Document:

Exhibit 10.17

 

INTEGRYS ENERGY GROUP, INC.

DEFERRED COMPENSATION PLAN

 

As Amended and Restated Effective January 1, 2012

 

 

TABLE OF CONTENTS

 

	
 
    	
 
    	
Page
    
	
ARTICLE I. DEFINITIONS AND CONSTRUCTION
    	
 
    	
2
    
	
 
    	
Section 1.01. Definitions
    	
 
    	
2
    
	
 
    	
Section 1.02. Construction and   Applicable Law
    	
 
    	
6
    
	
 
    	
 
    	
 
    
	
ARTICLE II. PARTICIPATION
    	
 
    	
7
    
	
 
    	
Section 2.01. Eligibility
    	
 
    	
7
    
	
 
    	
 
    	
 
    
	
ARTICLE III. EMPLOYEE DEFERRED COMPENSATION
    	
 
    	
8
    
	
 
    	
Section 3.01. Application
    	
 
    	
8
    
	
 
    	
Section 3.02. Deferrals Of   Base Compensation
    	
 
    	
8
    
	
 
    	
Section 3.03. Deferrals of   Annual Incentive Awards
    	
 
    	
9
    
	
 
    	
Section 3.04. Deferral of   LTIP Share or Share Unit Awards
    	
 
    	
9
    
	
 
    	
Section 3.05. Matching   Contribution Credits (Prior to 2013)
    	
 
    	
10
    
	
 
    	
Section 3.06. Defined   Contribution Restoration Credits
    	
 
    	
11
    
	
 
    	
Section 3.07. Defined   Contribution SERP Credits
    	
 
    	
12
    
	
 
    	
Section 3.08. Other   Deferrals and Credits
    	
 
    	
13
    
	
 
    	
Section 3.09. Involuntary   Termination of Deferral Elections
    	
 
    	
13
    
	
 
    	
 
    	
 
    
	
ARTICLE IV. DIRECTOR DEFERRED COMPENSATION
    	
 
    	
15
    
	
 
    	
Section 4.01. Application
    	
 
    	
15
    
	
 
    	
Section 4.02. Deferrals Of   Director Fees
    	
 
    	
15
    
	
 
    	
Section 4.03. Director   Deferred Stock Units
    	
 
    	
16
    
	
 
    	
Section 4.04. Involuntary   Termination of Deferral Elections
    	
 
    	
16
    
	
 
    	
 
    	
 
    
	
ARTICLE V. PARTICIPANT ACCOUNTS, RESERVE ACCOUNT A, RESERVE   ACCOUNT B, AND STOCK UNITS ACCOUNTS
    	
 
    	
17
    
	
 
    	
Section 5.01. Participant   Accounts
    	
 
    	
17
    
	
 
    	
Section 5.02. Reserve   Account A
    	
 
    	
17
    
	
 
    	
Section 5.03. Reserve   Account B
    	
 
    	
18
    
	
 
    	
Section 5.04. Integrys Stock   Units
    	
 
    	
19
    
	
 
    	
Section 5.05. Special   Rules Applicable to Restricted Stock or Stock Unit Deferrals
    	
 
    	
23
    
	
 
    	
 
    	
 
    
	
ARTICLE VI. ACCOUNTING AND HYPOTHETICAL INVESTMENT ELECTIONS
    	
 
    	
24
    
	
 
    	
Section 6.01. Hypothetical   Investment of Participant Accounts
    	
 
    	
24
    
	
 
    	
Section 6.02. Accounts are   For Record Keeping Purposes Only
    	
 
    	
26
    
	
 
    	
 
    	
 
    
	
ARTICLE VII. DISTRIBUTION OF PRE-2005 ACCOUNT
    	
 
    	
27
    
	
 
    	
Section 7.01. Distribution   Election
    	
 
    	
27
    
	
 
    	
Section 7.02. Modified   Distribution Election
    	
 
    	
28
    
	
 
    	
Section 7.03. Calculation of   Annual Distribution Amount
    	
 
    	
28
    
	
 
    	
Section 7.04. Time of   Distribution
    	
 
    	
29
    
	
 
    	
Section 7.05. Single Sum   Distribution at the Committee’s Option
    	
 
    	
30
    
	
 
    	
 
    	
 
    
	
ARTICLE VIII. DISTRIBUTION OF POST-2004 ACCOUNT
    	
 
    	
31
    
	
 
    	
Section 8.01. Distribution   Election
    	
 
    	
31
    
	
 
    	
Section 8.02. Modified   Distribution Election
    	
 
    	
32
    
	
 
    	
Section 8.03. Calculation of   Annual Distribution Amount
    	
 
    	
33
    

 

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Section 8.04. Time of Distribution
    	
 
    	
33
    
	
 
    	
Section 8.05. Automatic   Single Sum Distribution
    	
 
    	
34
    
	
 
    	
Section 8.06. Distributions   For Employment Tax Obligations
    	
 
    	
34
    
	
 
    	
 
    	
 
    
	
ARTICLE IX. RULES WITH RESPECT TO INTEGRYS STOCK AND INTEGRYS   STOCK UNITS
    	
 
    	
35
    
	
 
    	
Section 9.01. Relationship   to Shares Authorized Under Omnibus Plan
    	
 
    	
35
    
	
 
    	
Section 9.02. Transactions   Affecting Integrys Stock
    	
 
    	
35
    
	
 
    	
Section 9.03. No Shareholder   Rights With Respect to Integrys Stock Units
    	
 
    	
35
    
	
 
    	
 
    	
 
    
	
ARTICLE X. SPECIAL RULES APPLICABLE IN THE EVENT OF A CHANGE IN   CONTROL OF THE COMPANY
    	
 
    	
36
    
	
 
    	
Section 10.01. Definitions
    	
 
    	
36
    
	
 
    	
Section 10.02. Amendments in   Connection with a Change in Control
    	
 
    	
38
    
	
 
    	
Section 10.03. Acceleration   of Certain Vesting
    	
 
    	
40
    
	
 
    	
Section 10.04. Maximum   Payment Limitation
    	
 
    	
41
    
	
 
    	
Section 10.05. Resolution of   Disputes
    	
 
    	
42
    
	
 
    	
 
    	
 
    
	
ARTICLE XI. GENERAL PROVISIONS
    	
 
    	
43
    
	
 
    	
Section 11.01.   Administration
    	
 
    	
43
    
	
 
    	
Section 11.02. Restrictions   to Comply with Applicable Law
    	
 
    	
43
    
	
 
    	
Section 11.03. Claims   Procedures
    	
 
    	
44
    
	
 
    	
Section 11.04. Participant   Rights Unsecured
    	
 
    	
45
    
	
 
    	
Section 11.05. Income Tax   Withholding
    	
 
    	
46
    
	
 
    	
Section 11.06. Amendment or   Termination of Plan
    	
 
    	
46
    
	
 
    	
Section 11.07.   Administrative Expenses
    	
 
    	
48
    
	
 
    	
Section 11.08. Effect on   Other Employee Benefit Plans
    	
 
    	
48
    
	
 
    	
Section 11.09. Successors   and Assigns
    	
 
    	
48
    
	
 
    	
Section 11.10. Right of   Offset
    	
 
    	
48
    
	
 
    	
Section 11.11. Amounts   Accumulated Under Peoples Energy Plans
    	
 
    	
49
    
	
 
    	
Section 11.12. Miscellaneous   Distribution Rules
    	
 
    	
50
    

 

ii

 

INTEGRYS ENERGY GROUP, INC.

DEFERRED COMPENSATION PLAN

 

The Integrys Energy Group, Inc. Deferred Compensation Plan (the “Plan”) has been adopted to promote the best interests of Integrys Energy Group, Inc. (the “Company”) and the stockholders of the Company by attracting and retaining key management employees and non-employee directors 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.  The Plan is amended and restated effective January 1, 2012. as set forth herein.

 

Except as expressly provided herein, the Plan, as herein amended and restated, applies to (i) those employees who are actively employed by the Company or a Participating Employer on or after January 1, 2005 (the effective date of Internal Revenue Code Section 409A), and who have been designated for participation by the Committee, and (ii) non-employee directors of the Company and designated subsidiaries and affiliates with service as a director on or after January 1, 2005.  Except as expressly provided herein, distribution of benefits to an employee who retired from or terminated employment with the Company and its Affiliates prior to January 1, 2005, or a director whose service with the Company and its Affiliates terminated prior to January 1, 2005, shall be governed by the terms of the Plan (or predecessor plan) as in effect on the date of the employee’s or director’s retirement or termination of employment or service.

 

 

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:  The record keeping account or accounts maintained to record the interest of each Participant under Section 5.01 of the Plan.

 

(b)           Act:  The Securities Act of 1933, as interpreted by regulations and rules issued pursuant thereto, all as amended and in effect from time to time.  Any reference to a specific provision of the Act shall be deemed to include reference to any successor provision thereto.

 

(c)           Affiliate:  Except as otherwise provided in Section 10.01 for purposes of applying the provisions of Article X, a corporation, trade or business that, with the Company, forms part of a controlled group of corporations or group of trades or businesses under common control within the meaning of Code Section 414(b) and  (c); provided that Code Section 414(b) and (c) shall be applied by substituting “at least fifty percent (50%)” for “at least eighty percent (80%)” each place it appears.

 

(d)           Annual Incentive Deferral:  A deferral of a portion of an Eligible Employee’s annual incentive award in accordance with Section 3.03.

 

(e)           Base Compensation:  The base salary or wage payable by a Participating Employer to an Eligible Employee for services performed prior to reduction for contributions by the Eligible Employee to this Plan or pre-tax or after-tax contributions by the Eligible Employee to any other  employee benefit plan maintained by a Participating Employer, but exclusive of extraordinary payments such as overtime, bonuses, meal allowances, reimbursed expenses, termination pay, moving pay, commuting expenses, severance pay, non-elective deferred compensation payments or accruals, stock options or other equity grants or awards, or the value of employer-provided fringe benefits or coverage, all as determined in accordance with such uniform rules, regulations or standards as may be prescribed by the Committee.

 

(f)            Base Compensation Deferral:  A deferral of a portion of an Eligible Employee’s Base Compensation in accordance with Section 3.02.

 

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(g)           Beneficiary:  The person or entity designated by a Participant to be his or her beneficiary for purposes of this Plan.  If a Participant designates his or her spouse as a beneficiary, such beneficiary designation automatically shall become null and void, with respect to any undistributed portion of the Participant’s Account, on the date that the Committee obtains actual written notice of the Participant’s divorce or legal separation from such spouse; provided that neither the Plan nor the Committee shall be liable to any Beneficiary for the payments that have been made to such spouse prior to the date the Committee is notified in writing of such divorce or legal separation from such spouse.   If a valid designation of beneficiary is not in effect at the time of the Participant’s death, 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 that beneficiary.  Beneficiary designations shall be in writing, filed with the Committee, and in such form as the Committee may prescribe for this purpose.

 

(h)           Board:  The Board of Directors of the Company.

 

(i)            Cause:  Termination by the Company or an Affiliate of a Participant’s employment in connection with or following a Change in Control shall be limited to the following:

 

(A)          the engaging by the Participant in intentional conduct not taken in good faith which has caused demonstrable and serious financial injury to the Company and/or an Affiliate, 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;

 

(B)          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 Participant’s ability to perform his duties or responsibilities;

 

(C)          continuing willful and unreasonable refusal by the Participant to perform the Participant’s duties or responsibilities (unless significantly changed without the Participant’s consent); or

 

(D)          material violation of the Company’s Code of Conduct.

 

(j)            Code:  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.  Any reference to a specific provision of the Code shall be deemed to include reference to any successor provision thereto.

 

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(k)           Committee:  The Compensation Committee of the Board (with respect to Eligible Employee participation) or the Governance Committee of the Board (with respect to Director participation), or such other committee as may be appointed by the Board and that satisfies the requirements of Section 11.01.

 

(l)            Company:  Integrys Energy Group, Inc. or any successor corporation.  Prior to February 21, 2007, the Company was known as WPS Resources Corporation.

 

(m)          Director:  A non-employee member of the Board, a non-employee member of the board of directors of an Affiliate who is designated for participation by the Board, and where the context so requires, a former director entitled to receive a benefit hereunder.

 

(n)           Director Deferral:  A deferral by a Director of a portion of his or her Director Fees in accordance with Section 4.02.

 

(o)           Director Fees:  Those fees that are payable in cash to a Director for services rendered on the Board (including attendance fees and fees for serving as a committee chair) or for service on the board of directors of an Affiliate.  The term Director Fees does not include  fees that are automatically credited to the Director in the form of Stock Units pursuant to Section 4.03 of this Plan or pursuant to the Omnibus Plan

 

(p)           Disability:  The inability of a Participant to engage in any substantial gainful activity by reason of a medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, as determined by the Committee.

 

(q)           Eligible Employee:  A common law employee of a Participating Employer who has been designated by the Committee as being eligible to participate in this Plan and, where the context so requires, a former employee entitled to receive a benefit hereunder.

 

(r)            ERISA:  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.  Any reference to a specific provision of ERISA shall be deemed to include reference to any successor provision thereto.

 

(s)            Exchange Act:  The Securities Exchange Act of 1934, as interpreted by regulations and rules issued pursuant thereto, all as amended and in effect from time to time.  Any reference to a specific provision of the Exchange Act shall be deemed to include reference to any successor provision thereto.

 

(t)            Integrys Stock:  The common stock, $1.00 par value, of the Company.

 

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(u)           Integrys Stock Units or Stock Units:  The hypothetical shares of Integrys Stock that are credited to a Participant’s Stock Unit Accounts in accordance with Section 5.04.  A Participant’s Stock Units are further classified as Locked Stock Units or Discretionary Stock Units, in accordance with Section 5.04.

 

(v)           Investment Options:  The hypothetical investment accounts described in Article V and such other investment options as the Committee may from time to time determine (which may, but need not, be based upon one or more of the investment options available under a defined contribution plan sponsored by the Company or an Affiliate).

 

(w)          Long-Term Incentive Plan Deferral or LTIP Deferral:  A deferral of a portion of the performance shares, restricted stock or other stock-based compensation awarded to an Eligible Employee under the Omnibus Plan, in accordance with Section 3.04.

 

(x)           Omnibus Plan:  The Integrys Energy Group, Inc. 2010 Omnibus Incentive Compensation Plan, or as required by the context, any predecessor or successor to such plan.

 

(y)           Participant:  A Director and/or an Eligible Employee, as required by the context.

 

(z)           Participating Employer:  The Company and each Affiliate that, with the consent of the Committee, participates in the Plan for the benefit of one or more Participants.

 

(aa)         Pre-2005 Account:  See Section 5.01.

 

(bb)         Post-2004 Account:  See Section 5.01.

 

(cc)         Separation from Service:  A Participant’s Separation from Service shall occur when the Company (and its Affiliates) and the Participant reasonably anticipate that no further services (either as an employee or as an independent contractor) will be performed by the Participant for the Company (or an Affiliate) after a certain date, or that the level of bona fide services the Participant will perform for the Company (or the Affiliate) after such date (either as an employee or as an independent contractor) will permanently decrease to no more than twenty percent (20%) of the average level of bona fide services performed by the Participant (whether as an employee or independent contractor) for the Company or an Affiliate over the immediately preceding thirty-six (36) month period (or such lesser period of actual service).  A Participant is not considered to have incurred a Separation from Service if the Participant is absent from active employment due to military leave, sick leave or other bona fide leave of absence and if the period of such leave does not exceed the greater of (i) six (6) months, or (ii) the period during which the Participant’s right to reemployment by the Company or an Affiliate is provided either by statute or by contract; provided that if the leave of absence is due to a medically determinable physical or mental impairment that can be expected to result in death or last for a continuous period of not less than six (6) months, where such impairment causes the Participant to be unable to perform the duties of his or her position of employment or any

 

5

 

substantially similar position of employment, the leave may be extended for up to twenty-nine (29) months without causing a Separation from Service.

 

(dd)         Stock Unit Account:  The portion of a Participant’s overall Account that is deemed to be invested in Stock Units, as described in Section 5.04.

 

(ee)         Trust:  The Integrys Energy Group, Inc. Deferred Compensation Trust (which was previously known as 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.

 

(ff)          Valuation Date:  See Section 6.01(c).

 

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.

 

(b)           This Plan 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 Illinois, without regard to the principle of conflict of law, to the extent such state 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 part 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.

 

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ARTICLE II.  PARTICIPATION

 

Section 2.01.  Eligibility.

 

(a)           A Director shall be eligible to participate in the Plan immediately upon becoming a member of the Board.

 

(b)           An employee shall be eligible to participate in the Plan only if the employee is employed by a Participating Employer and if the employee has been designated as an Eligible Employee by the Committee.  When designating an employee as an Eligible Employee, the Committee, in its sole discretion, may designate the employee for participation in the entire Plan or any part thereof.

 

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ARTICLE III.  EMPLOYEE DEFERRED COMPENSATION

 

Section 3.01.  Application.

 

This Article III applies to Participants other than Directors.

 

Section 3.02.  Deferrals Of Base Compensation.

 

(a)           Amount.  A Participant may elect, in such form and manner as the Committee may prescribe, to defer payment of a portion of the Base Compensation that would otherwise be paid to the Participant.  A  Participant’s election shall specify the percentage (in increments of one percent (1%) to a maximum of eighty percent (80%)) of the Participant’s Base Compensation that the Participant wishes to defer; provided that with respect to periods prior to January 1, 2011, the amount deferred was subject to the maximum deferral limitations set forth in the Plan at the time of the Participant’s deferral election.

 

(b)           Initial Deferral Election.  In the case of a Participant who has been designated for participation for the first time (and who has not previously been designated as being eligible for participation in another deferred compensation plan that is required to be aggregated with this Plan for purposes of Code Section 409A) and who completes a deferral election within thirty (30) days of becoming eligible to participate in the Plan, the Participant’s validly executed deferral election shall become effective with respect to services to be performed starting with the first pay period commencing after the date the election is filed with the Committee.  If the Participant does not submit a deferral election during the initial thirty (30) day election period, the Participant may thereafter elect to defer payment of Base Compensation by submitting a validly executed deferral election to the Committee, but the election shall become effective and shall apply only to Base Compensation for the calendar year following the calendar year during which the election is received and accepted by the Committee.  A Participant’s deferral election, once effective, shall remain in effect until modified by the Participant in accordance with subsection (c) below or otherwise revoked in accordance with Plan rules.

 

(c)           Revised Deferral Election.  Except to the extent that the Committee is permitted (and elects) to give earlier effect to a Participant’s revocation or revision to his or her deferral election in accordance with regulations promulgated by the Secretary of the Treasury under Code Section 409A, a Participant’s deferral election, once effective with respect to a calendar year, may not be revoked or modified with respect to Base Compensation for that calendar year.  A Participant may modify his or her then current deferral election by filing a revised deferral election form, properly completed and signed, with the Committee.  However, except to the extent that the Committee is permitted (and elects) to give earlier effect to a Participant’s revised election in accordance with regulations promulgated by the Secretary of the Treasury under Code Section 409A, the revised election will be effective only with respect to Base Compensation for  the calendar year following the calendar year during which the revised election is received and accepted by the Committee.  A Participant’s revised deferral election, once

 

8

 

effective, shall remain in effect until again modified by the Participant under this subsection (c) or otherwise revoked in accordance with Plan rules.

 

(d)           Base Compensation Paid Following Year End For the Payroll Period That Includes December 31.  For purposes of applying a Participant’s deferral election, Base Compensation paid after December 31 of a calendar year that is attributable solely to services performed during the payroll period that includes December 31, if paid in accordance with the normal timing arrangement by which a Participating Employer compensates employees for services rendered, is treated as Base Compensation for services performed in the subsequent calendar year, even though part or all of the Participant’s services might have been performed in the prior calendar year.

 

Section 3.03.  Deferrals of Annual Incentive Awards.

