Document:

WPS RESOURCES CORPORATION

DEFERRED COMPENSATION PLAN

As Amended and Restated Effective March 1, 1999

 

 

 

 

WPS RESOURCES CORPORATION

DEFERRED COMPENSATION PLAN

          WPS Resources Corporation Deferred Compensation Plan (the "Plan")
has been established effective January 1, 1996 to promote the best interests of
WPS Resources Corporation (the "Company") and the stockholders of the
Company by (1) attracting and retaining well-qualified persons for service as
non-employee directors of the Company and designated subsidiaries or affiliates;
and (2) attracting and retaining key management employees possessing a strong
interest in the successful operation of the Company and its subsidiaries or
affiliates and encouraging their continued loyalty, service and counsel to the
Company and its subsidiaries or affiliates. This Plan replaces Deferred
Compensation Plans 008, 009, 010 and 011 previously maintained by the Wisconsin
Public Service Corporation.

 

ARTICLE I. DEFINITIONS AND CONSTRUCTION

     Section  1.01.
Definitions.  The following terms have the meanings indicated below unless the context in
which the term is used clearly indicates otherwise:

     (a)     "Account" means the recordkeeping account or accounts
maintained by a Participating Employer for each Participant, including to extent
applicable to any such Participant, Reserve Account A, Reserve Account B and the
Stock Account.

     (b)     An "Affiliate" of, or a person "affiliated" with, a
specified person is a person that directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common control with,
the person specified and the term "Associate" used to indicate a
relationship with any person, means (i) any corporation or organization (other
than the registrant or a majority-owned subsidiary of the registrant) of which
such person is an officer or partner or is, directly or indirectly, the
beneficial owner of 10 percent or more of any class of equity securities, (ii)
any trust or other estate in which such person has a substantial beneficial
interest or as to which such person serves as trustee or in a similar fiduciary
capacity, and (iii) any relative or spouse of such person, or any relative of
such spouse, who has the same home as such person or who is a director or
officer of the registrant or any of its parents or subsidiaries.

     (c)     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, 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 pursuant to the terms of the Company's Rights Agreement with
            Firstar Trust Company, dated as of December 12, 1996, 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 13d-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 13D 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 Section 1.01(c)(ii)
            above) or disposing of any voting securities of the Company.

     (d)     "Beneficiary" means the person or entity designated by the
Participant to be his beneficiary for purposes of this Plan. If a valid
designation of Beneficiary is not in effect at time of the death of a
Participant, the estate of the Participant is deemed to be the sole Beneficiary.
If a Beneficiary dies while entitled to receive distributions from the Plan, any
remaining payments shall be paid to the estate of the Beneficiary. Beneficiary
designations shall be in writing, filed with the Secretary, and in such form as
the Secretary may prescribe for this purpose.

     (e)     "Board" means the Board of Directors of the Company.

     (f)     "Bonus Deferral" means amounts credited, in accordance with an
Executive's election under Section 8.02(b) of the WPS Resources Corporation
Short-Term Variable Pay Plan, to an Executive's Stock Account in lieu of the
payment of an equal amount as a current cash bonus.

     (g)     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 any merger, consolidation, or
            reorganization of the Company with any other corporation as a result
            of which less than 50% of the outstanding voting securities of the
            surviving or resulting entity are owned by the former shareholders
            of the Company other than a shareholder who is an Affiliate or
            Associate of any party to such consolidation or merger;

            (iv) 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 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;

            (v) there shall be consummated 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 to a Person
            which is not a wholly owned subsidiary of the Company; or

            (vi) the shareholders of the Company approve any plan or proposal
            for the liquidation or dissolution of the Company.

     (h)     "Code" means the Internal Revenue Code of 1986, as interpreted
by regulations and rulings issued pursuant thereto, all as amended and in effect
from time to time.

     (i)     "Company" means WPS Resources Corporation, a Wisconsin
corporation, or any successor corporation.

     (j)     "Compensation" means (i) for a Director, the Retainer Fee and
(ii) for an Executive the base salary or wage payable by a Participating
Employer for services performed, including elective contributions to a Section
125, 129 or 401(k) arrangement or Voluntary Deferrals to this Plan, but
excluding extraordinary payments such as overtime, bonuses, meal allowances,
reimbursed expenses, termination pay, moving pay, commuting expenses, Mandatory
Deferrals to this Plan or other non-elective deferred compensation payments or
accruals, stock options, the value of employer-provided fringe benefits or
coverage, and any contributions on behalf of the Executive paid by a
Participating Employer to a survivor's income benefit plan or any other employee
benefit plan within the meaning of ERISA, all determined in accordance with such
uniform rules, regulations or standards as may be prescribed by the Compensation
Committee.

     (k)     "Compensation Committee" means the Compensation Committee of
the Board, which functions as the joint Compensation Committee for the Company
and for Wisconsin Public Service Corporation.

     (l)     "Continuing Director" means (i) any member of the Board of
Directors of the Company who was a member of such Board on May 1, 1997, (ii) 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 and (iii)
additional directors elected by a majority of the Continuing Directors then on
such Board.

     (m)    "Director" means a non-employee director of a Participating
Employer who has been designated by the Compensation Committee as covered under
or being eligible to participate in the Plan.

     (n)     "ERISA" means the Employee Retirement Income Security Act of
1974, as interpreted by regulations and rulings issued pursuant thereto, all as
amended and in effect from time to time.

     (o)     "Executive" means a common law employee of a Participating
Employer who has been designated by the Compensation Committee as covered under
or otherwise being eligible to participate in this Plan.

     (p)     "Mandatory Deferral" means the amount which may from time to
time be credited to the Stock Account of an Executive in accordance with Section
3.01 and for which the Executive does not receive the option between receiving
such amount as current cash compensation and deferring such amount into the
Plan.

     (q)     "Participant" means either a Director or Executive who is
participating in or eligible to participate in the Plan.

     (r)     "Participating Employer" means Company and any direct or
indirect subsidiary of the Company that, with the consent of the Compensation
Committee, adopts the Plan for the benefit of one or more Executives or
Directors.

     (s)     "Person" means 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.

     (t)     "Retainer Fee" means those fees paid by a Participating
Employer to non-employee directors for services rendered on the Board or any
committee of the Board, or for service on the board of directors of a subsidiary
or affiliate, including attendance fees and fees for serving as committee chair.

     (u)     "Secretary" means the Secretary of the Company (or his
delegate).

     (v)     "Trust" means the WPS Resources Corporation Deferred
Compensation Trust or other funding vehicle which may from time to time be
established, as amended and in effect from time to time.

     (w)     "Voluntary Deferrals" means amounts (other than Bonus
Deferrals) credited, in accordance with a Participant's election, to his Account
in lieu of the payment of an equal amount of current Compensation.

     (x)     "WPS Resources Stock" means the common stock, $1.00 par value,
of the Company.

     (y)     "WPS Resources Stock Units" means the hypothetical shares of
common stock, $1.00 par value, of the Company, that may be credited (i) to the
Stock Account of an Executive as a result of Mandatory Deferrals or Bonus
Deferrals, or (ii) to the Stock Account of either a Director or Executive as a
result of Voluntary Deferrals.

    

Section 1.02.
Construction and Applicable Law.  (a) 
Wherever any words are used in the masculine, they shall be construed as
though they were used in the feminine in all cases where they would so apply;
and wherever any words are use in the singular or the plural, they shall be
construed as though they were used in the plural or the singular, as the case
may be, in all cases where they would so apply. Titles of articles and sections
are for general information only, and the Plan is not to be construed by
reference to such items.

