-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, Qztp6bkkiwVSoDFhUYzvmZr0Eqh6tiMWdiNMWPrdHj4snhFE4uMxKzgC163yMTis 2McrHjS6QSlwcadyAj+Rrg== 0000897069-94-000087.txt : 19940822 0000897069-94-000087.hdr.sgml : 19940822 ACCESSION NUMBER: 0000897069-94-000087 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19940630 FILED AS OF DATE: 19940815 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WISCONSIN POWER & LIGHT CO CENTRAL INDEX KEY: 0000107832 STANDARD INDUSTRIAL CLASSIFICATION: 4931 IRS NUMBER: 390714890 STATE OF INCORPORATION: WI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-00337 FILM NUMBER: 94544248 BUSINESS ADDRESS: STREET 1: 222 W WASHINGTON AVE CITY: MADISON STATE: WI ZIP: 53703 BUSINESS PHONE: 6082523311 10-Q 1 WP&L COMPANY FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF X THE SECURITIES EXCHANGE ACT OF 1934 ----- For the quarterly period ended June 30, 1994 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 0-337 WISCONSIN POWER AND LIGHT COMPANY (Exact name of registrant as specified in its charter) Wisconsin 39-0714890 (State or other jurisdiction (I.R.S. Employer Identification of incorporation or organization) No.) 222 West Washington Avenue, Madison, Wisconsin 53703 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 608-252-3311 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. Common Stock outstanding at June 30, 1994: 13,236,601 shares CONTENTS PAGE PART I. Financial Information: Consolidated Financial Statements of Wisconsin Power and Light Company: Consolidated Balance Sheets as of June 30, 1994 and 1993 and December 31, 1993 . . . . . . . . . . . . . . . . . 2 Consolidated Statements of Income for the Three and Six Months Ended June 30, 1994 and 1993 . . . . . . . . . . . . . 4 Consolidated Statements of Cash Flows - Six Months Ended June 30, 1994 and 1993 . . . . . . . . . . . . . . . 5 Notes to Consolidated Financial Statements . . . . . . . . . . . . 6 Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . . 7 PART II. Other Information . . . . . . . . . . . . . . . . . . . . . . 13 Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 WISCONSIN POWER AND LIGHT COMPANY AND SUBSIDIARIES Consolidated Balance Sheets
June 30, June 30, December 31, 1994 1993 1993 (Thousands of dollars) ASSETS UTILITY PLANT: Plant in service-- Electric........................................................ $ 1,531,411 $ 1,476,864 $ 1,518,701 Gas............................................................. 195,233 184,625 194,283 Water........................................................... 20,945 19,834 20,437 Common.......................................................... 110,565 98,864 106,803 --------- --------- --------- 1,858,154 1,780,187 1,840,224 Dedicated decommissioning funds................................... 50,970 41,796 49,803 --------- --------- --------- 1,909,124 1,821,983 1,890,027 Less: Accumulated provision for depreciation...................... 780,514 743,510 763,027 --------- --------- --------- 1,128,610 1,078,473 1,127,000 Construction work in progress....................................... 76,540 57,267 75,732 Nuclear fuel, net................................................. 15,558 15,021 18,000 --------- --------- --------- Total utility plant............................................. 1,220,708 1,150,761 1,220,732 --------- --------- --------- OTHER PROPERTY AND EQUIPMENT, net................................... 646 634 652 --------- --------- --------- INVESTMENTS, at cost................................................ 12,514 13,673 12,537 --------- --------- --------- CURRENT ASSETS: Cash and equivalents.............................................. 3,504 1,964 5,930 Net accounts receivable and unbilled revenue, less allowance for doubtful accounts of $159, $266, and $259, respectively.................................... 18,943 16,117 30,572 Accounts receivable from parent for income taxes.................. - - 2,117 Coal, at average cost............................................. 12,772 18,097 16,042 Materials and supplies, at average cost........................... 22,310 23,620 21,679 Gas in storage, at average cost................................... 4,610 5,072 8,754 Prepayments and other............................................. 20,448 16,894 21,677 --------- --------- --------- Total current assets............................................ 82,587 81,764 106,771 --------- --------- --------- ENVIRONMENTAL REMEDIATION COSTS..................................... 82,280 82,475 82,380 --------- --------- --------- DEFFERRED CHARGES AND OTHER......................................... 123,177 109,733 127,585 --------- --------- --------- TOTAL ASSETS........................................................ $ 1,521,912 $ 1,439,040 $ 1,550,657 ========= ========= =========
The accompanying notes are an integral part of the consolidated financial statements. WISCONSIN POWER AND LIGHT COMPANY AND SUBSIDIARIES Consolidated Balance Sheets June 30, June 30, December 31, 1994 1993 1993 (Thousands of dollars) CAPITALIZATION AND LIABILITIES COMMON SHAREOWNER'S INVESTMENT: Common stock, $5 par value, authorized-- 18,000,000 shares; issued and outstanding--13,236,601 shares.................................. $ 66,183 $ 66,183 $ 66,183 Premium on capital stock and capital surplus...................... 197,982 177,961 189,520 Reinvested earnings............................................... 276,817 261,452 267,000 ------- -------- -------- 540,982 505,596 522,703 PREFERRED STOCK WITHOUT MANDATORY REDEMPTION: Cumulative, without par value, authorized 3,750,000 shares, maximum aggregate stated value $150,000,000 Cumulative, without par value, $100 stated value; 449,765, 599,630, and 449,765 shares, respectively, outstanding....................................... 44,977 59,963 44,977 Cumulative, without par value, $25 stated value, 599,460, 0 and 599,460 shares, respectively, outstanding................. 14,986 - 14,986 ------- ------- ------- Total preferred stock........................................... 59,963 59,963 59,963 FIRST MORTGAGE BONDS, NET........................................... 336,507 336,447 336,477 ------- ------- ------- Total capitalization............................................ 937,452 902,006 919,143 ------- ------- ------- CURRENT LIABILITIES: Variable rate demand bonds........................................ 56,975 57,075 56,975 Short-term debt................................................... 24,500 14,000 59,000 Accounts payable.................................................. 50,330 47,521 72,430 Accrued payroll and vacation...................................... 12,185 13,479 12,092 Accrued taxes..................................................... 4,791 (3,610) 804 Accrued interest.................................................. 7,618 7,907 7,695 Other............................................................. 23,416 21,767 16,431 ------- ------- ------- Total current liabilities....................................... 179,815 158,139 225,427 ------- ------- ------- OTHER CREDITS: Accumulated deferred income taxes ................................ 216,612 207,118 210,762 Accumulated deferred investment tax credits....................... 41,721 43,668 42,684 Accrued environmental remediation costs........................... 80,244 81,272 80,973 Other............................................................. 66,068 46,837 71,668 ------- ------- ------- Total other credits............................................. 404,645 378,895 406,087 --------- --------- --------- TOTAL CAPITALIZATION AND LIABILITIES................................ $ 1,521,912 $ 1,439,040 $ 1,550,657 ========= ========= ===========
The accompanying notes are an integral part of the consolidated financial statements. WISCONSIN POWER AND LIGHT COMPANY AND SUBSIDIARIES Consolidated Statements of Income
Three Months Ended Six Months Ended June 30, June 30, 1994 1993 1994 1993 (Thousands of Dollars) OPERATING REVENUES: Electric.............................................. $ 125,271 $ 116,817 $ 262,468 $ 242,428 Gas................................................... 22,130 23,281 85,265 78,781 Water................................................. 1,024 951 2,001 1,864 -------- -------- ------- ------- 148,425 141,049 349,734 323,073 -------- -------- ------- ------- OPERATING EXPENSES: Electric production fuels............................. 32,646 27,235 64,932 59,789 Purchased power....................................... 8,440 7,764 17,927 13,747 Purchased gas......................................... 12,861 15,675 54,606 53,014 Other operation....................................... 34,830 35,905 69,440 72,565 Maintenance........................................... 12,387 11,747 21,759 22,618 Depreciation.......................................... 17,519 15,261 37,015 31,006 Taxes -- Current federal income.............................. 3,814 3,939 15,341 10,665 Deferred income taxes............................... 2,782 192 4,563 1,456 Investment tax credit (restored).................... (481) (496) (963) (984) Current state income................................ 748 947 3,535 2,991 Property, payroll & other........................... 7,041 5,944 14,056 12,866 -------- -------- ------- ------- 132,587 124,113 302,211 279,733 -------- -------- ------- ------- NET OPERATING INCOME.................................... 15,838 16,936 47,523 43,340 -------- -------- ------- ------- OTHER INCOME AND (DEDUCTIONS): Allowance for equity funds used during construction........................................ 681 398 1,130 646 Other, net............................................ 4,140 402 9,415 1,009 Current income tax.................................... 693 96 (1,791) 259 Deferred income tax................................... (1,968) (753) (1,866) (1,296) -------- -------- ------- ------- 3,546 143 6,888 618 -------- -------- ------- ------- INCOME BEFORE INTEREST EXPENSE.......................... 19,384 17,079 54,411 43,958 -------- -------- ------- ------- INTEREST EXPENSE: Interest on bonds..................................... 7,142 7,164 14,316 14,282 Allowance for borrowed funds used during construction (credit)............................... (245) (252) (434) (409) Other................................................. 429 977 1,009 2,202 -------- -------- ------- ------- 7,326 7,889 14,891 16,075 -------- -------- ------- ------- NET INCOME.............................................. 12,058 9,190 39,520 27,883 PREFERRED STOCK DIVIDENDS............................... 827 953 1,655 1,906 -------- -------- ------- ------- NET INCOME AFTER PREFERRED STOCK DIVIDENDS............... $ 11,231 $ 8,237 $ 37,865 $ 25,977 ======== ======== ======= =======
The accompanying notes are an integral part of the consolidated financial statements. WISCONSIN POWER AND LIGHT COMPANY CONSOLIDATED STATEMENT OF CASH FLOWS Six Months Ended June 30, 1994 1993 (Thousands of Dollars) Cash flows from (used for) operating activities: Net income...................................................... $ 39,520 $ 27,883 Adjustments to reconcile net income to net cash from operating activities: Depreciation.................................................. 37,015 31,006 Amortization of nuclear fuel.................................. 2,749 2,933 Investment tax credit restored................................ (963) (983) Allowance for equity funds used during construction........... (1,130) (646) Deferred income taxes......................................... 6,429 3,536 Changes in assets and liabilities: Net accounts receivable and unbilled revenues................. 13,746 21,137 Coal.......................................................... 521 888 Materials and supplies........................................ (631) (6,822) Gas in storage................................................ 4,144 4,094 Prepayments and other......................................... 1,229 4,400 Accounts payable and accruals................................. (22,007) (19,375) Accrued taxes................................................. 3,987 (4,952) Other......................................................... 6,894 9,996 ------ ------ Net cash generated from (used for) operating activities..... 91,503 73,095 ------ ------ Cash flows generated from (used for) financing activities: Common stock cash dividends..................................... (28,696) (26,757) Preferred stock dividends....................................... (1,655) (1,906) Preferred stock issuance expense................................ 648 - Net change in short term debt................................... (34,500) (37,000) Equity contribution from parent................................. 8,462 49,840 ------ ------ Net cash generated from (used for) financing activities...................................... (55,741) (15,823) ------ ------ Cash flows from (used for) investing activities: Additions to utility plant, excluding AFUDC..................... (36,616) (52,477) Allowance for borrowed funds used during construction........... (434) (408) Dedicated decommissioning funds................................. (1,167) (1,419) Other........................................................... 29 (1,385) ------ ------ Net cash (used for) investing activities...................... (38,188) (55,689) ------ ------ Net increase (decrease) in cash and equivalents................... (2,426) 1,583 Cash and equivalents at beginning of period....................... 5,930 381 ------ ------ Cash and equivalents at end of period............................. $ 3,504 $ 1,964 ====== ===== Supplemental disclosures of cash flow information: Cash paid during the period for: Interest - debt............................................... $ 8,427 $ 16,241 Income taxes.................................................. $ 14,971 $ 15,506
The accompanying notes are an integral part of the consolidated financial statements. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. The consolidated financial statements included herein have been prepared by Wisconsin Power and Light Company ("WPL" or the "Company"), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. The consolidated financial statements include the Company and its consolidated subsidiaries. The Company is a wholly-owned subsidiary of WPL Holdings, Inc. These financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company's latest annual report on Form 10-K. In the opinion of the Company, the consolidated interim financial statements reflect all adjustments necessary to fairly state the results of operations for the interim periods presented. However, because of the seasonal nature of the Company's operations, the results shown for portions of a year are not indicative of annual results. 2. In November 1989, the Public Service Commission of Wisconsin ("PSCW") concluded that the Company did not properly administer a coal contract, resulting in an assessment to compensate ratepayers for excess fuel costs having been incurred. As a result, the Company recorded a reserve in 1989 which had an after-tax affect of reducing 1989 net income by $4.9 million. This reserve included a portion payable to the Company's ratepayers and portions payable to Wisconsin Public Service Corporation and Madison Gas and Electric Company for their joint ownership in the generating station served by the contract. In 1990, the Company refunded $2.0 million of the reserve, after tax, to its own ratepayers. The PSCW decision was found to represent unlawful retroactive ratemaking by both the Dane County Circuit Court and the Wisconsin Court of Appeals. The case was then appealed to the Wisconsin Supreme Court. In February 1994, the Wisconsin Supreme Court affirmed the decisions of the Dane County Circuit Court and Wisconsin Court of Appeals. In management's judgement, all avenues for appeal regarding this case have been exercised. As a result, in March 1994, the Company reversed the unrefunded portion of the assessment of amounts due to Wisconsin Public Service Corporation and Madison Gas and Electric Company. This action increased net income by $2.9 million in the first quarter of 1994. For the portion of the assessment which was refunded to the Company's ratepayers, a proposed plan for recollection was submitted to the PSCW on February 15, 1994 and was approved on May 11, 1994. With this approval, the Company recorded an additional after-tax increase to net income to account for the remaining $2.0 million in June, 1994. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 30, 1994 VS. JUNE 30, 1993: OVERVIEW The Company reported consolidated second-quarter net income of $12.1 million compared to $9.2 million for the same period in 1993. The principal factors leading to increased earnings include favorable early summer weather which yielded higher electric margins ($1.4 million), the benefits from decreased other operation expense due to the Company's cost management efforts ($.5 million) and a change in the mix of gas sales from lower margin to higher margin customer classes ($1.0 million). Also, second-quarter 1994 net income increased $2.0 million through the approval to recollect a previously refunded penalty assessed by the PSCW relating to the Company's administration of a coal contract. Offsetting the above was an increase in depreciation expense which was attributable to increased investment in plant and increased decommissioning costs which reduced net income by $1.3 million. Electric Operations
Revenues and Costs Per kWh % kWhs Sold, Generated % Sold Generated Customers at End of Revenues and Costs Change and Purchased Change and Purchased Quarter 1994 1993 1994 1993 1994 1993 1994 1993 Residential and Farm $42,801 $40,109 7% 602,761 602,421 0% .071 .067 322,202 315,326 Industrial 35,777 32,786 9% 955,781 878,476 9% .037 .037 755 698 Commercial 24,055 22,464 7% 393,496 382,857 3% .061 .059 43,437 42,467 Wholesale and Class A 20,877 18,588 12% 606,255 524,416 16% .034 .035 40 38 Other 1,761 2,870 39% 12,203 13,487 -10% .144 .213 1,471 1,419 ------- ----- --- ------ ------ --- --- --- ----- ----- Total 125,271 116,817 7% 2,570,496 2,401,657 7% .049 .049 367,905 359,948 ======= ======= === ========= ========= === === === ======= ======= Elec production fuels 32,646 27,235 20% 2,353,828 2,027,581 16% .014 .013 Purchased Power 8,440 7,764 9% 325,804 450,839 -28% .026 .017 ------- ----- --- Margin 84,185 81,818 3% ======= ======
WPL's electric sales benefitted from June's hot weather, however, low sales in April and May resulted in relatively flat volumes for the second quarter of 1994 compared to 1993. Additionally, the Company experienced strong growth in the commercial and industrial customer classes from favorable economic conditions in the service territory. Gas Operations
Revenues and Costs % Therms Sold and % Change Revenues and Costs Customers at End of (In Thousands) Change Purchased (In per Therms Sold and Quarter Thousands) Purchased 1994 1993 1994 1993 1994 1993 1994 1993 Residential $10,337 $11,853 -13% 18,154 18,207 0% $.569 $.651 122,476 117,721 Firm 5,930 6,720 -12% 13,022 13,404 -3% .455 .501 15,298 14,701 Interruptible 1,463 1,509 -3% 4,768 3,923 22% .307 .385 233 209 Transportation 3,384 3,088 10% 17,870 19,074 -6% .189 .162 87 74 Other 1,016 111 815% 3,740 242 1,445% .272 .459 93 90 ----- ---- ---- ----- ---- ----- ---- ---- ------- ------- Total 22,130 23,281 -5% 57,554 54,850 5% .385 .424 138,187 132,795 ===== ====== ==== ====== ====== ==== ==== ===== ======= ======= Purchased gas 12,942 15,675 -17% 37,794 37,386 1% .239 .363 ------ ------ Margin 9,188 7,606 12% ===== =====
Gas margin increased during the second quarter of 1994 compared to the second quarter of 1993 due primarily to a change in the mix of sales from lower margin to higher margin customer classes. Additionally, growth among all customer classes remained strong from the solid economic conditions in the Company's service territory. Other Operation Expense Other operation expense decreased as a result of the Company's cost management efforts. Depreciation Depreciation expense increased, principally reflecting increased property additions, and increased decommissioning costs. Other, Net Other, net increased for the second-quarter of 1994 compared with the same period in 1993 due to the coal contract reversal of $2.0 million discussed in Note 2 of the Notes to Consolidated Financial Statements. Income Taxes Income taxes increased between second quarters, primarily due to higher taxable income. SIX MONTHS ENDED JUNE 30, 1994 VS. JUNE 30, 1993: OVERVIEW The Company reported consolidated net income of $39.5 million for the six months ended June 30, 1994 compared to $27.9 million for the same period in 1993. A principal factor which resulted in increased earnings was the favorable weather conditions in the first six months of 1994 which yielded higher electric and gas margins ($9.3 million). Also, net income for the six months ended June 30, 1994 increased $4.9 million due to the reversal of a PSCW penalty relating to the Company's administration of a coal contract. Offsetting the above was an increase in depreciation expense which was attributable to increased investment in plant and increased decommissioning costs which reduced net income by $3.6 million. Electric Operations
Revenutes and Costs Per kWh % kWhs Sold, Generated % Sold Generated Customers at End Revenues and Costs Change and Purchased Change and Purchased of Quarter 1994 1993 1994 1993 1994 1993 1994 1993 Residential and Farm $97,356 $88,811 10% 1,389,627 1,345,225 3% .070 .066 322,202 315,326 Industrial 67,989 63,874 6% 1,822,824 1,700,873 7% .037 .038 755 698 Commercial 49,605 46,064 8% 821,480 783,911 5% .060 .059 43,437 42,467 Wholesale and Class A 43,239 37,661 15% 1,312,372 1,109,965 18% .033 .034 40 38 Other 4,279 6,018 -29% 28,986 27,338 6% .148 .220 1,471 1,419 ------- ------ ---- -------- --------- ---- ---- ---- ------- ------- Total 262,468 242,428 8% 5,375,289 4,967,312 8% .049 .049 367,905 359,948 ======= ======= ==== ========= ========= ==== ==== ==== ======= ======= Elec production fuels 64,932 59,788 9% 4,806,837 4,308,778 12% .014 .014 Purchased Power 17,927 13,747 30% 767,945 801,313 -4% .023 .017 ------- ------- Margin 179,609 168,893 6% ======= =======
WPL's electric sales benefitted from June's hot weather, however, low sales in April and May resulted in relatively flat volumes for the second quarter of 1994 compared to 1993. Additionally, the Company experienced growth in the commercial and industrial customer classes from favorable economic conditions. Gas Operations
Revenues and Costs % Therms Sold and % Revenues and Customers at End of (In Thousands) Change Purchased (In Change Costs per Quarter Thousands) Therms Sold and Purchased 1994 1993 1994 1993 1994 1993 1994 1993 Residential 45,090 42,642 6% 78,399 73,434 7% .575 .581 122,476 117,721 Firm 26,060 24,035 8% 57,089 52,031 10% .456 .462 15,298 14,701 Interruptible 4,308 6,371 -32% 11,762 14,620 -20% .366 .436 233 209 Transportation 8,345 6,022 39% 42,934 42,977 0% .194 .140 87 74 Other 1,462 -290 -604% 4,898 721 579% .298 -.402 93 90 ----- ------ ---- ------ ------ ---- ---- ----- ------- ------- Total 85,265 78,780 8% 195,082 183,783 6% .437 .429 138,187 132,795 ====== ====== === ====== ======= === ==== ==== ======= ======= Purchased gas 54,710 53,014 3% 143,661 161,892 21% .279 .327 Margin 30,555 25,766 5%
Gas margin increased for the six months ended June 30, 1994 compared to the same period in 1993 due primarily to favorable winter weather conditions. Also contributing to the margin increase was a change in the mix of sales from lower margin to higher margin customer classes. Additionally, growth among all customer classes remained strong due to favorable economic conditions in the Company's service territory. Other Operation Expense Other operation expense decreased as a result of the Company's cost management efforts. Depreciation Depreciation expense increased, principally reflecting increased property additions, and increased decommissioning costs. Other, Net Other, net increased for the second-quarter of 1994 compared with the same period in 1993, due to the coal contract reversal of $2.0 million discussed in Note 2 of the Notes to Consolidated Financial Statements. Income Taxes Income taxes increased between second quarters, primarily due to higher taxable income. LIQUIDITY AND CAPITAL RESOURCES Rates and Regulatory Matters See Part II -- Other Information, Item 1. Legal Proceedings. Financing and Capital Structure The level of short-term borrowing fluctuates based primarily on seasonal corporate needs, the timing of long-term financings and capital market conditions. To maintain flexibility in its capital structure and to take advantage of favorable short-term rates, the Company also uses proceeds from the sales of accounts receivable and unbilled revenues to finance a portion of its long-term cash needs. The Company's capitalization at June 30, 1994, including the current maturities of long-term debt, variable rate demand bonds and short-term debt, consisted of 53 percent common equity, 6 percent preferred stock and 41 percent debt. Common equity at June 30, 1994 increased from 50.5 percent at December 31, 1993 due to increased earnings and the receipt of $3.7 million of capital contributions from WPL Holdings, Inc. during the first quarter of 1994. In addition, the PSCW ordered that no dividend payments in excess of those forecasted in the projected test year ($56.8 million) may be paid prior to the end of the test year (July 31, 1994). At the end of the test year, dividends may be paid in excess of forecasted dividends if the additional payment does not reduce the average test year common equity ratio below 50.31 percent. Capital Expenditures The Company's liquidity is primarily determined by the level of cash generated from operations and the funding requirements of its ongoing construction and maintenance programs. Cash flows from operating activities, after dividends paid, provided approximately $91,503 million and $73,095 million for the six months ended June 30, 1994 and 1993, respectively. The Company finances its construction expenditures through internally generated funds supplemented, when required, by outside financing including equity investments from the Company's parent, WPL Holdings, Inc. The estimated construction expenditures for the remainder of 1994 are $82 million. The Company forecasts to finance approximately 68 percent of these expenditures through internally generated funds. The expenditures for the decommissioning of the Kewaunee Nuclear Power Plant are estimated to begin in 2014. It is anticipated that expenditures related to the actual decommissioning of the plant will occur between 2014 and 2021 of which the Company's share approximates $581 million. A remaining $435 million relates to the storage of spent nuclear fuel on site and other maintenance of the site that will likely occur from 2022 to 2050. By 2013, the Company currently expects to have the cost collected through electric rates and funded in an external trust. Therefore, such expenditures will not have a direct impact on liquidity or the availability of capital resources. PART II--OTHER INFORMATION Item 1. Legal Proceedings On February 4, 1994, the Company filed its annual retail rate application with the PSCW requesting no change in electric rates and a slight increase in natural gas and water rates. The application filed with the PSCW requests an overall increase of $3.6 million, or 2.7 percent for natural gas and a nominal water rate increase. Subsequent to this filing, the PSCW staff completed its audit and conducted hearings. Currently, PSCW staff is recommending a decrease in electric rates of $16.1 million or 3.7 percent, an increase in gas rates of $1.1 million or .8 percent and no change in water rates. A final decision is not expected until the fourth quarter of 1994 with final rates becoming effective January 1, 1995. Item 4. Submission of Matters to a Vote of Security Holders. At the Company's annual meeting of shareowners held on May 18, 1994, (a) Arnold M. Nemirow and Judith D. Pyle were elected as directors of the Company for terms expiring in 1995, (b) Rockne G. Flowers was elected as a director of the Company for a term expiring in 1996, and (c) Les Aspin, Erroll B. Davis, Jr., Milton E. Neshek and Carol T. Toussaint were elected as directors of the Company for terms expiring in 1997. The following table sets forth certain information with respect to the election of directors at the annual meeting: Shares Withholding Name of Nominee Shares Voted For Authority Arnold M. Nemirow 13,757,091 4,263 Judith D. Pyle 13,757,208 4,146 Rockne G. Flowers 13,756,840 4,514 Les Aspin 13,746,696 14,658 Erroll B. Davis, Jr. 13,757,077 4,277 Milton E. Neshek 13,757,163 4,191 Carol T. Toussaint 13,753,037 8,317 The following table sets forth the other directors of the Company whose terms of office continued after the 1994 meeting: Year in Which Name of Director Term Expires L. David Carley 1995 Donald R. Haldeman 1995 Katharine C. Lyall 1996 Henry C. Prange 1996 Henry F. Scheig 1996 In addition, at the annual meeting, shareowners approved the appointment of Arthur Andersen & Co. as the Company's independent auditors for the 1994 calendar year. With respect to such matter, the number of shares voted for and against were 13,743,678 and 3,251, respectively. The number of shares abstaining and the number of shares subject to broker non-votes were 14,425 and 0 , respectively. At the annual meeting, shareowners also approved amendments of the Company's Restated Articles of Organization, which, among other things, authorize the Company to issue preferred stock with a variable or floating dividend rate. With respect to such matter, the holders of the Company's preferred stock and the holder of the Company's common stock each voted separately as a class. The number of preferred stock votes for and against the amendments were 410,842 and 14,632, respectively. The number of preferred stock votes abstaining and the number of votes subject to broker non-votes were 48,362 and 50,917, respectively. All of the outstanding shares of the Company's common stock (13,236,601 shares), which shares are owned by WPL Holdings, Inc., were voted for the amendments. Item 6. Exhibits and Reports on Form 8-K 1. Exhibits: 3.1 Restated Articles of Organization, as amended, of Wisconsin Power and Light Company 4.1 WPL Holdings, Inc. Long-Term Equity Incentive Plan 4.2 Key Executive Employment and Severance Agreement by and between WPL Holdings, Inc. and E.B. Davis, Jr. 4.3 Form of Key Executive Employment and Severance Agreement by and between WPL Holdings, Inc. and each of W.D. Harvey, E.G. Protsch and A.J. Amato 4.4 Form of Key Executive Employment and Severance Agreement by and between WPL Holdings, Inc. and each of E.M. Gleason, B.J. Swan, D.A. Doyle, N.E. Boys, D.E. Ellestad, P.J. Wegner and K.K. Zuhlke 2. Reports on Form 8-K: None SIGNATURE 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 POWER AND LIGHT COMPANY Date 08/12/94 By: /s/ Daniel A. Doyle --------------------------- Daniel A. Doyle, Controller and Treasurer, Wisconsin Power and Light (principal accounting officer and officer authorized to sign on behalf of the registrant.) EXHIBIT INDEX Exhibit No. Description 3.1 Restated Articles of Organization, as amended, of Wisconsin Power and Light Company 4.1 WPL Holdings, Inc. Long-Term Equity Incentive Plan 4.2 Key Executive Employment and Severance Agreement by and between WPL Holdings, Inc. and E.B. Davis, Jr. 4.3 Form of Key Executive Employment and Severance Agreement by and between WPL Holdings, Inc. and each of W.D. Harvey, E.G. Protsch and A.J. Amato 4.4 Form of Key Executive Employment and Severance Agreement by and between WPL Holdings, Inc. and each of E.M. Gleason, B.J. Swan, D.A. Doyle, N.E. Boys, D.E. Ellestad, P.J. Wegner and K.K. Zuhlke EX-3 2 EXHIBIT 3.1 TO WP&L FORM 10-Q RESTATED ARTICLES OF ORGANIZATION OF WISCONSIN POWER AND LIGHT COMPANY These Restated Articles of Organization supersede and take the place of the existing Articles of Organization and all prior amendments thereto. ARTICLE I The undersigned have associated and do hereby associate themselves together for the purpose of forming a Corporation under Chapter 86 of the Wisconsin Statutes of 1898 and the acts amendatory thereof and supplementary thereto, the business and purposes of which Corporation shall be (a) to manufacture, generate, produce, buy, transmit, distribute and sell electricity, gas and artificial energy for light, heat and power purposes; (b) to distribute and sell water; (c) to operate motor bus lines; (d) to distribute and sell heat produced by means of steam or water; (e) to buy, sell and deal in articles of merchandise; and (f) to acquire, construct, own, operate, manage and/or control through direct ownership or by leasing or through the ownership of stock of other corporations any plant or property useful for the above business and purposes and to transact any and all business incidental to the above business and purposes. ARTICLE II The name of the Corporation shall be Wisconsin Power and Light Company. At the time of adoption of these Restated Articles of Organization the address of the registered office of the Corporation is 222 West Washington Avenue, P.O. Box 192, Madison, Wisconsin 53701, and the name of the Corporation's registered agent at said address is Martin W. Freck. ARTICLE III (1) The authorized capital stock of the Corporation is Two Hundred Forty Million Dollars ($240,000,000) and is divided into Three Million Seven Hundred Fifty Thousand (3,750,000) shares of Preferred Stock without par value, provided that the aggregate stated value thereof shall not exceed $150,000,000 at any time, and Eighteen Million (18,000,000) shares of Common Stock of the par value of $5 per share. All shares of the authorized Preferred Stock at any time having the status of authorized and unissued shares may be issued in one or more series, with such stated values, with such designation or designations and with such terms and conditions as to redemption (but the redemption price shall be not less than the stated value), as to rate of dividend (which may be fixed or variable) and frequency of dividend payment, and as to sinking fund provisions (if any) for the redemption or purchase of shares, applicable to the shares of each series as may be determined by the Board of Directors of the Corporation in the resolution authorizing the issue of such shares. Shares of any series of Preferred Stock may not be issued for a consideration less than the stated value thereof. (2) The holders of the Preferred Stock from time to time outstanding shall be entitled to receive, in respect of each share held, dividends upon the stated value thereof at the rate specified for such share, payable quarter-yearly