 

A Participant may elect, in such form and manner as the Committee may prescribe, to defer payment of a portion of the annual cash incentive that is awarded and that would otherwise be paid to the Participant with respect to any year.  A Participant’s election shall specify the percentage (in increments of one percent (1%) to a maximum of eighty percent (80%)) of the Participant’s annual cash incentive that the Participant wishes to defer; provided that with respect to periods prior to January 1, 2011, the amount deferred was subject to the maximum deferral limitations set forth in the Plan at the time of the Participant’s deferral election,.  In the case of any award that is not performance-based compensation for purposes of Code Section 409A, a validly executed deferral election shall be effective only if the deferral election is received and accepted by the Committee prior to the last day of the calendar year preceding the calendar year for which the annual incentive is paid, or by such other time as provided in regulations promulgated by the Secretary of the Treasury.  In the case of any award that is performance-based compensation for purposes of Code Section 409A, a validly executed deferral election shall become effective with respect to the annual incentive that may be awarded to the Participant with respect to a calendar year if the Participant’s deferral election is received and accepted by the Committee at least six (6) months prior to the end of the performance period for the bonus, or by such earlier (but not later) date as the Committee may establish.  A Participant’s election to defer part of an annual incentive award becomes irrevocable at the end of the permitted elected period, and the Participant may not thereafter revoke or modify his or her election.  A Participant’s election to defer part of an annual incentive award shall be effective only for the annual incentive to which the election relates, and shall not carry over from year to year or from incentive payment to incentive payment.

 

Section 3.04.  Deferral of LTIP Share or Share Unit Awards.

 

A Participant may elect, in such form and manner as the Committee may prescribe, to defer payment of a portion of any performance share, restricted stock, restricted stock unit or other stock-based compensation awarded to the Participant under the Omnibus Plan.  A Participant’s election shall specify the whole number of shares (up to eighty percent (80%) of the Participant’s award) that the Participant wishes to defer; provided that with respect to periods prior to January 1, 2011, the amount deferred was subject to the maximum deferral limitations set forth in the Plan at the time of the Participant’s deferral election.  In the case of any award that is not performance-based

 

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compensation for purposes of Code Section 409A, a validly executed deferral election shall be effective only if the deferral election is received and accepted by the Committee in accordance with rules established by the Committee pursuant to Code Section 409A.  In the case of any award that is performance-based compensation for purposes of Code Section 409A, a validly executed deferral election shall become effective with respect to shares to be earned by the Participant with respect to any Omnibus Plan performance period if the Participant’s deferral election is received and accepted by the Committee at least six (6) months prior to the end of such performance period or by such earlier (but not later) date as the Committee may establish.  A Participant’s election to defer part of an LTIP share award becomes irrevocable at the end of the permitted elected period, and the Participant may not thereafter revoke or modify his or her election.  A Participant’s election to defer an award shall be effective only for the Omnibus Plan award, service period or performance period to which the election relates, and a Participant’s election does not carry over from award to award, performance period to performance period or from service period to service period.

 

Section 3.05.  Matching Contribution Credits.

 

(a)           Allocation of Credits.  A Participant who is a participant in a qualified defined contribution 401(k) savings plan maintained by the Company or an Affiliate (“Savings Plan”), and who makes Base Compensation Deferrals and/or Annual Incentive Deferrals under this Plan, shall be entitled to a matching contribution credit if the Participant’s election to make Base Compensation Deferrals and/or Annual Incentive Deferrals causes the Participant to receive a smaller matching contribution under the Savings Plan than the Matching Contribution that the Participant would have received if the Participant had instead elected not to defer any portion of the Participant’s Base Compensation or annual incentive award.  The matching contribution credit will be determined as of December 31 of each year and will equal the difference (if any) between:

 

(i)                                     The value of the matching contribution that the Participant would have received for the calendar year under or with respect to the Savings Plan in which the Participant is eligible, based on amounts actually contributed to such Savings Plan, if Base Compensation Deferrals and Annual Bonus Deferrals made by the Participant under this Plan were instead treated as “compensation” under the Savings Plan for purposes of calculating the Participant’s maximum matching contribution under the Savings Plan; provided that all limits and restrictions otherwise imposed under the Savings Plan, including the maximum compensation limit under Section 401(a)(17) of the Code, shall continue to apply; and

 

(ii)                                  The value of the matching contribution actually received by the Participant for that year under the Savings Plan.

 

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Notwithstanding anything to the contrary, a Participant will not be eligible for matching contribution credits if (x) the Participant has been specifically excluded by the Committee, or (y) the Participant is covered under an employment contract or agreement that excludes the Participant from receiving pension restoration, supplemental retirement or similar restoration benefits or credits, or (z) the Participant is covered under an employment contract or agreement that references the Participant’s participation in the Plan generally but does not specifically provide for the Participant as being eligible for pension restoration, supplemental retirement or similar restoration benefits or credits.

 

(b)           Investment of Credits.  Matching contribution credits with respect to periods prior to January 1, 2008 will be credited to the Participant in the form of Locked Stock Units under Section 5.04(b).  Matching contribution credits with respect to periods after December 31, 2007 shall be credited to the Participant’s Account in accordance with the Participant’s investment direction under Section 6.01(a).

 

(c)           No Duplication.  The credit under this Section shall not duplicate any credit to which the Participant is entitled under Section 3.06 below with respect to the same compensation.

 

Section 3.06.  Defined Contribution Restoration Credits.

 

(a)           Eligibility.  A Participant who is eligible to make contributions to a qualified defined contribution retirement plan maintained by the Company or an Affiliate (“Defined Contribution Plan”) may be eligible to receive an additional credit to his or her Account for each year, in accordance with the rules of this Section.  Notwithstanding the foregoing, a Participant will not be eligible for defined contribution restoration credits if (i) the Participant has been specifically excluded by the Committee, or (ii) the Participant is covered under an employment contract or agreement that excludes the Participant from receiving pension restoration, supplemental retirement or similar restoration benefits or credits, or (iii) the Participant is covered under an employment contract or agreement that references the Participant’s participation in the Plan generally but does not specifically provide for the Participant as being eligible for pension restoration, supplemental retirement or similar restoration benefits or credits.

 

(b)           Amount of Additional Credit.

 

(i)            Matching Contribution Credit.  Effective January 1, 2013, if the Participant for any year is eligible to make elective deferral or other contributions to the Defined Contribution Plan and to receive a matching contribution with respect to such amounts, the Participant shall receive an additional credit under this Plan equal to five percent (5%) of the Participant’s compensation for the year in excess of the Code Section 401(a)(17) limitation in effect for such year.  For this

 

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purpose, the Participant’s compensation shall be the Participant’s compensation as defined in the Defined Contribution Plan, except that Base Compensation Deferrals and Annual Bonus Deferrals made by the Participant under this Plan shall be treated as if they had been paid to the Participant in cash.  This credit is to approximately reflect the matching contribution that the Participant could have received under the Defined Contribution Plan if the Participant had been permitted to make contributions to the Defined Contribution without being subject to the limitations under Code Sections 401(a)(17), 402(g), 415 or any limitation under the Code.

 

(ii)           Age and Service Points Contribution Credit.  If the Participant for any year is eligible for and receives an employer age and service points (non-elective) contribution under the Defined Contribution Plan and if the Participant’s allocation under the Defined Contribution Plan is limited because of the limitations of Code Section 401(a)(17) or 415, the Participant shall receive an additional credit under this Plan equal to the difference between (A) the employer age and service points (non-elective) contribution that would have been allocated to the Participant for the year under the Defined Contribution Plan if the Code Section 401(a)(17) and 415 limitations did not apply and if Base Compensation and Annual Bonus Deferrals made by the Participant under this Plan are treated as if they had been paid to the Participant in cash, and (B) the employer age and service points (non-elective) contribution to which the Participant is actually entitled for such year under the Defined Contribution Plan.

 

(c)           Vesting.  A Participant will have a vested and non-forfeitable right to the credits made under this Section, and any deemed investment gains or losses, if the Participant terminates employment with the Company and its Affiliates after having completed at least three (3) years of service.  If the Participant terminates employment prior to completing three (3) years of service, the Participant’s credits under this Section, together with all deemed investment gains or losses, shall be forfeited.

 

Section 3.07.  Defined Contribution SERP Credits.

 

(a)           Eligibility.  This Section is limited to Participants who have been specifically selected by the Committee to receive SERP Credits under this Section.  Even though the Committee may have designated an employee as being generally eligible for the Plan, or even though an employee’s employment contract or agreement

 

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may refer to the employee as being generally eligible for the Plan, the employee shall not be eligible for the Defined Contribution SERP credits described in this Section unless the Committee has specifically designated the employee as being eligible for such credits.

 

(b)           Amount of SERP Credit.  The SERP Credit shall be calculated and credited at (or near) the end of each calendar year.  If the Committee has designated a Participant as being eligible to receive a SERP credit under this Section, the Committee shall also designate the percentage of the Participant’s base salary and annual incentive that is to be credited to the Participant’s Account as a SERP Credit; provided that if the Committee designates a Participant as being eligible to receive a SERP Credit under this Section but the Committee does not affirmatively designate the applicable percentage of the Participant’s base salary and annual incentive to be credited, the applicable percentage shall be twelve percent (12%) until the Committee affirmatively designates a different percentage.  For this purpose, any Base Compensation and Annual Bonus Deferrals made by the Participant under this Plan are treated as if they had been paid to the Participant in cash, i.e., the SERP Credit is calculated based upon the Participant’s base salary and annual incentive prior to reduction for any Base Compensation and Annual Bonus Deferrals made by the Participant.  The Committee may from time to time change the amount of the SERP Credit applicable to any Participant, and the fact that a Participant receives a SERP Credit for any year (or portion of a year) does not provide the Participant with any right or entitlement to a SERP Credit with respect to any other period.  Any changes in the SERP Credit to which a Participant receives shall be made in accordance with the requirements of Code Section 409A.

 

(c)           Vesting.  A Participant will have a vested and non-forfeitable right to the credits made under this Section, and any deemed investment gains or losses, if the Participant terminates employment with the Company and its Affiliates after having completed at least five (5) years of service.  If the Participant terminates employment prior to completing five (5) years of service, the Participant’s credits under this Section, together with all deemed investment gains or losses, shall be forfeited.

 

Section 3.08.  Other Deferrals and Credits.

 

The Committee, in its discretion, may, with respect to any Participant, determine that the Participant is eligible to make deferrals with respect to additional components of the Participant’s remuneration or receive employer contribution credits in addition to the credits described herein.  In no event, however, shall the Committee authorize such additional deferrals or credits unless the Committee has first determined that the deferrals or credits have been elected or authorized in a manner that will not result in the imposition of tax under Code Section 409A.

 

Section 3.09.  Involuntary Termination of Deferral Elections.

 

A Participant’s deferral elections shall be automatically revoked upon the Participant’s termination of employment from the Participating Employers, unless the Committee determines otherwise in accordance with the requirements of Code Section 409A.  In addition, and subject to Code Section 409A, a Participant’s deferral election

 

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will terminate if the Committee determines that the Participant is no longer eligible to participate in the Plan or that revocation of a Participant’s eligibility is necessary or desirable in order for the Plan to qualify under ERISA as a plan of deferred compensation for a select group of management or highly compensated employees.

 

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ARTICLE IV.  DIRECTOR DEFERRED COMPENSATION

 

Section 4.01.  Application.

 

This Article IV applies only to Directors.

 

Section 4.02.  Deferrals Of Director Fees.

 

(a)           Amount.  A Director may elect, in such form and manner as the Committee may prescribe, to defer payment of a portion of the Director Fees that would otherwise be paid in cash to the Director.  A Director’s election shall specify the percentage (in increments of one percent (1%) to a maximum of one hundred percent (100%)) of the Director Fees that the Director wishes to defer.

 

(b)           Initial Deferral Election.  In the case of a Director who has become eligible for participation in the Plan for the first time (and who has not previously been designated as being eligible for participation in another deferred compensation plan that is required to be aggregated with this Plan for purposes of Code Section 409A), and who completes a deferral election within thirty (30) days of becoming eligible to participate in the Plan, the Director’s validity executed deferral election shall become effective with respect to services to be performed starting with the first pay period commencing after the date the election is filed with the Committee.  If the Director does not submit an initial deferral election during the initial thirty (30) day election period, the Director may thereafter elect to defer the payment of Director Fees by submitting a validly executed deferral election to the Committee, but the election shall become effective and shall apply only to Directors Fees for the calendar year following the calendar year in which the election is received and accepted by the Committee.  A Director’s deferral election, once effective, shall remain in effect until modified by the Director in accordance with subsection (c) below or otherwise revoked in accordance with Plan rules.

 

(c)           Revised Deferral Election.  Except to the extent that the Committee is permitted (and elects) to give earlier effect to a Director’s revocation or revision to his or her deferral election in accordance with regulations promulgated by the Secretary of the Treasury under Code Section 409A, a Director’s deferral election, once effective with respect to a calendar year, may not be modified or revoked with respect to Director Fees for that calendar year.  A Director may modify his or her then current deferral election by filing a revised deferral election form, properly completed and signed, with the Committee.  However, except to the extent that the Committee is permitted (and elects) to give earlier effect to a Participants revision to his or her deferral election in accordance with regulations promulgated by the Secretary of the Treasury under Code Section 409A, the revised election will be effective with respect to Director Fees for the calendar year following the calendar year during which the revised election is received and accepted by the Committee.  A Director’s revised deferral election, once effective, shall remain in effect until again modified by the Director in accordance with this subsection (c) or otherwise revoked in accordance with Plan rules.

 

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(d)           Director Fees Paid Following Year End For the Period That Includes December 31.  For purposes of applying a Director’s deferral election, Director Fees paid after December 31 of a calendar year that are attributable solely to services performed during the period that includes December 31, if paid in accordance with the normal timing arrangement by which a Participating Employer compensates Directors for services rendered, is treated as Director Fees for services performed in the subsequent calendar year, even though part or all of the Director’s services might have been performed in the prior calendar year.

 

Section 4.03.  Director Deferred Stock Units.

 

The Board may from time to time direct that a portion of the remuneration to be earned by a Director for service on the Board shall be credited under this Plan in the form of Stock Units. Effective January 1, 2011, any such grant of Stock Units under this Section 4.03 shall be made under the Omnibus Plan, shall be subject to all of the rules of the Omnibus Plan and shall be charged against the pool of shares available under the Omnibus Plan, but unless otherwise determined by the Board at the time of grant, shall be credited (for record-keeping purposes) under this Plan and shall be subject to the distribution provisions of this Plan.  Except to the extent that the Committee is permitted (and elects) to give earlier effect to a direction in accordance with regulations promulgated by the Secretary of the Treasury under Code Section 409A, any such direction shall be effective with respect to remuneration to be earned by the Director on and after January 1 of the calendar year following the date of such direction, and shall continue in effect through December 31 of the calendar year in which modified or revoked by a subsequent direction of the Board.  The provisions of this Section 4.03 shall not apply to Stock Units credited as a result of a Director’s deferral of cash fees pursuant to Section 4.02.

 

Section 4.04.  Involuntary Termination of Deferral Elections.

 

A Director’s deferral elections shall be automatically revoked upon the Director’s termination of service with the Participating Employers, unless the Committee determines otherwise in accordance with Code Section 409A.

 

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ARTICLE V.  PARTICIPANT ACCOUNTS, RESERVE ACCOUNT A, RESERVE ACCOUNT B, AND STOCK UNITS ACCOUNTS

 

Section 5.01.  Participant Accounts.

 

A record keeping Account will be maintained to record the interest of each Participant under the Plan.  An Account is established for record keeping purposes only and not to reflect the physical segregation of assets on the Participant’s behalf.  A Participant’s Account will consist of separate balances to record a Participant’s interest in each of the Investment Options, and to record the portion of a Participant’s overall Account that is attributable to deferrals and contribution credits made and vested prior to January 1, 2005, together with any earnings or loss thereon through the date of distribution from the Plan (the “Pre-2005 Account”), and the portion of the Participant’s overall Account that is attributable to deferrals and contribution credits made or vested after December 31, 2004, together with any earnings or loss thereon through the date of distribution from the Plan (the “Post-2004 Account”).  Further, a Participant’s Account will consistent of separate balances to record the portion of a Participant’s overall Account that is attributable to credits under Sections 3.06, 3.07 or 5.05, or any other credits, that are subject to a vesting schedule.  The Committee (or its delegate) may direct that a Participant’s Account include such additional sub-accounts and balances as the Committee (or its delegate) may determine to be necessary or appropriate.

 

Section 5.02.  Reserve Account A.

 

(a)           Limited Purpose Account.  Reserve Account A is limited to compensation or director fees attributable to employment or service with Wisconsin Public Service Corporation and that were deferred by a Participant prior to January 1, 1996, together with attributed earnings on such deferrals.  Except for attributed earnings as described below, no further deferrals, contributions or credits of any kind will be made to this account on behalf of a Participant, nor may a Participant transfer amounts from another Investment Option to Reserve Account A.  A Participant may transfer amounts credited to Reserve Account A to another available Investment Option, but the transferred amount may not subsequently be transferred back to Reserve Account A.

 

(b)           Crediting of Interest Equivalent.  Reserve Account A will be credited with an interest equivalent on the balance in the account from time to time during the year.  Unless the Committee prescribes an alternate method, the annual interest equivalent rate (on a non-compounded basis) will be the greater of:

 

(i)            six percent (6.0%); or

 

(ii)           a rate equal to the consolidated return on common shareholders’ equity of the Company and all consolidated subsidiaries (ROE); provided, however, that unless the Committee determines otherwise, this Paragraph (ii) will not apply to a Participant following termination of employment if the Participant’s termination of employment with the

 

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Company and its Affiliates occurs prior to attainment of age fifty-five (55) and prior to the occurrence of a Change in Control (as defined in Section 10.01).  For the months of April through September, ROE means the consolidated return on equity of the Company and all consolidated subsidiaries for the twelve (12) months ended on the preceding February 28 (or 29) 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 August 31.

 

(c)           Revised Rate.  Subject to Article X, the Committee may revise the interest equivalent rate 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 Committee.

 

Section 5.03.  Reserve Account B.

 

(a)           Availability.  Reserve Account B is an available Investment Option only with respect to eligible deferrals or contribution credits made prior to April 1, 2008.  Effective April 1, 2008, Reserve Account B is closed to new deferrals, contribution credits, or transfers from another Investment Option.  A Participant may transfer amounts credited to Reserve Account B to another available Investment Option, but the transferred amount may not subsequently be transferred back to Reserve Account B.

 

(b)           Crediting of Interest Equivalent.  Reserve Account B will be credited with an interest equivalent on the balance in the account from time to time during the year.  Unless the Committee prescribes an alternate method, the annual interest equivalent rate (on a non-compounded basis) will be the greater of:

 

(i)            six percent (6.0%); or

 

(ii)           a rate equal to seventy percent (70%) of the consolidated return on common shareholders equity of the Company and all consolidated subsidiaries (ROE); provided, however, that unless the Committee determines otherwise, this Paragraph (ii) will not apply to a Participant following termination of employment if the Participant’s termination of employment with the Company and its Affiliates occurs prior to attainment of age fifty-five (55) and prior to the occurrence of a Change in Control (as defined in Section 10.01).  For the months of April through September, ROE means the consolidated return on equity of the Company and all consolidated subsidiaries for the twelve (12)

 

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months ended on the preceding February 28 (or 29) 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 August 31.

 

(c)           Revised Rate.  Subject to Article X, the Committee may revise the interest equivalent rate 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 Committee.

 

Section 5.04.  Integrys Stock Units.

 

(a)           Locked and Discretionary Stock Units.  For purposes of the Plan, the term “Locked Stock Units” refers to the portion of a Participant’s Account that has been credited to the Plan in the form of Integrys Stock Units with respect to which the Participant is not able to exercise investment discretion or otherwise cause such amounts to be transferred to an alternate Investment Option.  The term “Discretionary Stock Units” refers to the portion of a Participant’s Account that, at any point in time, is deemed to be invested in Integrys Stock Units, but the Participant is permitted, in accordance with the rules of the Plan, to exercise investment discretion with respect to such amounts or to cause such amounts to be transferred to an alternate Investment Option.  The Locked Stock Units are described in subsection (b) below.  The Discretionary Stock Units are all Stock Units credited to the Participant’s Account, other than the Locked Stock Units.

 

(b)           Locked Stock Units.  The following are Locked Stock Units, meaning that the Participant is not able to exercise investment discretion, either with respect to the Stock Units that may be credited to the Participant’s Account from these sources, or with respect to any additional Stock Units that are credited as a result of the deemed payment of dividends or other distributions on such Stock Units:

 

(i)            Stock Units attributable to deferrals or contribution credits made prior to June 30, 2001 that, at the time of the deferral or contribution credits, were allocated to a Stock Unit Account (“Prior Plan Stock Units”).