          This Plan, as applied to Executives, is intended to be a plan of deferred
compensation maintained for a select group of management or highly compensated
employees as that term is used in ERISA, and shall be interpreted so as to
comply with the applicable requirements thereof. In all other respects, the Plan
is to be construed and its validity determined according to the laws of the
State of Wisconsin to the extent such laws are not preempted by federal law. In
case any provision of the Plan is held illegal or invalid for any reason, the
illegality or invalidity will not affect the remaining parts of the Plan, but
the Plan shall, to the extent possible, be construed and enforced as if the
illegal or invalid provision had never been inserted.

 

ARTICLE II. PLAN ACCOUNTS

     Section  2.01.
Establishment of Accounts.  One or more of the following Accounts (as applicable) will be established in
the name of each Participant who (i) is identified on Schedule A as being
eligible to participate in either the Voluntary Deferral component of the Plan
or the Mandatory Deferral component of the Plan or in both the Voluntary
Deferral and Mandatory Deferral components of the Plan, or (ii) is eligible for
and has elected to make Bonus Deferrals in accordance with the procedures
specified in Section 8.02(b) of the WPS Resources Corporation Short-Term
Variable Pay Plan:

(a) Reserve Account A

(b) Reserve Account B

(c) Stock Account.

    

Section 2.02.
Reserve Account A.  (a)  This Account will be credited with the reserve account balance accumulated by
a Participant as of December 31, 1995 under the prior deferred compensation
program of Wisconsin Public Service Corporation. Except for attributed earnings
as described below, no further "contributions" or credits of any kind
will be made to this Account on behalf of a Participant.

     (b)     As of the end of each Plan Year, the Account will be credited with an
interest equivalent on the balance in the Account from time to time during the
year. The annual interest equivalent will be the sum (on a non-compounded basis)
of the attributed earnings for each month during the year based on the Account
balance as of the last day of the month. Unless modified by the Compensation
Committee, the interest equivalent rate for any month will be the greater of:

            (i) one-half of one percent (0.5%); or

            (ii) one-twelfth (1/12) of the return on common shareholders'
            equity (ROE). For the months of April through September, ROE means
            the consolidated return on equity of the Company and all
            subsidiaries for the twelve (12) months ended on the preceding March
            31 as calculated pursuant to the Company's standard accounting
            procedure for financial reporting to shareholders. For the months
            October through March, ROE means return on equity as described above
            for the twelve (12) months ended on the preceding September 30.

     (c)     The Compensation Committee may revise the interest equivalent rate
described in Section 2.02(b) above or the manner in which it is calculated, but
in no event shall the rate be less than six percent (6%) per annum. Any such
revised rate shall be effective with the calendar month following such action by
the Compensation Committee.

     (d) Notwithstanding Sections 2.02(b) and (c), in the event of a Change in
Control, the rate of interest equivalent for each month following the Change in
Control for which attributed earnings are required to be calculated shall be the
greater of (A) the rate of interest equivalent otherwise applicable under
Section 2.02(b) and (c) above calculated based upon the consolidated return on
common shareholders equity of the Company (including for this purpose any
successor corporation that is the survivor of a merger with the Company or any
successor to that corporation) and all subsidiaries, and (B) a rate equal to two
(2) percentage points above the prime lending rate at Firstar Bank Milwaukee,
Milwaukee, Wisconsin (or any successor thereto) as of the last business day of
that month. The minimum rate of interest equivalent under clause (B) above shall
not apply with respect to any Participant who terminates employment under
circumstances entitling the Participant to benefits under a Key Executive
Employment and Severance Agreement in effect between the Company and such
Participant.

    

Section 2.03.
Reserve Account B.  (a)  This Account shall be credited with Voluntary Deferrals made after December
31, 1995 which a Participant elects to allocate to this Account in accordance
with Section 3.02(c)(ii).

     (b)     As of the end of each Plan Year, the Account will be credited with an
interest equivalent on the balance in the Account from time to time during the
year. The annual interest equivalent will be the sum (on a non-compounded basis)
of the attributed earnings for each month during the year based on the Account
balance as of the last day of each month. Unless modified by the Compensation
Committee, the interest equivalent rate for any month will be the greater of:

            (i) one-half of one percent (0.5%); or

            (ii) seventy percent (70%) of one-twelfth (1/12) of the return on
            common shareholders equity (ROE). For the months of April through
            September, ROE means the consolidated return on equity of the
            Company and all subsidiaries for the twelve (12) months ended on the
            preceding March 31 as calculated pursuant to the Company's standard
            accounting procedure for financial reporting to shareholders. For
            the months October through March, ROE means return on equity as
            described above for the twelve (12) months ended on the preceding
            September 30.

     (c)     The Compensation Committee may revise the interest equivalent rate
described in Section 2.03(b) above or the manner in which it is calculated, but
in no event shall the rate be less than six percent (6%) per annum. Any such
revised rate shall be effective with the calendar month following such action by
the Compensation Committee.

     (d)     Notwithstanding Sections 2.03(b) and (c), in the event of a Change in
Control, the rate of interest equivalent for each month following the Change in
Control for which attributed earnings are required to be calculated shall be the
greater of (A) the rate of interest equivalent otherwise applicable under
Section 2.03(b) and (c) above calculated based upon the consolidated return on
common shareholders equity of the Company (including for this purpose any
successor corporation that is the survivor of a merger with the Company or any
successor to that corporation) and all subsidiaries, and (B) a rate equal to two
(2) percentage points above the prime lending rate at Firstar Bank Milwaukee,
Milwaukee, Wisconsin (or any successor thereto) as of the last business day of
that month. The minimum rate of interest equivalent under clause (B) above shall
not apply with respect to any Participant who terminates employment under
circumstances entitling the Participant to benefits under a Key Executive
Employment and Severance Agreement in effect between the Company and such
Participant. Further, in the case of any other Participant, the minimum rate of
interest equivalent under clause (B) shall cease to apply on the third
anniversary of the Change in Control in the event that the Participant is
actively employed by the Company (or any successor thereto or affiliate thereof)
on such date.

    

Section 2.04.
Stock Account.  (a)  This Account shall be credited with (i) all Mandatory Deferrals made after
December 31, 1995, (ii) those Voluntary Deferrals made after December 31,
1995 which a Participant, in accordance with Section 3.02(c)(ii), elects to
allocate to this Account, and (iii) all Bonus Deferrals.

     (b)     As of the end of each month, all Voluntary Deferrals, Mandatory
Deferrals, and Bonus Deferrals made by or on behalf of a Participant during that
month and allocated to the Participant's Stock Account (the "Convertible
Amount") shall be converted, for recordkeeping purposes, into whole and
fractional WPS Resources Stock Units, with fractional units calculated to four
decimal places. The conversion shall be accomplished by dividing each
Participant's Convertible Amount by the average purchase price of all shares of
WPS Resources Stock purchased during that month by or on behalf of the Trust and
the WPS Resources Corporation Stock Investment Plan. Likewise, any dividends
that would have been payable on the WPS Resources Stock Units credited to a
Participant's Stock Account had such Units been actual shares of WPS Resources
Stock shall be converted, for recordkeeping purposes, into whole and fractional
WPS Resources Stock Units based on the average purchase price of all shares of
WPS Resources Stock purchased by or on behalf of the Trust and the WPS Resources
Corporation Stock Investment Plan during the month in which the dividend is
paid.

    

Section 2.05.
Accounts are For Recordkeeping Purposes Only. 
The Plan Accounts described in this Article II above serve solely as a device
for determining the amount of benefits accumulated by a Participant under the
Plan, and shall not constitute or imply an obligation on the part of a
Participating Employer to fund such benefits. In any event, the Company may, in
its discretion, set aside assets equal to part or all of such account balances
and invest such assets in Company stock, life insurance or any other investment
deemed appropriate. Any such assets, including WPS Resources Stock and any other
assets held under the Trust, shall be and remain the sole property of the
Company and except to the extent that the Trust authorizes a Participant to
direct the trustee with respect to the voting of WPS Resources Stock held in the
Trust, a Participant shall have no proprietary rights of any nature whatsoever
with respect to such assets.