in the case of a share of Preferred Stock with a fixed rate of dividend or payable as specified by the Board of Directors of the Corporation in the resolution authorizing the issue of such shares in the case of a share of Preferred Stock with a variable rate of dividend, in either case when and as declared by the Board of Directors, out of the surplus or net profits of the Corporation. Such dividends shall be cumulative from and including the first day of the dividend period in which such share shall have been originally issued; and shall for any completed dividend period be paid, or declared and set apart for payment, before any dividends shall be declared or paid on or set apart for the Common Stock, so that if for any completed dividend period dividends on the Preferred Stock shall not have been paid, or declared and set apart for payment, the deficiency shall be fully paid or declared and funds set apart for the payment thereof before any dividends shall be declared or paid on or set apart for the Common Stock. The holders of shares of any series of Preferred Stock shall not be entitled to receive any dividends thereon except dividends at the rate provided by the Board of Directors in the resolution authorizing the issue of such shares. The term "dividend period", as used herein, refers to either each period of three consecutive calendar months ending, respectively, February 28, May 31, August 31 and November 30 in each year in the case of a series of Preferred Stock having a fixed rate of dividend or, in the case of a series of Preferred Stock having a variable rate of dividend, such period as shall either be specified by the Board of Directors of the Corporation in the resolution authorizing the issue of shares of such series or determined in accordance with the authority granted in said resolution. All shares of Preferred Stock, regardless of designation, shall constitute one class of stock and, excepting only as to the stated values thereof, the dividend rates (whether fixed or variable) and the frequency of dividend payments thereon, the price at which, and the terms and conditions on which, shares may be redeemed and sinking fund provisions for the redemption or purchase of shares, shall be of equal rank and confer equal rights upon the holders thereof. No dividend shall be paid on any series of Preferred Stock for a dividend period at the conclusion of such period unless at that time all cumulative dividends upon the Preferred Stock of all series then outstanding for all completed dividend periods shall have been paid or declared and set apart for payment. When full cumulative dividends as aforesaid upon the Preferred Stock of all series then outstanding for all completed dividend periods shall have been paid or declared and set apart for payment, the Board of Directors may declare dividends on the Common Stock of the Corporation, subject to the restrictions hereinafter contained. (3) In the event of the liquidation, dissolution or winding up, whether voluntary or involuntary, of the Corporation, the holders of the Preferred Stock shall be entitled to be paid in full, out of the net assets of the Corporation, the stated value of their shares and, to the extent that there may be profits properly applicable thereto (whether capitalized or not), the unpaid dividends accrued thereon before any amount shall be paid out of such assets to the holders of the Common Stock. After such payment in full to the holders of the Preferred Stock, the remaining assets shall be divided among and paid to the holders of the Common Stock. (4) The Corporation, on the sole authority of its Board of Directors, shall have the right (subject to the specific terms of any series of Preferred Stock as fixed by the Board of Directors) at any time or from time to time to redeem and retire all or part of the Preferred Stock or all or part of the shares of one or more series of Preferred Stock upon and by the payment to the holders of the shares to be redeemed, or upon or by setting aside, as hereinafter provided, for the benefit of such holders, the stated value of each share to be redeemed, together with all unpaid accrued dividends thereon, and, in addition thereto, the premium (if any) fixed for the shares of such series; provided, however, that not less than thirty (30) days previous to the date fixed for redemption, notice of the intention of the Corporation to redeem such stock, specifying the stock to be redeemed and the date and place of redemption, (i) shall be published in a newspaper of general circulation published in the City of Madison, Wisconsin, and also in a newspaper of general circulation published in the City of Chicago, Illinois, and in a newspaper of general circulation published in the City of New York, New York, and (ii) shall be deposited in a United States post office or mail box at any place in the United States addressed to each holder of record of the shares to be redeemed at his address as the same appears upon the records of the Corporation; but in mailing such notice unintentional omissions or errors in names or addresses shall not impair the validity of the notice of redemption. In every case of the redemption of less than all of the outstanding shares of any one series of Preferred Stock, the shares of such series to be redeemed shall be chosen by lot or in such other manner as may be prescribed by resolution of the Board of Directors. The Corporation may deposit, with a bank or trust company, which shall be named in the notice of redemption, shall be located in the City of Milwaukee, Wisconsin, or in Chicago, Illinois, or in New York, New York, and shall then have capital, surplus and undivided profits of at least $1,000,000, the aggregate redemption price of the shares to be redeemed, in trust for the payment on or before the redemption date to or upon the order of the holders of such shares, upon surrender of the certificates for such shares. Such deposit in trust may, at the option of the Corporation, be upon terms whereby in case the holder of any shares of Preferred Stock called for redemption shall not, within ten years after the date fixed for redemption of such shares, claim the amount on deposit with any bank or trust company for the payment of the redemption price of said shares, such bank or trust company shall on demand pay to or upon the written order of the Corporation or its successor the amount so deposited and thereupon such bank or trust company shall be released from any and all further liability with respect to the payment of such redemption price and the holder of said shares shall be entitled to look only to the Corporation or its successor for the payment thereof. Upon the giving of notice of redemption and upon the deposit of the redemption price, as aforesaid, or, if no such deposit is made, upon the redemption date (unless the Corporation defaults in making payment of the redemption price as set forth in such notice), such holders shall cease to be stockholders with respect to said shares, and from and after the making of said deposit and the giving of said notice, or, if no such deposit is made, after the redemption date (the Corporation not having defaulted in making payment of the redemption price as set forth in such notice), said shares shall no longer be transferable on the books of the Corporation, and the said holders shall have no interest in or claim against the Corporation with respect to said shares, but shall be entitled only to receive said moneys on the date fixed for redemption as aforesaid from said bank or trust company, or from the Corporation, without interest thereon, upon surrender of the certificates as aforesaid. The term "accrued dividends" shall be deemed to mean, in respect of any share of the Preferred Stock as of any given date, the amount of dividends payable on such share, computed, at the dividend rate (which may be fixed or variable) for such share, from the date on which dividends thereon became cumulative to and including such given date, less the aggregate amount of all dividends which have been paid or which have been declared and set apart for payment on such share. Accumulations of dividends shall not bear interest. Nothing herein contained shall limit any legal right of the Corporation to purchase any shares of the Preferred Stock. Any shares of any series of Preferred Stock which shall at any time have been redeemed or otherwise reacquired by the Corporation shall, after such redemption or reacquisition, have the status of authorized but unissued shares of Preferred Stock of the Corporation, without designation as to series, until such shares are once more designated as part of a particular series by the Board of Directors of the Corporation. (5) So long as any shares of Preferred Stock of any series are outstanding, the Corporation shall not, without the affirmative vote of the record holders of shares of Preferred Stock of all series at the time outstanding, voting separately as one class, having in the aggregate a number of votes, calculated as provided in Paragraph (8)(a) hereof, at least equal to two-thirds of the total number of votes, as so calculated, possessed by all such holders: (a) Amend the provisions of the Restated Articles of Organization so as to create or authorize any stock ranking prior in any respect to the Preferred Stock; or issue any such stock; or (b) Change, by amendment to the Restated Articles of Organization, or otherwise, the terms and provisions of the Preferred Stock so as to affect adversely the rights and preferences of the holders thereof; provided, however, that if any such change will affect adversely the holders of one or more, but less than all, of the series of Preferred Stock at the time outstanding, there shall be required the vote only of the holders of the series so adversely affected at the time outstanding having in the aggregate a number of votes, calculated as provided in Paragraph (8)(a) hereof, at least equal to two-thirds of the total number of votes, as so calculated, possessed by all such holders of such series; or (c) Issue any shares of the Preferred Stock or shares of any stock ranking on a parity with the Preferred Stock, other than in exchange for, or for the purpose of effecting the redemption or other retirement of, shares of Preferred Stock, or shares of any stock ranking on a parity therewith, at the time outstanding, having an aggregate amount of par value and/or stated value of not less than the aggregate amount of par value or stated value of the shares to be issued, unless: (A) The gross income (determined in accordance with accepted accounting principles) of the Corporation available for the payment of interest charges shall, for a period of twelve consecutive calendar months within the fifteen calendar months next preceding the issue of such shares, have been at least one and one-half (1-1/2) times the sum of (i) the interest for one year on all funded indebtedness, and notes payable of the Corporation maturing more than twelve months after the date of issue of such shares, which shall be outstanding at the date of the issue of said shares, and (ii) an amount equal to the dividend requirement for one year on all shares of the Preferred Stock of all series and on all other shares of stock, if any, ranking prior to or on a parity with the Preferred Stock, which shall be outstanding after the issue of the shares proposed to be issued, provided that, in the case of any shares of Preferred Stock which do not have a fixed rate of dividend, the dividend requirement for one year shall be calculated by using the rate of dividend in effect with respect to such shares at the time of such determination; and (B) The capital represented by the Common Stock and the surplus accounts of the Corporation shall be not less than the aggregate amount payable on the involuntary dissolution, liquidation or winding up of the Corporation, in respect of all shares of Preferred Stock and all shares of stock, if any, ranking prior thereto, or on a parity therewith, which shall be outstanding after the issue of the shares proposed to be issued. No consent of the holders of Preferred Stock shall be required in respect of any transaction enumerated in this Paragraph (5) if at or prior to the time when such transaction is to take effect provision is made for the redemption or other retirement of all shares of Preferred Stock at the time outstanding, the consent of which would otherwise be required hereunder. (6) So long as any shares of the Preferred Stock are outstanding, the Corporation shall not, without the affirmative vote of the record holders of shares of Preferred Stock of all series then outstanding having in the aggregate a number of votes, calculated as provided in Paragraph (8)(a) hereof, at least equal to a majority of the total number of votes, as so calculated, possessed by all such holders, (a) Issue or assume any unsecured indebtedness (as hereinafter defined) for any purpose other than the refunding of secured or unsecured indebtedness, theretofore created or assumed by the Corporation and then outstanding, or the retiring, by redemption or otherwise, of shares of the Preferred Stock or shares of any stock ranking prior thereto or on a parity therewith, if immediately after such issue or assumption the total principal amount of all unsecured indebtedness issued or assumed by the Corporation and then outstanding would exceed twenty per centum (20%) of the aggregate of (i) the total principal amount of all bonds or other securities representing secured indebtedness issued or assumed by the Corporation and then outstanding, and (ii) the total of the capital and surplus of the Corporation, as then recorded on its books; or (b) Merge or consolidate with any other corporation or corporations or sell all or substantially all of the assets of the Corporation unless such merger, consolidation or sale or the issue or assumption of all securities to be issued or assumed in connection therewith shall have been ordered, approved or permitted by the Securities and Exchange Commission under the Public Utility Holding Company Act of 1935, or by any successor commission or regulatory authority of the United States of America then having jurisdiction in the premises. No consent of the holders of the Preferred Stock shall be required, however, if at or prior to the issue of any unsecured indebtedness, or such consolidation, merger or sale, provision is made for the redemption or other retirement of all shares of Preferred Stock then outstanding. "Unsecured indebtedness" as that term is used in this Paragraph (6) shall mean all unsecured notes, debentures or other securities representing unsecured indebtedness (whether having a single maturity, serial maturities or sinking fund or other similar periodic principal or debt retirement payment provisions) which has a final maturity date, determined as of the date of issuance or assumption by the Corporation, of less than three years. No provision contained in this Paragraph (6), or in Paragraph (5) of this Article III, is intended or shall be construed to relieve the Corporation from compliance with any applicable statutory provision requiring the vote or consent of a greater number of the holders of the outstanding shares of the Preferred Stock. (7) So long as any shares of the Preferred Stock are outstanding, the Corporation shall not pay any dividends on its Common Stock (other than dividends payable in Common Stock) or make any distribution on or purchase or otherwise acquire for value any of its Common Stock (each such payment, distribution, purchase and/or acquisition being herein referred to as a "common stock dividend"), except to the extent permitted by the following provisions of this Paragraph (7): (a) No common stock dividend shall be declared or paid in an amount which, together with all other common stock dividends declared in the year ending with (and including) the date of the declaration of such common stock dividend, would in the aggregate exceed fifty per centum (50%) of the net income of the Corporation available for dividends on its Common Stock for the twelve consecutive calendar months ending on the last day of the calendar month next preceding the declaration of such common stock dividend, if at the end of such calendar month (next preceding the date of the declaration of such common stock dividend) the ratio (herein referred to as the "capitalization ratio") of the Common Stock Equity (as hereinafter defined) of the Corporation, to the total capital (as hereinafter defined) of the Corporation shall be less than twenty per centum (20%). (b) If such capitalization ratio, determined as aforesaid, shall be twenty per centum (20%) or more, but less than twenty-five per centum (25%), no common stock dividend shall be declared or paid in an amount which, together with all other common stock dividends declared in the year ending on (and including) the date of the declaration of such common stock dividend, would exceed seventy-five per centum (75%) of the net income of the Corporation available for dividends on its Common Stock for the twelve consecutive calendar months ending on the last day of the calendar month next preceding the declaration of such common stock dividend. (c) If such capitalization ratio, determined as aforesaid, shall be in excess of twenty-five per centum (25%), no common stock dividend shall be declared or paid which would reduce such capitalization ratio to less than twenty-five per centum (25%) except to the extent permitted by the next preceding paragraphs (a) and (b) hereof. "Common Stock Equity" as that term is used in this Paragraph (7) shall consist of the sum of (1) the capital represented by the issued and outstanding shares of Common Stock (including premiums on common stock) and (2) the surplus accounts of the Corporation, less (i) any known, or estimated if not known, excess of the value, as recorded on the Corporation's books, over the original cost, of used and useful utility plant and other property, unless such excess is being amortized, or provided for by reserves, and (ii) any excess of the aggregate amount payable on the involuntary dissolution, liquidation or winding up of the Corporation, in respect of all its outstanding shares of preferred stock over the aggregate par value of, or stated value represented by, such preferred shares unless such excess is being amortized, or provided for by reserves, and (iii) any items such as debt discount, premium and expense, capital stock discount and expense and similar items, classified as assets on the balance sheet of the Corporation, unless such items are being amortized, or provided for by reserves. The "total capital of the Corporation" shall consist of the sum of (i) the principal amount of all outstanding indebtedness of the Corporation maturing one year or more after the date of the issue thereof and (ii) the par or stated value of all outstanding capital stock (including premiums on capital stock) of all classes of the Corporation, and (iii) the surplus accounts of the Corporation. All indebtedness and capital stock owned by the Corporation shall be excluded in determining total capital. Surplus accounts used in computing capitalization ratios shall be adjusted to eliminate all amounts, if any, restricted by the provisions of any indenture, or supplements thereto, securing bonds of the Corporation and to reflect payment of the proposed Common Stock dividend. In computing, for the purposes of this Paragraph (7), the "net income of the Corporation available for dividends on its Common Stock" for any period of twelve consecutive calendar months, there shall be deducted from such net income an amount equal to the annual charge made by the Corporation in such period for the amortization of Plant Acquisition Adjustments Account. Purchases or other acquisitions of Common Stock shall be deemed, for the purposes of this Paragraph (7), to have been declared as of the date on which such purchases or acquisitions are consummated. (8) (a) Every record holder of outstanding shares of Common Stock and every record holder of outstanding shares of Preferred Stock shall be entitled to vote in respect of the election of directors and upon all other matters, except as otherwise provided in this Paragraph (8) and except as otherwise provided in Paragraphs (5) and (6) of this Article III. Every holder of Common Stock at any time entitled to vote shall have one vote for each share held by him. Every holder of Preferred Stock at any time entitled to vote shall have, for each share of Preferred Stock held by him, that number of votes (including any fractional vote) determined by dividing the stated value of such share by 100. (b) If and when dividends, payable on the Preferred Stock, shall be in default in an amount equivalent to the dividend requirement for one year on all shares of Preferred Stock then outstanding (provided that, in the case of any shares of Preferred Stock which do not have a fixed rate of dividend, the dividend requirement for one year shall be calculated by using the rate of dividend in effect with respect to such shares at the time of such determination) and until all dividends then in default on the Preferred Stock shall have been paid, the record holders of the shares of Preferred Stock, voting separately as one class, shall be entitled, at each meeting of the shareholders at which directors are elected, to elect the smallest number of directors necessary to constitute a majority of the full Board of Directors, and the record holders of the shares of Common Stock, voting separately as a class, shall be entitled at any such meeting to elect the remaining directors of the Corporation. The term of office of each director of the Corporation shall terminate upon the election of his successor. At each election of directors by a class vote pursuant to the provisions of this paragraph, the class first electing the directors which it is entitled to elect shall name the directors who are to be succeeded by the directors then elected by such class, whereupon the term of office of the directors so named shall terminate. The term of office of the directors not so named shall terminate upon the election by the other class of the directors which it is entitled to elect. (c) If and when all dividends then in default on the Preferred Stock then outstanding shall be paid, the holders of the shares of the Preferred Stock shall thereupon be divested of the special right with respect to the election of directors provided in subparagraph (b) of this Paragraph (8), and the voting power of holders of shares of the Preferred Stock and the Common Stock shall revert to the status existing before the occurrence of such default, but always subject to the same provisions for vesting such special right in the Preferred Stock in case of further like default or defaults in dividends thereon. Dividends shall be deemed to have been paid, as that term is used in subparagraph (c) of this Paragraph (8), whenever such dividends shall have been declared and paid, or declared and provision made for the payment thereof, or whenever there shall be surplus and net profits of the Corporation legally available for the payment thereof which shall have accrued since the date of the default giving rise to such special voting right. (d) In case of any vacancy in the Board of Directors occurring among the directors elected by the holders of the shares of the Preferred Stock, as a class, pursuant to subparagraph (b) of this Paragraph (8), the holders of the shares of the Preferred Stock then outstanding and entitled to vote may elect a successor to hold office for the unexpired term of the director whose place shall be vacant. In case of a vacancy in the Board of Directors occurring among the directors elected by the holders of the shares of the Common Stock, as a class, pursuant to subparagraph (b) of this Paragraph (8), the holders of the shares of the Common Stock then outstanding and entitled to vote may elect a successor to hold office for the unexpired term of the director whose place shall be vacant. In all other cases, any vacancy occurring among the directors shall be filled in the manner provided in Article IV of these Restated Articles of Organization. (e) Whenever the holders of the shares of the Preferred Stock, as a class, become entitled to elect directors of the Corporation pursuant to subparagraph (b) or (d) of this Paragraph (8), or whenever the holders of the shares of the Common Stock, as a class, become entitled to elect directors of the Corporation pursuant to subparagraph (b) or (d) of this Paragraph (8), a special meeting of the holders of the shares of the Preferred Stock or of the holders of the shares of the Common Stock, as the case may be, for the election of such directors, shall be held at any time thereafter upon call by the holders of not less than 1,000 shares of the Common Stock or by the holders of shares of the Preferred Stock having an aggregate stated value of not less than $100,000, as the case may be, or upon call by the Secretary of the Corporation at the request in writing of any stockholder addressed to him at the principal office of the Corporation. If no such special meeting be called or be requested to be called, the election of the directors to be elected by the holders of the shares of the Preferred Stock, voting as a class, and of those to be elected by the holders of the shares of the Common Stock, voting as a class, shall take place at the next annual meeting of the stockholders of the Corporation next succeeding the accrual of such special voting right. At all meetings of stockholders at which directors are elected during such times as the holders of shares of the Preferred Stock shall have the special right, voting separately as one class, to elect directors pursuant to subparagraph (b) of this Paragraph (8), the presence in person or by proxy of the holders of a majority of the outstanding shares of the Common Stock shall be required to constitute a quorum of such class for the election of directors, and the presence in person or by proxy of the holders of that number of the outstanding shares of all series of the Preferred Stock having a majority of the total number of votes possessed by all holders of Preferred Stock entitled to vote at such meeting shall be required to constitute a quorum of such class for the election of directors; provided, however, that the absence of a quorum of the holders of stock of either such class shall not prevent the election at any such meeting or adjournment thereof of directors by the other such class if the necessary quorum of the holders of stock of such class is present in person or by proxy at such meeting; and provided further that in the absence of a quorum of the holders of stock of either such class, the holders of the stock of such class who are present in person or by proxy shall have power upon the majority vote of those votes represented at the meeting to adjourn the election of the directors to be elected by such class from time to time without notice other than announcement at the meeting until the requisite number of votes of such class shall be represented by stockholders present in person or by proxy. (f) Except when some mandatory provision of law shall be controlling, no particular series of the Preferred Stock shall be entitled to vote as a separate series or class on any matter and all shares of the Preferred Stock of all series shall be deemed to constitute but one class for any purpose for which a vote of the stockholders of the Corporation by classes may now or hereafter be required. (9) Upon the completion of any necessary filings relating to a resolution adopted by the Board of Directors of the Corporation authorizing the issue of shares of a new series of Preferred Stock pursuant to Paragraph (1) hereof, the terms of the new series as adopted therein, which shall constitute an amendment of these Restated Articles of Organization, shall be deemed to be an additional subparagraph to this Paragraph (9), and may be so certified by any officer of the Corporation or by any public official whose duty it may be to certify copies of these Restated Articles of Organization or amendments thereto. (a) 4-1/2% Preferred Stock (A) Designation and Amount. The Corporation is authorized to issue a series of Preferred Stock, which is hereby designated as "4-1/2% Preferred Stock". The number of shares of 4-1/2% Preferred Stock shall be limited to 100,000. The stated value of the 4-1/2% Preferred Stock shall be $100 per share. (B) Rate of Dividend. The rate of dividend applicable to each of the shares of 4-1/2% Preferred Stock shall be 4-1/2% per annum on the stated value thereof. (C) Redemption. The shares of 4-1/2% Preferred Stock shall be subject to redemption at the option of the Board of Directors of the Corporation, in whole at any time or in part from time to time, upon the notice and in the manner and with the effect provided in these Restated Articles of Organization at the stated value per share, together with unpaid accrued dividends to the date of redemption, and, in addition thereto, a premium of $7 per share. All shares of 4-1/2% Preferred Stock which shall at any time have been redeemed or otherwise reacquired by the Corporation shall, after such redemption or reacquisition, have the status of authorized but unissued shares of Preferred Stock of the Corporation, without designation as to series, until such shares are once more designated as part of a particular series by the Board of Directors of the Corporation. (D) No Sinking Fund. Shares of 4-1/2% Preferred Stock shall not be entitled to any sinking fund. (E) Other Terms. Shares of 4-1/2% Preferred Stock shall be subject to the other terms, provisions and restrictions set forth in these Restated Articles of Organization with respect to the shares of Preferred Stock of the Corporation. (b) 4.80% Preferred Stock (A) Designation and Amount. The Corporation is authorized to issue a series of Preferred Stock, which is hereby designated as "4.80% Preferred Stock". The number of shares of 4.80% Preferred Stock shall be limited to 75,000. The stated value of the 4.80% Preferred Stock shall be $100 per share. (B) Rate of Dividend. The rate of dividend applicable to each of the shares of 4.80% Preferred Stock shall be 4.80% per annum on the stated value thereof. (C) Redemption. The shares of 4.80% Preferred Stock shall be subject to redemption at the option of the Board of Directors of the Corporation, in whole at any time or in part from time to time, upon the notice and in the manner and with the effect provided in these Restated Articles of Organization at the stated value per share, together with unpaid accrued dividends to the date of redemption, and, in addition thereto, a premium of $1 per share. All shares of 4.80% Preferred Stock which shall at any time have been redeemed or otherwise reacquired by the Corporation shall, after such redemption or reacquisition, have the status of authorized but unissued shares of Preferred Stock of the Corporation, without designation as to series, until such shares are once more designated as part of a particular series by the Board of Directors of the Corporation. (D) No Sinking Fund. Shares of 4.80% Preferred Stock shall not be entitled to any sinking fund. (E) Other Terms. Shares of 4.80% Preferred Stock shall be subject to the other terms, provisions and restrictions set forth in these Restated Articles of Organization with respect to the shares of Preferred Stock of the Corporation. (c) 4.96% Preferred Stock (A) Designation and Amount. The Corporation is authorized to issue a series of Preferred Stock, which is hereby designated as "4.96% Preferred Stock". The number of shares of 4.96% Preferred Stock shall be limited to 65,000. The stated value of the 4.96% Preferred Stock shall be $100 per share. (B) Rate of Dividend. The rate of dividend applicable to each of the shares of 4.96% Preferred Stock shall be 4.96% per annum on the stated value thereof. (C) Redemption. The shares of 4.96% Preferred Stock shall be subject to redemption at the option of the Board of Directors of the Corporation, in whole at any time or in part from time to time, upon the notice and in the manner and with the effect provided in these Restated Articles of Organization at the stated value per share, together with unpaid accrued dividends to the date of redemption, and, in addition thereto, a premium of $1 per share. All shares of 4.96% Preferred Stock which shall at any time have been redeemed or otherwise reacquired by the Corporation shall, after such redemption or reacquisition, have the status of authorized but unissued shares of Preferred Stock of the Corporation, without designation as to series, until such shares are once more designated as part of a particular series by the Board of Directors of the Corporation. (D) No Sinking Fund. Shares of 4.96% Preferred Stock shall not be entitled to any sinking fund. (E) Other Terms. Shares of 4.96% Preferred Stock shall be subject to the other terms, provisions and restrictions set forth in these Restated Articles of Organization with respect to the shares of Preferred Stock of the Corporation. (d) 4.40% Preferred Stock (A) Designation and Amount. The Corporation is authorized to issue a series of Preferred Stock, which is hereby designated as "4.40% Preferred Stock". The number of shares of 4.40% Preferred Stock shall be limited to 30,000. The stated value of the 4.40% Preferred Stock shall be $100 per share. (B) Rate of Dividend. The rate of dividend applicable to each of the shares of 4.40% Preferred Stock shall be 4.40% per annum on the stated value thereof. (C) Redemption. The shares of 4.40% Preferred Stock shall be subject to redemption at the option of the Board of Directors of the Corporation, in whole at any time or in part from time to time, upon the notice and in the manner and with the effect provided in these Restated Articles of Organization at the stated value per share, together with unpaid accrued dividends to the date of redemption, and, in addition thereto, a premium of $4.50 per share. All shares of 4.40% Preferred Stock which shall at any time have been redeemed or otherwise reacquired by the Corporation shall, after such redemption or reacquisition, have the status of authorized but unissued shares of Preferred Stock of the Corporation, without designation as to series, until such shares are once more designated as part of a particular series by the Board of Directors of the Corporation. (D) No Sinking Fund. Shares of 4.40% Preferred Stock shall not be entitled to any sinking fund. (E) Other Terms. Shares of 4.40% Preferred Stock shall be subject to the other terms, provisions and restrictions set forth in these Restated Articles of Organization with respect to the shares of Preferred Stock of the Corporation. (e) 4.76% Preferred Stock (A) Designation and Amount. The Corporation is authorized to issue a series of Preferred Stock, which is hereby designated as "4.76% Preferred Stock". The number of shares of 4.76% Preferred Stock shall be limited to 30,000. The stated value of the 4.76% Preferred Stock shall be $100 per share. (B) Rate of Dividend. The rate of dividend applicable to each of the shares of 4.76% Preferred Stock shall be 4.76% per annum on the stated value thereof. (C) Redemption. The shares of 4.76% Preferred Stock shall be subject to redemption at the option of the Board of Directors of the Corporation, in whole at any time or in part from time to time, upon the notice and in the manner and with the effect provided in these Restated Articles of Organization at the stated value per share, together with unpaid accrued dividends to the date of redemption, and, in addition thereto, a premium of $1 per share. All shares of 4.76% Preferred Stock which shall at any time have been redeemed or otherwise reacquired by the Corporation shall, after such redemption or reacquisition, have the status of authorized but unissued shares of Preferred Stock of the Corporation, without designation as to series, until such shares are once more designated as part of a particular series by the Board of Directors of the Corporation. (D) No Sinking Fund. Shares of 4.76% Preferred Stock shall not be entitled to any sinking fund. (E) Other Terms. Shares of 4.76% Preferred Stock shall be subject to the other terms, provisions and restrictions set forth in these Restated Articles of Organization with respect to the shares of Preferred Stock of the Corporation. (f) 6.20% Preferred Stock (A) Designation and Amount. The Corporation is authorized to issue a series of Preferred Stock, which is hereby designated as "6.20% Preferred Stock". The number of shares of 6.20% Preferred Stock shall be limited to 150,000. The stated value of the 6.20% Preferred Stock shall be $100 per share. (B) Rate of Dividend. The rate of dividend applicable to each of the shares of 6.20% Preferred Stock shall be 6.20% per annum on the stated value thereof, and such dividends shall be cumulative from and including September 1, 1993. (C) Redemption. The 6.20% Preferred Stock shall not be redeemable prior to October 15, 2003. On and after October 15, 2003, the shares of 6.20% Preferred Stock shall be subject to redemption at the option of the Board of Directors of the Corporation, in whole at any time or in part from time to time, upon the notice and in the manner and with the effect provided in these Restated Articles of Organization at the stated value per share, together with unpaid accrued dividends to the date of redemption, and, in addition thereto, the following premium: If Redeemed During the If Redeemed During the Twelve Month Period Twelve Month Period Beginning October 15 Premium Beginning October 15 Premium 2003 . . . . . . . . . $3.10 2008 . . . . . . . . $1.55 2004 . . . . . . . . . 