<PAGE> 2
Accordingly, the Board has determined that appropriate steps
should be taken to assure WEC 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 Combination.
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 Date, WEC hereby establishes a separation
compensation plan known as the WEC Senior 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 INCENTIVE AWARD. The highest amount a Participant
received as an annual incentive award in any of the three years prior to a
termination of employment entitling the Participant to a Separation Benefit.
(b) ANNUAL COMPENSATION. The sum of a Participant's Annual
Salary and Annual Incentive Award.
- 2 -
<PAGE> 3
(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
Corporation.
(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 Corporation and any successor
thereto.
(h) DATE OF THE COMBINATION. The Effective Time, as defined in
the Merger Agreement.
(i) DATE OF TERMINATION. The date on which a Participant ceases
to be an Employee.
(j) EFFECTIVE DATE. The date of the Merger Agreement.
- 3 -
<PAGE> 4
(k) 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.
(l) EMPLOYER. The Corporation or a Subsidiary which has adopted
the Plan pursuant to Article V hereof.
(m) PARTICIPANT. An individual who is designated as such
pursuant to Section 3.1.
(n) SEPARATION BENEFITS. The benefits described in Section 4.3
that are provided to qualifying Participants under the Plan.
(o) PLAN. The WEC Senior Executive Severance Policy.
(p) SEPARATION PERIOD. The period beginning on a Participant's
Date of Termination and ending on the third anniversary thereof.
(q) 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.
- 4 -
<PAGE> 5
(r) TARGET ANNUAL INCENTIVE. The Annual Incentive that the
Participant would have received for the year in which his or her Date of
Termination occurs, if the target goals had been achieved.
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 a Separation Benefit 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 a
Separation Benefit. 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).
- 5 -
<PAGE> 6
4.2 TERMINATION OF EMPLOYMENT.
(a) TERMINATIONS WHICH GIVE RISE TO SEPARATION BENEFITS
UNDER THIS PLAN. Except as set forth in subsection (b) below, a Participant
shall be entitled to Separation Benefits if at any time before the second
anniversary of the Date of the Combination:
(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 (x) the amount in effect on the Effective Date and (y) 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 and retirement and welfare benefits
offered to the Participant are materially and adversely diminished in
comparison to the duties and responsibilities or the program of benefits
enjoyed by the Participant on the Effective 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 50 miles from the location where the Participant was based
and performed services on the Effective Date, and the Participant ceases to be
an Employee by his or her own action within 90 days after such relocation;
- 6 -
<PAGE> 7
(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 subsection (b)(iv) of this
Section 4.2 are not met, and the Participant ceases to be an Employee 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, retirement, or a qualified sale of business (as those terms
are defined below), or voluntarily by the Participant in the absence of an
event described in subsection (a)(ii), (iii) or (iv) of this Section 4.2, 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
from performing his duties (as they existed immediately prior to the illness
or injury) on a full time basis for 180 consecutive business days.
(ii) A termination by retirement shall have occurred
where a Participant's termination is due to his voluntary late, normal or
early retirement under a pension plan sponsored by his Employer or its
affiliates, as defined in such plan.
(iii) 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
- 7 -
<PAGE> 8
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 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.
(iv) 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
- 8 -
<PAGE> 9
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 second anniversary of the Date
of the Combination, 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
ten days of the Date of Termination, a cash lump sum as set forth in
subsection (b) below and the continued benefits set forth in subsection (c)
below. For purposes of determining the benefits set forth in subsections (b)
and (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
subsection (ii) or (iii) of Section 4.2, 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:
- 9 -
<PAGE> 10
(i) the sum of (1) the Participant's Annual Salary through
the Date of Termination to the extent not theretofore paid,
(2) the product of (x) the Target Incentive and (y) 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
(3) any compensation previously deferred by the Participant
(together with any accrued interest or earnings thereon) and 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 (1) three, and
(2) the sum of (x) the Participant's Annual Salary and (y) the
higher of the Target Annual Incentive 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, on the Effective 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
- 10 -
<PAGE> 11
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 Effective Date.