 

ARTICLE III. MANDATORY AND VOLUNTARY DEFERRALS

     Section  3.01.
Mandatory Deferrals.  The Compensation Committee may, from time to time, authorize a Mandatory
Deferral to be made on behalf of covered Executives. The authorization of any
such contribution, the Executives entitled to the contribution, and the amount
to be credited to each eligible Executive, shall be determined by the
Compensation Committee in its sole discretion; provided that the maximum
Mandatory Deferral for any year shall not exceed thirty percent (30%) of an
Executive's Compensation for the year. Any Mandatory Deferral will be credited
to an eligible Executive's Stock Account and converted into WPS Resources Stock
Units in accordance with Section 2.04.

    

Section 3.02.
Election to Make Voluntary Deferrals. 
(a)  A Participant may elect to make Voluntary Deferrals by submitting a properly
completed and signed election form to the Secretary on or before December 20,
1995. If the Participant so elects, Voluntary Deferrals will commence with
respect to Compensation earned by a Participant on or after January 1, 1996.
Notwithstanding the foregoing, if, as of January 1, 1996, the Participant has in
effect an election under the prior deferred compensation program maintained by
Wisconsin Public Service Corporation and does not file an election with the
Secretary in accordance with this Section 3.02(a), the prior election shall be
deemed the Participant's initial election under this Plan.

     (b)     If a Director or Executive first becomes eligible to participate in the
Plan following the election period described in Section 3.02(a) above (such as,
for example, a Director who commences service or an Executive who is newly
designated by the Compensation Committee as being eligible) the initial deferral
election may be made within thirty (30) days of the date that such person first
becomes eligible under the Plan, and shall be effective with respect to
Compensation earned by the Participant in the first payroll commencing on or
after the date on which the deferral election is made.

     (c)     A Participant's election shall be in such form as the Secretary may
prescribe, and shall specify:

            (i) The percentage or dollar amount of Compensation to be
            deferred as a Voluntary Deferral. A Director may elect to defer all
            or any part of his Compensation, in whole dollar amounts or in
            increments of one percent (1%). An Executive may, without the
            consent of the Compensation Committee, elect to defer a portion of
            his Compensation, in whole dollar amounts or in increments of one
            percent (1%), provided that the amount or percentage elected does
            not exceed thirty percent (30%) of the Executive's Compensation. An
            Executive may elect to defer more than thirty percent (30%) of
            Compensation only if the Compensation Committee has approved the
            Executive's specific deferral percentage or amount.

            (ii) Whether the Voluntary Deferrals are to be credited to the
            Participant's Reserve Account (Reserve Account B) or the
            Participant's Stock Account. If the Participant desires to allocate
            Voluntary Deferrals to both his Reserve and Stock Accounts, the
            election must further specify the portion of the Voluntary
            Deferrals, in whole dollar amounts or in increments of one percent
            (1%), to be allocated to each Account.

     (d)     An election shall be deemed made only when it is received by the
Secretary, and shall remain in effect until modified by the Participant in
accordance with Section 3.03 below or otherwise revoked in accordance with Plan
rules.

    

Section 3.03.
Revision or Modification of Voluntary Deferral Election. 
(a)  A Participant's initial election under Section 3.02 (including an election
not to make Voluntary Deferrals) shall remain in effect from year to year unless
revised or modified by the Participant in accordance with this Section 3.03 or
otherwise revoked in accordance with Plan rules.

     (b)     A Participant may modify his then current election (including an election
not to make Voluntary Deferrals) by filing a revised election form, properly
completed and signed, with the Secretary. The revised election will be effective
with respect to Compensation earned by the Participant in the first payroll
period commencing on or after the date on which the revised election is received
by the Secretary.

     (c)     An election shall be deemed revised in accordance with this Section 3.03
only when the revised election is received by the Secretary, and once effective,
the revised election shall remain in effect until further revised in accordance
with this Section 3.03 or otherwise revoked in accordance with Plan rules.
Revised elections are prospectively effective with respect to Compensation
earned on or after the applicable effective date described in Section 3.03(b)
and (c) above. A revised election does not operate to modify or otherwise
reallocate the amounts deferred prior to the effective date of the revised
election.

    

Section 3.04.
Involuntary Termination of Voluntary Deferral Elections. 
A deferral election shall be automatically revoked upon termination of
service as a Director (in the case of a Director) or termination of employment
(in the case of an Executive). In addition, an Executive's deferral election
shall terminate on the first day of the Plan Year following the date that the
Compensation Committee determines that the Executive is no longer eligible to
participate in the Plan, including any such action that may be necessary in
order for the Plan to qualify under ERISA, with respect to Executive employees,
as a plan of deferred compensation for a select group of management or highly
compensated employees.

 

ARTICLE IV. DISTRIBUTION OF RESERVE ACCOUNT A,

RESERVE ACCOUNT B AND STOCK ACCOUNTS

     Section  4.01.
Distribution Election.  (a)  The distribution election (if any) made by a Participant under the prior
deferred compensation program maintained by Wisconsin Public Service Corporation
shall be his distribution election under this Plan unless and until modified in
accordance with Section 4.02 below.

     (b)     A new Participant shall, at the time he commences participation in the
Plan, make a distribution election with respect to his Account. The election
shall be in such form as the Secretary may prescribe, and shall specify the
distribution commencement date, the distribution period, the method of
distributing earnings credited to the Account, and the distribution method
applicable following the Participant's death. Any such election shall be
consistent with the following rules (or where the Participant fails to make a
selection, in accordance with the default rules set forth below):

            (i) Distribution Commencement Date. Unless the Participant
            has selected a later commencement date (which in no event shall be
            later than the first distribution period following the Participant's
            attainment of age 72), distribution of a Participant's Accounts will
            commence within 60 days following the end of the calendar year in
            which occurs the Participant's retirement or termination of
            employment or service. For purposes of this Plan, a participating
            Executive who is disabled shall be deemed to have retired or
            terminated at the conclusion of benefits under all disability income
            plans sponsored by a Participating Employer or to which a
            Participating Employer contributes. Further, a participating
            Executive who ceases employment with a Participating Employer in
            connection with an early retirement (reduction in force) program
            sponsored by the Participating Employer shall, if a participant in
            the Wisconsin Public Service Administrative Employees Retirement
            Plan, be deemed to have retired upon commencement of retirement
            benefits under such plan.

            (ii) Distribution Period. Distributions will be made in 1,
            3, 6, 9, 12 or 15 annual installments, as elected by the
            Participant.

            (iii) Method of Calculating Annual Distribution Amount.
            Unless the Participant elects the Alternate Distribution Method, the
            amount to be distributed to the Participant each year during the
            distribution period will be determined under the Regular
            Distribution Method. The Regular and Alternate Distribution Methods
            are described in more detail in Section 4.03.

            (iv) Distribution of Remaining Account Following Participant's
            Death. In the event of the Participant's death, the
            Participant's remaining undistributed interest will be distributed
            to the Beneficiary designated by the Participant in either a single
            sum payment or in installments, as elected by the Participant. If
            the Participant has elected that death benefits be paid in a single
            sum, the payment shall be made no later than March 1 following the
            calendar year in which occurs the Participant's death. If the
            Participant has elected that death benefits be paid in installments,
            (A) any installments previously commenced to the Participant shall
            continue to the Beneficiary and (B) if installment distributions had
            not commenced as of the date of the Participant's death, payments
            over the installment period elected by the Participant shall
            commence to the Beneficiary no later than March 1 following the
            calendar year in which occurs the Participant's death.

     (c)     A distribution election shall be deemed made only when it is received by
the Secretary, and shall remain in effect until modified by the Participant in
accordance with Section 4.02 below or otherwise revoked in accordance with Plan
rules.