 

(ii)           Stock Units attributable to Annual Bonus Deferrals made after June 30, 2001 and prior to April 1, 2008, if the Participant received the five percent (5%) premium for Annual Bonus Awards irrevocably directed to a Stock Unit Account (“Incentive Stock Units”).

 

(iii)          Stock Units attributable to deferral of Omnibus Plan performance shares the final award for which was made after June 30, 2001 and prior to April 1, 2008 (“Incentive Stock Units”).

 

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(iv)          Stock Units attributable to deferral of Omnibus Plan restricted stock that became vested prior to April 1, 2008 (“Restricted Stock Units”).

 

(v)           Stock Units attributable to deferral of Omnibus Plan restricted stock with vesting dates after March 31, 2008, but only until the date on which the Participant becomes vested in such Stock Units.  When the Participant’s interest in the Stock Units becomes vested, such Stock Units will become Discretionary Stock Units.

 

(vi)          Stock Units attributable to matching contribution credits made with respect to periods prior to January 1, 2008 under Section 3.05 (“Matching Contribution Stock Units”).

 

(vii)         Stock Units attributable to the portion of a Director’s compensation that, in accordance with Section 4.03, is automatically deemed to be invested in Stock Units with no ability on a part of an individual Director to elect an alternate form of deemed investment (“Director Stock Units”).

 

(viii)        Any amounts credited in the form of Stock Units under a predecessor deferred compensation plan (including, without limitation, the deferred compensation plans of Peoples Energy Corporation, the predecessor to Peoples Energy, LLC), if the Participant did not have the right, under such predecessor plan, to direct that the amount be transferred to an alternate deemed investment.

 

(ix)          Any other Stock Units that the Committee directs be treated as Locked Stock Units or that are required to be treated as Locked Stock Units pursuant to the terms of the employment contract, incentive program or other plan that sets forth the Participant’s entitlement to be credited with Stock Units under the Plan.

 

(c)           Crediting of Stock Units.

 

(i)            Awards or Credits Already Expressed in the Form of Integrys Stock.  With respect to any amount that is being credited under the Plan in the form of Stock Units and that, immediately prior to being credited to the Participant’s Stock Unit Account, is already expressed as an award of shares of Integrys Stock, e.g., Omnibus Plan performance shares or

 

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restricted stock awards, the Participant will be credited, on a one-for-one basis, with a number of Stock Units equal to the number of shares of Integrys Stock that are being deferred or credited under the Plan.

 

(ii)           Conversion of Other Awards or Credits to Stock Units.  With respect to any amount that is being credited under the Plan in the form of Stock Units and that, immediately prior to being credited to the Participant’s Stock Unit Account, is not expressed in the form of shares of Integrys Stock, the amount of the deferral or credit shall be converted, for record-keeping purposes, into whole and fractional Stock Units, with fractional units calculated to four decimal places.  Except as provided in subparagraph (iii) below with respect to Director Stock Units under Section 4.03, the conversion shall be accomplished by dividing the amount of the deferral or credit by the closing price of a share of Integrys Stock on the date on which the deferral or credit would otherwise have been paid to the Participant, as reported in the Wall Street Journal’s New York Stock Exchange Composite Transaction listing.

 

(iii)          Special Rule for Certain Director Stock Units.  All Stock Unit amounts directed by the Board in accordance with Section 4.03, for which the Director is not able to elect an alternate form of deemed investment, shall be credited to the Director’s Account in the form of Stock Units.  If the Board directs that a Director be credited with a prescribed number of Stock Units, the number of units so prescribed shall be credited to the Director’s Account as of January 1 of the calendar year following the date of the Board’s direction or at such other time as the Board may prescribe consistent with Code Section 409A.  If the Board directs that the Director be credited with Stock Units with a prescribed value, the amount or value prescribed by the Board will be converted, for record keeping purposes, into whole and fractional Stock Units as of January 1 of the calendar year following the date of the Board’s direction, or at such other time as the Board may prescribe consistent with Code Section 409A, with fractional units calculated to four decimal places.  The conversion shall be accomplished by dividing the amount or value designated by the Board by the closing price of a share of Integrys Stock on the business day immediately preceding the January 1 crediting date, as reported in the Wall Street Journal’s New

 

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York Stock Exchange Composite Transactions listing; provided that if the Board directs, consistent with Code Section 409A, that the Stock Units should be determined as of a date other than January 1, the conversion of the amount or value designated by the Board shall be determined based upon the closing price of a share of Integrys Stock on the date designated by the Board, or if that date is not a business day, on the immediately preceding business day.

 

(d)                                 Crediting of Additional Stock Units For Deemed Dividends and Similar Distributions.  Any dividends (or similar distribution) that would have been payable on the Stock Units credited to a Participant’s Stock Unit Account had such Stock Units been actual shares of Integrys Stock, if not already expressed in the form of shares of Integrys Stock or shares in another entity, shall be converted, for record keeping purposes, into whole and fractional Stock Units, with fractional units calculated to four decimal places.  The conversion shall be accomplished by dividing the amount of the dividend or distribution by the closing price of a share of Integrys Stock on the payment date for the dividend or distribution.

 

(e)                                  Conversion from Stock Units to Another Investment Option.  If a Participant elects under Section 6.01(d) to transfer all or any portion of his or her Discretionary Stock Units to an alternate Investment Option, the Stock Units to which such election relates shall be converted, for record keeping purposes, from Stock Units into an amount that is equal to the product obtained by multiplying the number of such Stock Units that are being transferred by the closing price of a share of Integrys Stock, on the effective date of such investment transfer, as reported in the Wall Street Journal’s New York Stock Exchange Composite Transaction listing.

 

(f)                                   Securities Law Restrictions.  Notwithstanding anything to the contrary herein, all transfer elections under Section 6.01(d) by a Participant who is subject to Section 16 of the Exchange Act are subject to review by the Committee prior to implementation.  Further, the following transfer transactions under Section 6.01(d) by a Participant who is subject to Section 16 of the Exchange Act are prohibited: (i) elections to transfer the deemed investment of the affected Participant’s Account into Stock Units within six (6) months of an election to reallocate deemed investments out of Stock Units; and (ii) elections to transfer the deemed investment of the affected Participant’s Account out of Stock Units within six (6) months of an election to reallocate deemed investments into Stock Units (collectively, “Prohibited Transactions”).  All Prohibited Transactions are void.  In accordance with Section 11.02, the Committee may restrict additional transactions, or impose other rules and procedures, to the extent deemed desirable by the Committee in order to comply with the Exchange Act, including, without limitation, application of the review and approval provisions of this Section 5.04(f) to Participants who are not subject to Section 16 of the Exchange Act.

 

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Section 5.05.  Special Rules Applicable to Restricted Stock or Stock Unit Deferrals.

 

Unless otherwise determined by the Committee, the Participant’s interest in Stock Units attributable to a deferral of an Omnibus Plan restricted stock or restricted stock unit award shall be subject to the same vesting or forfeiture conditions to which the Participant would have been subject if the Participant had received the restricted stock directly rather than electing to defer delivery of such shares.  Similarly, except with respect to dividend (or other distribution) credits that the Committee has determined are at all times fully vested and therefore are to be credited to a special Restricted Stock Dividend Account, the dividend (or distribution) credit shall be credited to the Participant in the form of additional Stock Units, in accordance with Section 5.04(d), and such additional Stock Units shall be subject to the same vesting or forfeiture conditions as apply with respect to the underlying Integrys Stock Units on which the dividend (or distribution) credit is based.

 

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ARTICLE VI.  ACCOUNTING AND HYPOTHETICAL INVESTMENT ELECTIONS

 

Section 6.01.  Hypothetical Investment of Participant Accounts.

 

(a)                                 Deemed Investment of All Deferrals and Contribution Credits Other Than Deferrals of Restricted Stock.

 

(i)            In accordance with uniform rules prescribed by the Committee, each Participant shall designate, in writing or in such other manner as the Committee may prescribe, how deferrals and other authorized contribution credits made while the designation is in effect, other than deferrals of restricted stock, are credited among the Investment Options.  When selecting more than one Investment Option, the Participant shall designate, in whole multiples of one percent (1%) or such other percentage determined by the Committee, the percentage to be credited to each of the available Investment Options.  If the Participant fails to make a timely and complete investment designation, the deferrals or other contribution credits for which there is not a valid investment election shall be credited to the same “lifecycle” fund that is or would be the default investment option for the Participant under the qualified defined contribution plan in which the Participant is eligible, or is such other Investment Option specified by the Committee for this purpose.

 

(ii)           For purposes of crediting a Participant’s deferral of an Omnibus Plan performance share award, or other award that is expressed in shares of Integrys Stock, among the Investment Options, the following rules shall apply.  With respect to the portion of the award that the Participant allocates into Stock Units, the Participant will be credited with Stock Units, on a one-for-one basis, in accordance with Section 5.04(c)(i).  With respect to the portion of the award that the Participant allocates to Investment Option(s) other than Stock Units, the amount to be credited to each Investment Option other than Stock Units will be determined by multiplying the number of shares of Integrys Stock that corresponds to the portion of the award that the Participant has allocated to that Investment Option by the closing price of a share of Integrys Stock on the date on which the deferral or credit would

 

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otherwise have been paid to the Participant, as reported in the Wall Street Journal’s New York Exchange Composite Transaction listing.

 

(iii)          A Participant’s investment election or deemed investment election shall become effective for deferrals and other contribution credits beginning with the first payroll period commencing or payment date occurring on or after the date on which the election is received and accepted by the Committee, or such other date established by the Committee for this purpose, and shall remain in effect for all future deferrals and contribution credits unless and until modified by a subsequent election that becomes effective in accordance with the rules of this subsection.  The Participant’s election under this Section 6.01(a) governs the deemed investment of deferrals and contribution credits made while the Participant’s election is in effect.  A Participant’s ability to transfer amounts that are deemed to be invested in one Investment Option to another Investment Option is governed by Section 6.01(d).

 

(b)                                 Deemed Investment of Restricted Stock Deferrals.  Restricted stock deferrals are credited to the Plan in the form of Locked Stock Units until vested, at which time such Stock Units will become Discretionary Stock Units.  The Participant is not permitted to make an investment election with respect to Locked Stock Units or to cause Locked Stock Units to be transferred to an alternate Investment Option.  A Participant may transfer Discretionary Stock Units to an alternate Investment Option in accordance with Section 6.01(d).

 

(c)                                  Allocation of Deemed Investment Gain or Loss.  On each day that the New York Stock Exchange is open for business, or at such other times as the Committee may prescribe (the “Valuation Date”), the Account of each Participant will be credited (or charged) based upon the investment gain (or loss) that the Participant would have realized with respect to his or her Account since the immediately preceding Valuation Date had the Account been invested in accordance with the terms of the Plan and where applicable, the Participant’s election.  Subject to the special rules set forth in Article V with respect to Reserve Account A, Reserve Account B, and Integrys Stock Units, the credit (or charge) shall be the sum, separately calculated for each of the Investment Options, of the product obtained by multiplying (i) the portion (if any) of the Participant’s Account as of the immediately prior Valuation Date that is deemed to have been invested in each Investment Option, and (ii) the rate of return experienced by that Investment Option since the immediately preceding Valuation Date.  The Committee, in its discretion, may prescribe alternate rules for the valuation of Participant Accounts, including, without limitation, the application of unit accounting principles.

 

(d)                                 Reallocation of Account. Subject to such restrictions as may be in effect or implemented pursuant to Section 5.04(f), and in accordance with rules prescribed by the Committee (which may include limitations on the

 

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timing or frequency of reallocation transactions initiated by some or all Participants), each Participant may elect to reallocate his or her Account (other than Locked Stock Units) among the available Investment Options; provided that no amounts may be allocated to Reserve Account A or Reserve Account B.  When selecting more than one Investment Option, the Participant shall designate, in whole multiples of one percent (1%) or such other percentage determined by the Committee, the percentage of his or her available Account that is deemed to be invested in each available Investment Option after the investment reallocation is given effect.  Once effective, a Participant’s reallocation shall remain in effect unless and until modified by a subsequent election that becomes effective in accordance with the rules prescribed by the Committee.  Other than a reallocation of a Participant’s Account pursuant to a revised investment election submitted by the Participant, the deemed investment allocation of a Participant will not be adjusted to reflect differences in the relative investment return realized by the various hypothetical Investment Options that the Participant has designated.

 

Section 6.02.  Accounts are For Record Keeping Purposes Only.

 

Plan Accounts and the record keeping procedures described herein 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.   Each Participating Employer shall record on its books the amount of deferrals of compensation made hereunder (as adjusted for gains and losses thereon) by a Participant that are attributable to the services performed by such Participant for such Participating Employer and the Participating Employer shall be responsible for the payment thereof.  In any event, a Participating Employer may, in its discretion, set aside assets and/or contribute to the Trust assets equal to part or all of such account balances that are attributable to it and invest such assets in Integrys Stock, life insurance or any other investment deemed appropriate.  Any such assets held by a Participating Employer or the Trust shall be and remain the sole property of the Participating Employer or the Trust, as applicable, and except to the extent that the Trust authorizes a Participant to direct the trustee with respect to the voting of Integrys Stock held in the Trust, a Participant shall have no proprietary rights of any nature whatsoever with respect to such assets.

 

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ARTICLE VII.  DISTRIBUTION OF PRE-2005 ACCOUNT

 

Section 7.01.  Distribution Election.

 

(a)                                 Election.  A Participant, at the time he or she commenced participation in the Plan, made a distribution election with respect to his or her Pre-2005 Account.  The election specified the distribution commencement date, the distribution period, and the distribution method applicable following the Participant’s death.  Any such election was required to be consistent with the following rules (or if the Participant failed to make a selection with respect to a particular item, 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 seventy two (72), distribution of a Participant’s Pre-2005 Account will commence either (A) within sixty (60) days following the end of the calendar year in which the Participant terminates employment or service from the Company and all Affiliates, or (B) if determined by the Committee to be consistent with the “grand-father” rules of Code Section 409A and if directed by the Committee for purposes of creating administratively consistency between the distribution provisions of Articles VII and VIII, within sixty (60) days following the end of the calendar year in which occurs the six (6) month anniversary of the date on which the Participant terminates employment or service from the Company and all Affiliates.  For purposes of this Plan, a Participant 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, unless otherwise determined by the Committee.

 

(ii)           Distribution Period.  Distributions will be made in one (1) to fifteen (15) annual installments, as elected by the Participant.

 

(iii)          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 Participant’s Beneficiary in accordance with the distribution election (single sum payment or installments) elected by the Participant.  If the Participant had elected a single sum, the payment shall be made no later than March 1 following

 

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the calendar year in which occurs the Participant’s death.  If the Participant had elected an installment distribution, (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.

 

(b)                                 Effectiveness of Election.  A distribution election shall be deemed made only when it is received and accepted as complete by the Committee, and shall remain in effect until modified by the Participant in accordance with Section 7.02 below or otherwise revoked in accordance with Plan rules.

 

Section 7.02.  Modified Distribution Election.

 

A Participant may from time to time modify his or her distribution election by filing a revised distribution election, properly completed and signed, with the Committee.  However, a revised distribution election will be given effect only if the Participant remains employed by a Participating Employer for twelve (12) consecutive months following the date that the revised election is received and accepted as complete by the Committee.

 

Section 7.03.  Calculation of Annual Distribution Amount.

 

(a)                                 Pre-2001 Retirees.  For any Participant who retired or terminated employment or service prior to January 1, 2001, distribution of the Participant’s Account will be calculated and made under the distribution provisions of the Plan applicable to the Participant on the date of the Participant’s retirement or termination of employment or service.

 

(b)                                 Post-2000 Retirees.  For a Participant who retires or terminates employment or service after December 31, 2000, the annual distribution amount for the Pre-2005 Account, unless the Committee specifies a different or alternate method and such different or alternate method does not result in the imposition of tax under Code Section 409A, shall be calculated as follows:

 

(i)            The annual distribution amount for the Participant’s Pre-2005 Account, other than the portion of the Pre-2005 Account that is deemed to be invested in Stock Units (the “Distributable Account”), shall be determined by dividing (A) the aggregate balance in the Distributable Account as of January 1 of the year for which the distribution is being made, by (B) the number of installment payments remaining to be made under the distribution period selected by the Participant.

 

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Distributions shall be made in cash.  The amount of any distribution under this Paragraph (i) will be charged pro-rata against the Participant’s interest in each Investment Option comprising the Distributable Account.  Notwithstanding the foregoing, the last installment payment of the Distributable Account shall be adjusted to take into account deemed investment gains or losses for the period between the January 1 valuation date and the date of actual payment according to such methods and procedures adopted by the Committee.

 

(ii)           The annual distribution amount for the portion of the Participant’s Pre-2005 Account that is credited in the form of Stock Units shall be determined on a share basis by dividing (A) the number of Integrys Stock Units as of January 1 of the year for which the distribution is being made (subject to subsequent adjustment under Section 9.02), by (B) the number of installment payments remaining to be made under the distribution period selected by the Participant. The Participant will receive shares of Integrys Stock equal to the annual distribution amount, subject only to the distribution of cash in lieu of any fractional Integrys Stock Unit.  The cash payment for any fractional Integrys Stock Unit shall be determined based upon the closing price of a share of Integrys 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 distribution will be made based upon the closing price as reported for the immediately preceding business day.

 

Section 7.04.  Time of Distribution.

 

Subject to the provisions of Sections 9.02 and 10.02, each distribution of Integrys Stock made to a Participant (or Beneficiary) shall be distributed on January 22 (or if January 22 falls on a Saturday, Sunday or holiday, the following business day).  For distribution and tax reporting purposes, the value of Integrys Stock distributed shall equal the number of shares distributed multiplied by the closing price of Integrys Stock on January 21 (or if January 21 falls on a Saturday, Sunday or holiday, the 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.

 

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Section 7.05.  Single Sum Distribution at the Committee’s Option.

 

(a)                                 In the case of a Participant whose employment with the Company and its Affiliates is involuntarily terminated by the Company or an Affiliate, or whose employment with the Company and its Affiliates is mutually terminated in accordance with a separation agreement and release between the Company or an Affiliate and such Participant, the Committee may (but need not) direct that the Participant’s Pre-2005 Account be distributed in the form of a single sum payment in lieu of distribution over any installment distribution period that would otherwise apply.  If so directed by the Committee, the single sum distribution shall be made in cash and/or shares of Integrys Stock (as determined in accordance with Section 7.03) and shall be made at the time specified in Section 7.04.

 

(b)                                 In the case of any other Participant or Beneficiary whose Pre-2005 Account has a value of one hundred thousand dollars ($100,000) or less as of the valuation date that immediately precedes the date on which distribution would first be made to the Participant or Beneficiary, the Committee may (but need not) direct that the Participant’s Pre-2005 Account be distributed in the form of a single sum payment in lieu of any installment distribution period that would otherwise apply.  If so directed by the Committee, the single sum distribution shall be made in cash and/or shares of Integrys Stock (as determined in accordance with Section 7.03) and shall be made at the time specified in Section 7.04.

 

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ARTICLE VIII.  DISTRIBUTION OF POST-2004 ACCOUNT

 

Section 8.01.  Distribution Election.

 

(a)           Election.  A Participant, on or before December 31, 2008 or if later, at the time he or she commences participation in the Plan, shall make a distribution election with respect to his or her Post-2004 Account (other than the portion of the Post-2004 Account, if any, that is described in subsection (c) below).  The election shall be in such form as the Committee shall prescribe, and shall specify the distribution commencement date, the distribution period, and the distribution method applicable following the Participant’s death.  Any such election shall be consistent with the following rules (or if the Participant fails to make a selection with respect to a particular item, in accordance with the default rules set forth below):

 

(i)                                     Distribution Commencement Date.  Unless the Participant has selected a later commencement date, distribution of a Participant’s Post-2004 Account will commence within sixty (60) days following the end of the calendar year in which occurs the six (6) month anniversary of the Participant’s Separation from Service.

 

(ii)                                  Distribution Period.  Distributions will be made in one (1) to fifteen (15) annual installments, as elected by the Participant.  The default is one (1) annual installment. For purposes of applying the rules of Code Section 409A, a Participant’s election of annual installments is treated as an election of a single form of payment rather than an election of multiple separate payments.