2.79 2009 . . . . . . . . 1.24 2005 . . . . . . . . . 2.48 2010 . . . . . . . . 0.93 2006 . . . . . . . . . 2.17 2011 . . . . . . . . 0.62 2007 . . . . . . . . . 1.86 2012 . . . . . . . . 0.31 Thereafter . . . . . 0.00 All shares of 6.20% Preferred Stock which shall at any time have been redeemed or otherwise reacquired by the Corporation shall, after such redemption or reacquisition, have the status of authorized but unissued shares of Preferred Stock of the Corporation, without designation as to series, until such shares are once more designated as part of a particular series by the Board of Directors of the Corporation. (D) No Sinking Fund. Shares of 6.20% Preferred Stock shall not be entitled to any sinking fund. (E) Other Terms. Shares of 6.20% Preferred Stock shall be subject to the other terms, provisions and restrictions set forth in these Restated Articles of Organization with respect to the shares of Preferred Stock of the Corporation. (g) 6.50% Preferred Stock (A) Designation and Amount. The Corporation is authorized to issue a series of Preferred Stock, which is hereby designated as "6.50% Preferred Stock". The number of shares of 6.50% Preferred Stock shall be limited to 599,460. The stated value of the 6.50% Preferred Stock shall be $25 per share. (B) Rate of Dividend. The rate of dividend applicable to each of the shares of 6.50% Preferred Stock shall be 6.50% per annum on the stated value thereof, and such dividends shall be cumulative from and including September 1, 1993. (C) Redemption. The 6.50% Preferred Stock shall not be redeemable prior to November 1, 1998. On and after November 1, 1998, the shares of 6.50% Preferred Stock shall be subject to redemption at the option of the Board of Directors of the Corporation, in whole at any time or in part from time to time, upon the notice and in the manner and with the effect provided in these Restated Articles of Organization at the stated value per share, together with unpaid accrued dividends to the date of redemption. All shares of 6.50% Preferred Stock which shall at any time have been redeemed or otherwise reacquired by the Corporation shall, after such redemption or reacquisition, have the status of authorized but unissued shares of Preferred Stock of the Corporation, without designation as to series, until such shares are once more designated as part of a particular series by the Board of Directors of the Corporation. (D) No Sinking Fund. Shares of 6.50% Preferred Stock shall not be entitled to any sinking fund. (E) Other Terms. Shares of 6.50% Preferred Stock shall be subject to the other terms, provisions and restrictions set forth in these Restated Articles of Organization with respect to the shares of Preferred Stock of the Corporation. (10) No share of stock or evidence of indebtedness shall be deemed to be "outstanding", as that term is used in these Restated Articles of Organization if, prior to or concurrently with the event in reference to which a determination as to the amount thereof outstanding is to be made, the requisite funds for the redemption thereof shall be deposited in trust for that purpose and the requisite notice for the redemption thereof shall be given or the depositary of such funds shall be irrevocably authorized and directed to give or complete such notice of redemption. (11) No holder of capital stock of the Corporation shall have any preemptive right to purchase, acquire or subscribe to any capital stock or other securities issued or sold by the Corporation, including any such capital stock or other securities now or hereafter authorized. (12) The Corporation reserves the right to increase or decrease its authorized capital stock, or any class or series thereof, or to reclassify the same, and to amend, alter, change or repeal any provision contained in these Restated Articles of Organization, or in any amendment thereto, in the manner now or hereafter prescribed by law, but subject to such conditions and limitations as are hereinbefore prescribed, and all rights conferred upon stockholders in these Restated Articles of Organization, or any amendment thereto, are granted subject to this reservation. ARTICLE IV The stock, property, affairs and business of the Corporation shall be under the care of and managed by a Board of Directors. The number of directors constituting the Board of Directors shall be as fixed from time to time by the By-laws, but shall not be less than seven (7). At the 1978 annual meeting of stockholders the directors shall be divided into three classes as nearly equal in number as possible, the term of office of directors of the first class to expire at the first annual meeting of stockholders after their election, that of the second class to expire at the second annual meeting of stockholders after their election and that of the third class to expire at the third annual meeting of stockholders after their election, or in each case until their respective successors are duly elected and qualified. At each annual meeting after the 1978 annual meeting of stockholders, the successors of the class of directors whose term shall then expire shall be elected to hold office for a term expiring at the third annual meeting of stockholders after their election or until their respective successors are duly elected and qualified. If, at any annual meeting following the 1978 annual meeting of stockholders, directors of more than one class are to be elected, each class of directors to be elected at such meeting shall be nominated and voted for in a separate election. Any vacancy occurring in the Board of Directors, including a vacancy created by an increase in the number of directors, shall be filled until the next succeeding annual meeting of stockholders by the majority vote of the directors then in office, even if less than a quorum. The provisions of this paragraph shall not be applied in derogation of any special voting rights arising pursuant to Paragraph (8) of Article III of the Restated Articles of Organization. ARTICLE V The general officers of the Corporation shall be provided for by the By-laws and shall include the officers required by law. The Board of Directors may by resolution authorize and appoint additional officers. Officers shall be elected and vacancies shall be filled by a majority vote of the Board of Directors. The duties and powers of the officers of the Corporation shall be provided by the By-laws or by resolution of the Board of Directors pursuant to the By-laws. ARTICLE VI The registered holders of the certificates of stock of the Corporation shall be members of the Corporation and shall be entitled to vote at all meetings of stockholders in person or by proxy as provided in these Restated Articles of Organization or as may be provided by law. ARTICLE VII Subject to compliance with any applicable provision of Paragraph (5) of Article III of these Restated Articles of Organization, these Restated Articles of Organization may be amended from time to time in the manner and in any and as many respects as may be authorized from time to time by law at the time of amendment, upon the affirmative vote of the holders of shares of stock of the Corporation entitled to vote having in the aggregate a number of votes, calculated as provided in Paragraph (8)(a) of Article III hereof, at least equal to a majority of the total number of votes, as so calculated, possessed by all such holders entitled to vote; and, if required, upon the affirmative vote of the holders of shares of stock of the Corporation of each class or series entitled by law to vote as a class having in the aggregate a number of votes, as so calculated, at least equal to a majority of the total number of votes, as so calculated, possessed by all such holders of such class or series entitled by law to vote as a class. * * * EX-4 3 EXHIBIT 4.1 TO WP&L FORM 10-Q WPL HOLDINGS, INC. LONG-TERM EQUITY INCENTIVE PLAN Article 1. Establishment, Purpose, and Duration 1.1 Establishment of the Plan. WPL Holdings, Inc., a Wisconsin corporation (hereinafter referred to as the "Company"), hereby establishes an incentive compensation plan to be known as the "WPL Holdings, Inc. Long-Term Equity Incentive Plan" (hereinafter referred to as the "Plan"), as set forth in this document. The Plan permits the grant of Nonqualified Stock Options, Incentive Stock Options, Restricted Stock, Performance Units, and Performance Shares. Subject to ratification by an affirmative vote of a majority of Shares, the Plan shall become effective as of January 23, 1994 (the "Effective Date"), and shall remain in effect as provided in Section 1.3 herein. 1.2 Purpose of the Plan. The purpose of the Plan is to promote the success and enhance the value of the Company by linking the personal interests of Participants to those of Company shareowners, and by providing Participants with an incentive for outstanding performance. The Plan is further intended to provide flexibility to the Company in its ability to motivate, attract, and retain the services of Participants upon whose judgment, interest, and special effort the successful conduct of its operation largely is dependent. 1.3 Duration of the Plan. The Plan shall commence on the Effective Date, as described in Section 1.1 herein, and shall remain in effect, subject to the right of the Board of Directors to terminate the Plan at any time pursuant to Article 13 herein, until all Shares subject to it shall have been purchased or acquired according to the Plan's provisions. However, in no event may an Award be granted under the Plan on or after January 22, 2004. Article 2. Definitions Whenever used in the Plan, the following terms shall have the meanings set forth below and, when the meaning is intended, the initial letter of the word is capitalized: (a) "Award" means, individually or collectively, a grant under this Plan of Nonqualified Stock Options, Incentive Stock Options, Restricted Stock, Performance Units, or Performance Shares. (b) "Award Agreement" means an agreement entered into by each Participant and the Company setting forth the terms and provisions applicable to Awards granted to Participants under this Plan. (c) "Beneficial Owner" shall have the meaning ascribed to such term in Rule 13d-3 of the General Rules and Regulations under the Exchange Act. (d) "Board" or "Board of Directors" means the Board of Directors of the Company. (e) "Cause" means the admission by or the conviction of the Participant of an act of fraud, embezzlement, theft, or other criminal act constituting a felony under U.S. laws involving moral turpitude. The Board of Directors, by majority vote, shall make the determination of whether Cause exists. (f) "Change in Control" shall have the meaning ascribed to such term in the Rights Agreement dated February 22, 1989 with Morgan Shareholder Services Trust Company. (g) "Code" means the Internal Revenue Code of 1986, as amended from time to time. (h) "Committee" means the committee, as specified in Article 3, appointed by the Board to administer the Plan. (i) "Company" means WPL Holdings, Inc., a Wisconsin corporation, or any successor thereto as provided in Article 16 herein. (j) "Director" means any individual who is a member of the Board of Directors of the Company. (k) "Disability" shall have the meaning ascribed to such term in the Wisconsin Power and Light Company Retirement Plan A Plan of the Company. (l) "Dividend Equivalent" means a contingent right to be paid dividends declared with respect to outstanding Option grants, pursuant to the terms of Section 6.5 herein. (m) "Employee" means any full-time, nonunion employee of the Company or of the Company's Subsidiaries. Directors who are not otherwise employed by the Company shall not be considered Employees under this Plan. (n) "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, or any successor Act thereto. (o) "Fair Market Value" means the Fair Market Value of the Shares determined by such methods or procedures as shall be established from time to time by the Committee; provided, however, that so long as the Shares are traded in a public market, Fair Market Value means the average of the high and low prices of a Share in the principal market for the Shares on the specified date (or, if no sales occurred on such date, the last preceding date on which sales occurred). (p) "Incentive Stock Option" or "ISO" means an option to purchase Shares, granted under Article 6 herein, which is designated as an Incentive Stock Option and is intended to meet the requirements of Section 422 of the Code, or any successor provision thereto. (q) "Insider" shall mean an Employee who is, on the relevant date, an officer, director, or ten percent (10%) beneficial owner of the Company, as defined under Section 16 of the Exchange Act. (r) "Named Executive Officer" means a Participant who, as of the date of vesting and/or payout of an Award is one of the group of "covered employees," as defined in the Regulations promulgated under Code Section 162(m), or any successor statute. (s) "Nonqualified Stock Option" or "NQSO" means an option to purchase Shares, granted under Article 6 herein, which is not intended to be an Incentive Stock Option. (t) "Option" means an Incentive Stock Option or a Nonqualified Stock Option. (u) "Option Price" means the price at which a Share may be purchased by a Participant pursuant to an Option, as determined by the Committee. (v) "Participant" means an Employee of the Company who has outstanding an Award granted under the Plan. (w) "Performance Unit" means an Award granted to an Employee, as described in Article 8 herein. (x) "Performance Share" means an Award granted to an Employee, as described in Article 8 herein. (y) "Period of Restriction" means the period during which the transfer of Shares of Restricted Stock is limited in some way (based on the passage of time, the achievement of performance goals, or upon the occurrence of other events as determined by the Committee, at its discretion), and the Shares are subject to a substantial risk of forfeiture, as provided in Article 7 herein. (z) "Person" shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, including a "group" as defined in Section 13(d). (aa) "Restricted Stock" means an Award granted to a Participant pursuant to Article 7 herein. (ab) "Retirement" shall have the meaning ascribed to such term in the Wisconsin Power and Light Company Retirement Plan A Plan of the Company. (ac) "Shares" means the Shares of common stock of the Company. (ad) "Subsidiary" means any corporation, partnership, venture, or other entity in which the Company, directly or indirectly, has at least an eighty percent (80%) ownership interest. (ae) "Window Period" means the period beginning on the third business day following the date of public release of the Company's quarterly sales and earnings information, and ending on the twelfth business day following such date. Article 3. Administration 3.1 The Committee. The Plan shall be administered by the Compensation and Personnel Committee of the Board or by any other Committee appointed by the Board consisting of not less than two (2) Directors. The members of the Committee shall be appointed from time to time by, and shall serve at the discretion of, the Board of Directors. The Committee shall be comprised solely of Directors who are eligible to administer the Plan pursuant to Rule 16b-3(c)(2) under the Exchange Act. 3.2 Authority of the Committee. The Committee shall have full power except as limited by law or by the Articles of Incorporation or Bylaws of the Company, and subject to the provisions herein, to designate employees to be Participants in the Plan; to determine the size and types of Awards; to determine the terms and conditions of such Awards in a manner consistent with the Plan; to determine whether, to what extent, and under what circumstances, Awards granted to Participants may be settled or exercised in cash, Shares or other property; to construe and interpret the Plan and any agreement or instrument entered into under the Plan; to establish, amend, or waive rules and regulations for the Plan's administration; and (subject to the provisions of Article 13 herein) to amend the terms and conditions of any outstanding Award to the extent such terms and conditions are within the discretion of the Committee as provided in the Plan. Further, the Committee shall make all other determinations which may be necessary or advisable for the administration of the Plan. As permitted by law, the Committee may delegate its authorities as identified hereunder. 3.3 Decisions Binding. All determinations and decisions made by the Committee pursuant to the provisions of the Plan and all related orders or resolutions of the Board shall be final, conclusive, and binding on all persons, including the Company, its shareowners, Employees, Participants, and their estates and beneficiaries. Article 4. Shares Subject to the Plan 4.1 Number of Shares. Subject to adjustment as provided in Section 4.3 herein, the total number of Shares available for grant under the Plan shall be 1,000,000. Of this number, up to 300,000 Shares may be granted as Restricted Stock. These Shares may be either authorized but unissued or reacquired Shares. The following rules will apply for purposes of the determination of the number of Shares available for grant under the Plan: (a) While an Award is outstanding, it shall be counted against the authorized pool of Shares, regardless of its vested status. (b) The grant of an Option or Restricted Stock shall reduce the Shares available for grant under the Plan by the number of Shares subject to such Award. (c) The Committee shall in each case determine the appropriate number of Shares to deduct from the authorized pool in connection with the grant of Performance Units and/or Performance Shares. (d) Unless otherwise determined by the Committee, the grant of an award opportunity under Article 8 of this Plan shall not reduce the authorized pool; provided, however, that payout of such opportunity in the form of Shares shall reduce the authorized pool by such number of Shares. (e) To the extent that an Award is settled in cash rather than in Shares, the authorized Share pool shall be credited with the appropriate number of Shares represented by the cash settlement of the Award, as determined at the sole discretion of the Committee (subject to the limitation set forth in Section 4.2 herein). 4.2 Lapsed Awards. If any Award granted under this Plan is canceled, terminates, expires, or lapses for any reason, any Shares subject to such Award again shall be available for the grant of an Award under the Plan. However, in the event that prior to the Award's cancellation, termination, expiration, or lapse, the holder of the Award at any time received one or more "benefits of ownership" pursuant to such Award (as defined by the Securities and Exchange Commission, pursuant to any rule or interpretation promulgated under Section 16 of the Exchange Act), the Shares subject to such Award shall not be made available for regrant under the Plan. 4.3 Adjustments in Authorized Shares. In the event of any merger, reorganization, consolidation, recapitalization, separation, liquidation, stock dividend, split-up, Share combination, or other change in the corporate structure of the Company affecting the Shares, such adjustment shall be made in the number and class of Shares which may be delivered under the Plan, and in the number and class of and/or price of Shares subject to outstanding Awards granted under the Plan, as may be determined to be appropriate and equitable by the Committee, in its sole discretion, to prevent dilution or enlargement of rights; and provided that the number of Shares subject to any Award shall always be a whole number. Article 5. Eligibility and Participation 5.1 Eligibility. Persons eligible to participate in this Plan include all active Employees of the Company and its Subsidiaries, as determined by the Committee, including Employees who are members of the Board, but excluding Directors who are not Employees. 5.2 Actual Participation. Subject to the provisions of the Plan, the Committee may, from time to time, select from all eligible Employees, those to whom Awards shall be granted and shall determine the nature and amount of each Award. Article 6. Stock Options 6.1 Grant of Options. Subject to the terms and provisions of the Plan, Options may be granted to Employees at any time and from time to time as shall be determined by the Committee. The Committee shall have discretion in determining the number of Shares subject to Options granted to each Participant; provided, however, that the maximum number of Shares subject to Options which may be granted to any single Participant during the term of the Plan is 150,000. The Committee may grant ISOs, NQSOs, or a combination thereof. 6.2 Award Agreement. Each Option grant shall be evidenced by an Award Agreement that shall specify the Option Price, the duration of the Option, the number of Shares to which the Option pertains, and such other provisions as the Committee shall determine. The Award Agreement also shall specify whether the Option is intended to be an ISO within the meaning of Section 422 of the Code, or a NQSO whose grant is intended not to fall under the Code provisions of Section 422. 6.3 Option Price. The Option Price for each grant of an Option under this Section 6.3 shall be at least equal to one hundred percent (100%) of the Fair Market Value of a Share on the date the Option is granted. In addition, the Committee may grant Options which have Option Prices that increase over time, upon such terms as the Committee, in its sole discretion, deems appropriate. 6.4 Duration of Options. Each Option shall expire at such time as the Committee shall determine at the time of grant; provided, however, that no Option shall be exercisable later than the tenth (10th) anniversary date of its grant. 6.5 Dividend Equivalents. Simultaneous with the grant of an Option, the Participant receiving the Option may be granted, at no additional cost, Dividend Equivalents. Each Dividend Equivalent shall entitle the Participant to receive a contingent right to be paid an amount equal to the dividends declared on a Share on all record dates occurring during the period between the grant date of an Option and the date the Option is exercised. The underlying value of each Dividend Equivalent shall accrue as a book entry in the name of each Participant holding the Dividend Equivalent. Payout of the accrued value of a Dividend Equivalent shall occur only in the event the Option issued in tandem with the Dividend Equivalent is "in the money" (i.e., the Fair Market Value of Shares underlying the Option as of the exercise date exceeds the Option Price) as of the exercise date. Payout of Dividend Equivalents shall be made in cash, in one lump sum, within thirty (30) days following the exercise of the corresponding Option. 6.6 Exercise of Options. Options granted under the Plan shall be exercisable at such times and be subject to such restrictions and conditions as the Committee shall in each instance approve, which need not be the same for each grant or for each Participant. However, in no event may any Option granted under this Plan become exercisable prior to six (6) months following the date of its grant. 6.7 Payment. Options shall be exercised by the delivery of a written notice of exercise to the Company, setting forth the number of Shares with respect to which the Option is to be exercised, accompanied by full payment for the Shares. The Option Price upon exercise of any Option shall be payable to the Company in full either: (a) in cash or its equivalent, or (b) by tendering previously acquired Shares having an aggregate Fair Market Value at the time of exercise equal to the total Option Price (provided that the Shares which are tendered must have been held by the Participant for at least six (6) months prior to their tender to satisfy the Option Price), or (c) by a combination of (a) and (b). Notwithstanding the foregoing, the Committee also may allow cashless exercises as permitted under Federal Reserve Board's Regulation T, subject to such procedures as the Committee may deem appropriate, including without limitations the establishment of such procedures as may be necessary to satisfy the requirements of Rule 16b-3, or by any other means which the Committee determines to be consistent with the Plan's purpose and applicable law. As soon as practicable after receipt of a written notification of exercise and full payment, the Company shall deliver to the Participant, in the Participant's name, Share certificates in an appropriate amount based upon the number of Shares purchased under the Option(s). 6.8 Termination of Employment Due to Death, Disability, or Retirement. (a) Termination by Death. In the event the employment of a Participant is terminated by reason of death, all outstanding Options granted to that Participant shall immediately vest one hundred percent (100%), and shall remain exercisable at any time prior to their expiration date, or for one (1) year after the date of death, whichever period is shorter, by such person or persons as shall have been named as the Participant's beneficiary, or by such persons that have acquired the Participant's rights under the Option by will or by the laws of descent and distribution. (b) Termination by Disability. In the event the employment of a Participant is terminated by reason of Disability, all outstanding Options granted to that Participant shall immediately vest one hundred percent (100%) as of the date the Committee determines the definition of Disability to have been satisfied, and shall remain exercisable at any time prior to their expiration date, or for one (1) year after the date that the Committee determines the definition of Disability to have been satisfied, whichever period is shorter. (c) Termination by Retirement. In the event the employment of a Participant is terminated by reason of Retirement, all outstanding Options granted to that Participant shall immediately vest one hundred percent (100%), and shall remain exercisable at any time prior to their expiration date, or for three (3) years after the effective date of Retirement, whichever period is shorter. (d) Employment Termination Followed by Death. In the event that a Participant's employment terminates by reason of Disability or Retirement, and within the exercise period following such termination the Participant dies, then the remaining exercise period under outstanding Options shall equal the longer of: (i) one (1) year following death; or (ii) the remaining portion of the exercise period which was triggered by the employment termination. Such Options shall be exercisable by such person or persons who shall have been named as the Participant's beneficiary, or by such persons who have acquired the Participant's rights under the Option by will or by the laws of descent and distribution. (e) Exercise Limitations on ISOs. In the case of ISOs, the tax treatment prescribed under Section 422 of the Internal Revenue Code of 1986, as amended, may not be available if the Options are not exercised within the Section 422 prescribed time periods after each of the various types of employment termination. 6.9 Termination of Employment for Other Reasons. If the employment of a Participant shall terminate for any reason other than the reasons set forth in Section 6.8 (and other than for Cause), all Options held by the Participant which are not vested as of the effective date of employment termination immediately shall be forfeited to the Company (and shall once again become available for grant under the Plan). However, the Committee, in its sole discretion, shall have the right to immediately vest all or any portion of such Options, subject to such terms as the Committee, in its sole discretion, deems appropriate. Options which are vested as of the effective date of employment termination may be exercised by the Participant within the period beginning on the effective date of employment termination, and ending three (3) months after such date. If the employment of a Participant shall be terminated by the Company for Cause, all outstanding Options held by the Participant immediately shall be forfeited to the Company and no additional exercise period shall be allowed, regardless of the vested status of the Options. 6.10 Nontransferability of Options. No Option granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, all Options granted to a Participant under the Plan shall be exercisable during his or her lifetime only by such Participant, or, if permissible under applicable law, by such Participant's guardian or legal representative. Article 7. Restricted Stock 7.1 Grant of Restricted Stock. Subject to the terms and provisions of the Plan, the Committee, at any time and from time to time, may grant Shares of Restricted Stock to eligible Employees in such amounts as the Committee shall determine. 7.2 Restricted Stock Agreement. Each Restricted Stock grant shall be evidenced by a Restricted Stock Agreement that shall specify the Period of Restriction, or Periods, the number of Restricted Stock Shares granted, and such other provisions as the Committee shall determine. 7.3 Transferability. Except as provided in this Article 7, the Shares of Restricted Stock granted herein may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the end of the applicable Period of Restriction established by the Committee and specified in the Restricted Stock Agreement, or upon earlier satisfaction of any other conditions, as specified by the Committee in its sole discretion and set forth in the Restricted Stock Agreement. However, in no event may any Restricted Stock granted under the Plan become vested in a Participant prior to six (6) months following the date of its grant, except in case of death. All rights with respect to the Restricted Stock granted to a Participant under the Plan shall be available during his or her lifetime only to such Participant. 7.4 Other Restrictions. The Committee shall impose such other conditions and/or restrictions on any Shares of Restricted Stock granted pursuant to the Plan as it may deem advisable including, without limitation, a requirement that Participants pay a stipulated purchase price for each Share of Restricted Stock, restrictions based upon the achievement of specific performance goals (Company-wide, divisional, and/or individual), and/or restrictions under applicable Federal or state securities laws; and may legend the certificates representing Restricted Stock to give appropriate notice of such restrictions. 7.5 Certificate Legend. In addition to any legends placed on certificates pursuant to Section 7.4 herein, each certificate representing Shares of Restricted Stock granted pursuant to the Plan may bear the following legend: "The sale or other transfer of the Shares of stock represented by this certificate, whether voluntary, involuntary, or by operation of law, is subject to certain restrictions on transfer as set forth in the WPL Holdings, Inc. Equity Incentive Plan, and in a Restricted Stock Agreement. A copy of the Plan and such Restricted Stock Agreement may be obtained from WPL Holdings, Inc." The Company shall have the right to retain the certificates representing Shares of Restricted Stock in the Company's possession until such time as all conditions and/or restrictions applicable to such Shares have been satisfied. 7.6 Removal of Restrictions. Except as otherwise provided in this Article 7, Shares of Restricted Stock covered by each Restricted Stock grant made under the Plan shall become freely transferable by the Participant after the last day of the Period of Restriction. Once the Shares are released from the restrictions, the Participant shall be entitled to have the legend required by Section 7.5 removed from his or her Share certificate. 