    

Section 4.02.
Modified Distribution Election.  A Participant may from time to time modify his distribution election by
filing a revised distribution election, properly completed and signed, with the
Secretary. However, a revised distribution election will be given effect only if
the Participant remains employed by (or in the case of a Director, continues
service on the Board or the board of directors of a Participating Employer) for
twenty-four (24) consecutive months following the date that the revised election
is received by the Secretary.

    

Section 4.03.
Calculation of Annual Distribution Amount. 
(a)  For any Participant whose retirement date was prior to January 1, 1996,
distribution will continue to be calculated under the distribution method
applicable to such Participant at the time his distributions commenced under the
terms of the prior deferred compensation program maintained by Wisconsin Public
Service Corporation.

     (b)     For any Participant whose retirement date is after December 31, 1995,
unless the Participant has selected the Alternate Distribution Option, the
annual distribution amount shall be separately calculated for the Participant's
interest (if any) in Reserve Account A, Reserve Account B and the Stock Account.

            (i) The annual distribution amount for Reserve Account A and
            Reserve Account B shall be determined by dividing the balance in
            each Account as of January 1 of the year for which the distribution
            is being made by the number of installment payments remaining to be
            made under the distribution period selected by the Participant.
            Distributions from Reserve Account A and Reserve Account B shall be
            made in cash. The amount of any distribution under this Section
            4.03(b)(i) will be charged pro-rata against the Participant's
            interest in Reserve Account A and B.

            (ii) The annual distribution amount for the Stock Account shall
            be determined on a share basis by dividing the number of WPS
            Resources Stock Units credited to the Participant's Stock Account as
            of January 1 of the year for which the distribution is being made by
            the number of installment payments remaining to be made under the
            distribution period selected by the Participant, and then rounding
            the quotient obtained for all but the final installment to the next
            lowest whole number of WPS Resources Stock Units. The Committee will
            then distribute to the Participant shares of WPS Resources Stock
            and/or cash equal to the annual distribution amount. For any portion
            of the distribution that the Committee elects to satisfy by making a
            cash payment to the Participant, the cash payment shall be
            determined by multiplying the annual distribution amount (or the
            portion of the annual distribution amount being satisfied in cash)
            by the closing price of WPS Resources Stock on January 21 of the
            year in which the distribution is being made, as such share price is
            reported in the Wall Street Journal's New York Stock Exchange
            Composite Transactions listing. If January 21 falls on a Saturday,
            Sunday or holiday, the calculation of the cash portion of the
            distributions will be made based upon the closing price as reported
            for the immediately preceding business day.

     (c)     For any Participant whose retirement date is after December 31, 1995 and
who has selected the Alternate Distribution Method, the annual distribution
amount shall be separately calculated for the Participant's interest (if any) in
Reserve Account A, Reserve Account B and the Stock Accounts of January 1 of the
year in which distributions commence. The annual distribution amounts, once
calculated, shall not thereafter be recalculated.

            (i) For the year in which distribution commences, the annual
            distribution amount for Reserve Account A and Reserve Account B
            shall be determined by dividing the balance in each Account as of
            January 1 of the year in which distribution commences by the number
            of installment payments selected by the Participant. For each
            succeeding distribution year, the Participant shall be entitled to a
            distribution equal to the annual distribution amount calculated in
            accordance with the preceding sentence, plus all interest equivalent
            credited to the Account during the preceding calendar year.
            Distributions from Reserve Account A and Reserve Account B shall be
            made in cash. The amount of any distribution under this Section
            4.03(c)(i) will be charged pro-rata against the Participant's
            interest in Reserve Account A and B.

            (ii) For the year in which distribution commences, the annual
            distribution amount for the Stock Account shall be determined on a
            share basis by dividing the number of WPS Resources Stock Units
            credited to the Participant's Stock Account as of January 1 of the
            year in which distribution commences by the number of installment
            payments selected by the Participant, and then rounding the quotient
            obtained for all but the final installment to the next lowest whole
            number of WPS Resources Stock Units. For each succeeding
            distribution year, the Participant shall be entitled to distribution
            of the number of WPS Resources Stock Units determined in accordance
            with the preceding sentence, plus all additional WPS Resources Stock
            Units credited to the Stock Account during the preceding calendar
            year on account of the assumed reinvestment of dividends,
            disregarding for all but the final installment any fractional WPS
            Resources Stock Units. The Committee will then distribute to the
            Participant shares of WPS Resources Stock and/or cash equal to the
            number of WPS Resources Stock Units required to be distributed for
            that year. For any portion of the distribution that the Committee
            elects to satisfy by making a cash payment to the Participant, the
            cash payment shall be determined by multiplying the distribution
            amount (or the portion of the distribution amount being satisfied in
            cash) by the closing price of WPS Resources Stock on January 21 of
            the year in which the distribution is being made, as such share
            price is reported in the Wall Street Journal's New York Stock
            Exchange Composite Transactions listing. If January 21 falls on a
            Saturday, Sunday or holiday, the calculation of the cash portion of
            the distributions will be made based upon the closing price as
            reported for the immediately preceding business day.

    

Section 4.04.
Time of Distribution.  WPS Resources Stock distributed to a Participant shall be distributed on
January 22 (or if January 22 falls on a Saturday, Sunday or holiday, the
immediately following business day). For distribution and tax reporting
purposes, the value of WPS Resources Stock distributed shall equal the number of
shares distributed multiplied by the closing price of WPS Resources Stock on
January 21 (or if January 21 falls on a Saturday, Sunday or holiday, the
immediately preceding business day) of the year in which the distribution is
being made as reported in the Wall Street Journal's New York Stock Exchange
Composite Transaction listing. The cash portion of any distribution will be made
no later than March 1 of the year for which the distribution is being made.

    

Section 4.05.
Other Distribution Rules.  (a) 
Subject to adjustment as provided in paragraph (c) of this Section 4.05, the
total number of authorized but previously unissued shares of WPS Stock which may
be distributed to Participants pursuant to the Plan shall be one hundred
thousand (100,000), which number shall not be reduced by or as a result of (i)
any cash distributions pursuant to the Plan or (ii) the distribution to
Participants pursuant to the Plan of any outstanding shares of WPS Stock
purchased by or on behalf of the Trust.

     (b)     The amount actually distributed to the Participant will be reduced by
applicable income tax withholding. Unless the Participant has made a contrary
election, income tax on the entire annual distribution amount will be withheld
from the cash portion of the distribution, and WPS Resources Stock will be used
to satisfy withholding obligations only to the extent that the cash portion of
the distribution is insufficient for this purpose.

     (c)     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 or a
Participating Employer affecting WPS Stock, such adjustment shall be made in the
number and class of shares which may be distributed pursuant to the Plan as may
be determined to be appropriate and equitable by the Compensation Committee in
its sole discretion.

 

ARTICLE V. SPECIAL DEATH BENEFIT FOR PARTICIPANTS

WHO DIE WHILE MAKING VOLUNTARY AND MANDATORY DEFERRALS

     Section  5.01.
Eligibility.  If an Executive who is identified in Schedule B (as from time to time amended
by the Compensation Committee) dies prior to attainment of age sixty-two (62)
and while employed by a Participating Employer, and if at the time of the
Executive's death Voluntary or Mandatory Deferrals were being made by or on
behalf of the Executive, then a special death benefit shall be paid to the
Executive's Beneficiary. This special death benefit is in addition to any other
death benefit payable under the Plan.

    

Section 5.02.
Calculation of Special Death Benefit Amount. 
The special death benefit shall be an amount equal to the lesser of one
million dollars ($1,000,000) or the sum of (a), (b), (c) and (d) below.