 

(iii)                               Distribution of Remaining Account Following Participant’s Death.  In the event of the Participant’s death, the Participant’s remaining undistributed interest in his or her Post-2004 Account will be distributed to the Participant’s Beneficiary in accordance with the distribution election (single sum payment or installments) elected by the Participant.  If the Participant had elected 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 had elected an installment distribution, (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

 

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Participant shall commence to the Beneficiary no later than March 1 following the calendar year in which occurs the Participant’s death.

 

(b)           Effectiveness of Election.  A distribution election shall be deemed made only when it is received and accepted as complete by the Committee, and shall remain in effect until modified by the Participant in accordance with Section 8.02 below or otherwise revoked in accordance such circumstances as the Plan is permitted (and elects) to accept without resulting in the imposition of tax under Code Section 409A.

 

(c)           Coordination With Distributions Under Pension Restoration and Supplemental Retirement Plan.  In the case of a Participant who receives credits under this Plan that constitute Special Defined Contribution Credits (as that term is defined in the Integrys Energy Group, Inc. Pension Restoration and Supplemental Retirement Plan), the Participant’s actual or deemed distribution election shall not apply to the portion of the Participant’s Post-2004 Account that is attributable to Special Defined Contribution Credits (together with any earnings or loss thereon).  The portion of a Participant’s Post-2004 Account that is attributable to Special Defined Contribution Credits (together with any earnings or loss thereon) will be distributed in accordance with the Participant’s actual or deemed distribution election under the Integrys Energy Group, Inc. Pension Restoration and Supplemental Retirement Plan.  With respect to any Participant who receives Special Contribution Credits, any references in this Article VIII to the Participant’s Post-2004 Account shall mean the Participant’s Post-2004 Account, exclusive of such Special Contribution Credits (and any earnings or loss thereon).

 

Section 8.02.  Modified Distribution Election.

 

A Participant may from time to time modify his or her distribution election with respect to his or her Post-2004 Account by filing a revised distribution election, properly completed and signed, with the Committee.  However, except to the extent permitted under regulations promulgated by the Secretary of the Treasury under Code Section 409A, a revised distribution election must comply with the following rules:

 

(a)           The revised distribution election may not accelerate the time of payment in violation of Code Section 409A.  For example, a revised distribution election may not elect a distribution commencement date earlier than the distribution commencement date applicable under the Participant’s prior distribution election.  A revised election that does not comply with these rules will be null and void, and will be disregarded by the Plan.

 

(b)           The revised distribution election may (i) change the form of payment from a single sum payment to installment distributions, (ii) from installment distributions to a single sum distribution, (iii) from one installment period to a different installment period, or (iv) defer the distribution commencement date, and such a revised election will be given effect twelve (12) months after the date on which the election is made, but only if (i) the revised election is made at least twelve (12) months prior to the date on which payment would be made or commence in the absence of the revised election, and (ii) in the case of any election other than one related to payment on account of Disability or death, the first payment that is made pursuant to the revised election is deferred

 

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for at least five (5) years from the date payment would otherwise have been made.  For purposes of Code Section 409A, the installment payment option is considered to be a single form of payment rather than a series of independent payments.  A revised election that does not comply with these rules will be null and void, and will be disregarded by the Plan.

 

Section 8.03.  Calculation of Annual Distribution Amount.

 

The annual distribution amount for the Post-2004 Account shall be calculated as follows:

 

(a)           The annual distribution amount for the Participant’s Post-2004 Account, other than the portion of the Post-2004 Account that is deemed to be invested in Stock Units (the “Distributable Account”), shall be determined by dividing (A) the aggregate balance in the Distributable Account as of January 1 of the year for which the distribution is being made, by (B) the number of installment payments remaining to be made under the distribution period selected by the Participant.  Distributions shall be made in cash.  The amount of any distribution under this subsection (a) will be charged pro-rata against the Participant’s interest in each Investment Option comprising the Distributable Account.  Notwithstanding the foregoing, the last installment payment of the Distributable Account shall be adjusted to take into account deemed investment gains or losses for the period between the January 1 valuation date and the date of actual payment according to such methods and procedures adopted by the Committee.

 

(b)           The annual distribution amount for the portion of the Participant’s Post-2004 Account that is credited in the form of Stock Units shall be determined on a share basis by dividing (A) the number of Integrys Stock Units as of January 1 of the year for which the distribution is being made (subject to subsequent adjustment under Section 9.02), by (B) the number of installment payments remaining to be made under the distribution period selected by the Participant. The Participant will receive shares of Integrys Stock equal to the annual distribution amount, subject only to the distribution of cash in lieu of any fractional Integrys Stock Unit.  The cash payment for any fractional Integrys Stock Unit shall be determined based upon the closing price of a share of Integrys 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 distribution will be made based upon the closing price as reported for the immediately preceding business day.

 

Section 8.04.  Time of Distribution.

 

Subject to the provisions of Sections 9.02 and 10.02, each distribution of Integrys Stock made to a Participant (or Beneficiary) 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 Integrys Stock distributed shall equal the number of shares distributed multiplied by the closing price of Integrys Resources Stock on January 21 (or if January 21 falls on a Saturday, Sunday or holiday, the immediately preceding business

 

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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 8.05.  Automatic Single Sum Distribution.

 

In the case of any Participant or Beneficiary whose Post-2004 Account has a value equal to or less than the applicable dollar amount under Code Section 402(g)(1)(B), the Participant’s Post-2004 Account will be distributed in the form of a single sum payment on the date on which distributions would otherwise commence, and such single sum payment shall be in lieu of any installment distribution period that would otherwise apply.  Unless otherwise directed by the Committee, the single sum distribution shall be made in cash and/or shares of Integrys Stock (as determined in accordance with Section 8.03).  The foregoing rule shall apply only if (1) the payment results in the termination of liquidation of the Participant’s entire interest in his or her Post-2004 Account and his or her entire interest in all other plans, programs or arrangements that are required to be aggregated with the Participant’s Post-2004 Account for purposes of Code Section 409A, and (2) the payment is not greater than the applicable dollar amount under Code Section 402(g)(1)(B).

 

Section 8.06.  Distributions For Employment Tax Obligations.

 

(a)           Notwithstanding the time or schedule of payments otherwise applicable to the Participant, the Committee may direct that distribution from a Participant’s Account be made (i) to pay the Federal Insurance Contributions Act (“FICA”) tax imposed under Code Sections 3101, 3121(a) and 3121(v)(2) with respect to compensation deferred under the Plan, (ii) to pay the income tax at source on wages imposed under Code Section 3401 or the corresponding withholding provisions of applicable state, local, or foreign tax laws as a result of the payment of FICA taxes, and (iii) to pay the additional income tax at source on wages attributable to the “pyramiding” of Code Section 3401 wages and taxes; provided that the total amount distributed under this provision must not exceed the aggregate of the FICA tax and the income tax withholding related to such FICA tax.  In addition or in the alternative, the Committee may direct that all FICA taxes owed in connection with any allocation hereunder be withheld from other compensation owed to the Participant.

 

(b)           The amount actually distributed to the Participant in accordance with the time or schedule of payments applicable to the Participant will be reduced by applicable tax withholding except to the extent such withholding requirements previously were satisfied in accordance with subsection (a) above.

 

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ARTICLE IX.  RULES WITH RESPECT TO INTEGRYS STOCK AND INTEGRYS STOCK UNITS

 

Section 9.01.  Relationship to Shares Authorized Under Omnibus Plan.

 

Distribution of shares of Integrys Stock that are attributable to LTIP Deferrals that relate to an award that was made under the Omnibus Plan (or that relate to Director Deferred Stock Units granted on or after January 1, 2011 under Section 4.03) will be charged against the pool of available shares under the Omnibus Plan, i.e., the plan under which the share award was originally granted and from which the share award would have been paid except for the Participant’s election (or the Board’s direction) to defer delivery of the shares.

 

Section 9.02.  Transactions Affecting Integrys Stock.

 

In the event of any merger, share exchange, reorganization, consolidation, recapitalization, stock dividend or stock split involving Integrys Stock, or other event in which Integrys Stock is subdivided or combined, or a cash dividend the amount of which, on a per share basis, exceeds, fifteen percent (15%) of the fair market value of a share of Integrys Stock at the time the dividend is declared, or the Company shall effect any other dividend or other distribution of Integrys Stock that the Board determines by resolution is extraordinary or special in nature or that is in connection with a transaction that the Company characterizes publicly as a recapitalization or reorganization of Integrys Stock or words of similar import, or any other event shall occur, which, in the judgment of the Committee necessitates an adjustment to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under this Plan, the Committee shall make appropriate equitable adjustments with respect to the Integrys Stock Units (if any) credited to the Account of each Participant.  The nature of any such adjustment shall be determined by the Committee, in its discretion.

 

Section 9.03.  No Shareholder Rights With Respect to Integrys Stock Units.

 

Participants shall have no rights as a stockholder pertaining to Integrys Stock Units credited to their Accounts.  No Integrys Stock Unit nor any right or interest of a Participant under the Plan in any Integrys 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 Integrys Stock Unit are exercisable during the Participant’s lifetime only by the Participant or his or her guardian or legal representative.

 

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ARTICLE X.  SPECIAL RULES APPLICABLE IN THE EVENT OF A CHANGE IN CONTROL OF THE COMPANY

 

Section 10.01.  Definitions.

 

For purposes of this Article X, the following terms shall have the following respective meanings:

 

(a)           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 ten percent (10%) 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.

 

(b)           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, or other 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 any rights agreement that the Company may have in effect 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

 

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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 Paragraph (ii) above) or disposing of any voting securities of the Company.

 

(c)           A “Change in Control” shall be deemed to have occurred if:

 

(i)                                    any Person (other than any employee benefit plan of the Company or 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 thirty percent (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 fifty percent (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 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

 

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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.

 

(d)           “Continuing Directors” means (i) any member of the Board of Directors of the Company who was a member of such Board on the effective date of this amendment and restatement, (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 or recommended for membership by a majority of the Continuing Directors then on such Board.

 

(e)           “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; provided, that in the case of a merger, consolidation or reorganization of the Company with any other corporation or a share exchange involving the Company, the shareholders of the other corporation that is a party to the merger, consolidation, reorganization or share exchange shall not be considered to be acting in concert for purposes of Section 10.01(c)(i).

 

Section 10.02.  Amendments in Connection with a Change in Control.

 

(a)           Board Authority to Amend Plan.  Prior to the occurrence of a Change in Control, the Board may exercise its authority under Section 11.06 to amend the Plan, including, to the extent deemed necessary or desirable by the Board in anticipation of a Change in Control, to amend the Plan to eliminate Integrys Stock Units and cause the value of such units as of the Amendment Date (such value to be determined under Section 5.04(e)) to be reallocated to an alternate Investment Option that is then available for new investments and that is most similar to a fixed income fund.  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.

 

(b)           Automatic Amendments.  The Plan shall automatically be amended upon a Change in Control to provide that:

 

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(i)                                     the rate of interest equivalent to be credited with respect to Reserve Account A for each month following the Change in Control shall be the greater of (A) the rate of interest equivalent otherwise applicable with respect to Reserve Account A if such amount were 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 consolidated subsidiaries, or (B) a rate equal to two (2) percentage points above the prime lending rate at US Bank Milwaukee, Milwaukee, Wisconsin (or any successor thereto) as of the last business day of that month; and

 

(ii)                                  the rate of interest equivalent to be credited with respect to Reserve Account B for each month following the Change in Control shall be the greater of (A) the rate of interest equivalent otherwise applicable with respect to Reserve Account B if such amount were 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 consolidated subsidiaries, or (B) a rate equal to two (2) percentage points above the prime lending rate at US 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) 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 (including for this purpose any successor corporation or entity that is the survivor of a merger with the Company), or by any subsidiary or affiliate of the Company or such successor, on such date.

 

(c)           Prohibition on Certain Amendments.  Notwithstanding the foregoing, on or after a Change in Control, the Board or Company (including for this purpose any successor corporation or entity that is the survivor of a merger with the Company or to which sponsorship of the Plan is transferred following a Change in Control, or the board of directors or other managing body of any such entity) may not, without the written consent of the affected Participant (or in the case of a deceased Participant, the Participant’s Beneficiary) amend the Plan or take an action to terminate the Plan that would:

 

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(i)                                     Result in a decrease in the number of, or a change in the type of, Investment Options that were made available under the Plan immediately prior to the Change of Control; provided that the Plan may be amended to eliminate Integrys Stock Units as an Investment Option so long as the value of the Participant’s Integrys Stock Units are immediately credited to the Participant’s Account for investment in one or more of the remaining Investment Options as elected by the Participant, or

 

(ii)                                  Cause the Accounts to be valued under Section 6.01(c) less frequently than quarterly; or

 

(iii)                               Impair or otherwise limit a Participant’s rights to reallocate his or her Accounts under Section 6.01(d) as in effect on the date immediately prior to the Change in Control; or

 

(iv)                              Decrease the interest rate credited under Reserve Account A or Reserve Account B as determined pursuant to subsection (b) above, except as specifically provided therein;

 

(v)                                 Eliminate or reduce the distribution options made available under Articles VII and VIII or otherwise terminate any distribution elections then in effect; or

 

(vi)                              Modify the provisions of Article X in a manner detrimental or potentially detrimental to a Participant (or Beneficiary), except and only to the extent that modification is necessary to comply with applicable law.

 

Section 10.03.  Acceleration of Certain Vesting.

 

If a Change in Control occurs and the Participant’s employment or service with the Company and its Affiliates is involuntarily terminated for any reason other than Cause (or, in the case of a Participant who has in effect an employment, retention, change in control, severance or similar agreement with the Company or any Affiliate that provides for “good reason” termination and the Participant, in accordance with such agreement, terminates employment or service for “good reason”) within two years following the date of the Change in Control, then the Participant shall be fully vested in the portion of the Participant’s Account that is not otherwise vested at the time of the Participant’s termination of employment.

 

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Section 10.04.  Maximum Payment Limitation.

 

(a)           Limit on Payments.  Except as provided in subsection (b) below, if any portion of the payments or benefits described in this Plan or under any other agreement with or plan of the Company or its Affiliates (in the aggregate, “Total Payments”), would constitute an “excess parachute payment” that is subject to the tax imposed by Section 4999 of the Code, 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; provided that this Section 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.  The terms “excess parachute payment” and “parachute payment” shall have the meanings assigned to them in Section 280G of the Code, and such “parachute payments” shall be valued as provided therein.  Present value shall be calculated in accordance with Section 280G(d)(4) of the Code.  Within forty (40) 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, 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 the Participant’s 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.  As used in this Section, 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.  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, 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 so that there will be no excess parachute payment.  Such reduction will be achieved by reducing or eliminating payments or benefits in the manner that produces the highest economic value to the Participant; provided that in the event it is determined that the foregoing methodology for reduction would violate Section 409A of the Code, the reduction shall be made pro rata among the benefits and/or payments (on the basis of the relative present value of the parachute payments).  If such legal counsel so requests in connection with the opinion required by this Section, 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

 

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and 4999 of the Code (or any successor provisions) are repealed without succession, then this Section shall be of no further force or effect.

 

(b)           Employment Contract Governs.  The provisions of subsection (a) above shall not apply to a Participant whose employment is governed by an employment contract that provides for Total Payments in excess of the limitation described in subsection (a) above.

 

Section 10.05.  Resolution of Disputes.

 

If, after a Change in Control, (a) a dispute arises with respect to the enforcement of the Participant’s rights under the Plan, or (b) 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 US 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 therefore and reasonable substantiation that such Expense has been incurred, (but in no event later than the end of the calendar year following the calendar year in which such Expense is incurred), 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 shall apply with respect to the Participant’s Beneficiary or estate.

 

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ARTICLE XI.  GENERAL PROVISIONS

 

Section 11.01.  Administration.

 

The 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 Committee shall consist of not less than two members of the Board, each of whom is also a director of the Company and qualifies as a “non-employee director” for purposes of Rule 16b-3.  If at any time the 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 Exchange Act shall be made by the full Board, and all determinations affecting other Participants shall be made by the Board or a duly designated officer of the Board.  The Committee may, in its discretion, delegate any or all of its authority and responsibility; provided that the Committee shall not delegate authority and responsibility with respect to non-ministerial functions that relate to the participation by Participants who are subject to Section 16 of the Exchange Act at the time any such delegated authority or responsibility is exercised.  To the extent of any such delegation, any references herein to the Committee shall be deemed references to such delegee.  Interpretation of the Plan shall be within the sole discretion of the Committee and shall be final and binding upon each Participant and Beneficiary.  The Committee has the discretionary authority to adopt and modify rules and regulations relating to the Plan, interpret and construe the Plan and make determinations regarding eligibility and benefits,  as it deems necessary or advisable for the administration of the Plan; any such action, interpretation, construction or determination shall be final and binding on all Participants and Beneficiaries unless determined by a court of competent jurisdiction to be arbitrary and capricious.  If any delegee of the Committee shall also be a Participant or Beneficiary, any determinations affecting the delegee’s participation in the Plan shall be made by the Committee.  The Plan shall be interpreted to comply with the requirements of Section 409A of the Code with respect to any benefit that is subject to the requirements of such Section of the Code.

 

Section 11.02.  Restrictions to Comply with Applicable Law.

 

(a)           General Restrictions.  Notwithstanding any other provision of the Plan, the Company shall have no liability to deliver any shares of Integrys Stock under the Plan or make any payment unless such delivery or payment would comply with all applicable laws and the applicable requirements of any securities exchange or similar entity (and all applicable requirements of the Omnibus Plan, with respect to any shares of Integrys Stock that relate to awards made under that plan).  In addition, transactions under the Plan are intended to comply with all applicable conditions of Rule 16b-3 under the Exchange Act.  The Committee shall administer the Plan so that transactions under the Plan will be exempt from Section 16 of the Exchange Act, and shall have the right to restrict any transaction, or impose other rules and requirements, to the extent it deems necessary or desirable for such exemption to be met.

 

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(b)           Restriction on Transfer.  Shares of Integrys Stock issued under the Plan may not be sold or otherwise disposed of except (i) pursuant to an effective registration statement under the Act, or in a transaction which, in the opinion of counsel for the Company, is exempt from registration under the Act; and (ii) in compliance with state securities laws.  Further, as a condition to issuance of shares of Integrys Stock under the Plan (including shares of Integrys Stock originally granted under the Omnibus Plan but distributed under this Plan), the Participant, his or her Beneficiary or his or her heirs, legatees or legal representatives, as the case may be, shall, if the Committee deems it necessary, execute and deliver to the Company a restrictive stock transfer agreement in such form, and subject to such terms and conditions, as shall be reasonably determined or approved by the Committee, which agreement, among other things, may impose certain restrictions on the sale or other disposition of any shares of stock acquired under the Plan. The Committee may waive the foregoing restrictions, in whole or in part, in any particular case or cases or may terminate such restrictions whenever the Committee determines that such restrictions afford no substantial benefit to the Company.

 

(c)           Additional Restrictions; Legends.  All shares of Integrys Stock delivered under the Plan (including shares of Integrys Stock originally granted under the Omnibus Plan but distributed under this Plan) shall be subject to such stock transfer orders and other restrictions as the Committee may deem advisable under the Plan, the Omnibus Plan, and any applicable federal or state securities laws, and the Committee may cause a legend or legends to be put on any certificates to make appropriate references to such restrictions.

 

Section 11.03.  Claims Procedures.

 

(a)           If a Participant or Beneficiary (the “claimant”) believes that he is entitled to a benefit under the Plan that is not provided, the claimant or his or her legal representative shall file a written claim for such benefit with the Committee no later than ninety (90) days after the first payment is made (or should have been made) in accordance with the terms of the Plan or under Regulations issued by the Secretary of the Treasury under Code Section 409A.  If the Committee denies the claim, it shall deliver to the claimant, within one hundred thirty five (135) days of the date the first payment to the Participant was made (or should have been made) in accordance with the terms of the Plan or under Regulations issued by the Secretary of the Treasury under Code Section 409A, a written notice to the claimant of such denial.  The written notice shall include the specific reason(s) for the denial; reference to specific Plan provisions upon which the denial is based; a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and a description of the Plan’s review procedures (as set forth in subsection (b)) and the time limits applicable to such procedures, including a statement of the claimant’s right to bring a civil action under section 502(a) of ERISA following an adverse determination upon review.