7.7 Voting Rights. During the Period of Restriction, Participants holding Shares of Restricted Stock granted hereunder may exercise full voting rights with respect to those Shares. 7.8 Dividends and Other Distributions. During the Period of Restriction, Participants holding Shares of Restricted Stock granted hereunder may be credited with all regular cash dividends paid with respect to all Shares while they are so held. Except as provided in the succeeding sentence, all other cash dividends and other distributions paid with respect to Shares of Restricted Stock may be credited to Participants subject to the same restrictions on transferability and forfeitability as the Shares of Restricted Stock with respect to which they were paid. If any such dividends or distributions are paid in Shares, the Shares shall be subject to the same restrictions on transferability and forfeitability as the Shares of Restricted Stock with respect to which they were paid. Subject to the succeeding paragraph, all dividends credited to a Participant shall be paid to the Participant within forty-five (45) days following the full vesting of the Shares of Restricted Stock with respect to which such dividends were earned. In the event that any dividend constitutes a "derivative security" or an "equity security" pursuant to Rule 16(a) under the Exchange Act, such dividend shall be subject to a vesting period equal to the longer of: (i) the remaining vesting period of the Shares of Restricted Stock with respect to which the dividend is paid; or (ii) six months. The Committee shall establish procedures for the application of this provision. 7.9 Termination of Employment Due to Death, Disability, or Retirement. In the event the employment of a Participant is terminated by reason of death, Disability, or Retirement, all outstanding Shares of Restricted Stock shall immediately vest one hundred percent (100%) as of the date of employment termination (in the case of Disability, the date employment terminates shall be deemed to be the date that the Committee designates as the date the definition of Disability has been satisfied). The holder of the certificates of Restricted Stock shall be entitled to have any nontransferability legends required under Sections 7.4 and 7.5 of this Plan removed from the Share certificates. 7.10 Termination of Employment for Other Reasons. If the employment of a Participant shall terminate for any reason other than those specifically set forth in Section 7.9 herein, during the applicable Period of Restriction, all Shares of Restricted Stock still subject to restriction as of the effective date of employment termination immediately shall be forfeited and returned to the Company; provided, however, that the Committee may waive in whole or in part any or all remaining restrictions with respect to such Shares, upon such terms as the Committee, in its sole discretion, deems appropriate. Article 8. Performance Units and Performance Shares 8.1 Grant of Performance Units/Shares. Subject to the terms of the Plan, Performance Units and Performance Shares may be granted to eligible Employees at any time and from time to time, as shall be determined by the Committee. The Committee shall have complete discretion in determining the number of Performance Units and Performance Shares granted to each Participant; provided, however, that unless and until the Committee determines that a grant of Performance Units and/or Shares shall not be designed to qualify for the "performance-based" exemption under Code Section 162(m), the maximum payout to any Named Executive Officer with respect to Performance Units and/or Performance Shares granted in any one fiscal year of the Company shall be four hundred thousand dollars ($400,000). 8.2 Value of Performance Units/Shares. Each Performance Unit shall have an initial value that is established by the Committee at the time of grant. Each Performance Share shall have an initial value equal to the Fair Market Value of a Share on the date of grant. The Committee shall set performance goals in its discretion which, depending on the extent to which they are met, will determine the number and/or value of Performance Units/Shares that will be paid out to the Participants. The time period during which the performance goals must be met shall be called a "Performance Period." Performance Periods shall, in all cases, exceed six (6) months in length. Unless and until the Committee proposes for shareowner vote a change in the general performance measures, the attainment of which shall determine the number and/or value of Performance Units and/or Performance Shares granted under the Plan, the Company or Subsidiary performance measure to be used for purposes of grants to Named Executive Officers shall be chosen from among the following alternatives: (a) Return on equity; (b) Total shareowner return (share price appreciation plus dividends); (c) Net income; (d) Earnings per share; and/or (e) Cash flow. The Committee shall have sole discretion to alter the governing performance measures, subject to shareowner approval, to the extent required in order to comply with Section 162(m) of the Code and Rule 16b-3 under the Exchange Act. Notwithstanding the foregoing, in the event the Committee determines it is advisable to grant Performance Units and/or Performance Shares which shall not qualify for the "performance-based" exemption under Code Section 162(m), the Committee may make such grants without satisfying the requirements of Code Section 162(m). 8.3 Earning of Performance Units/Shares. After the applicable Performance Period has ended, the holder of Performance Units/Shares shall be entitled to receive payout on the number and value of Performance Units/Shares earned by the Participant over the Performance Period, to be determined as a function of the extent to which the corresponding performance goals have been achieved. 8.4 Form and Timing of Payment of Performance Units/Shares. Payment of earned Performance Units/Shares shall be made in a single lump sum, within seventy-five (75) calendar days following the close of the applicable Performance Period. The Committee, in its sole discretion, may pay earned Performance Units/Shares in the form of cash or in Shares (or in a combination thereof), which have an aggregate Fair Market Value equal to the value of the earned Performance Units/Shares at the close of the applicable Performance Period. Such Shares may be granted subject to any restrictions deemed appropriate by the Committee. Participants shall be entitled to receive any dividends declared with respect to Shares which have been earned in connection with grants of Performance Units and/or Performance Shares which have been earned, but not yet distributed to Participants. (Such dividends shall be subject to the same accrual, forfeiture, and payout restrictions as apply to dividends earned with respect to Shares of Restricted Stock, as set forth in Section 7.8 herein.) In addition, Participants may, at the discretion of the Committee, be entitled to exercise their voting rights with respect to such Shares. 8.5 Termination of Employment Due to Death, Disability, Retirement, or Involuntary Termination Without Cause. In the event the employment of a Participant is terminated by reason of death, Disability, Retirement, or involuntary termination without Cause during a Performance Period, the Participant shall receive a prorated payout of the Performance Units/Shares. The prorated payout shall be determined by the Committee, in its sole discretion, and shall be based upon the length of time that the Participant held the Performance Units/Shares during the Performance Period, and shall further be adjusted based on the achievement of the preestablished performance goals. Payment of earned Performance Units/Shares shall be made at the same time payments are made to Participants who did not terminate employment during the applicable Performance Period. 8.6 Termination of Employment for Other Reasons. In the event that a Participant's employment terminates for any reason other than those reasons set forth in Section 8.5 herein, all Performance Units/Shares shall be forfeited by the Participant to the Company. 8.7 Nontransferability. Performance Units/Shares may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. Further, a Participant's rights under the Plan shall be exercisable during the Participant's lifetime only by the Participant or the Participant's legal representative. Article 9. Beneficiary Designation Each Participant under the Plan may, from time to time, name any beneficiary or beneficiaries (who may be named contingently or successively) to whom any benefit under the Plan is to be paid in case of his or her death before he or she receives any or all of such benefit. Each such designation shall revoke all prior designations by the same Participant, shall be in a form prescribed by the Company, and will be effective only when filed by the Participant in writing with the Company during the Participant's lifetime. In the absence of any such designation, benefits remaining unpaid at the Participant's death shall be paid to the Participant's estate. The spouse of a married Participant domiciled in a community property jurisdiction shall join in any designation of beneficiary or beneficiaries other than the spouse. Article 10. Deferrals The Committee may permit a Participant to defer such Participant's receipt of the payment of cash or the delivery of Shares that would otherwise be due to such Participant by virtue of the exercise of an Option or the lapse or waiver of restrictions with respect to Restricted Stock, or the satisfaction of any requirements or goals with respect to Performance Units/Shares. If any such deferral election is required or permitted, the Committee shall, in its sole discretion, establish rules and procedures for such payment deferrals. Article 11. Rights of Employees 11.1 Employment. Nothing in the Plan shall interfere with or limit in any way the right of the Company to terminate any Participant's employment at any time, nor confer upon any Participant any right to continue in the employ of the Company. For purposes of the Plan, transfer of employment of a Participant between the Company and any one of its Subsidiaries, or vice versa, (or between Subsidiaries) shall not be deemed a termination of employment. 11.2 Participation. No Employee shall have the right to be selected to receive an Award under this Plan, or, having been so selected, to be selected to receive a future Award. Article 12. Change in Control Upon the occurrence of a Change in Control, unless otherwise specifically prohibited by the terms of Section 17 herein: (a) Any and all Options granted hereunder shall become immediately exercisable; (b) Any Period of Restriction and restrictions imposed on Restricted Shares shall lapse; (c) The target payout opportunity attainable under all outstanding Performance Units and Performance Shares shall be deemed to have been fully earned for the entire Performance Period(s) as of the effective date of the Change in Control, and there shall be paid out in cash to Participants within thirty (30) days following the effective date of the Change in Control a pro rata portion of such target payout opportunity based on the number of complete and partial calendar months within the Performance Period which had elapsed as of such effective date; provided, however, that there shall not be an accelerated payout with respect to Performance Units or Performance Shares which were granted less than six (6) months prior to the effective date of the Change in Control; (d) Subject to Article 13 herein, the Committee shall have the authority to make any modifications to the Awards as determined by the Committee to be appropriate before the effective date of the Change in Control. Article 13. Amendment, Modification, and Termination 13.1 Amendment, Modification, and Termination. The Board may, at any time and from time to time, alter, amend, suspend or terminate the Plan in whole or in part; provided, that no amendment which requires shareowner approval in order for the Plan to continue to comply with Rule 16b-3 under the Exchange Act, including any successor to such Rule, shall be effective unless such amendment shall be approved by the requisite vote of shareowners of the Company entitled to vote thereon. The Committee shall not have the authority to cancel outstanding Awards and issue substitute Awards in replacement thereof. 13.2 Awards Previously Granted. No termination, amendment, or modification of the Plan shall adversely affect in any material way any Award previously granted under the Plan, without the written consent of the Participant holding such Award. Article 14. Withholding 14.1 Tax Withholding. The Company shall have the power and the right to deduct or withhold, or require a Participant to remit to the Company, an amount sufficient to satisfy Federal, state, and local taxes (including the Participant's FICA obligation) required by law to be withheld with respect to any taxable event arising or as a result of any Awards to Participants under this Plan. 14.2 Share Withholding. With respect to withholding required upon the exercise of Options, upon the lapse of restrictions on Restricted Stock, or upon any other taxable event arising as a result of Awards granted hereunder, Participants may elect, subject to the approval of the Committee, to satisfy the withholding requirement, in whole or in part, by having the Company withhold Shares having a Fair Market Value on the date the tax is to be determined equal to the minimum statutory total tax which could be imposed on the transaction. The Committee may establish such procedures as it deems appropriate for the settling of withholding obligations with Shares, including, without limitation, the establishment of such procedures as may be necessary to comply with the requirements of Rule 16b-3, unless otherwise determined by the Committee. (a) Awards Having Exercise Timing Within Participants' Discretion. The Insider must either: (i) Deliver written notice of the stock withholding election to the Committee at least six (6) months prior to the date specified by the Insider on which the exercise of the Award is to occur; or (ii) Make the stock withholding election in connection with an exercise of an Award which occurs during a Window Period. (b) Awards Having a Fixed Exercise/Payout Schedule Which is Outside Insider's Control. The Insider must either: (i) Deliver written notice of the stock withholding election to the Committee at least six (6) months prior to the date on which the taxable event (e.g., exercise or payout) relating to the Award is scheduled to occur; or (ii) Make the stock withholding election during a Window Period which occurs prior to the scheduled taxable event relating to the Award (for this purpose, an election may be made prior to such a Window Period, provided that it becomes effective during a Window Period occurring prior to the applicable taxable event). Article 15. Indemnification Each person who is or shall have been a member of the Committee, or of the Board, shall be indemnified and held harmless by the Company against and from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by him or her in connection with or resulting from any claim, action, suit, or proceeding to which he or she may be a party or in which he or she may be involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by him or her in settlement thereof, with the Company's approval, or paid by him or her in satisfaction of any judgment in any such action, suit, or proceeding against him or her, provided he or she shall give the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company's Articles of Incorporation or Bylaws, as a matter of law, or otherwise, or any power that the Company may have to indemnify them or hold them harmless. Article 16. Successors All obligations of the Company under the Plan, with respect to Awards granted hereunder, shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company. Article 17. Restrictions on Share Transferability In addition to any restrictions imposed pursuant to the Plan, all certificates for Shares delivered under the Plan pursuant to any Award or the exercise thereof shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange or market upon which such Shares are then listed or traded, any applicable Federal or state securities laws, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. Article 18. Legal Construction 18.1 Gender and Number. Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine; the plural shall include the singular and the singular shall include the plural. 18.2 Severability. In the event any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included. 18.3 Requirements of Law. The granting of Awards and the issuance of Shares under the Plan shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required. Notwithstanding any other provision set forth in the Plan, if required to comply with the then-current rules promulgated under Section 16 of the Exchange Act, any "equity security" offered pursuant to the Plan to any Insider may not be sold or transferred for at least six (6) months after the date of grant, except in the case of death. The terms "equity security" and "derivative security" shall have the meanings ascribed to them in the then-current Rule 16(a) under the Exchange Act. 18.4 Securities Law Compliance. With respect to Insiders, transactions under this Plan are intended to comply with all applicable conditions or Rule 16b-3 or its successors under the 1934 Act. To the extent any provision of the Plan or action by the Committee fails to so comply, it shall be deemed null and void, to the extent permitted by law and deemed advisable by the Committee. 18.5 Governing Law. To the extent not preempted by Federal law, the Plan, and all agreements hereunder, shall be construed in accordance with and governed by the laws of the State of Wisconsin. EX-4 4 EXHIBIT 4.2 TO WP&L FORM 10-Q KEY EXECUTIVE EMPLOYMENT AND SEVERANCE AGREEMENT THIS AGREEMENT, made and entered into as of the 25th day of June, 1994, by and between WPL Holdings, Inc., a Wisconsin corporation (hereinafter referred to as the "Company"), and Erroll B. Davis, Jr. (hereinafter referred to as "Executive"). W I T N E S S E T H WHEREAS, the Executive is employed by the Company and/or a subsidiary of the Company (the "Employer") in a key executive capacity and the Executive's services are valuable to the conduct of the business of the Company; WHEREAS, the Executive possesses intimate knowledge of the business and affairs of the Company and has acquired certain confidential information and data with respect to the Company; WHEREAS, the Company desires to insure, insofar as possible, that it will continue to have the benefit of the Executive's services and to protect its confidential information and goodwill; WHEREAS, the Company recognizes that circumstances may arise in which a change in control of the Company occurs, through acquisition or otherwise, thereby causing uncertainty about the Executive's future employment with the Employer without regard to the Executive's competence or past contributions which uncertainty may result in the loss of valuable services of the Executive to the detriment of the Company and its shareholders, and the Company and the Executive wish to provide reasonable security to the Executive against changes in the Executive's relationship with the Company in the event of any such change in control; WHEREAS, the Company and the Executive are desirous that any proposal for a change in control or acquisition of the Company will be considered by the Executive objectively and with reference only to the best interests of the Company and its shareholders; and WHEREAS, the Executive will be in a better position to consider the Company's best interests if the Executive is afforded reasonable security, as provided in this Agreement, against altered conditions of employment which could result from any such change in control or acquisition. NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements hereinafter set forth, the parties hereto mutually covenant and agree as follows: 1. Definitions. (a) Act. For purposes of this Agreement, the term "Act" means the Securities Exchange Act of 1934, as amended. (b) Affiliate and Associate. For purposes of this Agreement, the terms "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule l2b-2 of the General Rules and Regulations of the Act. (c) Beneficial Owner. For purposes of this Agreement, a Person shall be deemed to be the "Beneficial Owner" of any securities: (i) which such Person or any of such Person's Affiliates or Associates has the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding, or upon the exercise of conversion rights, exchange rights, rights, warrants or options, or otherwise; provided, however, that a Person shall not be deemed the Beneficial Owner of, or to beneficially own, (A) securities tendered pursuant to a tender or exchange offer made by or on behalf of such Person or any of such Person's Affiliates or Associates until such tendered securities are accepted for purchase, or (B) securities issuable upon exercise of Rights issued pursuant to the terms of the Company's Rights Agreement with Morgan Shareholder Services Trust Company, dated as of February 22, 1989, as amended from time to time (or any successor to such Rights Agreement), at any time before the issuance of such securities; (ii) which such Person or any of such Person's Affiliates or Associates, directly or indirectly, has the right to vote or dispose of or has "beneficial ownership" of (as determined pursuant to Rule l3d-3 of the General Rules and Regulations under the Act), including pursuant to any agreement, arrangement or understanding; provided, however, that a Person shall not be deemed the Beneficial Owner of, or to beneficially own, any security under this subparagraph (ii) as a result of an agreement, arrangement or understanding to vote such security if the agreement, arrangement or understanding: (A) arises solely from a revocable proxy or consent given to such Person in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable rules and regulations under the Act and (B) is not also then reportable on a Schedule l3D under the Act (or any comparable or successor report); or (iii) which are beneficially owned, directly or indirectly, by any other Person with which such Person or any of such Person's Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting (except pursuant to a revocable proxy as described in Subsection 1(c) (ii) above) or disposing of any voting securities of the Company. (d) Cause. "Cause" for termination by the Company of the Executive's employment in connection with a Change of Control of the Company shall, for purposes of this Agreement, be limited to (i) the engaging by the Executive in intentional conduct not taken in good faith which has caused demonstrable and serious financial injury to the Company, as evidenced by a determination in a binding and final judgment, order or decree of a court or administrative agency of competent jurisdiction, in effect after exhaustion or lapse of all rights of appeal, in an action, suit or proceeding, whether civil, criminal, administrative or investigative; (ii) conviction of a felony (as evidenced by binding and final judgment, order or decree of a court of competent jurisdiction, in effect after exhaustion of all rights of appeal) which substantially impairs the Executive's ability to perform his duties or responsibilities; and (iii) continuing willful and unreasonable refusal by the Executive to perform the Executive's duties or responsibilities (unless significantly changed without the Executive's consent). (e) Change in Control of the Company. For purposes of this Agreement, a "Change in Control of the Company" shall mean a change in control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Act. Without limiting the inclusiveness of the definition in the preceding sentence, a Change in Control of the Company shall be deemed to have occurred if: (i) any Person (other than any employee benefit plan of the Company or of any subsidiary of the Company, any Person organized, appointed or established pursuant to the terms of any such benefit plan or any trustee, administrator or fiduciary of such a plan) is or becomes the Beneficial Owner of securities of the Company representing at least 30% of the combined voting power of the Company's then outstanding securities, (ii) one-half or more of the members of the Board are not Continuing Directors; (iii) there shall be consummated (x) any merger of the Company or share exchange involving the Company in which the Company is not the continuing or surviving corporation or pursuant to which shares of the Company's Common Stock would be converted into cash, securities or other property, other than a merger of the Company in which each of the holders of the Company's Common Stock immediately prior to the merger have the same proportionate ownership of common stock of the surviving corporation immediately after the merger, or (y) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Company, or (iv) the shareholders of the Company approve any plan or proposal for the liquidation or dissolution of the Company. (f) Code. For purposes of this Agreement, the term "Code" means the Internal Revenue Code of 1986, including any amendments thereto or successor tax codes thereof. (g) Continuing Director. For purposes of this Agreement, the term "Continuing Director" means any member of the Board of Directors of the Company who was a member of such Board on February 1, 1994, and any successor of a Continuing Director who is recommended to succeed a Continuing Director by a majority of the Continuing Directors then on such Board. (h) Covered Termination. Subject to Section 2(b) hereof, for purposes of this Agreement, the term "Covered Termination" means any termination of the Executive's employment where the Termination Date is any date prior to the end of the Employment Period. (i) Employment Period. For purposes of this Agreement, the term "Employment Period" means a period commencing on the date of a Change in Control of the Company, and ending at 11:59 p.m. Central Time on the earlier of the fifth anniversary of such date or the Executive's Normal Retirement Date. (j) Good Reason. For purposes of this Agreement, the Executive shall have a "Good Reason" for termination of employment in connection with a Change in Control of the Company in the event of: (i) any breach of this Agreement by the Company, including specifically any breach by the Company of its agreements contained in Sections 4, 5 or 6 hereof; (ii) the removal of the Executive from, or any failure to reelect or reappoint the Executive to, any of the positions held with the Company or the Employer on the date of the Change in Control of the Company or any other positions with the Company or the Employer to which the Executive shall thereafter be elected, appointed or assigned, except in the event that such removal or failure to reelect or reappoint relates to the termination by the Company of the Executive's employment for Cause or by reason of disability pursuant to Section 12 hereof; (iii) a good faith determination by the Executive that there has been a significant adverse change, without the Executive's written consent, in the Executive's working conditions or status with the Company or the Employer from such working conditions or status in effect immediately prior to the Change in Control of the Company, including but not limited to (A) a significant change in the nature or scope of the Executive's authority, powers, functions, duties or responsibilities, or (B) a significant reduction in the level of support services, staff, secretarial and other assistance, office space and accoutrements; or (iv) failure by the Company to obtain the Agreement referred to in Section 17(a) hereof as provided therein; or (v) any voluntary termination of employment by the Executive where the Notice of Termination is delivered during the 30 days following the first anniversary of the Change in Control of the Company. (k) Normal Retirement Date. For purposes of this Agreement, the term "Normal Retirement Date" means "Normal Retirement Date" as defined in the Wisconsin Power and Light Company Retirement Plan, or any successor plan, as in effect on the date of the Change in Control of the Company. (l) Person. For purposes of this Agreement, the term "Person" shall mean any individual, firm, partnership, corporation or other entity, including any successor (by merger or otherwise) of such entity, or a group of any of the foregoing acting in concert. (m) Termination Date. For purposes of this Agreement, except as otherwise provided in Section 10(b) and Section 17(a) hereof, the term "Termination Date" means (i) if the Executive's employment is terminated by the Executive's death, the date of death; (ii) if the Executive's employment is terminated by reason of voluntary early retirement, as agreed in writing by the Company and the Executive, the date of such early retirement which is set forth in such written agreement; (iii) if the Executive's employment is terminated for purposes of this Agreement by reason of disability pursuant to Section 12 hereof, the earlier of thirty days after the Notice of Termination is given or one day prior to the end of the Employment Period; (iv) if the Executive's employment is terminated by the Executive voluntarily (other than for Good Reason), the date the Notice of Termination is given; and (v) if the Executive's employment is terminated by the Company (other than by reason of disability pursuant to Section 12 hereof) or by the Executive for Good Reason, the earlier of thirty days after the Notice of Termination is given or one day prior to the end of the Employment Period. Notwithstanding the foregoing, (A) If termination is for Cause pursuant to Section 1(d)(iii) of this Agreement and if the Executive has cured the conduct constituting such Cause as described by the Company in its Notice of Termination within such thirty day or shorter period, then the Executive's employment hereunder shall continue as if the Company had not delivered its Notice of Termination. (B) If the Executive shall in good faith give a Notice of Termination for Good Reason and the Company notifies the Executive that a dispute exists concerning the termination within the fifteen day period following receipt thereof, then the Executive may elect to continue his employment during such dispute and the Termination Date shall be determined under this paragraph. If the Executive so elects and it is thereafter determined that Good Reason did exist, the Termination Date shall be the earliest of (l) the date on which the dispute is finally determined, either (x) by mutual written agreement of the parties or (y) in accordance with Section 22 hereof, (2) the date of the Executive's death or (3) one day prior to the end of the Employment Period. If the Executive so elects and it is thereafter determined that Good Reason did not exist, then the employment of the Executive hereunder shall continue after such determination as if the Executive had not delivered the Notice of Termination asserting Good Reason and there shall be no Termination Date arising out of such Notice. In either case, this Agreement continues, until the Termination Date, if any, as if the Executive had not delivered the Notice of Termination except that, if it is finally determined that Good Reason did exist, the Executive shall in no case be denied the benefits described in Sections 8(b) and 9 hereof (including a Termination Payment) based on events occurring after the Executive delivered his Notice of Termination. (C) If an opinion is required to be delivered pursuant to Section 9(b)(ii) hereof and such opinion shall not have been delivered, the Termination Date shall be the earlier of the date on which such opinion is delivered or one day prior to the end of the Employment Period. (D) Except as provided in Paragraph (B) above, if the party receiving the Notice of Termination notifies the other party that a dispute exists concerning the termination within the appropriate period following receipt thereof and it is finally determined that the reason asserted in such Notice of Termination did not exist, then (1) if such Notice was delivered by the Executive, the Executive will be deemed to have voluntarily terminated his employment and the Termination Date shall be the earlier of the date fifteen days after the Notice of Termination is given or one day prior to the end of the Employment Period and (2) if delivered by the Company, the Company will be deemed to have terminated the Executive other than by reason of death, disability or Cause. 2. Termination or Cancellation Prior to Change in Control. (a) Subject to Subsection 2(b) hereof, the Company (and the Employer) and the Executive shall each retain the right to terminate the employment of the Executive at any time prior to a Change in Control of the Company. Subject to Subsection 2(b) hereof, in the event the Executive's employment is terminated prior to a Change in Control of the Company, this Agreement shall be terminated and cancelled and of no further force and effect, and any and all rights and obligations of the parties hereunder shall cease. (b) Anything in this Agreement to the contrary notwithstanding, if a Change in Control of the Company occurs and if the Executive's employment with the Company or a subsidiary of the Company is terminated (other than a termination due to the Executive's death or as a result of the Executive's disability) during the period of 180 days prior to the date on which the Change in Control of the Company occurs, and if it is reasonably demonstrated by the Executive that such termination of employment (i) was at the request of a third party who has taken steps reasonably calculated to effect a Change in Control of the Company or (ii) otherwise arose in connection with or in anticipation of a Change in Control of the Company, then for all purposes of this Agreement such termination of employment shall be deemed a "Covered Termination." 3. Employment Period. If a Change in Control of the Company occurs when the Executive is employed by the Company or a subsidiary of the Company, the Company will, or will cause the Employer to, continue thereafter to employ the Executive during the Employment Period, and the Executive will remain in the employ of the Employer in accordance with and subject to the terms and provisions of this Agreement. Any termination of the Executive's employment during the Employment Period, whether by the Company or the Employer, shall be deemed a termination by the Company for purposes of this Agreement. 