     (a)     The difference between (i) the Voluntary Deferrals (not in excess of
twenty percent (20%) of Compensation) and Mandatory Deferrals that would have
been made by or on behalf of the Executive during the month in which occurs the
Executive's death, assuming, for this purpose that the Executive had lived, and
(ii) the Voluntary Deferrals and the Mandatory Deferrals actually made during
such month;

     (b)     The product obtained by multiplying (i) the Voluntary Deferrals (not in
excess of twenty percent (20%) of Compensation) and Mandatory Deferrals made by
or on behalf of the Executive during the month prior to the month in which
occurs the Executive's death, and (ii) the number of full calendar months,
inclusive, from the month following the month in which occurs the Executive's
death to the month preceding the month in which the Executive would have
attained age sixty-two (62) had he lived;

     (c)     In the event the Executive's birthday is other than the first day of a
calendar month, for the month in which the Executive would have attained age
sixty-two (62), the product obtained by multiplying (i) the Voluntary Deferrals
(not in excess of twenty percent (20%) of Compensation) and the Mandatory
Deferrals made by or on behalf of the Executive during the month prior to the
month in which occurs the Executive's death, and (ii) a fraction, the numerator
of which is the number of days in such month prior to the Executive's
sixty-second (62nd) birthday and the denominator of which is the total number of
days in the month;

     (d)     A projected earnings factor equal to the amount of interest equivalent
that would have accumulated on the amounts described in (a), (b) and (c) above.
The projected earnings factor shall be calculated using the interest equivalent
rate that was in effect under Reserve Account B for the month prior to the month
in which occurs the Executive's death. The calculation shall assume that the
Voluntary and Mandatory Deferrals described in (a), (b) and (c) above were
credited to Reserve Account B on a monthly basis assuming that the Executive had
lived and continued to make Voluntary and Mandatory Deferrals. The interest
equivalent shall be compounded in the same manner as the Executive's actual
Reserve Account balance, i.e., the annual interest equivalent calculated as of
the end of each Plan Year will be the sum (on a non-compounded basis) of the
attributed earnings for each month during the year based on the Account balance
as of the last day of the month.

    

Section 5.03.
Payment of Special Death Benefit. 
(a)  The special death benefit calculated in accordance with Section 5.02 above
shall be paid to the Executive's Beneficiary in fifteen (15) annual
installments, with the first installment commencing within sixty (60) days of
the Executive's death. The benefit calculated under Section 5.02 is a fixed
amount which does not accrue earnings or interest equivalent on the
undistributed balance.

 

ARTICLE VI. SUPPLEMENTAL RETIREMENT BENEFIT

     Section  6.01.
Supplemental Retirement Benefit. 
(a)  An Executive who at the time of his retirement or termination of employment
is identified in Schedule C shall be entitled to a supplemental retirement
benefit if the Executive:

            (i) retires from a Participating Employer on or after attainment
            of age fifty-eight (58); or

            (ii) terminates employment with a Participating Employer on or
            after the attainment of age fifty (50) provided that the Executive
            has completed ten (10) or more years of service with a Participating
            Employer; or

            (iii) terminates employment with a Participating Employer prior
            to satisfaction of the requirements specified in Section 6.01(a)(i)
            or (ii) above but with the advance written approval of the
            Compensation Committee.

     (b)     An Executive who at the time of his termination of employment is
identified in Schedule C shall be entitled to a reduced supplemental benefit if
the Executive terminates employment from a Participating Employer after
attainment of age fifty (50) but prior to satisfying the requirements of Section
6.01(a) above.

    

Section 6.02.
Amount of Supplemental Benefit.  (a) 
An Executive who qualifies for the supplemental retirement benefit under
Section 6.01(a) above shall receive a monthly amount equal to twenty percent
(20%) [in the case of an Executive identified in Part I of Schedule C] or ten
percent (10%) [in the case of an Executive identified in Part II of Schedule C]
of the Executive's "average monthly compensation".

     (b)     An Executive who qualifies for the supplemental retirement benefit under
Section 6.01(b) above shall receive a monthly amount equal to the product
obtained by multiplying (i) the monthly benefit determined under Section 6.02(a)
above, by (ii) a fraction, the numerator of which is the Executive's years of
service with a Participating Employer (including fractional years) and the
denominator of which is ten (10).

     (c)     The Executive's "average monthly compensation" is the
Executive's "compensation", expressed on a monthly basis, during
whichever period of thirty-six (36) consecutive months of employment produces
the highest average. For this purpose, "compensation" shall have the
same meaning as under the Wisconsin Public Service Corporation Administrative
Employees' Retirement Plan with the exception that (i) Voluntary Deferrals and
Mandatory Deferrals made by or on behalf of the Executive during the relevant
period will be included in the Executive's compensation and (ii) the
compensation limitation specified in Section 401(a)(17) of the Internal Revenue
Code shall not apply.

    

Section 6.03.
Commencement and Duration of Supplemental Retirement Benefits. 
Monthly payments calculated in accordance with Section 6.02 above will
commence to the Executive with a payment for the month following the later to
occur of (i) the month in which the Executive retires or terminates employment,
or (ii) the month in which the Executive attains age fifty-eight (58). Monthly
payments to the Executive shall continue until the earlier to occur of (a) the
month in which occurs the Executive's death, or (b) one hundred twenty (120)
monthly payments have been made.

    

Section 6.04.
Death After Benefit Commencement But Prior to Receipt of 120 Monthly Payments. 
If the Executive dies after his supplemental retirement benefit has commenced
but before receipt of 120 payments, and if the Executive leaves a surviving
spouse to whom the Executive was lawfully married on the date of his death, the
surviving spouse shall receive monthly payments equal to fifty percent (50%) of
the amount of the benefit that was being paid to the Executive. This benefit
will commence with a payment for the month following the month in which occurs
the death of the Executive and shall continue until the earlier to occur of (a)
the month in which occurs the death of the surviving spouse, or (b) a total of
one hundred twenty (120) monthly payments have been made to either the Executive
or the surviving spouse.

    

Section 6.05.
Death Prior to Benefit Commencement.  If the Executive dies prior to commencement of his supplemental retirement
benefit, and if the Executive leaves a surviving spouse to whom the Executive
was lawfully married on the date of his death, the surviving spouse shall
receive monthly payments equal to fifty percent (50%) of the amount that would
have been paid to the Executive (disregarding, in the case of an Executive who
dies while actively employed, the age and service conditions described in
Section 6.01 above but with the benefit amount calculated without assuming any
salary increases). This benefit will commence with a payment for the month
following the month in which occurs the death of the Executive and shall
continue until the earlier to occur of (a) the month in which occurs the death
of the surviving spouse, or (b) one hundred twenty (120) monthly payments have
been made.

    

Section 6.06.
Special Rules Applicable Upon a Change in Control. 
In the event of a Change in Control and unless otherwise waived by the
Executive, an Executive who is identified in Schedule C and who is actively
employed on the Change in Control date shall be entitled to receive a
supplemental retirement benefit whether or not the Executive has satisfied the
eligibility conditions set forth in Section 6.01. The supplemental retirement
benefit shall commence to the Executive with a payment for the month following
the month in which the Executive retires or otherwise terminates employment
following the Change in Control, and shall continue until the earlier to occur
of (a) the Executive's death, or (b) one hundred twenty (120) monthly payments
have been made; provided that the Executive, in accordance with rules prescribed
by the Committee but in no event after the Executive's termination of
employment, may waive the application of this sentence in which case the rules
of Section 6.03 shall govern the distribution of the Executive's benefit. If the
Executive dies after benefit commencement but prior to receiving one hundred
twenty (120) monthly payments, or if the Executive dies prior to benefit
commencement, the provisions of Sections 6.04 and 6.05 shall apply.