 

(b)           The claimant has the right to appeal the Committee’s decision by filing a written appeal with the Committee.  Notice of the appeal must be received by the Committee no later than one hundred eighty (180) days after the first payment is made (or should have been made) in accordance with the terms of the Plan or under

 

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Regulations issued by the Secretary of the Treasury under Code Section 409A.  The claimant will have the opportunity, upon request and free of charge, to have reasonable access to and copies of all documents, records and other information relevant to the claimant’s appeal.  The claimant may submit written comments, documents, records and other information relating to his or her claim with the appeal.  The Committee will review all comments, documents, records and other information submitted by the claimant relating to the claim, regardless of whether such information was submitted or considered in the initial claim determination.  The Committee shall make a determination on the appeal within sixty (60) days after receiving the claimant’s written appeal; provided that the Committee may determine that an additional sixty (60)-day extension is necessary due to circumstances beyond the Committee’s control, in which event the Committee shall notify the claimant prior to the end of the initial period that an extension is needed, the reason therefore and the date by which the Committee expects to render a decision. If the claimant’s appeal is denied in whole or part, the Committee shall provide written notice to the claimant of such denial.  The written notice shall include the specific reason(s) for the denial; reference to specific Plan provisions upon which the denial is based; a statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to and copies of all documents, records, and other information relevant to the claimant’s claim; and a statement of the claimant’s right to bring a civil action under section 502(a) of ERISA.

 

(c)           Notwithstanding anything in the Plan to the contrary, and as a condition of participating in the Plan, a Participant agrees, on behalf of the Participant and all persons or entities that may claim through the Participant, that (1) any claim for benefits or other legal action or legal proceeding concerning the Plan may be brought more than one (1) year after the later of (A) the last date on which the act or omission giving rise to the claim, legal action or other legal proceeding occurred, or (B) the date the individual or entity bringing such claim, legal action or other legal proceeding had knowledge (or reasonably should have had knowledge) of the act or omission, and (2) that any legal action or legal proceeding concerning the Plan may only be heard in a “bench” trial and that any right to a jury trial is waived.

 

Section 11.04.  Participant Rights Unsecured.

 

(a)           Unsecured Claim.  With respect to deferrals of compensation for services performed for a Participating Employer (as adjusted for gains or losses thereon), the right of a Participant or the Participant’s Beneficiary to receive a distribution hereunder shall be an unsecured claim with respect to such Participating Employer, and neither the Participant nor any Beneficiary shall have any rights in or against any amount credited to his or her Account with respect thereto 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 the Participant or his or her guardian or legal representative.

 

(b)           Contractual Obligation.  The Company may authorize the creation of a trust or other arrangements to assist it in meeting the obligations created under the Plan, subject to the restrictions on funding imposed by Code

 

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Section 409A(b)(3).  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, or as providing a Participant with a right to continue employment with a Participating Employer.

 

Section 11.05.  Income Tax Withholding.

 

The amount actually distributed to the Participant will be reduced by applicable income tax withholding (if any).  Unless the Participant has made a contrary election with the consent of the Committee, income tax on the entire annual distribution amount will be withheld from the cash portion of the distribution, and Integrys Stock will be used to satisfy withholding obligations only to the extent that the cash portion of the distribution is insufficient for this purpose.  No later than the date as of which an amount first becomes includible in the income of the Participant for employment tax purposes, the Participant shall pay or make arrangements satisfactory to the Committee regarding the payment of any such tax.  In addition, if prior to the date of distribution of any amount hereunder, the Federal Insurance Contributions Act (FICA) tax imposed under Code Sections 3101, 3121(a) and 3121(v)(2), where applicable, becomes due, the Company may direct that the Participant’s benefit be reduced to reflect the amount needed to pay the Participant’s portion of such tax.

 

Section 11.06.  Amendment or Termination of Plan.

 

(a)           There shall be no time limit on the duration of the Plan.

 

(b)           Except as otherwise limited pursuant to Section 10.02 on or after a Change in Control, the Board may at any time amend the Plan, including but not limited to modifying the terms and conditions applicable to (or otherwise eliminating) deferrals or contribution credits to be made on or after the amendment date; provided, however, that no amendment or termination may reduce or eliminate any Account balance accrued to the date of such amendment or termination (except as such Account balance may be reduced as a result of investment losses allocable to such Account).  Further, the Corporation’s Vice President of Human Resources (or any successor to such position) is authorized to amend the Plan to the extent that such amendment is determined to be necessary or desirable in order to comply or facilitate compliance with the requirements of Code Section 409A or other applicable law; or that is otherwise desirable to promote efficient Plan administration; provided that any such amendment shall not increase Plan benefits or result in non-ministerial action that is prohibited under Section 11.01.

 

(c)           The Board may terminate the Plan (or the Plan shall automatically terminate) in accordance with the following provisions.  Upon termination of the Plan, Accounts may be paid to Participants and Beneficiaries, but only if the following are met:

 

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(i)            The Board terminates the Plan within twelve (12) months of a corporate dissolution taxed under Code Section 331, or with the approval of a bankruptcy court pursuant to 11 U.S.C. §503(b)(1)(A), and the amounts accrued under the Plan but not yet paid are distributed to the Participants or Beneficiaries, as applicable, in a single sum payment, regardless of any distribution election then in effect, by the latest of: (A) the last day of the calendar year in which the Plan termination and liquidation occurs, (B) the last day of the calendar year in which the amount is no longer subject to a substantial risk of forfeiture, or (C) the last day of the first calendar year in which payment is administratively practicable.

 

(ii)           The Board terminates the Plan at any time during the period that begins thirty (30) days prior and ends twelve (12) months following a Change of Control Event (as defined for purposes of Code Section 409A), provided that all arrangements required to be aggregated with this Plan under Code Section 409A are terminated and liquidated with respect to each Participant that experienced the Change in Control Event, so that all participants under similar arrangements are required to receive all amounts of compensation deferred under the terminated arrangements within twelve (12) months of the date of termination of the arrangements.

 

(iii)          The Board terminates the Plan at any other time, provided that such termination does not occur proximate to a downturn in the financial health of the Company or an Affiliate. In such event, all amounts accrued under the Plan but not yet paid will be distributed to all Participants or Beneficiaries, as applicable, in a single sum payment no earlier than twelve (12) months (and no later than twenty-four (24) months) after the date of termination, regardless of any distribution election then in effect.  This provision shall not be effective unless all other plans required to be aggregated with this Plan under Code Section 409A are also terminated and liquidated.  Notwithstanding the foregoing, any payment that would otherwise be paid during the twelve (12)-month period beginning on the Plan termination date pursuant to the terms of the Plan shall be paid in accordance with such terms.  In addition, the Company or any Affiliate shall be prohibited from adopting a similar arrangement within three (3) years following the

 

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date of the Plan’s termination, unless any individual who was a Participant under this Plan is excluded from participating thereunder for such three (3) year period.

 

(iv)          Except as provided in Paragraphs (i), (ii) and (iii) above or as otherwise permitted in regulations promulgated by the Secretary of the Treasury under Code Section 409A, any action that purports to terminate the Plan shall instead be construed as an amendment to discontinue further benefit accruals, but the Plan will continue to operate, in accordance with its terms as from time to time amended and in accordance with applicable Participant elections, with respect to the Participant’s benefit accrued through the date of termination, and in no event shall any such action purporting to terminate the Plan form the basis for accelerating distributions to Participants and Beneficiaries.

 

Section 11.07.  Administrative Expenses.

 

Costs of establishing and administering the Plan will be paid by the Participating Employers.

 

Section 11.08.  Effect on Other Employee Benefit Plans.

 

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, unless otherwise provided by the terms of such plan.

 

Section 11.09.  Successors and Assigns.

 

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

 

Section 11.10.  Right of Offset.

 

The Company shall have the right to offset from the benefits payable hereunder any amount that the Participant owes to the Company or Affiliate or other entity in which the Company or an Affiliate maintains an ownership interest.  The Company may effectuate the offset without the consent of the Participant (or the Participant’s spouse or Beneficiary, in the event of the Participant’s death).

 

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Section 11.11.  Amounts Accumulated Under Peoples Energy Plans.

 

Notwithstanding anything in the Plan to the contrary, the following rules apply with respect to accounts originally credited under the Peoples Energy Corporation Executive Deferred Compensation Plan, the Peoples Energy Corporation Directors Deferred Compensation Plan and/or the Peoples Energy Corporation Directors Stock and Option Plan (collectively, the “Peoples Plans”) and transferred to this Plan.  Peoples Energy, LLC, an Affiliate of the Company, is the successor to Peoples Energy Corporation.

 

(a)           Amounts held under the Peoples Plans as Integrys Stock Units and transferred to this Plan will continue to be held as Integrys Stock Units.  The transferred Integrys Stock Units will be Locked Stock Units; provided that in lieu of the rules described in Section 5.04(d), any dividends (or similar distribution) that would have been payable on the Stock Units had such Stock Units been actual shares of Integrys Stock, if not already expressed in the form of shares of Integrys Stock, shall be converted, for record keeping purposes, into whole and fractional Stock Units, with fractional units calculated to four decimal places.  The conversion shall be accomplished by dividing the amount of the dividend or distribution by the mean price of a share of Integrys Stock on the payment date for the dividend or distribution.

 

(b)           “Cash accounts” transferred from the Peoples Plans shall continue to be credited with interest equivalent based on the rate specified in the Peoples Plan (the “Prime Rate Investment”), unless the Participant is offered the opportunity and elects to transfer such portion of the Participant’s Account to another Investment Option in accordance with Section 6.01(d).  If a Participant elects to transfer to an alternate Investment Option, the transferred amounts may not be subsequently transferred back to the Prime Rate Investment.

 

(c)           Distribution of the portion of the Participant’s overall Account that is attributable to participation in the Peoples Plans will be made in accordance with the terms of the applicable Peoples Plan (and if applicable, the Participant’s distribution election); provided that, in accordance with Internal Revenue Service transition rules under Code Section 409A, on before December 31, 2008, a Participant may elect to have the portion of the benefit that was accrued and vested after December 31, 2004 distributed in accordance with the Participant’s distribution election under Article VIII of this Plan (Distribution of Post-2004 Account).  An election in accordance with the Internal Revenue Service transition rules shall not operate to accelerate into the year in which the election is made amounts that would otherwise be distributed in a subsequent year, or to defer distribution of amounts that would otherwise be paid in the year in which the election is made into a subsequent year.

 

(d)           The shares of stock authorized for issuance under the predecessor Peoples Plans are not available for new grants under this Plan.  However, grants previously made under the Peoples Plan and now held under this Plan will be charged against the pool of available shares for the predecessor Peoples Plans.

 

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Section 11.12.  Miscellaneous Distribution Rules.

 

(a)           Accelerated Distribution Following Section 409A Failure.  If an amount under this Plan is required to be included in a Participant’s income under Code Section 409A prior to the date such amount is actually distributed, the Participant shall receive a distribution, in a lump sum, within ninety (90) days after the date it is finally determined that the Plan fails to meet the requirements of Code Section 409A.  The distribution shall equal the amount required to be included in the Participant’s income as a result of such failure.

 

(b)           Permitted Delay in Payment.  If a distribution required under the terms of this Plan would jeopardize the ability of the Company or of an Affiliate to continue as a going concern, the Company or the Affiliate shall not be required to make such distribution.  Rather, the distribution shall be delayed until the first date that making the distribution does not jeopardize the ability of the Company or of an Affiliate to continue as a going concern.  Further, if any distribution pursuant to the Plan will violate the terms of Section 16(b) of the Securities Exchange Act of 1934 or other Federal securities laws, or any other applicable law, then the distribution shall be delayed until the earliest date on which making the distribution will not violate such law.

 

50Exhibit 10.22

 

INTEGRYS ENERGY GROUP, INC.

2010 OMNIBUS INCENTIVE COMPENSATION PLAN

 

Section  1.                                       PURPOSE AND DEFINITIONS

 

(a)                                 Purpose.  The purpose of the Integrys Energy Group, Inc. 2010 Omnibus Incentive Compensation Plan is to promote the interests of the Company and its shareholders by (a) attracting and retaining executives and other key employees and directors of outstanding training, experience and ability; (b) motivating them, by means of performance-related incentives, to achieve performance goals; and (c) enabling them to participate in the growth and financial success of the Company. It is intended that this purpose be effected via performance-based incentives and through awards or grants of stock options and various other rights with respect to shares of the Company’s common stock, as provided herein, to such eligible employees and directors (as defined in subsection (b) below).

 

(b)                                 Definitions.  The following terms shall have the following respective meanings unless the context requires otherwise:

 

(1)                                 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.

 

(2)                                 The term “Annual Performance Right” shall mean the right to receive up to the amount of compensation described in the Participant’s award agreement, taking into account the Target Award and the Performance Formula, upon the attainment of one or more

 

 

specified Performance Goals over a period of time determined by the Committee, subject to the terms and conditions of the award agreement and the Plan.

 

(3)                                 A person shall be deemed to be the “Beneficial Owner” of any securities:

 

(A)                               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 any rights agreement that the Company may have in effect at a time before the issuance of such securities;

 

(B)                               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

 

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(C)                               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 paragraph (B) above) or disposing of any voting securities of the Company.

 

(4)                                 The term “Board” shall mean the Board of Directors of the Company.

 

(5)                                 The term “Cause” for termination by the Company or a Subsidiary of a Participant’s employment in connection with or following a Change in Control shall be limited to the following:

 

(A)                               the engaging by the Participant in intentional conduct not taken in good faith which has caused demonstrable and serious financial injury to the Company and/or a Subsidiary, 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;

 

(B)                               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 Participant’s ability to perform his duties or responsibilities;

 

(C)                               continuing willful and unreasonable refusal by the Participant to perform the Participant’s duties or responsibilities (unless significantly changed without the Participant’s consent);

 

(D)                               material violation of the Company’s Code of Conduct.

 

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(6)                                 The term “Change in Control” shall mean the occurrence of any one of the following:

 

(A)                               any Person (other than any employee benefit plan of Integrys Energy Group, Inc. or of any subsidiary of Integrys Energy Group, Inc., 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 Integrys Energy Group, Inc. representing at least 30% of the combined voting power of the then outstanding securities of Integrys Energy Group, Inc.;

 

(B)                               one-half or more of the members of the Board are not Continuing Directors;

 

(C)                               there shall be consummated any merger, consolidation, or reorganization of Integrys Energy Group, Inc. 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 Integrys Energy Group, Inc. other than a shareholder who is an Affiliate or Associate of any party to such consolidation or merger;

 

(D)                               there shall be consummated any merger of Integrys Energy Group, Inc. or share exchange involving Integrys Energy Group, Inc. in which Integrys Energy Group, Inc. is not the continuing or surviving corporation other than a merger of Integrys Energy Group, Inc. in which each of the holders of Common Stock of Integrys Energy Group, Inc. immediately prior to the merger have the same proportionate ownership of common stock of the surviving corporation immediately after the merger;

 

(E)                                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 Integrys Energy Group, Inc. to a

 

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Person which is not a wholly owned subsidiary of Integrys Energy Group, Inc.; or

 

(F)                                 the shareholders of Integrys Energy Group, Inc. approve any plan or proposal for the liquidation or dissolution of Integrys Energy Group, Inc.

 

If a Plan Award is considered deferred compensation subject to the provisions of Code Section 409A, and if a payment under such Plan Award would be accelerated or otherwise triggered upon a “change in control”, then the foregoing definition is modified, to the extent necessary to avoid the imposition of an excise tax under Section 409A, to mean a “change in control event” as such term is defined for purposes of Code Section 409A.

 

(7)                                 The term “Code” shall mean the Internal Revenue Code of 1986, or any successor thereto, as the same may be amended and in effect from time to time.

 

(8)                                 The term “Committee” shall mean the committee appointed pursuant to Section 2 to administer the Plan.

 

(9)                                 The term “Company” shall mean Integrys Energy Group, Inc., or any successor thereto.

 

(10)                          The term “Continuing Director” shall mean (i) any member of the Board of Directors of Integrys Energy Group, Inc. who was a member of such Board on the day following the Effective Date of this Plan, (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 or recommended for membership by a majority of the Continuing Directors then on such Board.

 

(11)                          The term “Covered Executive” shall mean, with respect to each taxable year of the Company, an individual who, on the last day of the taxable year, is the Chief Executive Officer of the Company or among the three highest compensated officers of the Company and its subsidiaries (other than the Chief Executive Officer or Chief Financial Officer), as determined pursuant to the executive compensation disclosure rules under the Exchange Act.

 

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(12)                          The term “Employee” shall mean an employee of the Company or any Subsidiary or a member of the Board of Directors of either the Company or a Subsidiary.  The term “Employee” shall also be deemed to include any person who is an employee of any joint venture corporation or partnership, or comparable entity, in which the Company or a Subsidiary has a substantial equity interest; provided that with respect to the granting of an Option or Stock Appreciation Right; a person who is employed by a joint venture corporation, partnership or comparable entity in which the Company or a Subsidiary has an ownership interest shall be considered to be an Employee only if such corporation, partnership or entity itself constitutes a Subsidiary.

 

(13)                          The term “Exchange Act” shall mean the Securities Exchange Act of 1934, or any successor thereto, as the same may be amended and in effect from time to time.

 

(14)                          The term “Fair Market Value” shall mean the closing price at which a share of Stock shall have been sold on the New York Stock Exchange on the date of grant of any Option, date of grant and date of exercise of a Stock Appreciation Right, or other relevant valuation date.  In the event that any Option or Stock Appreciation Right shall be granted, or a Stock Appreciation Right exercised, or other relevant valuation date shall occur, on a date on which there were no such sales of Stock on the New York Stock Exchange, the Fair Market Value of a share of Stock shall be deemed to be the closing price at which a share of Stock shall have been sold on the New York Stock Exchange on the next preceding day on which there were such sales.  If the Stock is not listed on the New York Stock Exchange but is traded on another national securities exchange or through an over-the-counter market, the last sales price on such exchange on the applicable date as described above shall be used in determining Fair Market Value.

 

(15)                          The term “Final Award” shall mean the amount of compensation or the number of shares of Stock to be awarded finally to the Participant who holds an Annual Performance Right or a Performance Stock Right, as determined by the Committee taking into account the extent to which the Participant has achieved the Performance Goals.

 

(16)                          The term “Option” or “Options” shall mean the option to purchase Stock in accordance with Section 6 and such other terms and conditions as may be prescribed by

 

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the Committee.  An Option may be either an “incentive stock option”, as such term is defined in the Code, or shall otherwise be designated as an option entitled to favorable treatment under the Code (“ISO”) or a “nonqualified stock option” (“NQO”). ISOs and NQOs are individually called an “Option” and collectively called “Options”.

 

(17)                          The term “Other Stock-Based Awards” shall mean awards of Stock (including Restricted Stock) or other rights (including “stock units” or “phantom stock”) made in accordance with Section 7.

 

(18)                          The term “Participant” shall mean an Employee who has been designated for participation in the Plan.