4. Duties. During the Employment Period, the Executive shall, in the same capacities and positions held by the Executive at the time of the Change in Control of the Company or in such other capacities and positions as may be agreed to by the Company and the Executive in writing, devote the Executive's best efforts and all of the Executive's business time, attention and skill to the business and affairs of the Employer, as such business and affairs now exist and as they may hereafter be conducted. The services which are to be performed by the Executive hereunder are to be rendered in the same metropolitan area in which the Executive was employed at the time of such Change in Control of the Company, or in such other place or places as shall be mutually agreed upon in writing by the Executive and the Company from time to time. Without the Executive's consent the Executive shall not be required to be absent from such metropolitan area more than 45 days in any fiscal year of the Company. 5. Compensation. During the Employment Period, the Executive shall be compensated as follows: (a) The Executive shall receive, at reasonable intervals (but not less often than monthly) and in accordance with such standard policies as may be in effect immediately prior to the Change in Control of the Company, an annual base salary in cash equivalent of not less than the Executive's annual base salary as in effect immediately prior to the Change in Control of the Company (which base salary shall, unless otherwise agreed in writing by the Executive, include the current receipt by the Executive of any amounts which, prior to the Change in Control of the Company, the Executive had elected to defer, whether such compensation is deferred under Section 401(k) of the Code or otherwise), subject to adjustment as hereinafter provided. (b) The Executive shall receive fringe benefits at least equal in value to those provided for the Executive immediately prior to the Change in Control of the Company, and shall be reimbursed, at such intervals and in accordance with such standard policies as may be in effect immediately prior to the Change in Control of the Company, for any and all monies advanced in connection with the Executive's employment for reasonable and necessary expenses incurred by the Executive on behalf of the Company, including travel expenses. (c) The Executive shall be included, to the extent eligible thereunder (which eligibility shall not be conditioned on the Executive's salary grade or on any other requirement which excludes persons of comparable status to the Executive unless such exclusion was in effect for such plan or an equivalent plan immediately prior to the Change in Control of the Company), in any and all plans providing benefits for the Employer's salaried employees in general, including but not limited to group life insurance, hospitalization, medical, dental, profit sharing and stock bonus plans; provided, that, in no event shall the aggregate level of benefits under such plans in which the Executive is included be less than the aggregate level of benefits under plans of the Company of the type referred to in this Section 5(c) in which the Executive was participating immediately prior to the Change in Control of the Company. (d) The Executive shall annually be entitled to not less than the amount of paid vacation and not fewer than the number of paid holidays to which the Executive was entitled annually immediately prior to the Change in Control of the Company or such greater amount of paid vacation and number of paid holidays as may be made available annually to other executives of the Company of comparable status and position to the Executive. (e) The Executive shall be included in all plans providing additional benefits to executives of the Company of comparable status and position to the Executive, including but not limited to deferred compensation, split-dollar life insurance, supplemental retirement, stock option, stock appreciation, stock bonus and similar or comparable plans; provided, that, in no event shall the aggregate level of benefits under such plans be less than the aggregate level of benefits under plans of the Company of the type referred to in this Section 5(e) in which the Executive was participating immediately prior to the Change in Control of the Company; and provided, further, that the Company's obligation to include the Executive in bonus or incentive compensation plans shall be determined by Subsection 5(f) hereof. (f) To assure that the Executive will have an opportunity to earn incentive compensation after a Change in Control of the Company, the Executive shall be included in a bonus plan of the Company which shall satisfy the standards described below (such plan, the "Bonus Plan"). Bonuses under the Bonus Plan shall be payable with respect to achieving such financial or other goals reasonably related to the business of the Company and the Employer as the Company shall establish (the "Goals"), all of which Goals shall be attainable, prior to the end of the Employment Period, with approximately the same degree of probability as the goals under the Company's bonus plan or plans as in effect immediately prior to the Change in Control of the Company (whether one or more, the "Company Bonus Plan") and in view of the Company's existing and projected financial and business circumstances applicable at the time. The amount of the bonus (the "Bonus Amount") that the Executive is eligible to earn under the Bonus Plan shall be no less than the amount of the Executive's maximum award provided in such Company Bonus Plan (such bonus amount herein referred to as the "Targeted Bonus"), and in the event the Goals are not achieved such that the entire Targeted Bonus is not payable, the Bonus Plan shall provide for a payment of a Bonus Amount equal to a portion of the Targeted Bonus reasonably related to that portion of the Goals which were achieved. Payment of the Bonus Amount shall not be affected by any circumstance occurring subsequent to the end of the Employment Period, including termination of the Executive's employment. 6. Annual Compensation Adjustments. During the Employment Period, the Board of Directors of the Company (or an appropriate committee thereof) will consider and appraise, at least annually, the contributions of the Executive to the Company, and in accordance with the Company's practice prior to the Change in Control of the Company, due consideration shall be given to the upward adjustment of the Executive's base compensation rate, at least annually, (i) commensurate with increases generally given to other executives of the Company of comparable status and position to the Executive, and (ii) as the scope of the Company's operations or the Executive's duties expand. 7. Termination For Cause or Without Good Reason. If there is a Covered Termination for Cause or due to the Executive's voluntarily terminating his employment other than for Good Reason (any such terminations to be subject to the procedures set forth in Section 13 hereof), then the Executive shall be entitled to receive only Accrued Benefits pursuant to Section 9(a) hereof. 8. Termination Giving Rise to a Termination Payment. (a) If there is a Covered Termination by the Executive for Good Reason, or by the Company other than by reason of (i) death, (ii) disability pursuant to Section 12 hereof, or (iii) Cause (any such terminations to be subject to the procedures set forth in Section 13 hereof), then the Executive shall be entitled to receive, and the Company shall promptly pay, Accrued Benefits and, in lieu of further base salary for periods following the Termination Date, as liquidated damages and additional severance pay and in consideration of the covenant of the Executive set forth in Section 14(a) hereof, the Termination Payment pursuant to Section 9(b) hereof. (b) If there is a Covered Termination and the Executive is entitled to Accrued Benefits and the Termination Payment, then the Executive shall be entitled to the following additional benefits: (i) The Executive shall receive, at the expense of the Company, outplacement services, on an individualized basis at a level of service commensurate with the Executive's status with the Company immediately prior to the Change in Control of the Company (or, if higher, immediately prior to the termination of the Executive's employment), provided by a nationally recognized executive placement firm selected by the Company; provided that the cost to the Company of such services shall not exceed 15% of the Executive's annual base salary in effect immediately prior to the Change in Control of the Company. (ii) Until the earlier of the end of the Employment Period or such time as the Executive has obtained new employment and is covered by benefits which in the aggregate are at least equal in value to the following benefits, the Executive shall continue to be covered, at the expense of the Company, by the same or equivalent life insurance, hospitalization, medical and dental coverage as was required hereunder with respect to the Executive immediately prior to the date the Notice of Termination is given. 9. Payments Upon Termination. (a) Accrued Benefits. For purposes of this Agreement, the Executive's "Accrued Benefits" shall include the following amounts, payable as described herein: (i) all base salary for the time period ending with the Termination Date; (ii) reimbursement for any and all monies advanced in connection with the Executive's employment for reasonable and necessary expenses incurred by the Executive on behalf of the Company for the time period ending with the Termination Date; (iii) any and all other cash earned through the Termination Date and deferred at the election of the Executive or pursuant to any deferred compensation plan then in effect; (iv) a lump sum payment of the bonus or incentive compensation otherwise payable to the Executive with respect to the year in which termination occurs under all bonus or incentive compensation plan or plans in which the Executive is a participant; and (v) all other payments and benefits to which the Executive (or in the event of the Executive's death, the Executive's surviving spouse or other beneficiary) may be entitled as compensatory fringe benefits or under the terms of any benefit plan of the Company, excluding severance payments under any Company severance policy, practice or agreement in effect immediately prior to the Change in Control of the Company. Payment of Accrued Benefits shall be made promptly in accordance with the Company's prevailing practice with respect to Subsections (i) and (ii) or, with respect to Subsections (iii), (iv) and (v), pursuant to the terms of the benefit plan or practice establishing such benefits. (b) Termination Payment. (i) Subject to the limits set forth in Subsection 9(b)(ii) hereof, the Termination Payment shall be an amount equal to (A) the Executive's annual base salary, as in effect immediately prior to the Change in Control of the Company, as adjusted upward, from time to time, pursuant to Section 6 hereof, plus (B) the amount of the average annual bonus award (determined on an annualized basis for any bonus award paid for a period of less than one year and excluding any year for which the Executive did not participate in any bonus plan) paid to the Executive with respect to the three complete fiscal years preceding the Termination Date (the aggregate amount set forth in (A) and (B) hereof shall hereafter be referred to as "Annual Cash Compensation"), times (C) the lesser of (1) three and (2) the number of years or fractional portion thereof remaining in the Employment Period determined as of the Termination Date; provided, however, that such amount shall not be less than the greater of (i) the amount of the Executive's Annual Cash Compensation or (ii) the severance benefits to which the Executive would have been entitled under the Company's severance policies and practices in effect immediately prior to the Change in Control of the Company. The Termination Payment shall be paid to the Executive in cash equivalent ten business days after the Termination Date. Such lump sum payment shall not be reduced by any present value or similar factor, and the Executive shall not be required to mitigate the amount of the Termination Payment by securing other employment or otherwise, nor will such Termination Payment be reduced by reason of the Executive securing other employment or for any other reason. The Termination Payment shall be in lieu of, and acceptance by the Executive of the Termination Payment shall constitute the Executive's release of any rights of Executive to, any other severance payments under any Company severance policy, practice or agreement. The Company shall bear up to $10,000 in the aggregate of fees and expenses of consultants and/or legal or accounting advisors engaged by the Executive to advise the Executive as to matters relating to the computation of benefits due and payable under this Subsection 9(b). (ii) Notwithstanding any other provision of this Agreement, if any portion of the Termination Payment or any other payment under this Agreement, or under any other agreement with or plan of the Company (in the aggregate, "Total Payments"), would constitute an "excess parachute payment," then the Total Payments to be made to the Executive shall be reduced such that the value of the aggregate Total Payments that the Executive is entitled to receive shall be One Dollar ($1) less than the maximum amount which the Executive may receive without becoming subject to the tax imposed by Section 4999 of the Code (or any successor provision) or which the Company may pay without loss of deduction under Section 280G(a) of the Code (or any successor provision). For purposes of this Agreement, the terms "excess parachute payment" and "parachute payments" shall have the meanings assigned to them in Section 280G of the Code (or any successor provision), and such "parachute payments" shall be valued as provided therein. Present value for purposes of this Agreement shall be calculated in accordance with Section 1274(b) (2) of the Code (or any successor provision). Within forty days following delivery of the Notice of Termination or notice by the Company to the Executive of its belief that there is a payment or benefit due the Executive which will result in an excess parachute payment as defined in Section 280G of the Code (or any successor provision), the Executive and the Company, at the Company's expense, shall obtain the opinion (which need not be unqualified) of nationally recognized tax counsel selected by the Company's independent auditors and acceptable to the Executive in his sole discretion (which may be regular outside counsel to the Company), which opinion sets forth (A) the amount of the Base Period Income, (B) the amount and present value of Total Payments and (C) the amount and present value of any excess parachute payments determined without regard to the limitations of this Subsection 9(b)(ii). As used in this Subsection 9(b)(ii), the term "Base Period Income" means an amount equal to the Executive's "annualized includible compensation for the base period" as defined in Section 280G(d)(l) of the Code (or any successor provision). For purposes of such opinion, the value of any noncash benefits or any deferred payment or benefit shall be determined by the Company's independent auditors in accordance with the principles of Sections 280G(d)(3) and (4) of the Code (or any successor provisions), which determination shall be evidenced in a certificate of such auditors addressed to the Company and the Executive. Such opinion shall be dated as of the Termination Date and addressed to the Company and the Executive and shall be binding upon the Company and the Executive. If such opinion determines that there would be an excess parachute payment, the Termination Payment hereunder or any other payment or benefit determined by such counsel to be includible in Total Payments shall be reduced or eliminated as specified by the Executive in writing delivered to the Company within thirty days of his receipt of such opinion or, if the Executive fails to so notify the Company, then as the Company shall reasonably determine, so that under the bases of calculations set forth in such opinion there will be no excess parachute payment. If such legal counsel so requests in connection with the opinion required by this Section, the Executive and the Company shall obtain, at the Company's expense, and the legal counsel may rely on in providing the opinion, the advice of a firm of recognized executive compensation consultants as to the reasonableness of any item of compensation to be received by the Executive. If the provisions of Sections 280G and 4999 of the Code (or any successor provisions) are repealed without succession, then this Section 9(b) (ii) shall be of no further force or effect. (iii) (A) If, notwithstanding the provisions of Subsection (ii) of this Section 9(b), but subject to paragraph (B), it is ultimately determined by a court or pursuant to a final determination by the Internal Revenue Service that any portion of Total Payments is subject to the tax (the "Excise Tax") imposed by Section 4999 of the Code (or any successor provision), the Company shall pay to the Executive an additional amount (the "Gross-Up Payment") such that the net amount retained by the Executive after deduction of any Excise Tax and any interest charges or penalties in respect of the imposition of such Excise Tax (but not any federal, state or local income tax) on the Total Payments, and any federal, state and local income tax and Excise Tax upon the payment provided for by this Subsection (iii), shall be equal to the Total Payments. For purposes of determining the amount of the Gross-Up Payment, the Executive shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rates of taxation in the state and locality of the Executive's domicile for income tax purposes on the date the Gross-Up Payment is made, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. (B) If legislation is enacted that would require the Company's shareholders to approve this Agreement, prior to a Change in Control of the Company, due solely to the provision contained in paragraph (A) of this Subsection 9(b)(iii), then (1) from and after such time as shareholder approval would be required, until shareholder approval is obtained as required by such legislation, paragraph (A) shall be of no force and effect; (2) the Company and the Executive shall use their best efforts to consider and agree in writing upon an amendment to this Subsection 9(b) (iii) such that, as amended, this Subsection would provide the Executive with the benefits intended to be afforded to the Executive by paragraph (A) without requiring shareholder approval; and (3) at the reasonable request of the Executive, the Company shall seek shareholder approval of this Agreement at the next annual meeting of shareholders of the Company. 10. Death. (a) Except as provided in Section 10(b) hereof, in the event of a Covered Termination due to the Executive's death, the Executive's estate, heirs and beneficiaries shall receive all the Executive's Accrued Benefits through the Termination Date. (b) In the event the Executive dies after a Notice of Termination is given (i) by the Company or (ii) by the Executive for Good Reason, the Executive's estate, heirs and beneficiaries shall be entitled to the benefits described in Section 10(a) hereof and, subject to the provisions of this Agreement, to such Termination Payment as the Executive would have been entitled to had the Executive lived. For purposes of this Subsection 10(b), the Termination Date shall be the earlier of thirty days following the giving of the Notice of Termination, subject to extension pursuant to Section 1(m) hereof, or one day prior to the end of the Employment Period. 11. Retirement. If, during the Employment Period, the Executive and the Company shall execute an agreement providing for the early retirement of the Executive from the Company, or the Executive shall otherwise give notice that he is voluntarily choosing to retire early from the Company, the Executive shall receive Accrued Benefits through the Termination Date; provided, that if the Executive's employment is terminated by the Executive for Good Reason or by the Company other than by reason of death, disability or Cause and the Executive also, in connection with such termination, elects voluntary early retirement, the Executive shall also be entitled to receive a Termination Payment pursuant to Section 8(a) hereof. 12. Termination for Disability. If, during the Employment Period, as a result of the Executive's disability due to physical or mental illness or injury (regardless of whether such illness or injury is job-related), the Executive shall have been absent from the Executive's duties hereunder on a full-time basis for a period of six consecutive months and, within thirty days after the Company notifies the Executive in writing that it intends to terminate the Executive's employment (which notice shall not constitute the Notice of Termination contemplated below), the Executive shall not have returned to the performance of the Executive's duties hereunder on a full-time basis, the Company may terminate the Executive's employment for purposes of this Agreement pursuant to a Notice of Termination given in accordance with Section 13 hereof. If the Executive's employment is terminated on account of the Executive's disability in accordance with this Section, the Executive shall receive Accrued Benefits in accordance with Section 9(a) hereof and shall remain eligible for all benefits provided by any long term disability programs of the Company in effect at the time of such termination. 13. Termination Notice and Procedure. Any Covered Termination by the Company or the Executive (other than a termination of the Executive's employment that is a Covered Termination by virtue of Section 2(b) hereof) shall be communicated by written Notice of Termination to the Executive, if such Notice is given by the Company, and to the Company, if such Notice is given by the Executive, all in accordance with the following procedures and those set forth in Section 23 hereof: (a) If such termination is for disability, Cause or Good Reason, the Notice of Termination shall indicate in reasonable detail the facts and circumstances alleged to provide a basis for such termination. (b) Any Notice of Termination by the Company shall have been approved, prior to the giving thereof to the Executive, by a resolution duly adopted by a majority of the directors of the Company (or any successor corporation) then in office. (c) If the Notice is given by the Executive for Good Reason, the Executive may cease performing his duties hereunder on or after the date fifteen days after the delivery of Notice of Termination and shall in any event cease employment on the Termination Date. If the Notice is given by the Company, then the Executive may cease performing his duties hereunder on the date of receipt of the Notice of Termination, subject to the Executive's rights hereunder. (d) The Executive shall have thirty days, or such longer period as the Company may determine to be appropriate, to cure any conduct or act, if curable, alleged to provide grounds for termination of the Executive's employment for Cause under this Agreement pursuant to Subsection 1(d) (iii) hereof. (e) The recipient of any Notice of Termination shall personally deliver or mail in accordance with Section 23 hereof written notice of any dispute relating to such Notice of Termination to the party giving such Notice within fifteen days after receipt thereof; provided, however, that if the Executive's conduct or act alleged to provide grounds for termination by the Company for Cause is curable, then such period shall be thirty days. After the expiration of such period, the contents of the Notice of Termination shall become final and not subject to dispute. 14. Further Obligations of the Executive. (a) Competition. The Executive agrees that, in the event of any Covered Termination where the Executive is entitled to Accrued Benefits and the Termination Payment, the Executive shall not, for a period expiring one year after the Termination Date, without the prior written approval of the Company's Board of Directors, participate in the management of, be employed by or own any business enterprise at a location within the United States that engages in substantial competition with the Company or its subsidiaries, where such enterprise's revenues from any competitive activities amount to 10% or more of such enterprise's net revenues and sales for its most recently completed fiscal year; provided, however, that nothing in this Section 14(a) shall prohibit the Executive from owning stock or other securities of a competitor amounting to less than five percent of the outstanding capital stock of such competitor. (b) Confidentiality. During and following the Executive's employment by the Company, the Executive shall hold in confidence and not directly or indirectly disclose or use or copy or make lists of any confidential information or proprietary data of the Company (including that of the Employer), except to the extent authorized in writing by the Board of Directors of the Company or required by any court or administrative agency, other than to an employee of the Company or a person to whom disclosure is reasonably necessary or appropriate in connection with the performance by the Executive of duties as an executive of the Company. Confidential information shall not include any information known generally to the public or any information of a type not otherwise considered confidential by persons engaged in the same business or a business similar to that of the Company. All records, files, documents and materials, or copies thereof, relating to the business of the Company which the Executive shall prepare, or use, or come into contact with, shall be and remain the sole property of the Company and shall be promptly returned to the Company upon termination of employment with the Company. 15. Expenses and Interest. If, after a Change in Control of the Company, (i) a dispute arises with respect to the enforcement of the Executive's rights under this Agreement or (ii) any legal or arbitration proceeding shall be brought to enforce or interpret any provision contained herein or to recover damages for breach hereof, in either case so long as the Executive is not acting in bad faith, the Executive shall recover from the Company any reasonable attorneys' fees and necessary costs and disbursements incurred as a result of such dispute, legal or arbitration proceeding ("Expenses"), and prejudgment interest on any money judgment or arbitration award obtained by the Executive calculated at the rate of interest announced by Firstar Bank Milwaukee, National Association, Milwaukee, Wisconsin, from time to time as its prime or base lending rate from the date that payments to him should have been made under this Agreement. Within ten days after the Executive's written request therefor, the Company shall pay to the Executive, or such other person or entity as the Executive may designate in writing to the Company, the Executive's reasonable Expenses in advance of the final disposition or conclusion of any such dispute, legal or arbitration proceeding. 16. Payment Obligations Absolute. The Company's obligation during and after the Employment Period to pay the Executive the amounts and to make the benefit and other arrangements provided herein shall be absolute and unconditional and shall not be affected by any circumstances, including, without limitation, any setoff, counterclaim, recoupment, defense or other right which the Company may have against him or anyone else. Except as provided in Section 15 of this Agreement, all amounts payable by the Company hereunder shall be paid without notice or demand. Each and every payment made hereunder by the Company shall be final, and the Company will not seek to recover all or any part of such payment from the Executive, or from whomsoever may be entitled thereto, for any reason whatsoever. 17. Successors. (a) If the Company sells, assigns or transfers all or substantially all of its business and assets to any Person or if the Company merges into or consolidates or otherwise combines (where the Company does not survive such combination) with any Person (any such event, a "Sale of Business"), then the Company shall assign all of its right, title and interest in this Agreement as of the date of such event to such Person, and the Company shall cause such Person, by written agreement in form and substance reasonably satisfactory to the Executive, to expressly assume and agree to perform from and after the date of such assignment all of the terms, conditions and provisions imposed by this Agreement upon the Company. Failure of the Company to obtain such agreement prior to the effective date of such Sale of Business shall be a breach of this Agreement constituting "Good Reason" hereunder, except that for purposes of implementing the foregoing the date upon which such Sale of Business becomes effective shall be deemed the Termination Date. In case of such assignment by the Company and of assumption and agreement by such Person, as used in this Agreement, "Company" shall thereafter mean such Person which executes and delivers the agreement provided for in this Section 18 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law, and this Agreement shall inure to the benefit of, and be enforceable by, such Person. The Executive shall, in his discretion, be entitled to proceed against any or all of such Persons, any Person which theretofore was such a successor to the Company (as defined in the first paragraph of this Agreement) and the Company (as so defined) in any action to enforce any rights of the Executive hereunder. Except as provided in this Subsection, this Agreement shall not be assignable by the Company. This Agreement shall not be terminated by the voluntary or involuntary dissolution of the Company. (b) This Agreement and all rights of the Executive shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, heirs and beneficiaries. All amounts payable to the Executive under Sections 7, 8, 9, 10, 11, 12 and 15 hereof if the Executive had lived shall be paid, in the event of the Executive's death, to the Executive's estate, heirs and representatives; provided, however, that the foregoing shall not be construed to modify any terms of any benefit plan of the Company, as such terms are in effect on the date of the Change in Control of the Company, that expressly govern benefits under such plan in the event of the Executive's death. 18. Severability. The provisions of this Agreement shall be regarded as divisible, and if any of said provisions or any part hereof are declared invalid or unenforceable by a court of competent jurisdiction, the validity and enforceability of the remainder of such provisions or parts hereof and the applicability thereof shall not be affected thereby. 19. Amendment. This Agreement may not be amended or modified at any time except by written instrument executed by the Company and the Executive. 20. Withholding. The Company shall be entitled to withhold from amounts to be paid to the Executive hereunder any federal, state or local withholding or other taxes or charges which it is from time to time required to withhold; provided, that the amount so withheld shall not exceed the minimum amount required to be withheld by law. The Company shall be entitled to rely on an opinion of nationally recognized tax counsel if any question as to the amount or requirement of any such withholding shall arise. 21. Certain Rules of Construction. No party shall be considered as being responsible for the drafting of this Agreement for the purpose of applying any rule construing ambiguities against the drafter or otherwise. No draft of this Agreement shall be taken into account in construing this Agreement. Any provision of this Agreement which requires an agreement in writing shall be deemed to require that the writing in question be signed by the Executive and an authorized representative of the Company. 22. Governing Law; Resolution of Disputes. This Agreement and the rights and obligations hereunder shall be governed by and construed in accordance with the laws of the State of Wisconsin. Any dispute arising out of this Agreement shall, at the Executive's election, be determined by arbitration under the rules of the American Arbitration Association then in effect (in which case both parties shall be bound by the arbitration award) or by litigation. Whether the dispute is to be settled by arbitration or litigation, the venue for the arbitration or litigation shall be Madison, Wisconsin or, at the Executive's election, if the Executive is no longer residing or working in the Madison, Wisconsin metropolitan area, in the judicial district encompassing the city in which the Executive resides; provided, that, if the Executive is not then residing in the United States, the election of the Executive with respect to such venue shall be either Madison, Wisconsin or in the judicial district encompassing that city in the United States among the thirty cities having the largest population (as determined by the most recent United States Census data available at the Termination Date) which is closest to the Executive's residence. The parties consent to personal jurisdiction in each trial court in the selected venue having subject matter jurisdiction notwithstanding their residence or situs, and each party irrevocably consents to service of process in the manner provided hereunder for the giving of notices. 23. Notice. Notices given pursuant to this Agreement shall be in writing and, except as otherwise provided by Section 13(d) hereof, shall be deemed given when actually received by the Executive or actually received by the Company's Secretary or any officer of the Company other than the Executive. If mailed, such notices shall be mailed by United States registered or certified mail, return receipt requested, addressee only, postage prepaid, if to the Company, to WPL Holdings, Inc., Attention: Secretary (or President, if the Executive is then Secretary), 222 West Washington Avenue, P.O. Box 2568, Madison, Wisconsin 53701-2568, or if to the Executive, at the address set forth below the Executive's signature to this Agreement, or to such other address as the party to be notified shall have theretofore given to the other party in writing. 