PROTECTION OF QUALIFIED RETIREMENT PLAN BENEFIT

    

Section 6.07.
Pension Equalization Benefit.  (a)  In the case of an Executive who is identified on Schedule D ( as from time to
time amended by the Compensation Committee) and who participates in the
Wisconsin Public Service Corporation Administrative Employees' Retirement Plan
("Retirement Plan"), a monthly benefit shall be paid to the Executive
during his lifetime, and if applicable, to his surviving spouse following the
Executive's death, a monthly amount equal to the difference between:

            (i) The monthly benefit that would have been payable to or on
            behalf of the Participant under the Retirement Plan had the
            Participant's (A) compensation for Retirement Plan purposes been
            calculated prior to reduction for Voluntary and Mandatory Deferrals
            made to this Plan and without regard to the compensation limitation
            described in Section 401(a)(17) of the Code, and (B) benefit been
            calculated without regard to the maximum benefit limitation
            described in Section 415 of the Internal Revenue Code; and

            (ii) The monthly benefit actually payable to or on behalf of the
            Executive under the Retirement Plan.

     (b)     Payments under this Section 7.01 shall cease when all benefits payable to
or on behalf of the Executive under the Retirement Plan are discontinued.

 

ARTICLE VII. RULES WITH RESPECT TO WPS RESOURCES STOCK

AND WPS RESOURCES STOCK UNITS

     Section  7.01.
Transactions Affecting WPS Resources Stock. 
In the event of any merger, share exchange, reorganization, consolidation,
recapitalization, stock dividend, stock split or other change in corporate
structure affecting WPS Resources Stock, appropriate adjustments shall be made
to the WPS Resources Stock Units (if any) credited to the Stock Account of each
Participant.

    

Section 7.02.
No Shareholder Rights With Respect to WPS Resources Stock Units. 
Participants shall have no rights as a stockholder pertaining to WPS
Resources Stock Units credited to their Stock Account. No WPS Resources Stock
Unit nor any right or interest of a Participant under the Plan in any WPS
Resources Stock Unit may be assigned, encumbered, or transferred, except by will
or the laws of descent and distribution. The rights of a Participant hereunder
with respect to any WPS Resources Stock Unit are exercisable during the
Participant's lifetime only by him or his guardian or legal representative.

 

ARTICLE VIII. PARTICIPATING EMPLOYERS

     Section  8.01.
Responsibility for Benefits.  Each Participating Employer shall be responsible for providing all benefits
under the Plan that became payable to a Participant who is or was employed by
(or serves or served on the board of directors of) that Participating Employer.
To the extent that a Participant is or was employed by two or more Participating
Employers, each such Participating Employer shall be responsible for providing
the portion of the Participant's benefits accrued while in the employ of that
employer.

 

ARTICLE IX. PROVISIONS

     Section  9.01.
Administration.  The Compensation Committee shall administer and interpret the Plan and
supervise preparation of Participant elections, forms, and any amendments
thereto. To the extent necessary to comply with applicable conditions of Rule
16b-3, the Compensation Committee shall consist of not less than two members of
the Board, each of whom is also a director of Parent and qualifies as a
"non-employee director" for purposes of Rule 16b-3. If at any time the
Compensation Committee shall not be in existence or not be composed of members
of the Board who qualify as "non-employee directors", then all
determinations affecting Participants who are subject to Section 16 of the
Securities Exchange Act of 1934 (the "Exchange Act") shall be made by
the full Board. The Board may, in its discretion, delegate to the Secretary or
another committee of the Board any or all of the authority and responsibility of
the Compensation Committee with respect to participation by Participants other
than Participants who are subject to Section 16 of the Exchange Act at the time
any such delegated authority or responsibility is exercised. Interpretation of
the Plan shall be within the sole discretion of the Compensation Committee and
shall be final and binding upon each Participant and Beneficiary. The
Compensation Committee, and the Secretary with respect to matters assigned to
him under this Plan or delegated to him by the Compensation Committee, may adopt
and modify rules and regulations relating to the Plan as it deems necessary or
advisable for the administration of the Plan. If the Secretary shall also be a
Participant or Beneficiary, any determinations affecting the Secretary's
participation in the Plan shall be made by the Compensation Committee.

    

Section 9.02.
Compliance With Securities Exchange Act.  Transactions under the Plan are intended to comply with all applicable
conditions of Rule 16b-3 or its successor under the Exchange Act. The Plan shall
be administered by the Compensation Committee so that transactions under the
Plan will be exempt from Section 16 of the Exchange Act pursuant to regulations
and interpretations issued from time to time by the Securities and Exchange
Commission.

    

Section 9.03.
Participant Rights Unsecured.  (a) 
The right of a Participant or his Beneficiary to receive a distribution
hereunder shall be an unsecured claim, and neither the Participant nor any
Beneficiary shall have any rights in or against any amount credited to his
Account or any other specific assets of a Participating Employer. The right of a
Participant or Beneficiary to the payment of benefits under this Plan shall not
be assigned, encumbered, or transferred, except by will or the laws of descent
and distribution. The rights of a Participant hereunder are exercisable during
the Participant's lifetime only by him or his guardian or legal representative.

     (b)     The Company may authorize the creation of a trust or other arrangements
to assist in meeting the obligations created under the Plan. However, any
liability to any person with respect to the Plan shall be based solely upon any
contractual obligations that may be created pursuant to the Plan. No obligation
of a Participating Employer shall be deemed to be secured by any pledge of, or
other encumbrance on, any property of a Participating Employer. Nothing
contained in this Plan and no action taken pursuant to its terms shall create or
be construed to create a trust of any kind, or a fiduciary relationship between
a Participating Employer and any Participant or Beneficiary, or any other
person.

     (c)     If, after a Change in Control, (i) a dispute arises with respect to the
enforcement of the Participant's rights under the Plan, or (ii) any legal
proceeding shall be brought to enforce or interpret any provision contained in
the Plan or to recover damages for breach of the Plan, in either case so long as
the Participant is not acting in bad faith or otherwise pursuing a course of
action that a reasonable person would determine to be frivolous, the Participant
shall recover from the Company any reasonable attorneys' fees and necessary
costs and disbursements incurred as a result of such dispute or legal proceeding
("Expenses"), and prejudgment interest on any money judgment obtained
by the Participant calculated at the rate of interest announced by Firstar Bank
Milwaukee, Milwaukee, Wisconsin (or any successor thereto), from time to time as
its prime or base lending rate from the date that payments to the Participant
should have been made under this Plan. Within ten (10) days after the
Participant's written request therefor, the Company shall pay to the
Participant, or such other person or entity as the Participant may designate in
writing to the Company, the Participant's Expenses in advance of the final
disposition or conclusion of any such dispute or legal proceeding. In the case
of a deceased Participant, this Section 10.03(c) shall apply with respect to the
Participant's Beneficiary or estate.

    

Section 9.04.
Income Tax Withholding.  Subject to Section 4.04(c), no later than the date as of which an amount
first becomes includible in the gross income of the Participant for Federal
income tax purposes, the Participant shall pay or make arrangements satisfactory
to the Compensation Committee regarding the payment of, any Federal, state,
local or foreign taxes of any kind required by law to be withheld with respect
to such amount.

    

Section 9.05.
Establishment, Amendment or Termination of Plan.

     (a)     There shall be no time limit on the duration of the Plan. Except as
provided in Section 10.05(b) below, the Board (or where specified herein, the
Compensation Committee) may at any time amend or terminate the Plan; provided,
however, that no amendment or termination may reduce or eliminate any Account
balance accrued or credited on behalf of a Participant based on Mandatory
Deferrals, Voluntary Deferrals and Bonus Deferrals already made or reduce or
eliminate benefits accrued or credited based upon service already rendered.

     (b)     Upon and following the occurrence of a Change in Control:

            (i) The Board may at any time amend the Plan consistent with
            Section 10.05(a) to (A) modify the terms and conditions applicable
            to (or otherwise eliminate) Bonus Deferrals, Mandatory Deferrals and
            Voluntary Deferrals made (or that in the absence of the amendment
            would have been made) on or after the Amendment Date, or (B) modify
            the terms and conditions applicable to (or otherwise eliminate) the
            accrual of benefits, with respect to periods on or after the
            Amendment Date, under the supplemental benefits described in
            Articles VI and VII of the Plan.