 

(19)                          The term “Performance Goals” shall mean, with respect to any Annual Performance Right or Performance Stock Right that is granted to a Participant who is a Covered Executive and that intended to constitute performance-based compensation for purposes of Code Section 162(m), a performance measure that is based upon one or more of the following objective business criteria established by the Committee with respect to the Company and/or any Subsidiary, division, business unit or component thereof: asset charge, asset turnover, capital employed in the business, capital spending, cash flow (including operating cash flow, free cash flow, cash flow return on equity, and cash flow return on investment), cost structure improvements, complexity reductions, customer loyalty, customer value, diversity, debt (or the ratio of debt to equity or to another financial measure that appears on the Company’s financial statements or is derived from one or more amounts that appear on the Company’s financial statements), dividend payouts, earnings (before or after one or more of interest, taxes depreciation, amortization or extraordinary items), earnings growth, earnings per share, economic value-added (or other measure of productivity that considers the cost of capital employed), employee wellness, environmental health or performance, expense targets or reductions, gross profit, increase in customer base, level of parental guarantees, market efficiency, energy price weighted availability of generation facilities, market share, net cash balance, net earnings or net income (whether before or after tax, and including variations of net income, such as net income from continuing operations), net income margin, net operating cash flow, margins (including operating profit margin), occupational health reportable incidents,

 

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operations and maintenance reduction, electric and/or gas utility rate levels, productivity, response time, profits before tax, quality/customer satisfaction, realized return (including return on assets, return on capital, return on equity, return on invested capital, return on net operating assets, return on revenue, return on sales, or return on another financial measure that appears in the Company’s financial statements or is derived from one or more amounts that appear in the Company’s financial statements), revenue, sales or revenue growth, safety, sales margin, sales volume, stock price, system reliability, total shareholder return, variable margin, value at risk, workers compensation costs,, and working capital (including accounts receivable, inventories, accounts payable or other components of working capital).  With respect to each financial Performance Goal, the relevant measurement of performance shall be computed in accordance with generally accepted accounting principles, if applicable; provided that unless otherwise determined by the Committee, which determination may be made at any time with respect to a Plan Award that is not intended to constitute performance-based compensation for purposes of Code Section 162(m) and not later than 90 days after the beginning of the Performance Period with respect to a Plan Award that is intended to constitute performance-based compensation for purposes of Code Section 162(m), the measurement of the Performance Goal shall exclude, to the extent applicable under the particular Performance Goal, the effects of (1) extraordinary, unusual and/or non-recurring items of income or expense, (2) gains or losses on the disposition of a business or business unit, (3) changes in tax or accounting laws or regulations, or (iv) a merger or acquisition. With respect to any Annual Performance Right or Performance Stock Right granted to a Participant who is not a Covered Executive, or with respect to any Annual Performance Right or Performance Stock Right that is granted to a Participant who is a Covered Executive but the Committee determines that the Annual Performance Right or Performance Stock Right either is not eligible for or is not to be considered “performance-based compensation” for purposes of Code Section 162(m), the Performance Goals may be based on one or more of the business criteria described above or any other criteria based on individual, business unit, Subsidiary, group or Company performance selected by the Committee.  The Performance Goals may be expressed, without limitation, in terms of attaining a specified level of the particular criterion or the attainment of an increase or decrease (expressed as absolute numbers or as a percentage) in the particular criterion or achievement in relation to a peer group or other index.

 

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(20)                          The term “Performance Formula” shall mean a formula to be applied in relation to the Performance Goals in determining the percentage of the Target Award earned by the Participant with respect to a Plan Award.

 

(21)                          The term “Performance Period” shall mean the period of time for which performance with respect to one or more Performance Goals with respect to any Annual Performance Right or Performance Stock Right is to be measured.

 

(22)                          The terms “Performance Stock Rights” or “Performance Shares” shall mean the right to receive, without payment to the Company, up to the number of shares of Stock described in the Participant’s award agreement, taking into account the Target Award and the Performance Formula, upon the attainment of one or more specified Performance Goals, subject to the terms and provisions of the award agreement and the Plan.

 

(23)                          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; provided, that in the case of a merger, consolidation or reorganization of the Company with any other corporation or a share exchange involving the Company, the shareholders of the other corporation that is a party to the merger, consolidation, reorganization or share exchange shall not be considered to be acting in concert for purposes of applying Section 1(b)(6)(A).

 

(24)                          The term “Plan” shall mean the Integrys Energy Group, Inc. 2010 Omnibus Incentive Compensation Plan as the same may be amended and in effect from time to time.

 

(25)                          The term “Plan Awards” shall mean awards or grants of incentive compensation, whether in cash or in the form of Options, Stock Appreciation Rights, Performance Shares, Restricted Stock, or Other Stock Based Awards.

 

(26)                          The term “Restricted Stock” or “Restricted Shares” shall mean shares of Stock delivered to (or held in escrow or in a book account for the benefit of) a Participant, subject to such restrictions on the Participant’s right to retain the shares as the Committee shall, in its discretion, determine.

 

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(27)                          The term “Right” shall mean an Annual Performance Right or a Performance Stock Right, as required by the context.

 

(28)                          The term “Stock Appreciation Right” shall mean the right to receive, without payment to the Company, an amount of cash or Stock as determined in accordance with Section 6, based on the amount by which the Fair Market Value of a share of Stock on the relevant valuation date exceeds the grant price.

 

(29)                          The term “Subsidiary” shall mean any corporation, limited liability company or other limited liability entity in an unbroken chain of entities beginning with the Company if each of the entities (other than the last entity or entities in the chain) owns the stock or equity interest possessing at least fifty percent (50%) of the total combined voting power of all classes of stock or other equity interests in one of the other entities in the chain.  In addition, solely for purposes of determining those individuals to whom an Option (other than an Option that is designated as an incentive stock option for purposes of the Code) or a Stock Appreciation Right may be granted, the term “Subsidiary” includes an entity that would be a Subsidiary if the preceding sentence were applied by substituting “at least twenty percent (20%)” in lieu of “at least fifty percent (50%)” if the Committee determines that there are legitimate business reasons for extending Options or Stock Appreciation Rights to individuals employed by such an entity.

 

(30)                          The term “Stock” shall mean shares of the Company’s common stock, par value $1.00 per share.

 

(31)                          The term “Target Award” shall mean the amount of compensation or the number of shares of Stock, subject to adjustment pursuant to Section 12, to be earned by a Participant under an Annual Performance Right or a Performance Stock Right if all of the Performance Goals are achieved at the targeted level of performance.

 

Section  2.                                       ADMINISTRATION

 

(a)                                 Committee.  The Plan shall be administered by the Compensation Committee of the Board consisting of not less than two (2) members of the Board who meet the “outside” director requirements of Section 162(m) of the Code, the independence standards of the New York Stock Exchange and the “non-employee director” requirements of Rule 16b-

 

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3(b)(3) under the Exchange Act, or by any other committee appointed by the Board, provided the members of such committee meet such requirements.  The Committee shall administer the Plan and perform such other functions as are assigned to it under the Plan.  The Committee is authorized, subject to the provisions of the Plan, from time to time, to establish such rules and regulations as it may deem appropriate for the proper administration of the Plan, and to make such determinations under, and such interpretations of, and to take such steps in connection with, the Plan and the Plan Awards as it may deem necessary or advisable, in each case in its sole discretion.  The Committee’s decisions and determinations under the Plan need not be uniform and may be made selectively among Participants, whether or not they are similarly situated.  Any authority granted to the Committee may also be exercised by the Board, except to the extent that the grant or exercise of such authority would cause any qualified performance-based award to cease to qualify for exemption under Section 162(m) of the Code.  To the extent that any permitted action taken by the Board conflicts with any action taken by the Committee, the Board action shall control.

 

(b)                                 Effective Date of Plan Awards.  Unless otherwise determined by the Committee at the time of grant, a Plan Award approved by the Committee shall become effective, and the grant shall occur on the date on which the Plan Award is ratified by the Board.

 

(c)                                  Delegation of Authority.  To the extent permitted by law, the Committee may delegate any or all of its powers and duties under the Plan, including, but not limited to, its authority to make awards under the Plan or to grant waivers pursuant to Section 9, to one or more of its members or to one or more officers of the Company as it shall appoint, and with any such delegation to be subject to such conditions or limitations as the Committee may establish; provided, however, that the Committee shall not delegate its authority to act on non-ministerial matters affecting any Participant who is subject to the reporting requirements of Section 16(a) of the Exchange Act, or the liability provisions of Section 16(b) of the Exchange Act (any such Participant being called a “Section 16 Person”).  Further, no person to whom authority has been delegated shall grant a Plan Award to himself or herself or otherwise administer or interpret a Plan Award that has been previously granted to such person.  To the extent of any such delegation, the term “Committee” when used herein shall mean and include (except for purposes of subsection (c) below) any such delegate.

 

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(d)                                 Eligibility of Board Members.  Notwithstanding anything in the Plan to the contrary, a member of the Board shall be eligible to hold or receive a Plan Award; provided that with respect to any Plan Award for a non-employee member of the Board, the Plan Award shall be reviewed and recommended by the Governance Committee, and shall be effective upon approval by the Board.

 

Section  3.                                       ANNUAL PERFORMANCE RIGHTS AND FINAL AWARDS

 

(a)                                 Grant of Annual Performance Rights.  The Committee, at any time and from time to time while the Plan is in effect, may grant or authorize the granting of, Annual Performance Rights to such officers of the Company and any Subsidiary, and other Employees, whether or not members of the Board, as it may select and in such amount as it shall designate, subject to the provisions of this Section 3.

 

(b)                                 Maximum Awards.  The maximum amount that may be granted to a Covered Executive as a Final Award with respect to one or more Annual Performance Rights during any calendar year during any part of which the Plan is in effect, whether such Final Award is payable in cash or credited to the Covered Executive’s account under the Integrys Energy Group, Inc. Deferred Compensation Plan in accordance with subsection (d) below, shall be $5 million.

 

(c)                                  Terms and Provisions of Annual Performance Rights.  Prior to the grant of any Annual Performance Right, the Committee shall determine the terms and provisions of such Right, including, without limitation (1) the Target Award; (2) one or more Performance Goals to be used to measure performance under such Right, and the Performance Formula to be applied against the Performance Goals in determining the amount of compensation earned under such Right as a percentage of the Target Award; (3) the Performance Period; and (4) the effect of the Participant’s termination of employment or death.  With respect to any Right that is intended to constitute qualified performance-based compensation for purposes of Code Section 162(m), such actions must be completed within 90 days of the commencement of the Performance Period.  The Committee may establish a minimum threshold objective for any Performance Goal for such Performance Period which, if not met, would result in no Final Award being made to any Participant with respect to such Performance Goal for such Performance Period.  During and

 

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after the Performance Period, but prior to the Committee’s final determination of the Participant’s Final Award as provided in subsection (d), the Committee may adjust the Performance Goals, Performance Formula and Target Award and otherwise modify the terms and provisions of a Right subject to the terms and conditions of the Plan; provided that if the Committee acts more than 90 days following commencement of the Performance Period, to adjust or modify the terms and provisions of a Right granted to a Participant who is a Covered Executive, other than to decrease the amount of compensation that may be paid under such Right, any Final Award with respect to such Right shall not constitute qualified performance-based compensation for purposes of Code Section 162(m).  Each Right shall be evidenced by an award agreement that is consistent with the terms and conditions approved by the Committee.

 

(d)                                 Final Awards.

 

(1)                                 As soon as practicable following the completion of the Performance Period relating to any Annual Performance Right, but not later than 12 months following such completion, the Committee shall determine the extent to which the Participant achieved the Performance Goals and the amount of compensation to be awarded as a Final Award to the Participant who holds such Right.  In making such determination, the Committee shall apply the applicable Performance Formula for the Participant for the Performance Period against the accomplishment of the related Performance Goals.  The Committee may, in its sole discretion, reduce the amount of any Final Award that otherwise would be awarded to any Participant for any Performance Period.  In addition, the Committee may, in its sole discretion, increase the amount of any Final Award that otherwise would be awarded to any Participant; provided that if the Committee acts to increase the amount of any Final Award that would otherwise be awarded to a Participant who is a Covered Executive, the Award shall not constitute qualified performance-based compensation for purposes of Code Section 162(m).  Any such determination shall take into account (A) the extent to which the Performance Goals provided in such Right were, in the Committee’s sole opinion, achieved, (B) the individual performance of such Participant during the related Performance Period and (C) such other factors as the Committee may deem relevant, including, without limitation, any change in circumstances or unforeseen events, relating to the Company, the economy or otherwise, since the date of grant of

 

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such Right.  The Committee shall notify such Participant of such Participant’s Final Award as soon as practicable following such determination.

 

(2)                                 Following the determination of each Final Award, unless the Participant has elected to defer all or a portion of the Final Award in accordance with the procedures set forth in the Integrys Energy Group, Inc. Deferred Compensation Plan, the Final Award will be payable to the Participant in cash.

 

Section  4.                                       STOCK AVAILABLE FOR PLAN AWARDS

 

(a)                                 Stock Subject to Plan.  The Stock issued under the Plan in satisfaction of Plan Awards may be either authorized and unissued or held in the treasury of the Company.

 

(1)                                 Aggregate Share Limit.  The maximum number of shares of Stock that may be issued under the Plan in satisfaction of Plan Awards, subject to adjustment in accordance with the provisions of Section 12, shall be equal to the sum of (A) three million (3,000,000) shares not previously authorized for issuance under any plan, plus (B) the number of shares remaining for issuance under the Integrys Energy Group, Inc. 2007 Omnibus Incentive Compensation Plan (“2007 Plan”) but not subject to outstanding awards as of May 13, 2010, plus (C) the number of shares subject to awards outstanding under the 2007 Plan and the Integrys Energy Group, Inc. 2005 Omnibus Incentive Compensation Plan (“2005 Plan”) as of May 13, 2010, but only to the extent that such outstanding awards are forfeited, unearned, expire, or otherwise terminate without the issuance of such shares of Stock.  All such shares may be issued pursuant to the exercise of nonqualified or incentive stock options.  Upon this Plan being approved by the Company’s shareholders in accordance with Section 23, no further Plan Awards shall be granted under or pursuant to the 2007 Plan; provided, that the 2007 Plan will continue to operate in accordance with its terms with respect to Plan Awards previously granted.

 

(2)                                 Limit on Full-Value Awards.  Of the shares of Stock authorized for issuance under Section 4(a)(1) above, no more than the following number of such shares shall be granted as Plan Awards other than Options or Stock Appreciation Rights, where such number is: the sum of (A) nine hundred thousand (900,000) shares, plus (B) the number of shares remaining available for grant as Performance Shares, Restricted Stock or Other Stock-Based Awards

 

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pursuant to Section 4(a)(2) of the 2007 Plan as of May 13, 2010, plus (C) the number of shares subject to awards as Performance Shares, Restricted Stock or Other Stock-Based Awards outstanding under the 2007 Plan and the 2005 Plan as of May 13, 2010, but only to the extent that such outstanding awards are forfeited, unearned, expire, or otherwise terminate without the issuance of such shares of Stock.

 

(3)                                 Limits on Plan Awards to Covered Executives.  In addition to the aggregate share limitations sets forth in Section 4(a)(1) and 4(a)(2) above, the following individual limitations shall apply with respect to Plan Awards granted to any Covered Executive:

 

(A)                               The maximum number of shares subject to Options, with or without any related Stock Appreciation Rights, or Stock Appreciation Rights (not related to Options) that may be granted pursuant to Section 6 to any Covered Executive during any calendar year during any part of which the Plan is in effect shall be one million (1,000,000), subject to adjustment in accordance with the provision of Section 12; and

 

(B)                               The maximum number of shares of Stock that may be granted as Final Awards pursuant to Section 5 or as Code Section 162(m) performance-based awards under Section 7 to any Covered Executive during any calendar year during any part of which the Plan is in effect shall be 250,000, subject to adjustment in accordance with the provision of Section 12.

 

(b)                                 Computation of Stock Available for Plan Awards.  For the purpose of computing the total number of shares of Stock remaining available for Plan Awards at any time while the Plan is in effect, there shall be debited against the total number of shares determined to be available pursuant to this Section 4, (1) the maximum number of shares of Stock subject to Options or Stock Appreciation Rights granted under this Plan, (2) the maximum number of shares of Stock issuable under Performance Stock Rights granted under this Plan, and (3) the number of shares of Stock related to Other Stock-Based Awards granted under this Plan, as determined by the Committee in each case as of the dates on which such Plan Awards were granted.  Further, and for the avoidance of doubt, the following rules shall apply:

 

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(1)                                 Stock Appreciation Rights Settled in Stock.  With respect to a Stock Appreciation Right that is exercised or otherwise become payable and that is settled in shares of Stock, the number of shares of Stock subject to the Stock Appreciation Right shall be counted against the reserve of shares of Stock available for issuance under the Plan, even though the number of shares of Stock actually issued to settle the Stock Appreciation Right might be less.

 

(2)                                 Shares Tendered or Withheld in Payment of Option Exercise Price.  With respect to an Option or other Plan Award that is exercised or becomes payable and for which the Participant tenders shares of Stock, or shares of Stock are otherwise withheld, as full or partial payment of the Option exercise price or other price of a Plan Award, the number of shares of Stock subject to the Option or other Plan Award shall be counted against the reserve of shares of Stock available or issuance under the Plan, even though the number of shares of Stock actually issued upon exercise or settlement of the Option or other Plan Award might be less.  The shares of Stock tendered by or withheld for payment of the Option exercise or other purchase price shall not be available for issuance under the Plan.

 

(3)                                 Shares Tendered or Withheld in Payment of Tax Obligations.  With respect to any Plan Award with respect to which the Participant tenders shares of Stock, or shares of Stock are otherwise withheld, as full or partial payment of the Participant’s tax withholding or tax payment obligations, the number of shares of Stock subject to the Plan Award, prior to the satisfaction of tax withholding or tax payment obligations through the tender or withholding of shares of Stock, shall be counted against the reserve of shares of Stock available or issuance under the Plan, even though the number of shares of Stock actually issued upon exercise or settlement of the Plan Award might be less.  The shares of Stock tendered by or withheld for payment of tax withholding or tax payment obligations shall not be available for issuance under the Plan.

 

(c)                                  Terminated, Expired, Unearned or Forfeited Plan Awards.  The shares involved in the unexercised or undistributed portion of any terminated, expired, unearned or forfeited Plan Award shall be reinstated to the pool of available shares, and any applicable limit against which such shares are counted, and shall be made available for further Plan Awards.

 

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Notwithstanding the foregoing, in the event any Plan Award granted to a Covered Executive is canceled, the number of shares of Stock subject to such canceled Plan Award shall continue to count against the individual limit specified in subsection (a)(4), in accordance with the requirements of Code Section 162(m).

 

(d)                                 Plan Awards Settled in Cash.  The shares involved in any Plan Award that is settled in cash shall be reinstated to the pool of available shares, and any applicable limit against which such shares are counted, and shall be made available for further Plan Awards.  Notwithstanding the foregoing, in the event any Plan Award is settled in cash, the number of shares of Stock subject to such Plan Award shall continue to count against the individual limit specified in subsection (a)(4), in accordance with the requirements of Code Section 162(m).

 

(e)                                  Certain Mergers and Acquisitions.  Without affecting the number of shares otherwise reserved or available under this Plan, in connection with any merger, consolidation, acquisition of property or stock, or reorganization, the Committee may authorize the issuance of awards under this Plan upon such terms and conditions as it may deem appropriate in exchange for the cancellation, exchange or assumption of awards held by individuals affected by such merger, consolidation, acquisition or reorganization.

 

Section  5.                                       PERFORMANCE STOCK RIGHTS AND FINAL AWARDS

 

(a)                                 Grant of Performance Stock Rights.  The Committee, at any time and from time to time while the Plan is in effect, may grant, or authorize the granting of, Rights to such officers of the Company and any Subsidiary, and other Employees, whether or not members of the Board, as it may select and for such numbers of shares as it shall designate, subject to the provisions of this Section 5 and Section 4.

 

(b)                                 Terms and Provisions of Performance Stock Rights.  Prior to the grant of any Right, the Committee shall determine the terms and provisions of each Right, including, without limitation (1) the Target Award; (2) one or more Performance Goals to be used to measure performance under such Right, and the Performance Formula to be applied against the Performance Goals in determining the number of shares of Stock earned under such Right as a percentage of the Target Award; (3) the Performance Period; (4) the period of time, if any,

 

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during which the disposition of shares of Stock issuable under such Right shall be restricted as provided in subsection (a) of Section 10, provided, however, that the Committee may establish restrictions applicable to any Right at the time of or at any time prior to the granting of the related Final Award rather than at the time of granting such Right; and (5) the effect of the Participant’s termination of employment or death.  With respect to any Right that is intended to constitute qualified performance-based compensation for purposes of Code Section 162(m), such actions must be completed within 90 days of the commencement a Performance Period.  The Committee may establish a minimum threshold objective for any Performance Goal for such Performance Period which, if not met, would result in no Final Award being made to any Participant with respect to such Performance Goal for such Performance Period.  During and after the Performance Period, but prior to the Committee’s final determination of the Participant’s Final Award as provided in subsection (d), the Committee may adjust the Performance Goals, Performance Formula and Target Award and otherwise modify the terms and provisions of a Right, subject to the terms and conditions of the Plan; provided that if the Committee acts, more than 90 days following commencement of the Performance Period, to adjust or modify the terms and provisions of a Right granted to a Participant who is a Covered Executive, other than to decrease the amount of compensation that may be paid under such Right, any Final Award with respect to such Right shall not constitute qualified performance-based compensation for purposes of Code Section 162(m).  Each Right shall be evidenced by an award agreement that is consistent with the terms and conditions approved by the Committee.

 

(c)                                  Dividend Equivalents on Stock Performance Rights.