24. No Waiver. No waiver by either party at any time of any breach by the other party of, or compliance with, any condition or provision of this Agreement to be performed by the other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same time or any prior or subsequent time. 25. Headings. The headings herein contained are for reference only and shall not affect the meaning or interpretation of any provision of this Agreement. IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. WPL HOLDINGS, INC. By: /s/ Edward M. Gleason Its: Vice President, Treasurer and Corporate Secretary Attest: /s/ Steven F. Price Its: Assistant Corporate Secretary and Assistant Treasurer EXECUTIVE: /s/ Erroll B. Davis, Jr. (SEAL) Erroll B. Davis, Jr. Address: 7829 Noll Valley Road Verona, Wisconsin 53593 EX-4 5 EXHIBIT 4.3 TO WP&L FORM 10-Q KEY EXECUTIVE EMPLOYMENT AND SEVERANCE AGREEMENT THIS AGREEMENT, made and entered into as of the ____ day of ___________, by and between WPL Holdings, Inc., a Wisconsin corporation (hereinafter referred to as the "Company"), and _____________________ (hereinafter referred to as "Executive"). W I T N E S S E T H WHEREAS, the Executive is employed by the Company and/or a subsidiary of the Company (the "Employer") in a key executive capacity and the Executive's services are valuable to the conduct of the business of the Company; WHEREAS, the Executive possesses intimate knowledge of the business and affairs of the Company and has acquired certain confidential information and data with respect to the Company; WHEREAS, the Company desires to insure, insofar as possible, that it will continue to have the benefit of the Executive's services and to protect its confidential information and goodwill; WHEREAS, the Company recognizes that circumstances may arise in which a change in control of the Company occurs, through acquisition or otherwise, thereby causing uncertainty about the Executive's future employment with the Employer without regard to the Executive's competence or past contributions which uncertainty may result in the loss of valuable services of the Executive to the detriment of the Company and its shareholders, and the Company and the Executive wish to provide reasonable security to the Executive against changes in the Executive's relationship with the Company in the event of any such change in control; WHEREAS, the Company and the Executive are desirous that any proposal for a change in control or acquisition of the Company will be considered by the Executive objectively and with reference only to the best interests of the Company and its shareholders; and WHEREAS, the Executive will be in a better position to consider the Company's best interests if the Executive is afforded reasonable security, as provided in this Agreement, against altered conditions of employment which could result from any such change in control or acquisition. NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements hereinafter set forth, the parties hereto mutually covenant and agree as follows: 1. Definitions. (a) Act. For purposes of this Agreement, the term "Act" means the Securities Exchange Act of 1934, as amended. (b) Affiliate and Associate. For purposes of this Agreement, the terms "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule l2b-2 of the General Rules and Regulations of the Act. (c) Beneficial Owner. For purposes of this Agreement, a Person shall be deemed to be the "Beneficial Owner" of any securities: (i) which such Person or any of such Person's Affiliates or Associates has the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding, or upon the exercise of conversion rights, exchange rights, rights, warrants or options, or otherwise; provided, however, that a Person shall not be deemed the Beneficial Owner of, or to beneficially own, (A) securities tendered pursuant to a tender or exchange offer made by or on behalf of such Person or any of such Person's Affiliates or Associates until such tendered securities are accepted for purchase, or (B) securities issuable upon exercise of Rights issued pursuant to the terms of the Company's Rights Agreement with Morgan Shareholder Services Trust Company, dated as of February 22, 1989, as amended from time to time (or any successor to such Rights Agreement), at any time before the issuance of such securities; (ii) which such Person or any of such Person's Affiliates or Associates, directly or indirectly, has the right to vote or dispose of or has "beneficial ownership" of (as determined pursuant to Rule l3d-3 of the General Rules and Regulations under the Act), including pursuant to any agreement, arrangement or understanding; provided, however, that a Person shall not be deemed the Beneficial Owner of, or to beneficially own, any security under this subparagraph (ii) as a result of an agreement, arrangement or understanding to vote such security if the agreement, arrangement or understanding: (A) arises solely from a revocable proxy or consent given to such Person in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable rules and regulations under the Act and (B) is not also then reportable on a Schedule l3D under the Act (or any comparable or successor report); or (iii) which are beneficially owned, directly or indirectly, by any other Person with which such Person or any of such Person's Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting (except pursuant to a revocable proxy as described in Subsection 1(c) (ii) above) or disposing of any voting securities of the Company. (d) Cause. "Cause" for termination by the Company of the Executive's employment in connection with a Change of Control of the Company shall, for purposes of this Agreement, be limited to (i) the engaging by the Executive in intentional conduct not taken in good faith which has caused demonstrable and serious financial injury to the Company, as evidenced by a determination in a binding and final judgment, order or decree of a court or administrative agency of competent jurisdiction, in effect after exhaustion or lapse of all rights of appeal, in an action, suit or proceeding, whether civil, criminal, administrative or investigative; (ii) conviction of a felony (as evidenced by binding and final judgment, order or decree of a court of competent jurisdiction, in effect after exhaustion of all rights of appeal) which substantially impairs the Executive's ability to perform his duties or responsibilities; and (iii) continuing willful and unreasonable refusal by the Executive to perform the Executive's duties or responsibilities (unless significantly changed without the Executive's consent). (e) Change in Control of the Company. For purposes of this Agreement, a "Change in Control of the Company" shall mean a change in control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Act. Without limiting the inclusiveness of the definition in the preceding sentence, a Change in Control of the Company shall be deemed to have occurred if: (i) any Person (other than any employee benefit plan of the Company or of any subsidiary of the Company, any Person organized, appointed or established pursuant to the terms of any such benefit plan or any trustee, administrator or fiduciary of such a plan) is or becomes the Beneficial Owner of securities of the Company representing at least 30% of the combined voting power of the Company's then outstanding securities, (ii) one-half or more of the members of the Board are not Continuing Directors; (iii) there shall be consummated (x) any merger of the Company or share exchange involving the Company in which the Company is not the continuing or surviving corporation or pursuant to which shares of the Company's Common Stock would be converted into cash, securities or other property, other than a merger of the Company in which each of the holders of the Company's Common Stock immediately prior to the merger have the same proportionate ownership of common stock of the surviving corporation immediately after the merger, or (y) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Company, or (iv) the shareholders of the Company approve any plan or proposal for the liquidation or dissolution of the Company. (f) Code. For purposes of this Agreement, the term "Code" means the Internal Revenue Code of 1986, including any amendments thereto or successor tax codes thereof. (g) Continuing Director. For purposes of this Agreement, the term "Continuing Director" means any member of the Board of Directors of the Company who was a member of such Board on February 1, 1994, and any successor of a Continuing Director who is recommended to succeed a Continuing Director by a majority of the Continuing Directors then on such Board. (h) Covered Termination. Subject to Section 2(b) hereof, for purposes of this Agreement, the term "Covered Termination" means any termination of the Executive's employment where the Termination Date is any date prior to the end of the Employment Period. (i) Employment Period. For purposes of this Agreement, the term "Employment Period" means a period commencing on the date of a Change in Control of the Company, and ending at 11:59 p.m. Central Time on the earlier of the fifth anniversary of such date or the Executive's Normal Retirement Date. (j) Good Reason. For purposes of this Agreement, the Executive shall have a "Good Reason" for termination of employment in connection with a Change in Control of the Company in the event of: (i) any breach of this Agreement by the Company, including specifically any breach by the Company of its agreements contained in Sections 4, 5 or 6 hereof; (ii) the removal of the Executive from, or any failure to reelect or reappoint the Executive to, any of the positions held with the Company or the Employer on the date of the Change in Control of the Company or any other positions with the Company or the Employer to which the Executive shall thereafter be elected, appointed or assigned, except in the event that such removal or failure to reelect or reappoint relates to the termination by the Company of the Executive's employment for Cause or by reason of disability pursuant to Section 12 hereof; (iii) a good faith determination by the Executive that there has been a significant adverse change, without the Executive's written consent, in the Executive's working conditions or status with the Company or the Employer from such working conditions or status in effect immediately prior to the Change in Control of the Company, including but not limited to (A) a significant change in the nature or scope of the Executive's authority, powers, functions, duties or responsibilities, or (B) a significant reduction in the level of support services, staff, secretarial and other assistance, office space and accoutrements; or (iv) failure by the Company to obtain the Agreement referred to in Section 17(a) hereof as provided therein. (k) Normal Retirement Date. For purposes of this Agreement, the term "Normal Retirement Date" means "Normal Retirement Date" as defined in the Wisconsin Power and Light Company Retirement Plan, or any successor plan, as in effect on the date of the Change in Control of the Company. (l) Person. For purposes of this Agreement, the term "Person" shall mean any individual, firm, partnership, corporation or other entity, including any successor (by merger or otherwise) of such entity, or a group of any of the foregoing acting in concert. (m) Termination Date. For purposes of this Agreement, except as otherwise provided in Section 10(b) and Section 17(a) hereof, the term "Termination Date" means (i) if the Executive's employment is terminated by the Executive's death, the date of death; (ii) if the Executive's employment is terminated by reason of voluntary early retirement, as agreed in writing by the Company and the Executive, the date of such early retirement which is set forth in such written agreement; (iii) if the Executive's employment is terminated for purposes of this Agreement by reason of disability pursuant to Section 12 hereof, the earlier of thirty days after the Notice of Termination is given or one day prior to the end of the Employment Period; (iv) if the Executive's employment is terminated by the Executive voluntarily (other than for Good Reason), the date the Notice of Termination is given; and (v) if the Executive's employment is terminated by the Company (other than by reason of disability pursuant to Section 12 hereof) or by the Executive for Good Reason, the earlier of thirty days after the Notice of Termination is given or one day prior to the end of the Employment Period. Notwithstanding the foregoing, (A) If termination is for Cause pursuant to Section 1(d)(iii) of this Agreement and if the Executive has cured the conduct constituting such Cause as described by the Company in its Notice of Termination within such thirty day or shorter period, then the Executive's employment hereunder shall continue as if the Company had not delivered its Notice of Termination. (B) If the Executive shall in good faith give a Notice of Termination for Good Reason and the Company notifies the Executive that a dispute exists concerning the termination within the fifteen day period following receipt thereof, then the Executive may elect to continue his employment during such dispute and the Termination Date shall be determined under this paragraph. If the Executive so elects and it is thereafter determined that Good Reason did exist, the Termination Date shall be the earliest of (l) the date on which the dispute is finally determined, either (x) by mutual written agreement of the parties or (y) in accordance with Section 22 hereof, (2) the date of the Executive's death or (3) one day prior to the end of the Employment Period. If the Executive so elects and it is thereafter determined that Good Reason did not exist, then the employment of the Executive hereunder shall continue after such determination as if the Executive had not delivered the Notice of Termination asserting Good Reason and there shall be no Termination Date arising out of such Notice. In either case, this Agreement continues, until the Termination Date, if any, as if the Executive had not delivered the Notice of Termination except that, if it is finally determined that Good Reason did exist, the Executive shall in no case be denied the benefits described in Sections 8(b) and 9 hereof (including a Termination Payment) based on events occurring after the Executive delivered his Notice of Termination. (C) If an opinion is required to be delivered pursuant to Section 9(b)(ii) hereof and such opinion shall not have been delivered, the Termination Date shall be the earlier of the date on which such opinion is delivered or one day prior to the end of the Employment Period. (D) Except as provided in Paragraph (B) above, if the party receiving the Notice of Termination notifies the other party that a dispute exists concerning the termination within the appropriate period following receipt thereof and it is finally determined that the reason asserted in such Notice of Termination did not exist, then (1) if such Notice was delivered by the Executive, the Executive will be deemed to have voluntarily terminated his employment and the Termination Date shall be the earlier of the date fifteen days after the Notice of Termination is given or one day prior to the end of the Employment Period and (2) if delivered by the Company, the Company will be deemed to have terminated the Executive other than by reason of death, disability or Cause. 2. Termination or Cancellation Prior to Change in Control. (a) Subject to Subsection 2(b) hereof, the Company (and the Employer) and the Executive shall each retain the right to terminate the employment of the Executive at any time prior to a Change in Control of the Company. Subject to Subsection 2(b) hereof, in the event the Executive's employment is terminated prior to a Change in Control of the Company, this Agreement shall be terminated and cancelled and of no further force and effect, and any and all rights and obligations of the parties hereunder shall cease. (b) Anything in this Agreement to the contrary notwithstanding, if a Change in Control of the Company occurs and if the Executive's employment with the Company or a subsidiary of the Company is terminated (other than a termination due to the Executive's death or as a result of the Executive's disability) during the period of 180 days prior to the date on which the Change in Control of the Company occurs, and if it is reasonably demonstrated by the Executive that such termination of employment (i) was at the request of a third party who has taken steps reasonably calculated to effect a Change in Control of the Company or (ii) otherwise arose in connection with or in anticipation of a Change in Control of the Company, then for all purposes of this Agreement such termination of employment shall be deemed a "Covered Termination." 3. Employment Period. If a Change in Control of the Company occurs when the Executive is employed by the Company or a subsidiary of the Company, the Company will, or will cause the Employer to, continue thereafter to employ the Executive during the Employment Period, and the Executive will remain in the employ of the Employer in accordance with and subject to the terms and provisions of this Agreement. Any termination of the Executive's employment during the Employment Period, whether by the Company or the Employer, shall be deemed a termination by the Company for purposes of this Agreement. 4. Duties. During the Employment Period, the Executive shall, in the same capacities and positions held by the Executive at the time of the Change in Control of the Company or in such other capacities and positions as may be agreed to by the Company and the Executive in writing, devote the Executive's best efforts and all of the Executive's business time, attention and skill to the business and affairs of the Employer, as such business and affairs now exist and as they may hereafter be conducted. The services which are to be performed by the Executive hereunder are to be rendered in the same metropolitan area in which the Executive was employed at the time of such Change in Control of the Company, or in such other place or places as shall be mutually agreed upon in writing by the Executive and the Company from time to time. Without the Executive's consent the Executive shall not be required to be absent from such metropolitan area more than 45 days in any fiscal year of the Company. 5. Compensation. During the Employment Period, the Executive shall be compensated as follows: (a) The Executive shall receive, at reasonable intervals (but not less often than monthly) and in accordance with such standard policies as may be in effect immediately prior to the Change in Control of the Company, an annual base salary in cash equivalent of not less than the Executive's annual base salary as in effect immediately prior to the Change in Control of the Company (which base salary shall, unless otherwise agreed in writing by the Executive, include the current receipt by the Executive of any amounts which, prior to the Change in Control of the Company, the Executive had elected to defer, whether such compensation is deferred under Section 401(k) of the Code or otherwise), subject to adjustment as hereinafter provided. (b) The Executive shall receive fringe benefits at least equal in value to those provided for the Executive immediately prior to the Change in Control of the Company, and shall be reimbursed, at such intervals and in accordance with such standard policies as may be in effect immediately prior to the Change in Control of the Company, for any and all monies advanced in connection with the Executive's employment for reasonable and necessary expenses incurred by the Executive on behalf of the Company, including travel expenses. (c) The Executive shall be included, to the extent eligible thereunder (which eligibility shall not be conditioned on the Executive's salary grade or on any other requirement which excludes persons of comparable status to the Executive unless such exclusion was in effect for such plan or an equivalent plan immediately prior to the Change in Control of the Company), in any and all plans providing benefits for the Employer's salaried employees in general, including but not limited to group life insurance, hospitalization, medical, dental, profit sharing and stock bonus plans; provided, that, in no event shall the aggregate level of benefits under such plans in which the Executive is included be less than the aggregate level of benefits under plans of the Company of the type referred to in this Section 5(c) in which the Executive was participating immediately prior to the Change in Control of the Company. (d) The Executive shall annually be entitled to not less than the amount of paid vacation and not fewer than the number of paid holidays to which the Executive was entitled annually immediately prior to the Change in Control of the Company or such greater amount of paid vacation and number of paid holidays as may be made available annually to other executives of the Company of comparable status and position to the Executive. (e) The Executive shall be included in all plans providing additional benefits to executives of the Company of comparable status and position to the Executive, including but not limited to deferred compensation, split-dollar life insurance, supplemental retirement, stock option, stock appreciation, stock bonus and similar or comparable plans; provided, that, in no event shall the aggregate level of benefits under such plans be less than the aggregate level of benefits under plans of the Company of the type referred to in this Section 5(e) in which the Executive was participating immediately prior to the Change in Control of the Company; and provided, further, that the Company's obligation to include the Executive in bonus or incentive compensation plans shall be determined by Subsection 5(f) hereof. (f) To assure that the Executive will have an opportunity to earn incentive compensation after a Change in Control of the Company, the Executive shall be included in a bonus plan of the Company which shall satisfy the standards described below (such plan, the "Bonus Plan"). Bonuses under the Bonus Plan shall be payable with respect to achieving such financial or other goals reasonably related to the business of the Company and the Employer as the Company shall establish (the "Goals"), all of which Goals shall be attainable, prior to the end of the Employment Period, with approximately the same degree of probability as the goals under the Company's bonus plan or plans as in effect immediately prior to the Change in Control of the Company (whether one or more, the "Company Bonus Plan") and in view of the Company's existing and projected financial and business circumstances applicable at the time. The amount of the bonus (the "Bonus Amount") that the Executive is eligible to earn under the Bonus Plan shall be no less than the amount of the Executive's maximum award provided in such Company Bonus Plan (such bonus amount herein referred to as the "Targeted Bonus"), and in the event the Goals are not achieved such that the entire Targeted Bonus is not payable, the Bonus Plan shall provide for a payment of a Bonus Amount equal to a portion of the Targeted Bonus reasonably related to that portion of the Goals which were achieved. Payment of the Bonus Amount shall not be affected by any circumstance occurring subsequent to the end of the Employment Period, including termination of the Executive's employment. 6. Annual Compensation Adjustments. During the Employment Period, the Board of Directors of the Company (or an appropriate committee thereof) will consider and appraise, at least annually, the contributions of the Executive to the Company, and in accordance with the Company's practice prior to the Change in Control of the Company, due consideration shall be given to the upward adjustment of the Executive's base compensation rate, at least annually, (i) commensurate with increases generally given to other executives of the Company of comparable status and position to the Executive, and (ii) as the scope of the Company's operations or the Executive's duties expand. 7. Termination For Cause or Without Good Reason. If there is a Covered Termination for Cause or due to the Executive's voluntarily terminating his employment other than for Good Reason (any such terminations to be subject to the procedures set forth in Section 13 hereof), then the Executive shall be entitled to receive only Accrued Benefits pursuant to Section 9(a) hereof. 8. Termination Giving Rise to a Termination Payment. (a) If there is a Covered Termination by the Executive for Good Reason, or by the Company other than by reason of (i) death, (ii) disability pursuant to Section 12 hereof, or (iii) Cause (any such terminations to be subject to the procedures set forth in Section 13 hereof), then the Executive shall be entitled to receive, and the Company shall promptly pay, Accrued Benefits and, in lieu of further base salary for periods following the Termination Date, as liquidated damages and additional severance pay and in consideration of the covenant of the Executive set forth in Section 14(a) hereof, the Termination Payment pursuant to Section 9(b) hereof. (b) If there is a Covered Termination and the Executive is entitled to Accrued Benefits and the Termination Payment, then the Executive shall be entitled to the following additional benefits: (i) The Executive shall receive, at the expense of the Company, outplacement services, on an individualized basis at a level of service commensurate with the Executive's status with the Company immediately prior to the Change in Control of the Company (or, if higher, immediately prior to the termination of the Executive's employment), provided by a nationally recognized executive placement firm selected by the Company; provided that the cost to the Company of such services shall not exceed 15% of the Executive's annual base salary in effect immediately prior to the Change in Control of the Company. (ii) Until the earlier of the end of the Employment Period or such time as the Executive has obtained new employment and is covered by benefits which in the aggregate are at least equal in value to the following benefits, the Executive shall continue to be covered, at the expense of the Company, by the same or equivalent life insurance, hospitalization, medical and dental coverage as was required hereunder with respect to the Executive immediately prior to the date the Notice of Termination is given. 9. Payments Upon Termination. (a) Accrued Benefits. For purposes of this Agreement, the Executive's "Accrued Benefits" shall include the following amounts, payable as described herein: (i) all base salary for the time period ending with the Termination Date; (ii) reimbursement for any and all monies advanced in connection with the Executive's employment for reasonable and necessary expenses incurred by the Executive on behalf of the Company for the time period ending with the Termination Date; (iii) any and all other cash earned through the Termination Date and deferred at the election of the Executive or pursuant to any deferred compensation plan then in effect; (iv) a lump sum payment of the bonus or incentive compensation otherwise payable to the Executive with respect to the year in which termination occurs under all bonus or incentive compensation plan or plans in which the Executive is a participant; and (v) all other payments and benefits to which the Executive (or in the event of the Executive's death, the Executive's surviving spouse or other beneficiary) may be entitled as compensatory fringe benefits or under the terms of any benefit plan of the Company, excluding severance payments under any Company severance policy, practice or agreement in effect immediately prior to the Change in Control of the Company. Payment of Accrued Benefits shall be made promptly in accordance with the Company's prevailing practice with respect to Subsections (i) and (ii) or, with respect to Subsections (iii), (iv) and (v), pursuant to the terms of the benefit plan or practice establishing such benefits. (b) Termination Payment. (i) Subject to the limits set forth in Subsection 9(b)(ii) hereof, the Termination Payment shall be an amount equal to (A) the Executive's annual base salary, as in effect immediately prior to the Change in Control of the Company, as adjusted upward, from time to time, pursuant to Section 6 hereof, plus (B) the amount of the average annual bonus award (determined on an annualized basis for any bonus award paid for a period of less than one year and excluding any year for which the Executive did not participate in any bonus plan) paid to the Executive with respect to the three complete fiscal years preceding the Termination Date (the aggregate amount set forth in (A) and (B) hereof shall hereafter be referred to as "Annual Cash Compensation"), times (C) the lesser of (1) three and (2) the number of years or fractional portion thereof remaining in the Employment Period determined as of the Termination Date; provided, however, that such amount shall not be less than the greater of (i) the amount of the Executive's Annual Cash Compensation or (ii) the severance benefits to which the Executive would have been entitled under the Company's severance policies and practices in effect immediately prior to the Change in Control of the Company. The Termination Payment shall be paid to the Executive in cash equivalent ten business days after the Termination Date. Such lump sum payment shall not be reduced by any present value or similar factor, and the Executive shall not be required to mitigate the amount of the Termination Payment by securing other employment or otherwise, nor will such Termination Payment be reduced by reason of the Executive securing other employment or for any other reason. The Termination Payment shall be in lieu of, and acceptance by the Executive of the Termination Payment shall constitute the Executive's release of any rights of Executive to, any other severance payments under any Company severance policy, practice or agreement. The Company shall bear up to $10,000 in the aggregate of fees and expenses of consultants and/or legal or accounting advisors engaged by the Executive to advise the Executive as to matters relating to the computation of benefits due and payable under this Subsection 9(b). (ii) Notwithstanding any other provision of this Agreement, if any portion of the Termination Payment or any other payment under this Agreement, or under any other agreement with or plan of the Company (in the aggregate, "Total Payments"), would constitute an "excess parachute payment," then the Total Payments to be made to the Executive shall be reduced such that the value of the aggregate Total Payments that the Executive is entitled to receive shall be One Dollar ($1) less than the maximum amount which the Executive may receive without becoming subject to the tax imposed by Section 4999 of the Code (or any successor provision) or which the Company may pay without loss of deduction under Section 280G(a) of the Code (or any successor provision). For purposes of this Agreement, the terms "excess parachute payment" and "parachute payments" shall have the meanings assigned to them in Section 280G of the Code (or any successor provision), and such "parachute payments" shall be valued as provided therein. Present value for purposes of this Agreement shall be calculated in accordance with Section 1274(b) (2) of the Code (or any successor provision). Within forty days following delivery of the Notice of Termination or notice by the Company to the Executive of its belief that there is a payment or benefit due the Executive which will result in an excess parachute payment as defined in Section 280G of the Code (or any successor provision), the Executive and the Company, at the Company's expense, shall obtain the opinion (which need not be unqualified) of nationally recognized tax counsel selected by the Company's independent auditors and acceptable to the Executive in his sole discretion (which may be regular outside counsel to the Company), which opinion sets forth (A) the amount of the Base Period Income, (B) the amount and present value of Total Payments and (C) the amount and present value of any excess parachute payments determined without regard to the limitations of this Subsection 9(b)(ii). As used in this Subsection 9(b)(ii), the term "Base Period Income" means an amount equal to the Executive's "annualized includible compensation for the base period" as defined in Section 280G(d)(l) of the Code (or any successor provision). For purposes of such opinion, the value of any noncash benefits or any deferred payment or benefit shall be determined by the Company's independent auditors in accordance with the principles of Sections 280G(d)(3) and (4) of the Code (or any successor provisions), which determination shall be evidenced in a certificate of such auditors addressed to the Company and the Executive. Such opinion shall be dated as of the Termination Date and addressed to the Company and the Executive and shall be binding upon the Company and the Executive. If such opinion determines that there would be an excess parachute payment, the Termination Payment hereunder or any other payment or benefit determined by such counsel to be includible in Total Payments shall be reduced or eliminated as specified by the Executive in writing delivered to the Company within thirty days of his receipt of such opinion or, if the Executive fails to so notify the Company, then as the Company shall reasonably determine, so that under the bases of calculations set forth in such opinion there will be no excess parachute payment. If such legal counsel so requests in connection with the opinion required by this Section, the Executive and the Company shall obtain, at the Company's expense, and the legal counsel may rely on in providing the opinion, the advice of a firm of recognized executive compensation consultants as to the reasonableness of any item of compensation to be received by the Executive. If the provisions of Sections 280G and 4999 of the Code (or any successor provisions) are repealed without succession, then this Section 9(b) (ii) shall be of no further force or effect. (iii) (A) If, notwithstanding the provisions of Subsection (ii) of this Section 9(b), but subject to paragraph (B), it is ultimately determined by a court or pursuant to a final determination by the Internal Revenue Service that any portion of Total Payments is subject to the tax (the "Excise Tax") imposed by Section 4999 of the Code (or any successor provision), the Company shall pay to the Executive an additional amount (the "Gross-Up Payment") such that the net amount retained by the Executive after deduction of any Excise Tax and any interest charges or penalties in respect of the imposition of such Excise Tax (but not any federal, state or local income tax) on the Total Payments, and any federal, state and local income tax and Excise Tax upon the payment provided for by this Subsection (iii), shall be equal to the Total Payments. For purposes of determining the amount of the Gross-Up Payment, the Executive shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rates of taxation in the state and locality of the Executive's domicile for income tax purposes on the date the Gross-Up Payment is made, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. (B) If legislation is enacted that would require the Company's shareholders to approve this Agreement, prior to a Change in Control of the Company, due solely to the provision contained in paragraph (A) of this Subsection 9(b)(iii), then (1) from and after such time as shareholder approval would be required, until shareholder approval is obtained as required by such legislation, paragraph (A) shall be of no force and effect; (2) the Company and the Executive shall use their best efforts to consider and agree in writing upon an amendment to this Subsection 9(b) (iii) such that, as amended, this Subsection would provide the Executive with the benefits intended to be afforded to the Executive by paragraph (A) without requiring shareholder approval; and (3) at the reasonable request of the Executive, the Company shall seek shareholder approval of this Agreement at the next annual meeting of shareholders of the Company. 