            (ii) Any amendment to the Plan or action to terminate the Plan
            that is not described in Section 10.05(b)(i) above, including,
            without limitation, an amendment that would affect the crediting of
            interest equivalent with respect to Bonus Deferrals, Mandatory
            Deferrals and Voluntary Deferrals made prior to the Amendment Date
            and any amendment that would affect the supplemental benefits
            described in Articles VI and VII that have accrued through the
            Amendment Date, shall be effective only with the written consent of
            the Participant (or in the case of a deceased Participant, the
            Participant's Beneficiary).

     (c)     The term "Amendment Date" means the date on which an amendment
to the Plan is validly adopted or the date on which the amendment is or purports
to be effective, whichever is later.

    

Section 9.06.
Administrative Expenses.  Costs of establishing and administering the Plan will be paid by the
Participating Employers.

    

Section 9.07.
Effect on Other Employee Benefit Plans.  Voluntary Deferrals, Mandatory Deferrals and Bonus Deferrals credited to a
Participant's Account under this Plan shall not be considered
"compensation" for the purpose of computing benefits under any
qualified retirement plan maintained by a Participating Employer, but shall be
considered compensation for welfare benefit plans, such as life and disability
insurance programs sponsored by a Participating Employer.

    

Section 9.08.
Successor and Assigns.  This Plan shall be binding upon and inure to the benefit of the Company and
Participating Employers, their successors and assigns and the Participants and
their heirs, executors, administrators, and legal representatives.

     Section  9.09.
Maximum Payment Limitation. 
Notwithstanding any other provision of this Plan, if any portion of the
payments or benefits described in this Plan 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 Participant shall be reduced such that the value of the aggregate
Total Payments that the Participant is entitled to receive shall be one dollar
($1) less than the maximum amount which the Participant may receive without
becoming subject to the tax imposed by Section 4999 of the 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); provided that
this Section 10.09 shall not apply in the case of a Participant who has in
effect a valid employment contract providing that the Total Payments to the
Participant shall be determined without regard to the maximum amount allowable
under Section 280G of the Code (or any successor provision). The terms
"excess parachute payment" and "parachute payment" 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 shall be calculated in accordance with Section 280G(d)(4)
of the Code (or any successor provision). Within forty days following delivery
of notice by the Company to the Participant of its belief that there is a
payment or benefit due the Participant which will result in an excess parachute
payment as defined in Section 280G of the Code (or any successor provision), the
Participant and the 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 Participant 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 Section
10.09. As used in this Section 10.09, the term "Base Period Income"
means an amount equal to the Participant's "annualized includible
compensation for the base period" as defined in Section 280G(d)(1) of the
Code (or any successor provision). For purposes of such opinion, the value of
any noncash benefits or any deferred payment or benefit shall be determined by
the 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 Participant. Such opinion shall be addressed to the Company
and the Participant and shall be binding upon the Company and the Participant.
If such opinion determines that there would be an excess parachute payment, the
payments hereunder that are includible in Total Payments 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 Participant in writing delivered to
the Company within thirty days of his receipt of such opinion or, if the
Participant 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 10.09, the Participant 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 Participant. If the provisions of Sections 280G and 4999 of
the Code (or any successor provisions) are repealed without succession, then
this Section 10.09 shall be of no further force or effect.EXHIBIT 10G-2

  

WPS RESOURCES CORPORATION

SHORT-TERM VARIABLE PAY PLAN

 

 

 

As Amended Effective January 1, 1999

 

 

 

WPS RESOURCES CORPORATION

SHORT-TERM VARIABLE PAY PLAN

 

  
  	
           1.     Purpose.

                   
        The WPS Resources Corporation Short-Term Variable Pay Plan (the
        "Plan") has been established effective January 1, 1998, and is
        amended effective January 1, 1999 as set forth herein, to promote the
        best interests of WPS Resources Corporation ("Company") and
        the stockholders of the Company by (a) attracting and retaining key
        employees possessing a strong interest in the above-average performance
        of the Company and its subsidiaries and (b) encouraging their continued
        loyalty, service and counsel.

             2.     Administration.

                   
        The Plan will be administered by the Compensation Committee of the Board
        of Directors of the Company (the "Committee"). The Committee
        shall have full and final authority and discretion to conclusively
        interpret the provisions of the Plan and to decide all questions of fact
        arising under the Plan, including the authority and discretion to:

        
          
            (i)   determine those employees who are eligible to
            participate in the Plan for any year;

            (ii)  review and from time to time and revise factors on
            which incentive compensation awards may be based;

            (iii) determine the amount (if any) awarded or to be awarded
            under the Plan to any employee for any year; and

            (iv)  to make all other determinations respecting the
            administration, operation and interpretation of the Plan that the
            Committee, in its sole discretion, determines to be necessary or
            appropriate.

          

        

             3.     Designation of
        Participating Employees.

                   
        (a)  For each calendar year for which this Plan is in effect, the
        Committee shall designate:

        
          
            (i)   those employees of the Company and its
            subsidiaries who are eligible to participate in the Plan for such
            year ("Participants");

            (ii)  the Target Award applicable to each Participant for
            such year (see Section 7); and

            (iii) whether each Participant is a Utility Participant or a
            Non-Utility Participant.

          

        

                   
        (b)  An employee's participation in the Plan in any year, and any
        amounts awarded to the employee under the Plan for any such year, does
        not imply that the employee is entitled to participate in or receive an
        award under the Plan for any subsequent year.

                   
        (c)  Nothing in the Plan shall interfere with or limit in any way
        the right of the Company or any subsidiary of the Company to terminate
        an employee's employment at any time nor confer upon any employee any
        right to continue in the employ of the Company or any subsidiary.

             4.     Award of
        Incentive Compensation.

                    A
        Participant shall not have any right to an amount under this Plan until
        the Committee has awarded such amount to the Participant. The incentive
        compensation (if any) awarded to a Participant with respect to any
        calendar year will be an amount determined by the Committee based on
        both qualitative and quantitative measurements of Participant and
        employer performance, including, without limitation (1) utility year-end
        net income, (2) system reliability, (3) safety, (4) non-utility earnings
        per share contribution, (5) non-utility customer account growth and
        retention, (6) customer satisfaction and response to customer
        complaints, (7) environmental strategy, and (8) such other factors as
        the Committee in its discretion may consider relevant. In determining
        the amount of any incentive compensation to be awarded, the Committee
        may take into account the amounts determined under two non-binding
        target awards known as the Utility Performance Award and the Non-Utility
        Performance Award. In no event will the Committee make an award to a
        Participant unless the Participant was employed on December 31 of the
        year to which the award relates or the Participant terminated employment
        prior to December 31 of such year on account of retirement on or after
        age 58, permanent and total disability (as defined in the Company's
        long-term disability plan) or death.

             5.     Utility
        Performance Award.

                   
        (a)  A Participant's Utility Performance Award for any year equals:

        
          
            (i)   the Participant's Base Salary for such year
            multiplied by

            (ii)  0.75 (if the Participant has been designated as a
            Utility Participant) or 0.25 (if the Participant has been designated
            as a Non-Utility Participant), multiplied by

            (iii) the factor determined in accordance with Section 5(d).

          

        

                   
        (b)  The Committee, in its sole discretion, may adjust the 0.75 and
        0.25 factors specified in Section 5(a)(ii) above.

                   
        (c)  Definitions.