 

(1)                                 If the Committee shall determine, each Participant to whom a Right is granted shall be entitled to receive payment of the same amount of cash that such Participant would have received as cash dividends if, on each record date during the Performance Period relating to such Right, such Participant had been the holder of record of a number of shares of Stock equal to 100% of the related Target Award (as adjusted pursuant to Section 12).  Any such dividend equivalent shall be deferred until the date that a Final Award is determined, and shall only be paid to the extent that the Stock underlying the Plan Award is paid out upon satisfaction of the Performance Goals. all as determined by the Committee in its sole discretion.  Such cash payments are hereinafter called “dividend equivalents”.  Notwithstanding anything to

 

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the contrary herein, if the Committee determines that Dividend Equivalents should be granted with respect to any “stock right” within the meaning of Code Section 409A, the terms and conditions of the Dividend Equivalent rights shall be set forth in a separate writing, and to the extent that the Dividend Equivalents are considered deferred compensation subject to Code Section 409A, the writing shall include terms and conditions, including payment terms, that comply with the provisions of Code Section 409A.

 

(2)                                 Notwithstanding the provisions of subsection (c)(1), the Committee may determine that, in lieu of receiving all or any portion of any such dividend equivalent in cash, a Participant shall receive an award of full shares of Stock having a Fair Market Value approximately equal to the portion of such dividend equivalent that was not paid in cash.  Certificates for shares of Stock so awarded may be issued as of the payment date for the related cash dividend or may be deferred until the date that the Final Award is determined, and the shares of Stock covered thereby may be subject to the terms and conditions of the Right to which it relates (including but not limited to the attainment of the Performance Goals) and the terms and conditions of the Plan (including but not limited to Sections 5, 9, 10 and 12), all as determined by the Committee in its sole discretion.

 

(d)                                 Final Awards.

 

(1)                                 As soon as practicable following the completion of the Performance Period relating to any Right, but not later than 12 months following such completion, the Committee shall determine the extent to which the Participant achieved the Performance Goals and the number of shares of Stock to be awarded as a Final Award to the Participant who holds such Right.  Each Final Award shall represent only full shares of Stock, and any fractional share that would otherwise result from such Final Award calculation shall be disregarded.  In making such determination, the Committee shall apply the applicable Performance Formula for the Participant for the Performance Period against the accomplishment of the related Performance Goals.  The Committee may, in its sole discretion, reduce the amount of any Final Award that otherwise would be awarded to any Participant for any Performance Period.  In addition, the Committee may, in its sole discretion, increase the amount of any Final Award that otherwise would be awarded to any Participant; provided that if the Committee acts

 

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to increase the amount of any Final Award that would otherwise be awarded to a Participant who is a Covered Executive, the Award shall not constitute qualified performance-based compensation for purposes of Code Section 162(m).  Any such determination shall take into account (A) the extent to which the Performance Goals provided in such Right were, in the Committee’s sole opinion, achieved, (B) the individual performance of such Participant during the related Performance Period and (C) such other factors as the Committee may deem relevant, including, without limitation, any change in circumstances or unforeseen events, relating to the Company, the economy or otherwise, since the date of grant of such Right.  The Committee shall notify such Participant of such Participant’s Final Award as soon as practicable following such determination.

 

(2)                                 Following the determination of each Final Award, unless the Participant has elected to defer all or a portion of the Final Award in accordance with the procedures set forth in the Integrys Energy Group, Inc. Deferred Compensation Plan or unless the Committee has directed an alternate form of distribution, the Company shall issue or cause to be issued certificates for the number of shares of Stock representing such Final Award, registered in the name of the Participant who received such Final Award. Such Participant shall thereupon become the holder of record of the number of shares of Stock evidenced by such certificates, entitled to dividends, voting rights and other rights of a holder thereof, subject to the terms and provisions of the Plan, including, without limitation, the provisions of this subsection (d) and Sections 9, 10 and 12. The Committee may require that such certificates bear such restrictive legend as the Committee may specify and be held by the Company in escrow or otherwise pursuant to any form of agreement or instrument that the Committee may specify.  If the Committee has determined that deferred dividend equivalents shall be payable to a Participant with respect to any Right pursuant to subsection (c) of this Section 5, then concurrently with the issuance of such certificates, the Company shall deliver to such Participant a cash payment or additional shares of Stock in settlement of such dividend equivalents.

 

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Section  6.                                       OPTIONS AND STOCK APPRECIATION RIGHTS

 

(a)                                 Grant of Options.

 

(1)                                 The Committee, at any time and from time to time while the Plan is in effect, may authorize the granting of Options to such officers of the Company and any Subsidiary, and other Employees, whether or not members of the Board, as it may select, and for such numbers of shares as it shall designate, subject to the provisions of this Section 6 and Section 4.  Each Option granted pursuant to the Plan shall be a NQO unless the Option is both (A) granted to an Employee who is eligible to receive an ISO under the Code, and (B) designated by the Committee at the time of grant as an ISO.

 

(2)                                 The date on which an Option shall be granted shall be the date on which the Board ratifies the Committee’s approval of such grant or such later date as may be determined by the Committee at the time such grant is authorized.  The Committee may not approve a grant of an Option with a grant date that is effective prior to the date the Committee takes action to approve such Plan Award.  Any individual may hold more than one Option.

 

(b)                                 Price.  In the case of each Option granted under the Plan the option price shall be the Fair Market Value of Stock on the date of grant of such Option; provided, however, that the Committee may in its discretion fix an option price in excess of (but not lower than) the Fair Market Value of Stock on such date.

 

(c)                                  Grant of Stock Appreciation Rights.

 

(1)                                 The Committee, at any time and from time to time while the Plan is in effect, may authorize the granting of Stock Appreciation Rights to such officers of the Company and any Subsidiary, and other salaried Employees, whether or not members of the Board, as it may select, and for such numbers of shares as it shall designate, subject to the provisions of this Section 6 and Section 4.  The date on which a Stock Appreciation Right shall be granted shall be the date on which the Board ratifies the Committee’s approval of such grant or such later date as may be determined by the Committee at the time such grant is authorized.  The Committee may not approve a grant of a Stock Appreciation Right with a grant date that is effective prior to the date the Committee takes action to approve such Plan Award.  Each Stock

 

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Appreciation Right may relate to all or a portion of a specific Option granted under the Plan and may be granted concurrently with the Option to which it relates or at any time prior to the exercise, termination or expiration of such Option (a “Tandem SAR”), or may be granted independently of any Option, as determined by the Committee.  If the Stock Appreciation Right is granted independently of an Option, the grant price of such Stock Appreciation Right shall be the Fair Market Value of Stock on the date of grant; provided, however, that the Committee may, in its discretion, fix a grant price in excess of (but not less than) the Fair Market Value of Stock on such grant date.

 

(2)                                 Upon exercise of a Stock Appreciation Right, the Participant will be entitled to receive, without payment to the Company, either (A) that number of shares of Stock determined by dividing (i) the total number of shares of Stock subject to the Stock Appreciation Right being exercised by the Participant, multiplied by the amount by which the Fair Market Value of a share of Stock on the day the right is exercised exceeds the grant price (such amount being hereinafter referred to as the “Spread”), by (ii) the Fair Market Value of a share of Stock on the exercise date, or (B) cash in any amount determined by multiplying (i) the total number of shares of Stock subject to the Stock Appreciation Right being exercised by the Participant, by (ii) the amount of the Spread; or (C) a combination of shares of Stock and cash, in amounts determined as set forth in clauses (A) and (B) above, as determined by the Committee in its sole discretion; provided, however, that, in the case of a Tandem SAR, the total number of shares which may be received upon exercise of a Stock Appreciation Right for Stock shall not exceed the total number of shares subject to the related Option or relevant portion thereof, and the total amount of cash which may be received upon exercise of a Stock Appreciation Right for cash shall not exceed the Fair Market Value on the date of exercise of the total number of shares subject to the related Option or portion thereof that are subject to the cash exercise.

 

(d)                                 Terms and Conditions.

 

(1)                                 Each Option and Stock Appreciation Right granted under the Plan shall be exercisable on such date or dates, during such period, for such number of shares and subject to such further conditions as shall be determined pursuant to the provisions of the award agreement with respect to such Option and Stock Appreciation Right; provided, however, that a

 

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Tandem SAR shall not be exercisable prior to or later than the time the related Option could be exercised; and provided, further, that in any event no Option or Stock Appreciation Right shall be exercised beyond ten years from the date of grant.

 

(2)                                 The Committee may impose such conditions as it may deem appropriate upon the exercise of an Option or a Stock Appreciation Right, including, without limitation, a condition that the Stock Appreciation Right may be exercised only in accordance with rules and regulations adopted by the Committee from time to time.

 

(3)                                 With respect to Options issued with Tandem SARs, the right of a Participant to exercise the Tandem SAR shall be cancelled if and to the extent the related Option is exercised, and the right of a Participant to exercise an Option shall be cancelled if and to the extent that shares covered by such Option are used to calculate the consideration received upon exercise of the Tandem SAR.

 

(4)                                 The Participant shall not be entitled to dividends or dividend equivalents with respect to an Option or a Stock Appreciation Right prior to the date on which the Option or Stock Appreciation Right is exercised.

 

(5)                                 If any fractional share of Stock would otherwise be payable to a Participant upon the exercise of an Option or Stock Appreciation Right, the Participant shall be paid a cash amount equal to the same fraction of the Fair Market Value of the Stock on the date of exercise.

 

(e)                                  Award Agreement.  Each Option and Stock Appreciation Right shall be evidenced by an award agreement that is consistent with the terms and conditions approved by the Committee.

 

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(f)                                   Payment for Option Shares.

 

(1)                                 Payment for shares of Stock purchased upon exercise of an Option granted hereunder shall be made in such manner as is provided in the applicable award agreement or as otherwise permitted by the Committee, which may include payment through a cash-less exercise if the Committee has determined that the particular form of cashless exercise will not result in adverse accounting implications for the Company.

 

(2)                                 Unless the Committee shall provide otherwise in any award agreement, any payment for shares of Stock purchased upon exercise of an Option granted hereunder may be made in cash, by delivery of shares of Stock beneficially owned by the Participant, or by a combination of cash and Stock, at the election of the Participant; provided, however, that, to the extent necessary to avoid adverse accounting implications for the Company, any shares of Stock so delivered shall have been beneficially owned by the Participant for a period of not less than six months prior to the date of exercise.  Any such shares of Stock so delivered shall be valued at their Fair Market Value on the date of such exercise.  The Committee shall determine whether and if so the extent to which actual delivery of share certificates to the Company shall be required.

 

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Section  7.                                       OTHER STOCK-BASED AWARDS

 

(a)                                 Grants of Other Stock-Based Awards.  The Committee, at any time and from time to time while the Plan is in effect, may grant Other Stock-Based Awards to such officers of the Company and its Subsidiaries, and other Employees, whether or not members of the Board, as it may select. Such Plan Awards pursuant to which Stock is or may in the future be acquired, or Plan Awards valued or determined in whole or part by reference to, or otherwise based on, Stock, may include, but are not limited to, awards of Restricted Stock or Plan Awards denominated in the form of “stock units”, grants of so-called “phantom stock” and options containing terms or provisions differing in whole or in part from Options granted pursuant to Section 6.  Other Stock-Based Awards may be granted either alone, in addition to, in tandem with or as an alternative to any other kind of Plan Award, grant or benefit granted under the Plan or under any other employee plan of the Company, including a plan of any acquired entity.

 

(b)                                 Terms and Conditions.  Subject to the provisions of the Plan, the Committee shall have the authority to determine the time or times at which Other Stock-Based Awards shall be made, the number of shares of Stock or stock units and the like to be granted or covered pursuant to such Plan Awards (subject to the provisions of Section 4) and all other terms and conditions of such Plan Awards, including, but not limited to, the vesting period (if any) applicable to such Plan Awards, and whether such Plan Awards shall be payable or paid in cash, Stock or otherwise.

 

(c)                                  Consideration for Other Stock-Based Awards.  In the discretion of the Committee, any Other Stock-Based Award may be granted (1) as a Stock bonus for no consideration other than services rendered or to be rendered, (2) in lieu of cash compensation, (3) subject to Code Section 409A, in exchange for another compensation right that the Participant has, or (4) on such other terms and conditions as determined by the Committee.

 

Section  8.                                       CASH AWARDS TO EMPLOYEES OF FOREIGN SUBSIDIARIES OR BRANCHES OR JOINT VENTURES

 

In order to facilitate the granting of Plan Awards to Participants who are foreign nationals or who are employed outside of the United States of America, the Committee may provide for such special terms and conditions, including without limitation substitutes for Plan Awards, as

 

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the Committee may consider necessary or appropriate to accommodate differences in local law, tax policy or custom. Such substitutes for Plan Awards may include a requirement that the Participant receive cash, in such amount as the Committee may determine in its sole discretion, in lieu of any Plan Award or share of Stock that would otherwise have been granted to or delivered to such Participant under the Plan. The Committee may approve any supplements to, or amendments, restatements or alternative versions of the Plan as it may consider necessary or appropriate for purposes of this Section 8 without thereby affecting the terms of the Plan as in effect for any other purpose, and the Secretary or other appropriate officer of the Company may certify any such documents as having been approved and adopted pursuant to properly delegated authority; provided, however,  that no such supplements, amendments, restatements or alternative versions shall include any provision that is inconsistent with the terms of the Plan as then in effect.  Participants subject to the laws of a foreign jurisdiction may request copies of, or the right to view, any materials that are required to be provided by the Company pursuant to the laws of such jurisdiction.

 

Section  9.                                       PAYMENT OF PLAN AWARDS AND CONDITIONS THEREON

 

(a)                                 Effect of Competitive Activity.  Anything contained in the Plan to the contrary notwithstanding, if the employment of any Participant shall terminate, for any reason other than death, while any Plan Award granted to such Participant is outstanding hereunder, and such Participant has not yet received the compensation or Stock covered by such Plan Award or otherwise received the full benefit of such Plan Award, such Participant, if otherwise entitled thereto, shall receive such Stock or compensation or benefit only if, during the entire period from the date of such Participant’s termination to the date of such receipt, such Participant shall have (1) made himself or herself available, upon request, at reasonable times and upon a reasonable basis, to consult with, supply information to and otherwise cooperate with the Company or any Subsidiary with respect to any matter that shall have been handled by him or her or under his or her supervision while he or she was in the employ of the Company or of any Subsidiary, and (2) refrained from engaging in any activity that is directly or indirectly in competition with any activity of the Company or any Subsidiary.

 

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(b)                                 Nonfulfillment of Competitive Activity Conditions: Waivers Under the Plan.  In the event of a Participant’s non-fulfillment of any condition set forth in subsection (a) of this Section 9, such Participant’s rights under any Plan Award shall be forfeited and cancelled forthwith; provided, however, that the nonfulfillment of such condition may at any time (whether before, at the time of or subsequent to termination of employment) be waived in the following manner:

 

(1)                                 with respect to any such Participant who at any time shall have been a Section 16 Person, such waiver may be granted by the Committee upon its determination that in its sole judgment there shall not have been and will not be any substantial adverse effect upon the Company or any Subsidiary by reason of the nonfulfillment of such condition; and

 

(2)                                 with respect to any other such Participant, such waiver may be granted by the Committee (or any delegate thereof) upon its determination that in its sole judgment there shall not have been and will not be any such substantial adverse effect.

 

(c)                                  Effect of Inimical Conduct.  Anything contained in the Plan to the contrary notwithstanding, all rights of a Participant under any Plan Award shall cease on and as of the date on which it has been determined by the Committee that such Participant at any time (whether before or subsequent to termination of such Participant’s employment) acted in a manner inimical to the best interests of the Company or any Subsidiary.

 

(d)                                 Taxes and Tax Withholding.  Prior to any distribution of cash, Stock or Other Stock-Based Awards (including payments under Section 5(c)) to any Participant,  arrangements deemed appropriate by the Committee shall be made for the payment of any taxes and other amounts required to be withheld by federal, state or local law.  Such arrangements may include a requirement that the Company (or an Affiliate) withhold from cash or shares otherwise due the Participant with respect to a Plan Award.  Alternatively, the Committee may require the Participant to pay to the Company or Affiliate, in cash and promptly upon demand, the aggregate amount of such taxes or other required amounts.  If shares of the Company’s stock are deliverable upon the Participant’s exercise of or payment of a Plan Award, the Committee may, but need not, permit the Participant to satisfy all or a portion of the Federal, state and local tax withholding obligations resulting from such Plan Award by (1) withholding shares otherwise

 

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deliverable under the Plan Award, (2) tendering back shares received in connection with the Plan Award, or (3) delivering other previously owned shares; provided that to the extent that the Committee determines that such action is necessary or appropriate in order to avoid an accounting charge, the Committee may require that previously owned shares have been held by the Participant for a minimum period of time prescribed by the Committee prior to being delivered in payment of the tax obligations, and the Committee may restrict the number of shares withheld, tendered back or delivered to the minimum Federal, state and local tax withholding obligation associated with the transaction.  In any case, the Committee may defer making payment or delivery under any Plan Award until tax withholding and payment matters have been resolved to the Committee’s satisfaction.  Notwithstanding anything to the contrary, neither the Company nor the Committee nor any other person guarantees to any Participant or any other person with an interest in a Plan Award that (1) any Plan Award intended to be exempt from Code Section 409A shall be so exempt, (2) any Plan Award intended to comply with Code Section 409A or Code Section 422 shall so comply, or (3) any Plan Award shall receive specific tax treatment under the Code or other applicable tax law.  Neither the Company nor the Committee nor any other person shall have any duty to indemnify, defend or hold harmless any individual with respect to the tax consequences of any Plan Award.

 

(e)                                  Substitution.  The Committee, in its sole discretion, may substitute a Plan Award (except ISOs) for another Plan Award or Plan Awards of the same or different type.

 

(f)                                   Section 409A Separation from Service.  For purposes of any Plan Award that is subject to Code Section 409A and with respect to which the terms and conditions of the Plan Award, as determined by the Committee (or if applicable, elected by the Participant) at the time of grant provide for distribution or settlement of the Plan Award upon the Participant’s termination of employment, the Participant will be deemed to have terminated employment on the date on which the Participant incurs a “separation from service” within the meaning of Code Section 409A, and to the extent required in order to comply with Code Section 409A, no distribution or settlement of the Plan Award shall be made until the date that is six months and one day following the date of the Participant’s “separation from service” A Participant’s “separation from service” shall occur when the Company reasonably anticipates that no further services will be performed by the Participant for the Company after a certain date or that the

 

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level of bona fide services the Participant will perform after such date will permanently decrease to no more than twenty percent (20%) of the average level of bona fide services performed by the Participant (whether as an employee or independent contractor) for the Company over the immediately preceding thirty-six (36) month period (or such lesser period of actual service).  For purposes of this definition, the term “Company” includes each other corporation, trade or business that, with Integrys Energy Group, Inc., constitutes a controlled group of corporations or group of trades or businesses under common control within the meaning of Code Sections 414(b) or (c).  For this purpose, Code Sections 414(b) and (c) shall be applied by substituting “at least 50 percent” for “at least 80 percent” each place it appears therein or in the regulations promulgated thereunder.  A Participant is not considered to have incurred a “separation from service” if the Participant is absent from active employment due to military leave, sick leave or other bona fide leave of absence if the period of such leave does not exceed the greater of (i) six (6) months, or (ii) the period during which the Participant’s right to reemployment by the Company or controlled group member is provided either by statute or by contract; provided that if the leave of absence is due to a medically determinable physical or mental impairment that can be expected to result in death or last for a continuous period of not less than six (6) months, where such impairment causes the Participant to be unable to perform the duties of his or her position of employment or any substantially similar position of employment, the leave may be extended for up to twenty-nine (29) months without causing a “separation from service”.

 

Section  10.                                NON-TRANSFERABILITY OF PLAN AWARDS; RESTRICTIONS ON DISPOSITION AND EXERCISE OF PLAN AWARDS

 

(a)                                 Restrictions on Transfer of Rights or Final Awards.  No Right or, until the expiration of any restriction period imposed by the Committee, no shares of Stock covered by any Final Award, shall be transferred, pledged, assigned or otherwise disposed of by a Participant, except as permitted by the Plan, without the consent of the Committee, otherwise than by will or the laws of descent and distribution; provided, however, that the Committee may permit, on such terms as it may deem appropriate, use of Stock included in any Final Award as partial or full payment upon exercise of an Option under the Plan or a stock option under any other stock option plan of the Company prior to the expiration of any restriction period relating to such Final Award.