10. Death. (a) Except as provided in Section 10(b) hereof, in the event of a Covered Termination due to the Executive's death, the Executive's estate, heirs and beneficiaries shall receive all the Executive's Accrued Benefits through the Termination Date. (b) In the event the Executive dies after a Notice of Termination is given (i) by the Company or (ii) by the Executive for Good Reason, the Executive's estate, heirs and beneficiaries shall be entitled to the benefits described in Section 10(a) hereof and, subject to the provisions of this Agreement, to such Termination Payment as the Executive would have been entitled to had the Executive lived. For purposes of this Subsection 10(b), the Termination Date shall be the earlier of thirty days following the giving of the Notice of Termination, subject to extension pursuant to Section 1(m) hereof, or one day prior to the end of the Employment Period. 11. Retirement. If, during the Employment Period, the Executive and the Company shall execute an agreement providing for the early retirement of the Executive from the Company, or the Executive shall otherwise give notice that he is voluntarily choosing to retire early from the Company, the Executive shall receive Accrued Benefits through the Termination Date; provided, that if the Executive's employment is terminated by the Executive for Good Reason or by the Company other than by reason of death, disability or Cause and the Executive also, in connection with such termination, elects voluntary early retirement, the Executive shall also be entitled to receive a Termination Payment pursuant to Section 8(a) hereof. 12. Termination for Disability. If, during the Employment Period, as a result of the Executive's disability due to physical or mental illness or injury (regardless of whether such illness or injury is job-related), the Executive shall have been absent from the Executive's duties hereunder on a full-time basis for a period of six consecutive months and, within thirty days after the Company notifies the Executive in writing that it intends to terminate the Executive's employment (which notice shall not constitute the Notice of Termination contemplated below), the Executive shall not have returned to the performance of the Executive's duties hereunder on a full-time basis, the Company may terminate the Executive's employment for purposes of this Agreement pursuant to a Notice of Termination given in accordance with Section 13 hereof. If the Executive's employment is terminated on account of the Executive's disability in accordance with this Section, the Executive shall receive Accrued Benefits in accordance with Section 9(a) hereof and shall remain eligible for all benefits provided by any long term disability programs of the Company in effect at the time of such termination. 13. Termination Notice and Procedure. Any Covered Termination by the Company or the Executive (other than a termination of the Executive's employment that is a Covered Termination by virtue of Section 2(b) hereof) shall be communicated by written Notice of Termination to the Executive, if such Notice is given by the Company, and to the Company, if such Notice is given by the Executive, all in accordance with the following procedures and those set forth in Section 23 hereof: (a) If such termination is for disability, Cause or Good Reason, the Notice of Termination shall indicate in reasonable detail the facts and circumstances alleged to provide a basis for such termination. (b) Any Notice of Termination by the Company shall have been approved, prior to the giving thereof to the Executive, by a resolution duly adopted by a majority of the directors of the Company (or any successor corporation) then in office. (c) If the Notice is given by the Executive for Good Reason, the Executive may cease performing his duties hereunder on or after the date fifteen days after the delivery of Notice of Termination and shall in any event cease employment on the Termination Date. If the Notice is given by the Company, then the Executive may cease performing his duties hereunder on the date of receipt of the Notice of Termination, subject to the Executive's rights hereunder. (d) The Executive shall have thirty days, or such longer period as the Company may determine to be appropriate, to cure any conduct or act, if curable, alleged to provide grounds for termination of the Executive's employment for Cause under this Agreement pursuant to Subsection 1(d) (iii) hereof. (e) The recipient of any Notice of Termination shall personally deliver or mail in accordance with Section 23 hereof written notice of any dispute relating to such Notice of Termination to the party giving such Notice within fifteen days after receipt thereof; provided, however, that if the Executive's conduct or act alleged to provide grounds for termination by the Company for Cause is curable, then such period shall be thirty days. After the expiration of such period, the contents of the Notice of Termination shall become final and not subject to dispute. 14. Further Obligations of the Executive. (a) Competition. The Executive agrees that, in the event of any Covered Termination where the Executive is entitled to Accrued Benefits and the Termination Payment, the Executive shall not, for a period expiring one year after the Termination Date, without the prior written approval of the Company's Board of Directors, participate in the management of, be employed by or own any business enterprise at a location within the United States that engages in substantial competition with the Company or its subsidiaries, where such enterprise's revenues from any competitive activities amount to 10% or more of such enterprise's net revenues and sales for its most recently completed fiscal year; provided, however, that nothing in this Section 14(a) shall prohibit the Executive from owning stock or other securities of a competitor amounting to less than five percent of the outstanding capital stock of such competitor. (b) Confidentiality. During and following the Executive's employment by the Company, the Executive shall hold in confidence and not directly or indirectly disclose or use or copy or make lists of any confidential information or proprietary data of the Company (including that of the Employer), except to the extent authorized in writing by the Board of Directors of the Company or required by any court or administrative agency, other than to an employee of the Company or a person to whom disclosure is reasonably necessary or appropriate in connection with the performance by the Executive of duties as an executive of the Company. Confidential information shall not include any information known generally to the public or any information of a type not otherwise considered confidential by persons engaged in the same business or a business similar to that of the Company. All records, files, documents and materials, or copies thereof, relating to the business of the Company which the Executive shall prepare, or use, or come into contact with, shall be and remain the sole property of the Company and shall be promptly returned to the Company upon termination of employment with the Company. 15. Expenses and Interest. If, after a Change in Control of the Company, (i) a dispute arises with respect to the enforcement of the Executive's rights under this Agreement or (ii) any legal or arbitration proceeding shall be brought to enforce or interpret any provision contained herein or to recover damages for breach hereof, in either case so long as the Executive is not acting in bad faith, the Executive shall recover from the Company any reasonable attorneys' fees and necessary costs and disbursements incurred as a result of such dispute, legal or arbitration proceeding ("Expenses"), and prejudgment interest on any money judgment or arbitration award obtained by the Executive calculated at the rate of interest announced by Firstar Bank Milwaukee, National Association, Milwaukee, Wisconsin, from time to time as its prime or base lending rate from the date that payments to him should have been made under this Agreement. Within ten days after the Executive's written request therefor, the Company shall pay to the Executive, or such other person or entity as the Executive may designate in writing to the Company, the Executive's reasonable Expenses in advance of the final disposition or conclusion of any such dispute, legal or arbitration proceeding. 16. Payment Obligations Absolute. The Company's obligation during and after the Employment Period to pay the Executive the amounts and to make the benefit and other arrangements provided herein shall be absolute and unconditional and shall not be affected by any circumstances, including, without limitation, any setoff, counterclaim, recoupment, defense or other right which the Company may have against him or anyone else. Except as provided in Section 15 of this Agreement, all amounts payable by the Company hereunder shall be paid without notice or demand. Each and every payment made hereunder by the Company shall be final, and the Company will not seek to recover all or any part of such payment from the Executive, or from whomsoever may be entitled thereto, for any reason whatsoever. 17. Successors. (a) If the Company sells, assigns or transfers all or substantially all of its business and assets to any Person or if the Company merges into or consolidates or otherwise combines (where the Company does not survive such combination) with any Person (any such event, a "Sale of Business"), then the Company shall assign all of its right, title and interest in this Agreement as of the date of such event to such Person, and the Company shall cause such Person, by written agreement in form and substance reasonably satisfactory to the Executive, to expressly assume and agree to perform from and after the date of such assignment all of the terms, conditions and provisions imposed by this Agreement upon the Company. Failure of the Company to obtain such agreement prior to the effective date of such Sale of Business shall be a breach of this Agreement constituting "Good Reason" hereunder, except that for purposes of implementing the foregoing the date upon which such Sale of Business becomes effective shall be deemed the Termination Date. In case of such assignment by the Company and of assumption and agreement by such Person, as used in this Agreement, "Company" shall thereafter mean such Person which executes and delivers the agreement provided for in this Section 18 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law, and this Agreement shall inure to the benefit of, and be enforceable by, such Person. The Executive shall, in his discretion, be entitled to proceed against any or all of such Persons, any Person which theretofore was such a successor to the Company (as defined in the first paragraph of this Agreement) and the Company (as so defined) in any action to enforce any rights of the Executive hereunder. Except as provided in this Subsection, this Agreement shall not be assignable by the Company. This Agreement shall not be terminated by the voluntary or involuntary dissolution of the Company. (b) This Agreement and all rights of the Executive shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, heirs and beneficiaries. All amounts payable to the Executive under Sections 7, 8, 9, 10, 11, 12 and 15 hereof if the Executive had lived shall be paid, in the event of the Executive's death, to the Executive's estate, heirs and representatives; provided, however, that the foregoing shall not be construed to modify any terms of any benefit plan of the Company, as such terms are in effect on the date of the Change in Control of the Company, that expressly govern benefits under such plan in the event of the Executive's death. 18. Severability. The provisions of this Agreement shall be regarded as divisible, and if any of said provisions or any part hereof are declared invalid or unenforceable by a court of competent jurisdiction, the validity and enforceability of the remainder of such provisions or parts hereof and the applicability thereof shall not be affected thereby. 19. Amendment. This Agreement may not be amended or modified at any time except by written instrument executed by the Company and the Executive. 20. Withholding. The Company shall be entitled to withhold from amounts to be paid to the Executive hereunder any federal, state or local withholding or other taxes or charges which it is from time to time required to withhold; provided, that the amount so withheld shall not exceed the minimum amount required to be withheld by law. The Company shall be entitled to rely on an opinion of nationally recognized tax counsel if any question as to the amount or requirement of any such withholding shall arise. 21. Certain Rules of Construction. No party shall be considered as being responsible for the drafting of this Agreement for the purpose of applying any rule construing ambiguities against the drafter or otherwise. No draft of this Agreement shall be taken into account in construing this Agreement. Any provision of this Agreement which requires an agreement in writing shall be deemed to require that the writing in question be signed by the Executive and an authorized representative of the Company. 22. Governing Law; Resolution of Disputes. This Agreement and the rights and obligations hereunder shall be governed by and construed in accordance with the laws of the State of Wisconsin. Any dispute arising out of this Agreement shall, at the Executive's election, be determined by arbitration under the rules of the American Arbitration Association then in effect (in which case both parties shall be bound by the arbitration award) or by litigation. Whether the dispute is to be settled by arbitration or litigation, the venue for the arbitration or litigation shall be Madison, Wisconsin or, at the Executive's election, if the Executive is no longer residing or working in the Madison, Wisconsin metropolitan area, in the judicial district encompassing the city in which the Executive resides; provided, that, if the Executive is not then residing in the United States, the election of the Executive with respect to such venue shall be either Madison, Wisconsin or in the judicial district encompassing that city in the United States among the thirty cities having the largest population (as determined by the most recent United States Census data available at the Termination Date) which is closest to the Executive's residence. The parties consent to personal jurisdiction in each trial court in the selected venue having subject matter jurisdiction notwithstanding their residence or situs, and each party irrevocably consents to service of process in the manner provided hereunder for the giving of notices. 23. Notice. Notices given pursuant to this Agreement shall be in writing and, except as otherwise provided by Section 13(d) hereof, shall be deemed given when actually received by the Executive or actually received by the Company's Secretary or any officer of the Company other than the Executive. If mailed, such notices shall be mailed by United States registered or certified mail, return receipt requested, addressee only, postage prepaid, if to the Company, to WPL Holdings, Inc., Attention: Secretary (or President, if the Executive is then Secretary), 222 West Washington Avenue, P.O. Box 2568, Madison, Wisconsin 53701-2568, or if to the Executive, at the address set forth below the Executive's signature to this Agreement, or to such other address as the party to be notified shall have theretofore given to the other party in writing. 24. No Waiver. No waiver by either party at any time of any breach by the other party of, or compliance with, any condition or provision of this Agreement to be performed by the other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same time or any prior or subsequent time. 25. Headings. The headings herein contained are for reference only and shall not affect the meaning or interpretation of any provision of this Agreement. IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. WPL HOLDINGS, INC. By: _____________________________________ Its: _____________________________________ Attest: ________________________________ Its: _____________________________________ EXECUTIVE: _____________________________________(SEAL) Address: EX-4 6 EXHIBIT 4.4 TO WP&L FORM 10-Q KEY EXECUTIVE EMPLOYMENT AND SEVERANCE AGREEMENT THIS AGREEMENT, made and entered into as of the ____ day of ___________, by and between WPL Holdings, Inc., a Wisconsin corporation (hereinafter referred to as the "Company"), and _____________________ (hereinafter referred to as "Executive"). W I T N E S S E T H WHEREAS, the Executive is employed by the Company and/or a subsidiary of the Company (the "Employer") in a key executive capacity and the Executive's services are valuable to the conduct of the business of the Company; WHEREAS, the Executive possesses intimate knowledge of the business and affairs of the Company and has acquired certain confidential information and data with respect to the Company; WHEREAS, the Company desires to insure, insofar as possible, that it will continue to have the benefit of the Executive's services and to protect its confidential information and goodwill; WHEREAS, the Company recognizes that circumstances may arise in which a change in control of the Company occurs, through acquisition or otherwise, thereby causing uncertainty about the Executive's future employment with the Employer without regard to the Executive's competence or past contributions which uncertainty may result in the loss of valuable services of the Executive to the detriment of the Company and its shareholders, and the Company and the Executive wish to provide reasonable security to the Executive against changes in the Executive's relationship with the Company in the event of any such change in control; WHEREAS, the Company and the Executive are desirous that any proposal for a change in control or acquisition of the Company will be considered by the Executive objectively and with reference only to the best interests of the Company and its shareholders; and WHEREAS, the Executive will be in a better position to consider the Company's best interests if the Executive is afforded reasonable security, as provided in this Agreement, against altered conditions of employment which could result from any such change in control or acquisition. NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements hereinafter set forth, the parties hereto mutually covenant and agree as follows: 1. Definitions. (a) Act. For purposes of this Agreement, the term "Act" means the Securities Exchange Act of 1934, as amended. (b) Affiliate and Associate. For purposes of this Agreement, the terms "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule l2b-2 of the General Rules and Regulations of the Act. (c) Beneficial Owner. For purposes of this Agreement, a Person shall be deemed to be the "Beneficial Owner" of any securities: (i) which such Person or any of such Person's Affiliates or Associates has the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding, or upon the exercise of conversion rights, exchange rights, rights, warrants or options, or otherwise; provided, however, that a Person shall not be deemed the Beneficial Owner of, or to beneficially own, (A) securities tendered pursuant to a tender or exchange offer made by or on behalf of such Person or any of such Person's Affiliates or Associates until such tendered securities are accepted for purchase, or (B) securities issuable upon exercise of Rights issued pursuant to the terms of the Company's Rights Agreement with Morgan Shareholder Services Trust Company, dated as of February 22, 1989, as amended from time to time (or any successor to such Rights Agreement), at any time before the issuance of such securities; (ii) which such Person or any of such Person's Affiliates or Associates, directly or indirectly, has the right to vote or dispose of or has "beneficial ownership" of (as determined pursuant to Rule l3d-3 of the General Rules and Regulations under the Act), including pursuant to any agreement, arrangement or understanding; provided, however, that a Person shall not be deemed the Beneficial Owner of, or to beneficially own, any security under this subparagraph (ii) as a result of an agreement, arrangement or understanding to vote such security if the agreement, arrangement or understanding: (A) arises solely from a revocable proxy or consent given to such Person in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable rules and regulations under the Act and (B) is not also then reportable on a Schedule l3D under the Act (or any comparable or successor report); or (iii) which are beneficially owned, directly or indirectly, by any other Person with which such Person or any of such Person's Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting (except pursuant to a revocable proxy as described in Subsection 1(c) (ii) above) or disposing of any voting securities of the Company. (d) Cause. "Cause" for termination by the Company of the Executive's employment in connection with a Change of Control of the Company shall, for purposes of this Agreement, be limited to (i) the engaging by the Executive in intentional conduct not taken in good faith which has caused demonstrable and serious financial injury to the Company, as evidenced by a determination in a binding and final judgment, order or decree of a court or administrative agency of competent jurisdiction, in effect after exhaustion or lapse of all rights of appeal, in an action, suit or proceeding, whether civil, criminal, administrative or investigative; (ii) conviction of a felony (as evidenced by binding and final judgment, order or decree of a court of competent jurisdiction, in effect after exhaustion of all rights of appeal) which substantially impairs the Executive's ability to perform his duties or responsibilities; and (iii) continuing willful and unreasonable refusal by the Executive to perform the Executive's duties or responsibilities (unless significantly changed without the Executive's consent). (e) Change in Control of the Company. For purposes of this Agreement, a "Change in Control of the Company" shall mean a change in control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Act. Without limiting the inclusiveness of the definition in the preceding sentence, a Change in Control of the Company shall be deemed to have occurred if: (i) any Person (other than any employee benefit plan of the Company or of any subsidiary of the Company, any Person organized, appointed or established pursuant to the terms of any such benefit plan or any trustee, administrator or fiduciary of such a plan) is or becomes the Beneficial Owner of securities of the Company representing at least 30% of the combined voting power of the Company's then outstanding securities, (ii) one-half or more of the members of the Board are not Continuing Directors; (iii) there shall be consummated (x) any merger of the Company or share exchange involving the Company in which the Company is not the continuing or surviving corporation or pursuant to which shares of the Company's Common Stock would be converted into cash, securities or other property, other than a merger of the Company in which each of the holders of the Company's Common Stock immediately prior to the merger have the same proportionate ownership of common stock of the surviving corporation immediately after the merger, or (y) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Company, or (iv) the shareholders of the Company approve any plan or proposal for the liquidation or dissolution of the Company. (f) Code. For purposes of this Agreement, the term "Code" means the Internal Revenue Code of 1986, including any amendments thereto or successor tax codes thereof. (g) Continuing Director. For purposes of this Agreement, the term "Continuing Director" means any member of the Board of Directors of the Company who was a member of such Board on February 1, 1994, and any successor of a Continuing Director who is recommended to succeed a Continuing Director by a majority of the Continuing Directors then on such Board. (h) Covered Termination. Subject to Section 2(b) hereof, for purposes of this Agreement, the term "Covered Termination" means any termination of the Executive's employment where the Termination Date is any date prior to the end of the Employment Period. (i) Employment Period. For purposes of this Agreement, the term "Employment Period" means a period commencing on the date of a Change in Control of the Company, and ending at 11:59 p.m. Central Time on the earlier of the fifth anniversary of such date or the Executive's Normal Retirement Date. (j) Good Reason. For purposes of this Agreement, the Executive shall have a "Good Reason" for termination of employment in connection with a Change in Control of the Company in the event of: (i) any breach of this Agreement by the Company, including specifically any breach by the Company of its agreements contained in Sections 4, 5 or 6 hereof; (ii) the removal of the Executive from, or any failure to reelect or reappoint the Executive to, any of the positions held with the Company or the Employer on the date of the Change in Control of the Company or any other positions with the Company or the Employer to which the Executive shall thereafter be elected, appointed or assigned, except in the event that such removal or failure to reelect or reappoint relates to the termination by the Company of the Executive's employment for Cause or by reason of disability pursuant to Section 12 hereof; (iii) a good faith determination by the Executive that there has been a significant adverse change, without the Executive's written consent, in the Executive's working conditions or status with the Company or the Employer from such working conditions or status in effect immediately prior to the Change in Control of the Company, including but not limited to (A) a significant change in the nature or scope of the Executive's authority, powers, functions, duties or responsibilities, or (B) a significant reduction in the level of support services, staff, secretarial and other assistance, office space and accoutrements; or (iv) failure by the Company to obtain the Agreement referred to in Section 17(a) hereof as provided therein. (k) Normal Retirement Date. For purposes of this Agreement, the term "Normal Retirement Date" means "Normal Retirement Date" as defined in the Wisconsin Power and Light Company Retirement Plan, or any successor plan, as in effect on the date of the Change in Control of the Company. (l) Person. For purposes of this Agreement, the term "Person" shall mean any individual, firm, partnership, corporation or other entity, including any successor (by merger or otherwise) of such entity, or a group of any of the foregoing acting in concert. (m) Termination Date. For purposes of this Agreement, except as otherwise provided in Section 10(b) and Section 17(a) hereof, the term "Termination Date" means (i) if the Executive's employment is terminated by the Executive's death, the date of death; (ii) if the Executive's employment is terminated by reason of voluntary early retirement, as agreed in writing by the Company and the Executive, the date of such early retirement which is set forth in such written agreement; (iii) if the Executive's employment is terminated for purposes of this Agreement by reason of disability pursuant to Section 12 hereof, the earlier of thirty days after the Notice of Termination is given or one day prior to the end of the Employment Period; (iv) if the Executive's employment is terminated by the Executive voluntarily (other than for Good Reason), the date the Notice of Termination is given; and (v) if the Executive's employment is terminated by the Company (other than by reason of disability pursuant to Section 12 hereof) or by the Executive for Good Reason, the earlier of thirty days after the Notice of Termination is given or one day prior to the end of the Employment Period. Notwithstanding the foregoing, (A) If termination is for Cause pursuant to Section 1(d)(iii) of this Agreement and if the Executive has cured the conduct constituting such Cause as described by the Company in its Notice of Termination within such thirty day or shorter period, then the Executive's employment hereunder shall continue as if the Company had not delivered its Notice of Termination. (B) If the Executive shall in good faith give a Notice of Termination for Good Reason and the Company notifies the Executive that a dispute exists concerning the termination within the fifteen day period following receipt thereof, then the Executive may elect to continue his employment during such dispute and the Termination Date shall be determined under this paragraph. If the Executive so elects and it is thereafter determined that Good Reason did exist, the Termination Date shall be the earliest of (l) the date on which the dispute is finally determined, either (x) by mutual written agreement of the parties or (y) in accordance with Section 22 hereof, (2) the date of the Executive's death or (3) one day prior to the end of the Employment Period. If the Executive so elects and it is thereafter determined that Good Reason did not exist, then the employment of the Executive hereunder shall continue after such determination as if the Executive had not delivered the Notice of Termination asserting Good Reason and there shall be no Termination Date arising out of such Notice. In either case, this Agreement continues, until the Termination Date, if any, as if the Executive had not delivered the Notice of Termination except that, if it is finally determined that Good Reason did exist, the Executive shall in no case be denied the benefits described in Sections 8(b) and 9 hereof (including a Termination Payment) based on events occurring after the Executive delivered his Notice of Termination. (C) If an opinion is required to be delivered pursuant to Section 9(b)(ii) hereof and such opinion shall not have been delivered, the Termination Date shall be the earlier of the date on which such opinion is delivered or one day prior to the end of the Employment Period. (D) Except as provided in Paragraph (B) above, if the party receiving the Notice of Termination notifies the other party that a dispute exists concerning the termination within the appropriate period following receipt thereof and it is finally determined that the reason asserted in such Notice of Termination did not exist, then (1) if such Notice was delivered by the Executive, the Executive will be deemed to have voluntarily terminated his employment and the Termination Date shall be the earlier of the date fifteen days after the Notice of Termination is given or one day prior to the end of the Employment Period and (2) if delivered by the Company, the Company will be deemed to have terminated the Executive other than by reason of death, disability or Cause. 2. Termination or Cancellation Prior to Change in Control. (a) Subject to Subsection 2(b) hereof, the Company (and the Employer) and the Executive shall each retain the right to terminate the employment of the Executive at any time prior to a Change in Control of the Company. Subject to Subsection 2(b) hereof, in the event the Executive's employment is terminated prior to a Change in Control of the Company, this Agreement shall be terminated and cancelled and of no further force and effect, and any and all rights and obligations of the parties hereunder shall cease. (b) Anything in this Agreement to the contrary notwithstanding, if a Change in Control of the Company occurs and if the Executive's employment with the Company or a subsidiary of the Company is terminated (other than a termination due to the Executive's death or as a result of the Executive's disability) during the period of 180 days prior to the date on which the Change in Control of the Company occurs, and if it is reasonably demonstrated by the Executive that such termination of employment (i) was at the request of a third party who has taken steps reasonably calculated to effect a Change in Control of the Company or (ii) otherwise arose in connection with or in anticipation of a Change in Control of the Company, then for all purposes of this Agreement such termination of employment shall be deemed a "Covered Termination." 3. Employment Period. If a Change in Control of the Company occurs when the Executive is employed by the Company or a subsidiary of the Company, the Company will, or will cause the Employer to, continue thereafter to employ the Executive during the Employment Period, and the Executive will remain in the employ of the Employer in accordance with and subject to the terms and provisions of this Agreement. Any termination of the Executive's employment during the Employment Period, whether by the Company or the Employer, shall be deemed a termination by the Company for purposes of this Agreement. 4. Duties. During the Employment Period, the Executive shall, in the same capacities and positions held by the Executive at the time of the Change in Control of the Company or in such other capacities and positions as may be agreed to by the Company and the Executive in writing, devote the Executive's best efforts and all of the Executive's business time, attention and skill to the business and affairs of the Employer, as such business and affairs now exist and as they may hereafter be conducted. The services which are to be performed by the Executive hereunder are to be rendered in the same metropolitan area in which the Executive was employed at the time of such Change in Control of the Company, or in such other place or places as shall be mutually agreed upon in writing by the Executive and the Company from time to time. Without the Executive's consent the Executive shall not be required to be absent from such metropolitan area more than 45 days in any fiscal year of the Company. 