(c) The continued benefits referred to above shall be as
follows:
(i) During the Separation Period, the Participant and his
family shall be provided with 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;
(ii) The Corporation shall, at its sole expense as
incurred, provide the Participant with outplacement services the
scope and provider of which shall be selected by the Participant
in his or her sole discretion (but at a cost to the Corporation of
not more than $30,000) or, at the Participant's option, the use of
office space, office supplies and equipment and secretarial
services for a period not to exceed one year;
- 11 -
<PAGE> 12
(iii) The Corporation shall continue to provide the
Participant with financial planning counseling benefits through
the second anniversary of the Date of Termination, on the same
terms and conditions as were in effect immediately before the
termination or, if more favorable, on the Effective Date; and
(iv) The Corporation shall transfer to the Participant, at
no cost to the Participant, the title to the company car being
used by the Participant as of the Date of Termination.
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, life insurance plan, health plan, disability plan or similar or
successor plan but excluding any severance pay 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.
(a) For purposes of this Section 4.5, (i) a Payment shall
mean any payment or distribution in the nature of compensation to or for the
- 12 -
<PAGE> 13
benefit of a Participant, whether paid or payable pursuant to this Plan or
otherwise; (ii) Separation Payment shall mean a Payment paid or payable
pursuant to this Plan (disregarding this Section); (iii) Net After Tax Receipt
shall mean the Present Value of a Payment net of all taxes imposed on a
Participant with respect thereto under Sections 1 and 4999 of the Internal
Revenue Code of 1986, as amended (the "Code"), determined by applying the
highest marginal rate under Section 1 of the Code which applied to the
Participant's taxable income for the immediately preceding taxable year;
(iv) "Present Value" shall mean such value determined in accordance with
Section 280G(d)(4) of the Code; and (v) "Reduced Amount" shall mean the
greatest aggregate amount of Separation Payments which (a) is less than the
sum of all Separation Payments and (b) results in aggregate Net After Tax
Receipts which are equal to or greater than the Net After Tax Receipts which
would result if the Participant were paid the sum of all Separation Payments.
(b) Anything in this Agreement to the contrary
notwithstanding, in the event Price Waterhouse or such other certified public
accounting firm designated by the Participant (the "Accounting Firm") shall
determine that receipt of all Payments would subject the Participant to tax
under Section 4999 of the Code, it shall determine whether some amount of
Separation Payments would meet the definition of a "Reduced Amount." If the
Accounting Firm determines that there is a Reduced Amount, the aggregate
Separation Payments shall be reduced to such Reduced Amount. All fees payable
to the Accounting Firm shall be paid solely by the Corporation.
(c) If the Accounting Firm determines that aggregate
Separation Payments should be reduced to the Reduced Amount, the Corporation
shall promptly give the Participant notice to that effect and a copy of the
detailed calculation thereof, and the Participant may then elect, in his sole
discretion, which and how much of the Separation Payments shall be eliminated
- 13 -
<PAGE> 14
or reduced (as long as after such election the present value of the aggregate
Separation Payments equals the Reduced Amount), and shall advise the
Corporation in writing of his election within ten days of his receipt of
notice. If no such election is made by the Participant within such ten-day
period, the Corporation may elect which of such Separation Payments shall be
eliminated or reduced (as long as after such election the present value of the
aggregate Separation Payments equals the Reduced Amount) and shall notify the
Participant promptly of such election. All determinations made by the
Accounting Firm under this Section shall be binding upon the Corporation and
the Participant and shall be made within 60 days of a termination of
employment of the Participant. As promptly as practicable following such
determination, the Corporation shall pay to or distribute for the benefit of
the Participant such Separation Payments as are then due to the Participant
under this Plan and shall promptly pay to or distribute for the benefit of the
Participant in the future such Separation Payments as become due to the
Participant under this Plan.