        
          
            (i)   "Base Salary" means base salary paid to
            the Participant by the Company and/or a consolidated subsidiary of
            the Company for services performed by the Participant during the
            applicable calendar year for which he or she has been designated as
            a Participant in the Plan. Base Salary shall include amounts that
            would have been paid to the Participant as base salary but for the
            fact that the Participant elected to defer such amounts as an
            elective contribution under a Section 125, 129 or 401(k) arrangement
            or as a Voluntary Deferral under the WPS Resources Corporation
            Deferred Compensation Plan. Base Salary shall not include
            extraordinary payments made to or on behalf of the Participant, such
            as overtime, bonuses, meal allowances, reimbursed expenses
            (including any tax "gross-up" payments), termination pay,
            moving pay, commuting expenses, Mandatory Deferrals under the WPS
            Resources Deferred Compensation Plan or other non-elective deferred
            compensation payments or accruals, stock options, the value of
            employer-provided fringe benefits or coverage, any contributions on
            behalf of the Participant to a survivor's income benefit plan or any
            other employee benefit plan within the meaning of ERISA, all as
            determined in accordance with such uniform rules, regulations or
            standards as may be prescribed by the Committee. In the case of an
            employee who is designated as a Participant after the first day of
            the calendar year, the Committee may elect to apply the foregoing
            definition with respect to the Base Salary received by the
            Participant on and after the effective date of his or her
            participation.

            (ii)  "Net Income" for any year means Wisconsin
            Public Service Corporation's after-tax earnings on common stock as
            reported in the Company's Form 10-K Annual Report for that year, as
            further adjusted by the Committee in its discretion to exclude from
            Net Income the effects of extraordinary items, non-recurring items
            or any other items that the Committee determines should be excluded
            from the definition of Net Income for purposes of this Plan.

          

        

                   
        (d)  For each year during which the Plan is in effect, the
        Committee will prescribe the criteria by (or from) which the factor
        applicable under Section 5(a)(iii) will be determined. Such criteria may
        take into account Wisconsin Public Service Corporation's Net Income or
        such other factors as the Committee, in its sole discretion, may
        determine.

             6.     Non-Utility
        Performance Award.

                   
        (a)  A Participant's Non-Utility Performance Award for any year
        equals:

        
          
            (i)   the Participant's Target Award for such year
            multiplied by

            (ii)  0.25 (if the Participant has been designated as a
            Utility Participant) or 0.75 (if the Participant has been designated
            as a Non-Utility Participant), multiplied by

            (iii) the factor determined in accordance with Section 6(d).

          

        

                   
        (b)  The Committee, in its sole discretion, may adjust the 0.25 and
        0.75 factors specified in Section 6(a)(ii) above.

                   
        (c)  Definitions.

        
          
            (i)   "EPS Impact" means, with respect to any
            calendar year, the fully diluted earnings per share of the Company
            taking into account only the after-tax net income of WPS Energy
            Services, Inc. and WPS Power Development, Inc. and their
            consolidated subsidiaries, as calculated to the nearest one-tenth of
            one cent in accordance with FASB 128 or any successor pronouncement
            and in a manner consistent with the methodology used by the Company
            and its consolidated subsidiaries for the purpose of reporting
            earnings per share information generally. The Committee in its
            discretion, may adjust such after-tax net income to (A) include the
            proportionate share of the after-tax net income of a
            non-consolidated subsidiary, and (B) exclude the effects of
            extraordinary, non-recurring items or any other items that the
            Committee determines should be excluded for purposes of this Plan.

            (ii)  "Account Retention" means, with respect to
            any calendar year, the percentage of "Accounts" actively
            served on January 1 of the calendar year that the Company or its
            non-utility subsidiaries continue to serve on December 31 of the
            same calendar year, rounded to the nearest one-tenth (1/10) of one
            percent.

            (iii) "Account" means an actively served customer
            account entered into by an agent or employee of the customer who has
            the authority to contract with WPS Energy Services, Inc. or WPS
            Power Development, Inc. with respect to all or a portion of the
            customer's business. Where a customer has multiple contracts with
            WPS Energy Services, Inc. and/or WPS Power Development, Inc., such
            contracts, although originating with the same customer, may be
            considered separate Accounts for purposes of this Plan to the extent
            that the contracts are entered into or authorized by different
            contacts at the customer each of whom has independent authority to
            contract with WPS Energy Services, Inc. and/or WPS Power
            Development, Inc.

            (iv) "Account Growth" means, with respect to any
            calendar year, (i) the total number of Accounts on December 31 of
            the calendar year minus the total number of Accounts on January 1 of
            the calendar year, this amount divided by (ii) the total number of
            Accounts on January 1 of the calendar year. This quotient shall be
            rounded to the nearest one-tenth (1/10) of one percent.

          

        

                   
        (d)  For each year during which the Plan is in effect, the
        Committee will prescribe the criteria by (or from) which the factor
        applicable under Section 6(a)(iii) will be determined. Such criteria may
        take into account EPS Impact, Account Retention, Account Growth or such
        other factors as the Committee, in its sole discretion, may determine.

             7.     Target Award

                   
        (a)  The Target Award for each Participant shall be an amount or
        percentage of Base Salary selected by the Committee.

                   
        (b)  The Target Award assigned to a Participant is relevant solely
        for purposes of the non-binding calculation described in Section 6
        above. The establishment of a Target Award with respect to any
        Participant does not imply that the Participant is or will become
        entitled to incentive compensation in the amount of the Target Award.

             8.     Distribution.

                   
        (a)  Unless deferred in accordance with Section 8(b) below,
        incentive compensation amounts awarded under this Plan shall be paid to
        the eligible Participant (less applicable withholding) as soon as
        practicable following the date on which such payment has been authorized
        by the Committee.

                   
        (b)  A Participant may, but need not, elect to defer the receipt of
        all or any portion of the incentive compensation amounts awarded to the
        Participant under this Plan. If the Participant so elects, the deferred
        portion of the Participant's incentive compensation award will be
        credited to the Participant's Stock Account under the WPS Resources
        Corporation Deferred Compensation Plan ("Deferred Compensation
        Plan") for later distribution in accordance with the terms of the
        Deferred Compensation Plan and the Participant's elections under that
        plan. A Participant's election to defer all or a portion of his award
        under this Plan for any year shall be given effect only if the
        Participant's executed deferral election is received by the Committee or
        its delegate prior to January 1 of the calendar year during which the
        incentive compensation will be earned, e.g., prior to January 1, 1999
        for deferral of incentive compensation amounts that may be earned in
        1999. Notwithstanding the foregoing, in the case of a Participant who is
        designated by the Committee as being eligible to participate with
        respect to a particular calendar year after the beginning of such year,
        the Participant's deferral election for such year may be made within 30
        days of the date on which the Committee designates the Participant as
        being eligible to participate in the Plan.

        
             9.     Amendment or
        Termination.

                   
        The Committee may amend, modify or terminate the Plan at any time and
        for any reason, including, without limitation, the authority to alter at
        any time during the calendar year the amount of incentive compensation
        that is available or potentially available to Participants with respect
        to the calendar year or the terms and conditions under which such
        incentive compensation is or will become payable.

            10.     Participant Rights
        Unsecured.

                    
        The right of a Participant to receive a distribution of incentive
        compensation awarded hereunder shall be an unsecured claim, and the
        Participant shall not have any rights in or against any specific assets
        of the Company or any of its subsidiaries. The right of a Participant to
        the payment of incentive compensation that has been awarded or may be
        awarded under this Plan may not in any manner be subject to
        anticipation, alienation, sale, transfer, assignment, pledge,
        encumbrance, attachment or garnishment; provided that any benefits
        awarded to the Participant but unpaid as of the date of the
        Participant's death shall be paid to the Participant's estate.

            11.     Successor and Assigns.

                    
        This Plan, with respect to any amount awarded to a Participant by the
        Committee in accordance with Section 4, shall be binding upon and inure
        to the benefit of the Company and its subsidiaries, their successors and
        assigns and to the Participant and the executor, administrator or legal
        representative of the Participant's estate.

            12.     Governing Law.

                    
        This Plan shall be governed by and construed in accordance with the law
        of the State of Wisconsin.

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