5. Compensation. During the Employment Period, the Executive shall be compensated as follows: (a) The Executive shall receive, at reasonable intervals (but not less often than monthly) and in accordance with such standard policies as may be in effect immediately prior to the Change in Control of the Company, an annual base salary in cash equivalent of not less than the Executive's annual base salary as in effect immediately prior to the Change in Control of the Company (which base salary shall, unless otherwise agreed in writing by the Executive, include the current receipt by the Executive of any amounts which, prior to the Change in Control of the Company, the Executive had elected to defer, whether such compensation is deferred under Section 401(k) of the Code or otherwise), subject to adjustment as hereinafter provided. (b) The Executive shall receive fringe benefits at least equal in value to those provided for the Executive immediately prior to the Change in Control of the Company, and shall be reimbursed, at such intervals and in accordance with such standard policies as may be in effect immediately prior to the Change in Control of the Company, for any and all monies advanced in connection with the Executive's employment for reasonable and necessary expenses incurred by the Executive on behalf of the Company, including travel expenses. (c) The Executive shall be included, to the extent eligible thereunder (which eligibility shall not be conditioned on the Executive's salary grade or on any other requirement which excludes persons of comparable status to the Executive unless such exclusion was in effect for such plan or an equivalent plan immediately prior to the Change in Control of the Company), in any and all plans providing benefits for the Employer's salaried employees in general, including but not limited to group life insurance, hospitalization, medical, dental, profit sharing and stock bonus plans; provided, that, in no event shall the aggregate level of benefits under such plans in which the Executive is included be less than the aggregate level of benefits under plans of the Company of the type referred to in this Section 5(c) in which the Executive was participating immediately prior to the Change in Control of the Company. (d) The Executive shall annually be entitled to not less than the amount of paid vacation and not fewer than the number of paid holidays to which the Executive was entitled annually immediately prior to the Change in Control of the Company or such greater amount of paid vacation and number of paid holidays as may be made available annually to other executives of the Company of comparable status and position to the Executive. (e) The Executive shall be included in all plans providing additional benefits to executives of the Company of comparable status and position to the Executive, including but not limited to deferred compensation, split-dollar life insurance, supplemental retirement, stock option, stock appreciation, stock bonus and similar or comparable plans; provided, that, in no event shall the aggregate level of benefits under such plans be less than the aggregate level of benefits under plans of the Company of the type referred to in this Section 5(e) in which the Executive was participating immediately prior to the Change in Control of the Company; and provided, further, that the Company's obligation to include the Executive in bonus or incentive compensation plans shall be determined by Subsection 5(f) hereof. (f) To assure that the Executive will have an opportunity to earn incentive compensation after a Change in Control of the Company, the Executive shall be included in a bonus plan of the Company which shall satisfy the standards described below (such plan, the "Bonus Plan"). Bonuses under the Bonus Plan shall be payable with respect to achieving such financial or other goals reasonably related to the business of the Company and the Employer as the Company shall establish (the "Goals"), all of which Goals shall be attainable, prior to the end of the Employment Period, with approximately the same degree of probability as the goals under the Company's bonus plan or plans as in effect immediately prior to the Change in Control of the Company (whether one or more, the "Company Bonus Plan") and in view of the Company's existing and projected financial and business circumstances applicable at the time. The amount of the bonus (the "Bonus Amount") that the Executive is eligible to earn under the Bonus Plan shall be no less than the amount of the Executive's maximum award provided in such Company Bonus Plan (such bonus amount herein referred to as the "Targeted Bonus"), and in the event the Goals are not achieved such that the entire Targeted Bonus is not payable, the Bonus Plan shall provide for a payment of a Bonus Amount equal to a portion of the Targeted Bonus reasonably related to that portion of the Goals which were achieved. Payment of the Bonus Amount shall not be affected by any circumstance occurring subsequent to the end of the Employment Period, including termination of the Executive's employment. 6. Annual Compensation Adjustments. During the Employment Period, the Board of Directors of the Company (or an appropriate committee thereof) will consider and appraise, at least annually, the contributions of the Executive to the Company, and in accordance with the Company's practice prior to the Change in Control of the Company, due consideration shall be given to the upward adjustment of the Executive's base compensation rate, at least annually, (i) commensurate with increases generally given to other executives of the Company of comparable status and position to the Executive, and (ii) as the scope of the Company's operations or the Executive's duties expand. 7. Termination For Cause or Without Good Reason. If there is a Covered Termination for Cause or due to the Executive's voluntarily terminating his employment other than for Good Reason (any such terminations to be subject to the procedures set forth in Section 13 hereof), then the Executive shall be entitled to receive only Accrued Benefits pursuant to Section 9(a) hereof. 8. Termination Giving Rise to a Termination Payment. (a) If there is a Covered Termination by the Executive for Good Reason, or by the Company other than by reason of (i) death, (ii) disability pursuant to Section 12 hereof, or (iii) Cause (any such terminations to be subject to the procedures set forth in Section 13 hereof), then the Executive shall be entitled to receive, and the Company shall promptly pay, Accrued Benefits and, in lieu of further base salary for periods following the Termination Date, as liquidated damages and additional severance pay and in consideration of the covenant of the Executive set forth in Section 14(a) hereof, the Termination Payment pursuant to Section 9(b) hereof. (b) If there is a Covered Termination and the Executive is entitled to Accrued Benefits and the Termination Payment, then the Executive shall be entitled to the following additional benefits: (i) The Executive shall receive, at the expense of the Company, outplacement services, on an individualized basis at a level of service commensurate with the Executive's status with the Company immediately prior to the Change in Control of the Company (or, if higher, immediately prior to the termination of the Executive's employment), provided by a nationally recognized executive placement firm selected by the Company; provided that the cost to the Company of such services shall not exceed 15% of the Executive's annual base salary in effect immediately prior to the Change in Control of the Company. (ii) Until the earlier of the end of the Employment Period or such time as the Executive has obtained new employment and is covered by benefits which in the aggregate are at least equal in value to the following benefits, the Executive shall continue to be covered, at the expense of the Company, by the same or equivalent life insurance, hospitalization, medical and dental coverage as was required hereunder with respect to the Executive immediately prior to the date the Notice of Termination is given. 9. Payments Upon Termination. (a) Accrued Benefits. For purposes of this Agreement, the Executive's "Accrued Benefits" shall include the following amounts, payable as described herein: (i) all base salary for the time period ending with the Termination Date; (ii) reimbursement for any and all monies advanced in connection with the Executive's employment for reasonable and necessary expenses incurred by the Executive on behalf of the Company for the time period ending with the Termination Date; (iii) any and all other cash earned through the Termination Date and deferred at the election of the Executive or pursuant to any deferred compensation plan then in effect; (iv) a lump sum payment of the bonus or incentive compensation otherwise payable to the Executive with respect to the year in which termination occurs under all bonus or incentive compensation plan or plans in which the Executive is a participant; and (v) all other payments and benefits to which the Executive (or in the event of the Executive's death, the Executive's surviving spouse or other beneficiary) may be entitled as compensatory fringe benefits or under the terms of any benefit plan of the Company, excluding severance payments under any Company severance policy, practice or agreement in effect immediately prior to the Change in Control of the Company. Payment of Accrued Benefits shall be made promptly in accordance with the Company's prevailing practice with respect to Subsections (i) and (ii) or, with respect to Subsections (iii), (iv) and (v), pursuant to the terms of the benefit plan or practice establishing such benefits. (b) Termination Payment. (i) Subject to the limits set forth in Subsection 9(b)(ii) hereof, the Termination Payment shall be an amount equal to (A) the Executive's annual base salary, as in effect immediately prior to the Change in Control of the Company, as adjusted upward, from time to time, pursuant to Section 6 hereof, plus (B) the amount of the average annual bonus award (determined on an annualized basis for any bonus award paid for a period of less than one year and excluding any year for which the Executive did not participate in any bonus plan) paid to the Executive with respect to the three complete fiscal years preceding the Termination Date (the aggregate amount set forth in (A) and (B) hereof shall hereafter be referred to as "Annual Cash Compensation"), times (C) the lesser of (1) two and (2) the number of years or fractional portion thereof remaining in the Employment Period determined as of the Termination Date; provided, however, that such amount shall not be less than the greater of (i) the amount of the Executive's Annual Cash Compensation or (ii) the severance benefits to which the Executive would have been entitled under the Company's severance policies and practices in effect immediately prior to the Change in Control of the Company. The Termination Payment shall be paid to the Executive in cash equivalent ten business days after the Termination Date. Such lump sum payment shall not be reduced by any present value or similar factor, and the Executive shall not be required to mitigate the amount of the Termination Payment by securing other employment or otherwise, nor will such Termination Payment be reduced by reason of the Executive securing other employment or for any other reason. The Termination Payment shall be in lieu of, and acceptance by the Executive of the Termination Payment shall constitute the Executive's release of any rights of Executive to, any other severance payments under any Company severance policy, practice or agreement. The Company shall bear up to $10,000 in the aggregate of fees and expenses of consultants and/or legal or accounting advisors engaged by the Executive to advise the Executive as to matters relating to the computation of benefits due and payable under this Subsection 9(b). (ii) Notwithstanding any other provision of this Agreement, if any portion of the Termination Payment or any other payment under this Agreement, or under any other agreement with or plan of the Company (in the aggregate, "Total Payments"), would constitute an "excess parachute payment," then the Total Payments to be made to the Executive shall be reduced such that the value of the aggregate Total Payments that the Executive is entitled to receive shall be One Dollar ($1) less than the maximum amount which the Executive may receive without becoming subject to the tax imposed by Section 4999 of the Code (or any successor provision) or which the Company may pay without loss of deduction under Section 280G(a) of the Code (or any successor provision). For purposes of this Agreement, the terms "excess parachute payment" and "parachute payments" shall have the meanings assigned to them in Section 280G of the Code (or any successor provision), and such "parachute payments" shall be valued as provided therein. Present value for purposes of this Agreement shall be calculated in accordance with Section 1274(b) (2) of the Code (or any successor provision). Within forty days following delivery of the Notice of Termination or notice by the Company to the Executive of its belief that there is a payment or benefit due the Executive which will result in an excess parachute payment as defined in Section 280G of the Code (or any successor provision), the Executive and the Company, at the Company's expense, shall obtain the opinion (which need not be unqualified) of nationally recognized tax counsel selected by the Company's independent auditors and acceptable to the Executive in his sole discretion (which may be regular outside counsel to the Company), which opinion sets forth (A) the amount of the Base Period Income, (B) the amount and present value of Total Payments and (C) the amount and present value of any excess parachute payments determined without regard to the limitations of this Subsection 9(b)(ii). As used in this Subsection 9(b)(ii), the term "Base Period Income" means an amount equal to the Executive's "annualized includible compensation for the base period" as defined in Section 280G(d)(l) of the Code (or any successor provision). For purposes of such opinion, the value of any noncash benefits or any deferred payment or benefit shall be determined by the Company's independent auditors in accordance with the principles of Sections 280G(d)(3) and (4) of the Code (or any successor provisions), which determination shall be evidenced in a certificate of such auditors addressed to the Company and the Executive. Such opinion shall be dated as of the Termination Date and addressed to the Company and the Executive and shall be binding upon the Company and the Executive. If such opinion determines that there would be an excess parachute payment, the Termination Payment hereunder or any other payment or benefit determined by such counsel to be includible in Total Payments shall be reduced or eliminated as specified by the Executive in writing delivered to the Company within thirty days of his receipt of such opinion or, if the Executive fails to so notify the Company, then as the Company shall reasonably determine, so that under the bases of calculations set forth in such opinion there will be no excess parachute payment. If such legal counsel so requests in connection with the opinion required by this Section, the Executive and the Company shall obtain, at the Company's expense, and the legal counsel may rely on in providing the opinion, the advice of a firm of recognized executive compensation consultants as to the reasonableness of any item of compensation to be received by the Executive. If the provisions of Sections 280G and 4999 of the Code (or any successor provisions) are repealed without succession, then this Section 9(b) (ii) shall be of no further force or effect. (iii) (A) If, notwithstanding the provisions of Subsection (ii) of this Section 9(b), but subject to paragraph (B), it is ultimately determined by a court or pursuant to a final determination by the Internal Revenue Service that any portion of Total Payments is subject to the tax (the "Excise Tax") imposed by Section 4999 of the Code (or any successor provision), the Company shall pay to the Executive an additional amount (the "Gross-Up Payment") such that the net amount retained by the Executive after deduction of any Excise Tax and any interest charges or penalties in respect of the imposition of such Excise Tax (but not any federal, state or local income tax) on the Total Payments, and any federal, state and local income tax and Excise Tax upon the payment provided for by this Subsection (iii), shall be equal to the Total Payments. For purposes of determining the amount of the Gross-Up Payment, the Executive shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rates of taxation in the state and locality of the Executive's domicile for income tax purposes on the date the Gross-Up Payment is made, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. (B) If legislation is enacted that would require the Company's shareholders to approve this Agreement, prior to a Change in Control of the Company, due solely to the provision contained in paragraph (A) of this Subsection 9(b)(iii), then (1) from and after such time as shareholder approval would be required, until shareholder approval is obtained as required by such legislation, paragraph (A) shall be of no force and effect; (2) the Company and the Executive shall use their best efforts to consider and agree in writing upon an amendment to this Subsection 9(b) (iii) such that, as amended, this Subsection would provide the Executive with the benefits intended to be afforded to the Executive by paragraph (A) without requiring shareholder approval; and (3) at the reasonable request of the Executive, the Company shall seek shareholder approval of this Agreement at the next annual meeting of shareholders of the Company. 10. Death. (a) Except as provided in Section 10(b) hereof, in the event of a Covered Termination due to the Executive's death, the Executive's estate, heirs and beneficiaries shall receive all the Executive's Accrued Benefits through the Termination Date. (b) In the event the Executive dies after a Notice of Termination is given (i) by the Company or (ii) by the Executive for Good Reason, the Executive's estate, heirs and beneficiaries shall be entitled to the benefits described in Section 10(a) hereof and, subject to the provisions of this Agreement, to such Termination Payment as the Executive would have been entitled to had the Executive lived. For purposes of this Subsection 10(b), the Termination Date shall be the earlier of thirty days following the giving of the Notice of Termination, subject to extension pursuant to Section 1(m) hereof, or one day prior to the end of the Employment Period. 11. Retirement. If, during the Employment Period, the Executive and the Company shall execute an agreement providing for the early retirement of the Executive from the Company, or the Executive shall otherwise give notice that he is voluntarily choosing to retire early from the Company, the Executive shall receive Accrued Benefits through the Termination Date; provided, that if the Executive's employment is terminated by the Executive for Good Reason or by the Company other than by reason of death, disability or Cause and the Executive also, in connection with such termination, elects voluntary early retirement, the Executive shall also be entitled to receive a Termination Payment pursuant to Section 8(a) hereof. 12. Termination for Disability. If, during the Employment Period, as a result of the Executive's disability due to physical or mental illness or injury (regardless of whether such illness or injury is job-related), the Executive shall have been absent from the Executive's duties hereunder on a full-time basis for a period of six consecutive months and, within thirty days after the Company notifies the Executive in writing that it intends to terminate the Executive's employment (which notice shall not constitute the Notice of Termination contemplated below), the Executive shall not have returned to the performance of the Executive's duties hereunder on a full-time basis, the Company may terminate the Executive's employment for purposes of this Agreement pursuant to a Notice of Termination given in accordance with Section 13 hereof. If the Executive's employment is terminated on account of the Executive's disability in accordance with this Section, the Executive shall receive Accrued Benefits in accordance with Section 9(a) hereof and shall remain eligible for all benefits provided by any long term disability programs of the Company in effect at the time of such termination. 13. Termination Notice and Procedure. Any Covered Termination by the Company or the Executive (other than a termination of the Executive's employment that is a Covered Termination by virtue of Section 2(b) hereof) shall be communicated by written Notice of Termination to the Executive, if such Notice is given by the Company, and to the Company, if such Notice is given by the Executive, all in accordance with the following procedures and those set forth in Section 23 hereof: (a) If such termination is for disability, Cause or Good Reason, the Notice of Termination shall indicate in reasonable detail the facts and circumstances alleged to provide a basis for such termination. (b) Any Notice of Termination by the Company shall have been approved, prior to the giving thereof to the Executive, by a resolution duly adopted by a majority of the directors of the Company (or any successor corporation) then in office. (c) If the Notice is given by the Executive for Good Reason, the Executive may cease performing his duties hereunder on or after the date fifteen days after the delivery of Notice of Termination and shall in any event cease employment on the Termination Date. If the Notice is given by the Company, then the Executive may cease performing his duties hereunder on the date of receipt of the Notice of Termination, subject to the Executive's rights hereunder. (d) The Executive shall have thirty days, or such longer period as the Company may determine to be appropriate, to cure any conduct or act, if curable, alleged to provide grounds for termination of the Executive's employment for Cause under this Agreement pursuant to Subsection 1(d) (iii) hereof. (e) The recipient of any Notice of Termination shall personally deliver or mail in accordance with Section 23 hereof written notice of any dispute relating to such Notice of Termination to the party giving such Notice within fifteen days after receipt thereof; provided, however, that if the Executive's conduct or act alleged to provide grounds for termination by the Company for Cause is curable, then such period shall be thirty days. After the expiration of such period, the contents of the Notice of Termination shall become final and not subject to dispute. 14. Further Obligations of the Executive. (a) Competition. The Executive agrees that, in the event of any Covered Termination where the Executive is entitled to Accrued Benefits and the Termination Payment, the Executive shall not, for a period expiring one year after the Termination Date, without the prior written approval of the Company's Board of Directors, participate in the management of, be employed by or own any business enterprise at a location within the United States that engages in substantial competition with the Company or its subsidiaries, where such enterprise's revenues from any competitive activities amount to 10% or more of such enterprise's net revenues and sales for its most recently completed fiscal year; provided, however, that nothing in this Section 14(a) shall prohibit the Executive from owning stock or other securities of a competitor amounting to less than five percent of the outstanding capital stock of such competitor. (b) Confidentiality. During and following the Executive's employment by the Company, the Executive shall hold in confidence and not directly or indirectly disclose or use or copy or make lists of any confidential information or proprietary data of the Company (including that of the Employer), except to the extent authorized in writing by the Board of Directors of the Company or required by any court or administrative agency, other than to an employee of the Company or a person to whom disclosure is reasonably necessary or appropriate in connection with the performance by the Executive of duties as an executive of the Company. Confidential information shall not include any information known generally to the public or any information of a type not otherwise considered confidential by persons engaged in the same business or a business similar to that of the Company. All records, files, documents and materials, or copies thereof, relating to the business of the Company which the Executive shall prepare, or use, or come into contact with, shall be and remain the sole property of the Company and shall be promptly returned to the Company upon termination of employment with the Company. 15. Expenses and Interest. If, after a Change in Control of the Company, (i) a dispute arises with respect to the enforcement of the Executive's rights under this Agreement or (ii) any legal or arbitration proceeding shall be brought to enforce or interpret any provision contained herein or to recover damages for breach hereof, in either case so long as the Executive is not acting in bad faith, the Executive shall recover from the Company any reasonable attorneys' fees and necessary costs and disbursements incurred as a result of such dispute, legal or arbitration proceeding ("Expenses"), and prejudgment interest on any money judgment or arbitration award obtained by the Executive calculated at the rate of interest announced by Firstar Bank Milwaukee, National Association, Milwaukee, Wisconsin, from time to time as its prime or base lending rate from the date that payments to him should have been made under this Agreement. Within ten days after the Executive's written request therefor, the Company shall pay to the Executive, or such other person or entity as the Executive may designate in writing to the Company, the Executive's reasonable Expenses in advance of the final disposition or conclusion of any such dispute, legal or arbitration proceeding. 16. Payment Obligations Absolute. The Company's obligation during and after the Employment Period to pay the Executive the amounts and to make the benefit and other arrangements provided herein shall be absolute and unconditional and shall not be affected by any circumstances, including, without limitation, any setoff, counterclaim, recoupment, defense or other right which the Company may have against him or anyone else. Except as provided in Section 15 of this Agreement, all amounts payable by the Company hereunder shall be paid without notice or demand. Each and every payment made hereunder by the Company shall be final, and the Company will not seek to recover all or any part of such payment from the Executive, or from whomsoever may be entitled thereto, for any reason whatsoever. 17. Successors. (a) If the Company sells, assigns or transfers all or substantially all of its business and assets to any Person or if the Company merges into or consolidates or otherwise combines (where the Company does not survive such combination) with any Person (any such event, a "Sale of Business"), then the Company shall assign all of its right, title and interest in this Agreement as of the date of such event to such Person, and the Company shall cause such Person, by written agreement in form and substance reasonably satisfactory to the Executive, to expressly assume and agree to perform from and after the date of such assignment all of the terms, conditions and provisions imposed by this Agreement upon the Company. Failure of the Company to obtain such agreement prior to the effective date of such Sale of Business shall be a breach of this Agreement constituting "Good Reason" hereunder, except that for purposes of implementing the foregoing the date upon which such Sale of Business becomes effective shall be deemed the Termination Date. In case of such assignment by the Company and of assumption and agreement by such Person, as used in this Agreement, "Company" shall thereafter mean such Person which executes and delivers the agreement provided for in this Section 18 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law, and this Agreement shall inure to the benefit of, and be enforceable by, such Person. The Executive shall, in his discretion, be entitled to proceed against any or all of such Persons, any Person which theretofore was such a successor to the Company (as defined in the first paragraph of this Agreement) and the Company (as so defined) in any action to enforce any rights of the Executive hereunder. Except as provided in this Subsection, this Agreement shall not be assignable by the Company. This Agreement shall not be terminated by the voluntary or involuntary dissolution of the Company. (b) This Agreement and all rights of the Executive shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, heirs and beneficiaries. All amounts payable to the Executive under Sections 7, 8, 9, 10, 11, 12 and 15 hereof if the Executive had lived shall be paid, in the event of the Executive's death, to the Executive's estate, heirs and representatives; provided, however, that the foregoing shall not be construed to modify any terms of any benefit plan of the Company, as such terms are in effect on the date of the Change in Control of the Company, that expressly govern benefits under such plan in the event of the Executive's death. 18. Severability. The provisions of this Agreement shall be regarded as divisible, and if any of said provisions or any part hereof are declared invalid or unenforceable by a court of competent jurisdiction, the validity and enforceability of the remainder of such provisions or parts hereof and the applicability thereof shall not be affected thereby. 19. Amendment. This Agreement may not be amended or modified at any time except by written instrument executed by the Company and the Executive. 20. Withholding. The Company shall be entitled to withhold from amounts to be paid to the Executive hereunder any federal, state or local withholding or other taxes or charges which it is from time to time required to withhold; provided, that the amount so withheld shall not exceed the minimum amount required to be withheld by law. The Company shall be entitled to rely on an opinion of nationally recognized tax counsel if any question as to the amount or requirement of any such withholding shall arise. 21. Certain Rules of Construction. No party shall be considered as being responsible for the drafting of this Agreement for the purpose of applying any rule construing ambiguities against the drafter or otherwise. No draft of this Agreement shall be taken into account in construing this Agreement. Any provision of this Agreement which requires an agreement in writing shall be deemed to require that the writing in question be signed by the Executive and an authorized representative of the Company. 22. Governing Law; Resolution of Disputes. This Agreement and the rights and obligations hereunder shall be governed by and construed in accordance with the laws of the State of Wisconsin. Any dispute arising out of this Agreement shall, at the Executive's election, be determined by arbitration under the rules of the American Arbitration Association then in effect (in which case both parties shall be bound by the arbitration award) or by litigation. Whether the dispute is to be settled by arbitration or litigation, the venue for the arbitration or litigation shall be Madison, Wisconsin or, at the Executive's election, if the Executive is no longer residing or working in the Madison, Wisconsin metropolitan area, in the judicial district encompassing the city in which the Executive resides; provided, that, if the Executive is not then residing in the United States, the election of the Executive with respect to such venue shall be either Madison, Wisconsin or in the judicial district encompassing that city in the United States among the thirty cities having the largest population (as determined by the most recent United States Census data available at the Termination Date) which is closest to the Executive's residence. The parties consent to personal jurisdiction in each trial court in the selected venue having subject matter jurisdiction notwithstanding their residence or situs, and each party irrevocably consents to service of process in the manner provided hereunder for the giving of notices. 23. Notice. Notices given pursuant to this Agreement shall be in writing and, except as otherwise provided by Section 13(d) hereof, shall be deemed given when actually received by the Executive or actually received by the Company's Secretary or any officer of the Company other than the Executive. If mailed, such notices shall be mailed by United States registered or certified mail, return receipt requested, addressee only, postage prepaid, if to the Company, to WPL Holdings, Inc., Attention: Secretary (or President, if the Executive is then Secretary), 222 West Washington Avenue, P.O. Box 2568, Madison, Wisconsin 53701-2568, or if to the Executive, at the address set forth below the Executive's signature to this Agreement, or to such other address as the party to be notified shall have theretofore given to the other party in writing. 24. No Waiver. No waiver by either party at any time of any breach by the other party of, or compliance with, any condition or provision of this Agreement to be performed by the other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same time or any prior or subsequent time. 25. Headings. The headings herein contained are for reference only and shall not affect the meaning or interpretation of any provision of this Agreement. IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written. WPL HOLDINGS, INC. By: _____________________________________ Its: _____________________________________ Attest: ________________________________ Its: _____________________________________ EXECUTIVE: _____________________________________(SEAL) Address: -----END PRIVACY-ENHANCED MESSAGE-----