(d) While it is the intention of the Corporation to reduce
the amounts payable or distributable to the Participants hereunder only if the
aggregate Net After Tax Receipts to a Participant would thereby be increased,
as a result of the uncertainty in the application of Section 4999 of the Code
at the time of the initial determination by the Accounting Firm hereunder, it
is possible that amounts will have been paid or distributed by the Corporation
to or for the benefit of a Participant pursuant to this Plan which should not
have been so paid or distributed ("Overpayment") or that additional amounts
which will have not been paid or distributed by the Corporation to or for the
benefit of a Participant pursuant to this Plan could have been so paid or
distributed ("Underpayment"), in each case, consistent with the calculation of
the Reduced Amount hereunder. In the event that the Accounting Firm, either
upon the assertion of a deficiency by the Internal Revenue Service against
- 14 -
<PAGE> 15
either the Corporation or the Participant which the Accounting Firm believes
has a high probability of success determines that an Overpayment has been
made, any such Overpayment paid or distributed by the Corporation to or for
the benefit of a Participant shall be treated for all purposes as a loan to
the Participant which the Participant shall repay to the Corporation together
with interest at the applicable federal rate provided for in
Section 7872(f)(2) of the Code; provided, however, that no such loan shall be
deemed to have been made and no amount shall be payable by a Participant to
the Corporation if and to the extent such deemed loan and payment would not
either reduce the amount on which the Participant is subject to tax under
Section 1 and Section 4999 of the Code or generate a refund of such taxes. In
the event that the Accounting Firm, based upon controlling precedent or
substantial authority, determines that an Underpayment has occurred, any such
Underpayment shall be promptly paid by the Corporation to or for the benefit
of the Participant together with interest at the applicable federal rate
provided for in Section 7872(f)(2) of the Code.
4.6 PAYMENT OBLIGATIONS ABSOLUTE.
Subject to Section 4.5, 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)(i).
- 15 -
<PAGE> 16
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. If the Combination has not occurred, this Plan
shall expire five years from the Effective Date, unless extended for an
- 16 -
<PAGE> 17
additional period or periods by resolution adopted by the Board.
If the Combination occurs, this 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 Section 4.5 have been
made.
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 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
- 17 -
<PAGE> 18
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 30 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
- 18 -
<PAGE> 19
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 pre-empted by federal law.
- 19 -
</DOCUMENT/>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND> THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE UNAUDITED FINANCIAL STATEMENTS OF WISCONSIN ENERGY
CORPORATION FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
<MULTIPLIER> 1,000
<S> <C>
<CURRENCY> U.S. DOLLARS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<PERIOD-TYPE> 6-MOS
<EXCHANGE-RATE> 1
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 2,947,522
<OTHER-PROPERTY-AND-INVEST> 618,972
<TOTAL-CURRENT-ASSETS> 482,860
<TOTAL-DEFERRED-CHARGES> 0
<OTHER-ASSETS> 391,690
<TOTAL-ASSETS> 4,441,044
<COMMON> 1,098
<CAPITAL-SURPLUS-PAID-IN> 648,781
<RETAINED-EARNINGS> 1,154,373
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,804,252
0
30,451
<LONG-TERM-DEBT-NET> 1,137,598
<SHORT-TERM-NOTES> 92,334
<LONG-TERM-NOTES-PAYABLE> 92,475
<COMMERCIAL-PAPER-OBLIGATIONS> 148,487
<LONG-TERM-DEBT-CURRENT-PORT> 30,435
0
<CAPITAL-LEASE-OBLIGATIONS> 23,075
<LEASES-CURRENT> 22,444
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,059,493
<TOT-CAPITALIZATION-AND-LIAB> 4,441,044
<GROSS-OPERATING-REVENUE> 876,215
<INCOME-TAX-EXPENSE> 65,304
<OTHER-OPERATING-EXPENSES> 653,491
<TOTAL-OPERATING-EXPENSES> 718,795
<OPERATING-INCOME-LOSS> 157,420
<OTHER-INCOME-NET> 12,591
<INCOME-BEFORE-INTEREST-EXPEN> 170,011
<TOTAL-INTEREST-EXPENSE> 55,280
<NET-INCOME> 114,731
602
<EARNINGS-AVAILABLE-FOR-COMM> 114,129
<COMMON-STOCK-DIVIDENDS> 78,658
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 224,800
<EPS-PRIMARY> 1.04
<EPS-DILUTED> 1.04
<FN>
See financial statements and footnotes in accompanying 10-Q.
</TABLE>