 

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(b)                                 Restrictions on Transfer of Options or Stock Appreciation Rights.  Unless the Committee determines otherwise, no Option or Stock Appreciation Right shall be transferable by a Participant otherwise than by will or the laws of descent and distribution, and during the lifetime of a Participant the Option or Stock Appreciation Right shall be exercisable only by such Participant or such Participant’s guardian or legal representative.

 

(c)                                  Restrictions on Transfer of Certain Other Stock-Based Awards.  Unless the Committee determines otherwise, no Other Stock-Based Award shall be transferable by a Participant otherwise than by will or the laws of descent and distribution, and during the lifetime of a Participant any such Other Stock-Based Award shall be exercisable only by such Participant or such Participant’s guardian or legal representative.

 

(d)                                 No Transfers for Value.  Notwithstanding anything in Section 10 to the contrary, in no event may a Right or Plan Award be transferred for value or consideration while the Right is outstanding or prior to the date on which any restriction period imposed by the Committee has lapsed.

 

(e)                                  Attachment and Levy.  No Plan Award shall be subject, in whole or in part, to attachment, execution or levy of any kind, and any purported transfer in violation hereof shall be null and void.  Without limiting the generality of the foregoing, no domestic relations order purporting to authorize a transfer of a Plan Award, or to grant to any person other than the Participant the authority to exercise or otherwise act with respect to a Plan Award, shall be recognized as valid.

 

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Section  11.           DESIGNATION OF BENEFICIARIES

 

Any benefits due and payable to a Participant following the Participant’s death shall be paid to the executor or administrator of the Participant’s estate (or to such person as the executor or administrator of the estate may certify as being eligible to receive such award as a result of the operation of the Participant’s last will and testament or the application of the laws of intestate succession), and upon any such payment, the Company, the Plan, the Committee and the members thereof shall not be under any further liability to anyone.  Notwithstanding the foregoing, the Committee may, but need not, permit a Participant to file with the Company a written designation of a beneficiary or beneficiaries under the Plan, subject to such limitations as to the classes and number of beneficiaries and contingent beneficiaries and such other limitations as the Committee from time to time may prescribe.  A Participant may from time to time revoke or change any such designation of beneficiary.  Any designation of a beneficiary under the Plan shall be controlling over any other disposition, testamentary or otherwise; provided, however, that if the Committee shall be  in doubt as to the entitlement of any such beneficiary to receive any Right, Final Award, Option, Stock Appreciation Right or Other Stock-Based Award, or if applicable law requires the Company to do so, the Committee may recognize only the legal representative of such Participant as the sole beneficiary, in which case the Company, the Plan, the Committee and the members thereof shall not be under any further liability to anyone.  In the event of the death of any Participant, the term “Participant” as used in the Plan shall thereafter be deemed to refer to the person entitled to payment pursuant to this Section 11 unless the context otherwise requires.

 

Section  12.           MERGER, CONSOLIDATION, STOCK DIVIDENDS, ETC.

 

(a)           Adjustments In General.  In the event of any merger, share exchange, consolidation, reorganization, recapitalization, stock split, stock dividend or other event in which the Stock is subdivided or combined, cash dividend the amount of which, on a per share basis, exceeds fifteen percent (15%) of the Fair Market Value of a share of Stock at the time the dividend is declared, or the Company shall effect any other dividend or other distribution of its Stock that the Board determines by resolution is extraordinary or special in nature or that is in connection with a transaction that the Company characterizes publicly as a recapitalization or

 

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reorganization of the Shares or words of similar import, or any other event shall occur, which, in the judgment of the Committee necessitates an adjustment to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under this Plan, an appropriate adjustment, as the Committee may deem equitable and consistent with applicable law, shall be made in (1) the total number of shares available for Plan Awards and in all other provisions of the Plan that include a reference to a number of shares, (2) in the numbers of shares covered by, and other terms and provisions (including, but not limited to the grant or exercise price of any Plan Award) of outstanding Plan Awards, and (3) to the extent that the exercise of such discretion does not cause a Plan Award that is intended to qualify as performance-based compensation under Code Section 162(m) to lose its status as such, the Performance Goals applicable to a Plan Award.

 

(b)           Special Rules.  The following supplement the adjustment rules set forth in Section 12(a) above:

 

(1)           In the event of any reorganization, merger, consolidation, combination or other similar corporate transaction or event, whether or not constituting a Change of Control (other than any such transaction in which the Company is the continuing corporation and in which the outstanding Stock of the Company is not being converted into or exchanged for different securities, cash or other property, or any combination thereof), the Committee may substitute, on an equitable basis as the Committee determines, for each share of Stock then subject to a Plan Award and the shares of Stock subject to this Plan (if the Plan will continue in effect),  the number and kind of shares of stock, other securities, cash or other property to which holders of Stock are or will be entitled in respect of each share of Stock pursuant to the transaction.

 

(2)           Without affecting the number of shares of Stock otherwise reserved or available under this Plan, in connection with any merger, consolidation, acquisition of property or stock, or reorganization, the Committee may authorize the issuance or assumption of awards under this Plan upon such terms and conditions as it may deem appropriate.

 

(c)           Committee Determinations.  The foregoing adjustments and the manner of application of the foregoing provisions shall be determined by the Committee in its sole

 

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discretion Any such adjustment may provide for the elimination of any fractional share which might otherwise become subject to a Plan Award.  With respect to Plan Awards that are intended to qualify as ISOs, any such adjustment must satisfy Code Section 422(b).

 

Section  13.           ACCELERATION OF PAYMENT OR MODIFICATION OF PLAN AWARDS

 

(a)           Acceleration and Modification.  The Committee, in the event of the death of a Participant or in any other circumstance, may accelerate distribution of any Plan Award in its entirety or in a reduced amount, or modify or terminate any Plan Award, including the cancellation of an outstanding Plan Award in exchange for a cash payment, in each case on such basis and in such manner as the Committee may determine in its sole discretion; provided, however, that in no event shall the Committee (1) “re-price” an Option or Stock Appreciation Right to provide for a grant price that is less than the Fair Market Value of the Stock on the date on which the Option or Stock Appreciation Right was originally granted, except as permitted pursuant to Section 12, (2) cancel an Option or Stock Appreciation Right and replace the cancelled Option or Stock Appreciation Right with an Option, Stock Appreciation Right or other Plan Award having an exercise price or base price less than that of the cancelled Option or Stock Appreciation Right, or (3) make a cash payment in exchange for an Option or Stock Appreciation Right if the Fair Market Value of a share of Stock is less than the Option exercise price or Stock Appreciation Right base price.   Notwithstanding the foregoing, unless determined otherwise by the Committee, any such action shall be taken in a manner that will enable a Plan Award that is intended to be exempt from Code Section 409A to continue to be so exempt, or to enable a Plan Award that is intended to comply with Code Section 409A to continue to so comply.

 

(b)           Change in Control.  If the Participant has in effect an employment, retention, change in control, severance or similar agreement with the Company or any Affiliate that discusses the effect of a Change in Control on the Participant’s Plan Awards, then such agreement shall control.  In all other cases, unless provided otherwise in the Plan Award agreement or determined by the Committee prior to the occurrence of a Change in Control, in the event of a Change in Control:

 

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(1)           The successor or purchaser in the Change in Control transaction may assume a Plan Award or provide a substitute award with similar terms and conditions, and preserving the same benefits, as the Plan Award it is replacing.  In such event, if the Participant is involuntarily terminated from employment or service for any reason other than Cause (or, in the case of a Participant who has in effect an employment, retention, change in control, severance or similar agreement with the Company or any Affiliate that provides for “good reason” termination and the Participant, in accordance with such agreement, terminates employment or service for “good reason”) within two years following the date of the Change in Control, then:

 

(A)          each Option or SAR outstanding as of the date of the Change in Control shall become immediately and fully vested and exercisable as of the date of such termination;

 

(B)          each other Plan Award (including an Annual Performance Right) outstanding as of the date of the Change in Control, and that is not then vested:

 

(i)            shall become fully vested as of the date of termination, if vesting is based solely upon length of the employment relationship, or shall become fully vested as of the date of termination at the target level (or if greater, the then projected Final Award level), prorated for the portion of the Performance Period that has been completed as of the date of termination; provided that a Plan Award that relates to a Performance Period that was completed prior to the date of the Participant’s termination shall be paid in full in accordance with the terms of the Plan Award;

 

(ii)           any restrictions or other conditions applicable to the Plan Award shall lapse as of the date of termination, and such Plan Award shall become free of all restrictions and conditions; and

 

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(iii)          such Plan Award shall be immediately paid to the Participant as of the date of termination.

 

(C)          For purposes of this Section 13(b)(1) a Participant shall not be deemed to have been involuntarily terminated if the successor or purchaser in the Change in Control transaction offers the Participant employment on substantially similar terms and conditions as the Participant had with the Company (or Affiliate) and the Participant does not accept such offer employment.

 

(2)           If the successor or purchaser in the Change in Control transaction does not assume the Plan Awards or issue replacement awards that are effective upon the Change in Control as provided in subsection (b)(1), then immediately prior to the Change in Control:

 

(A)          each Option or Stock Appreciation Right that is then held by a Participant who is employed by or in the service of the Company or a Subsidiary shall become immediately and fully vested and exercisable, or, if so determined by the Committee, shall be cancelled on the date of the Change in Control in exchange for a cash payment equal to the excess of the Change in Control price of the Stock covered by the Option or Stock Appreciation Right that is so cancelled over the purchase or grant price of such Stock under the Plan Award;

 

(B)          each other Plan Award (including an Annual Performance Right) that is then held by a Participant who is employed by or in the service of the Company or a Subsidiary, and that is not then vested:

 

(i)            shall become fully vested as of the date of the Change in Control, if vesting is based solely upon length of the employment relationship, or shall become fully vested as of the date of the Change in Control at the target level (or if greater, the then projected Final Award level),

 

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prorated for the portion of the Performance Period that has been completed as of the date of the Change in Control; provided that a Plan Award that relates to a Performance Period that was completed prior to the date of the Change in Control shall be paid in full in accordance with the terms of the Plan Award;

 

(ii)           any restrictions or other conditions applicable to the Plan Award shall lapse as of the date of the Change in Control, and such Plan Award shall become free of all restrictions and conditions; and

 

(iii)          such Plan Award shall be immediately paid to the Participant as of the date of the Change in Control.

 

Except as otherwise expressly provided in any agreement between a Participant and the Company or a Subsidiary, if the receipt of any payment by a Participant under the circumstances described above would result in the payment by the Participant of any excise tax provided for in Section 280G and Section 4999 of the Code, then the amount of such payment shall be reduced to the extent required to prevent the imposition of such excise tax.

 

Notwithstanding the foregoing provisions of Section 13(b), unless determined otherwise by the Committee, any such action shall be taken in a manner that will enable a Plan Award that is intended to be exempt from Code Section 409A to continue to be so exempt, or to enable a Plan Award that is intended to comply with Code Section 409A to continue to so comply.

 

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Section  14.           RIGHTS AS A SHAREHOLDER

 

A Participant shall not have any rights as a shareholder with respect to any Stock covered by any Plan Award until such Participant shall have become the holder of record of such Stock.

 

Section  15.           TERM, AMENDMENT, MODIFICATION AND TERMINATION OF THE PLAN AND AGREEMENTS

 

(a)           Term.  No Plan Award shall be granted under the Plan on or after the tenth (10th) anniversary of the Effective Date of the Plan, or such earlier date on which the Plan is terminated pursuant to subsection (b) below.

 

(b)           Amendment, Modification, Termination, or Recoupment.

 

(1)           The Board may, from time to time, amend or modify the Plan or any outstanding Plan Award, including without limitation, to authorize the Committee to make Plan Awards payable in other securities or other forms of property of a kind to be determined by the Committee, and such other amendments as may be necessary or desirable to implement such Plan Awards, or may terminate the Plan or any provision thereof; provided, however, that no such action of the Board, without approval of the shareholders of the Company, may (1) increase the total number of shares of Stock with respect to which Plan Awards may be granted under the Plan or increase the limits specified in Section 4, (2) extend the term of the Plan as set forth in subsection (a) of this Section 15, (3) permit the Committee to take any of the actions prohibited under items (1), (2) or (3) of subsection (a) of Section 13, or (4) take any other action to amend the Plan, if the Company determines that such amendment requires approval of the Company’s shareholders in order to comply with Section 16 of the Exchange Act, Section 162(m) or other relevant section of the Code, the listing requirements of any principal securities exchange or market on which the Stock is then traded, or other applicable law.

 

(2)           Any Plan Awards granted pursuant to the Plan on or after February     , 2012 [This date should be the date of Committee approval], and any Stock issued or cash paid pursuant to such a Plan Award, shall be subject to any recoupment or clawback policy that may be adopted by the Company from time to time and to any requirement of applicable law,

 

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regulation or listing standard that requires the Company to recoup or claw back compensation paid pursuant to such a Plan Award.

 

(c)           Limitation and Survival.  The Committee’s authority to act and to apply the terms of the Plan with respect to any Plan Award granted prior termination of the Plan, and a Participant’s ability to exercise an outstanding Plan award granted prior to termination of the Plan and not otherwise cancelled by the Board, shall survive termination of the Plan.

 

(d)           Amendments for Changes in Law.  Notwithstanding anything to the contrary herein, the Board shall have the authority to amend outstanding Plan Awards and the Plan to take into account changes in law and tax and accounting rules as well as other developments, and to grant Plan Awards that qualify for beneficial treatment under such rules, without shareholder approval.  Further, the provisions of Code Section 409A are incorporated into the Plan by reference to the extent necessary for any Plan Award that is subject to Code Section 409A to comply with such requirements, and except as otherwise determined by the Committee, the Plan shall be administered in accordance with Section 409A as if the requirements of Code Section 409A were set forth herein.

 

Section  16.           INDEMNIFICATION AND EXCULPATION

 

(a)           Indemnification.  Each person who is or shall have been a member of the Board, the Committee, or of any other committee of the Board administering the Plan or of any committee appointed by the foregoing committees, shall be indemnified and held harmless by the Company against and from any and all loss, cost, liability or expense that may be imposed upon or reasonably incurred by such person in connection with or resulting from any claim, action, suit or proceeding to which such person may be or become a party or in which such person may be or become involved by reason of any action taken or failure to act under the Plan and against and from any and all amounts paid by such person in settlement thereof (with the Company’s written approval) or paid by such person in satisfaction of a judgment in any such action, suit or proceeding, except a judgment in favor of the Company based upon a finding of such person’s lack of good faith; subject, however, to the condition that, upon the institution of any claim, action, suit or proceeding against such person, such person shall in writing give the Company an opportunity, at its own expense, to handle and defend the same before such person undertakes to

 

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handle and defend it on such person’s behalf.  The foregoing right of indemnification shall not be exclusive of any other right to which such person may be entitled as a matter of law or otherwise, or any power that the Company may have to indemnify or hold such person harmless.

 

(b)           Exculpation.  Each member of the Board, the Committee, or of any other committee of the Board administering the Plan or any committee appointed by the foregoing committees, and each officer and employee of the Company, shall be fully justified in relying or acting in good faith upon any information furnished in connection with the administration of the Plan by any appropriate person or persons other than such person.  In no event shall any person who is or shall have been a member of the Board, the Committee, or of any other committee of the Board administering the Plan or of any committee appointed by the foregoing committees, or an officer or employee of the Company, be held liable for any determination made or other action taken or any omission to act in reliance upon any such information, or for any action (including the furnishing of information) taken or any failure to act, if in good faith.

 

Section  17.           EXPENSES OF PLAN

 

The entire expense of offering and administering the Plan shall be borne by the Company and its participating Subsidiaries; provided, that the costs and expenses associated with the redemption or exercise of any Plan Award, including but not limited to commissions charged by any agent of the Company, may be charged to the Participants.

 

Section  18.           FINALITY OF DETERMINATIONS

 

Each determination, interpretation, or other action made or taken pursuant to the provisions of the Plan by the Board, the Committee or any committee of the Board administering the Plan or any committee appointed by the foregoing committees, shall be final and shall be binding and conclusive for all purposes and upon all persons, including, but without limitation thereto, the Company, the shareholders, the Committee and each of the members thereof, and the directors, officers, and employees of the Company and its Subsidiaries, the Participants, and their respective successors in interest.

 

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Section  19.           NO RIGHTS TO CONTINUED EMPLOYMENT OR TO PLAN AWARD

 

(a)           No Right to Employment.  Nothing contained in this Plan, or in any booklet or document describing or referring to the Plan, shall be deemed to confer on any Participant the right to continue as an Employee or director of the Company or Subsidiary, whether for the duration of any Performance Period, the duration of any vesting period under a Plan Award, or otherwise, or affect the right of the Company or Subsidiary to terminate the employment of any Participant for any reason.

 

(b)           No Right to Award.  No Employee or other person shall have any claim or right to be granted a Plan Award under the Plan.  Having received an Award under the Plan shall not give a Participant or any other person any right to receive any other Plan Award under the Plan.  A Participant shall have no rights in any Plan Award, except as set forth herein and in the applicable award grant.

 

Section  20.           GOVERNING LAW, LIMITATION ON ACTIONS, AND CONSTRUCTION

 

The Plan and all actions taken hereunder shall be governed by, and the Plan shall be construed in accordance with the laws of the State of Illinois without regard to the principle of conflict of laws.  As a condition of receiving benefits pursuant to any Plan Award, a Participant agrees, on behalf of the Participant and all persons or entities that may claim through the Participant, that (1) any legal action or other legal proceeding concerning the Plan or a Plan Award may only be heard in a “bench” trial, and (2) any right to a jury trial is waived.  No legal action or other legal proceeding may be brought with respect to the Plan or any Plan Award more than one (1) year after the later of (1) the last date on which the act or omission giving rise to the legal action or proceeding occurred, or (2) the date on which the individual or entity bringing such legal action or proceeding had knowledge (or reasonably should have had knowledge) of the act of omission.  Titles and headings to Sections are for purposes of reference only, and shall in no way limit, define or otherwise affect the meaning or interpretation of the Plan.

 

Section  21.           SECURITIES AND STOCK EXCHANGE REQUIREMENTS

 

(a)           Restrictions on Resale.  Notwithstanding any other provision of the Plan, no person who acquires Stock pursuant to the Plan may, during any period of time that such person is an affiliate of the Company (within the meaning of the rules and regulations of the

 

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Securities Exchange Commission) sell or otherwise transfer such Stock, unless such offer and sale or transfer is made (1) pursuant to an effective registration statement under the Securities Act of 1933 (“1933 Act”), which is current and includes the Stock to be sold, or (2) pursuant to an appropriate exemption from the registration requirements of the 1933 Act, such as that set forth in Rule 144 promulgated pursuant thereto.

 

(b)           Registration, Listing and Qualification of Shares of Common Stock.  Notwithstanding any other provision of the Plan, if at any time the Committee shall determine that the registration, listing or qualification of the Stock covered by a Plan Award upon any securities exchange or under any foreign, federal, state or local law or practice, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of, or in connection with, the granting of such Plan Award or the purchase or receipt of Stock in connection therewith, no Stock may be purchased, delivered or received pursuant to such Plan Award unless and until such registration, listing, qualification, consent or approval shall have been effected or obtained free of any condition not acceptable to the Committee.  Any person receiving or purchasing Stock pursuant to a Plan Award shall make such representations and agreements and furnish such information as the Committee may request to assure compliance with the foregoing or any other applicable legal requirements.  The Company shall not be required to issue or deliver any certificate or certificates for Stock under the Plan prior to the Committee’s determination that all related requirements have been fulfilled.  The Company shall in no event be obligated to register any securities pursuant to the 1933 Act or applicable state or foreign law or to take any other action in order to cause the issuance and delivery of such certificates to comply with any such law, regulation, or requirement.

 

Section  22.           EFFECTIVE DATE

 

The Plan shall become effective on the date on which affirmative shareholder approval pursuant to Section 23 is obtained.

 

Section  23.           VOTE REQUIRED

 

The affirmative vote of the holders of a majority of the total votes cast on the proposal to approve the Plan at the 2010 annual meeting of shareholders of the Company will be required for

 

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approval of the Plan, provided, that the total votes cast on the proposal represents over fifty percent (50%) of all shares entitled to vote on the proposal.

 

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