WISCONSIN ENERGY CORPORATION SUPPLEMENTAL PENSION PLAN

Exhibit 10.9

W ISCONSIN ENERGY CORPORATION
SUPPLEMENTAL PENSION PLAN

Effective as of January 1, 2005

 

INTRODUCTION      ........................................................................................................1

Article 1 DEFINITIONS          ...........................................................................1

Article 2 SERP BENEFIT        ......................................................................... 6

2.1       Eligibility and Participation         .................................................6

2.2       Vesting .............................................................................7

2.3       SERP Benefit A            ................................................................7

2.4       SERP Benefit B            ................................................................8

Article 3 PENSION MAKE-WHOLE BENEFIT        .......................................8

3.1       Eligibility and Participation         .................................................8

3.2       Vesting

3.3       Pension Make-Whole Benefit   .............................................9

Article 4 TIME AND FORM OF PAYMENT ............................................10

4.1       Application of Time and Form of Payment Provisions    .........10

4.2       Time for Distribution     ..........................................................10

4.3       Payment Form  ...................................................................10

4.4       Election Form Requirements.    ..............................................11

4.5       Discretion to Accelerate Distribution.    ..................................12

Article 5 DEATH BENEFITS  ......................................................................13

5.1       Death While In Pay Status.       .................................................13

5.2       Death While Actively Employed            ..........................................14

Article 6 BENEFICIARY DESIGNATION     .................................................14

6.1       Beneficiary       .........................................................................14

6.2       Beneficiary Designation; Change           .........................................14

6.3       Acknowledgment          ................................................................15

6.4       No Beneficiary Designation       .................................................15

6.5       Doubt as to Beneficiary .......................................................15

6.6       Discharge of Obligations           ......................................................15

Article 7 TERMINATION, AMENDMENT OR MODIFICATION   .............15

7.1       Termination.     .........................................................................15

7.2       Amendment      ..........................................................................16

7.3       Effect of Payment         .................................................................16

Article 8 ADMINISTRATION            ......................................................................17

8.1       Plan Administration       ..............................................................17

8.2       Powers, Duties and Procedures            ............................................17

8.3       Administration Upon Change In Control            ...............................17

8.4       Agents  ................................................................................18

8.5       Binding Effect of Decisions        ...................................................18

8.6       Indemnity of Committee            .......................................................18

8.7       Employer Information   ...........................................................18

8.8       Coordination with Other Benefits          ..........................................18

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Article 9 CLAIMS PROCEDURES     ...............................................................18

9.1       Presentation of Claim    ............................................................18

9.2       Decision on Initial Claim            ........................................................18

9.3       Right to Review            .....................................................................19

9.4       Decision on Review      ...............................................................19

9.5       Form of Notice and Decision    .................................................20

9.6       Legal Action     ..........................................................................20

Article 10 TRUST        ............................................................................................20

10.1     Establishment of the Trust         .....................................................20

10.2     Interrelationship of the Plan and the Trust          ..............................20

10.3     Distributions From the Trust      ..................................................20

Article 11 MISCELLANEOUS            ........................................................................21

11.1     Status of Plan   ........................................................................21

11.2     Unsecured General Creditor     ..................................................21

11.3     Employer's Liability       ................................................................21

11.4     Nonassignability            .....................................................................21

11.5     Not a Contract of Employment ...............................................21

11.6     Furnishing Information   ............................................................22

11.7     Receipt and Release     ...............................................................22

11.8     Incompetent     ............................................................................22

11.9     Governing Law and Severability            ..............................................22

11.10   Notices and Communications    .................................................22

11.11   Successors       ............................................................................22

11.12   Insurance          ...............................................................................23

11.13   Legal Fees To Enforce Rights After Change in Control  ............23

11.14   Terms   ....................................................................................23

11.15   Headings          .................................................................................23

 

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WISCONSIN ENERGY CORPORATION
SUPPLEMENTAL PENSION PLAN

INTRODUCTION

Wisconsin Energy Corporation, a Wisconsin Corporation (the "Company"), previously established the Legacy Wisconsin Energy Corporation Supplemental Executive Retirement Plan (previously named the Wisconsin Energy Corporation Supplemental Executive Retirement Plan) (the "Legacy Plan") to attract and retain key employees by providing such employees with supplemental pension benefits. The Company most recently amended and restated the Legacy Plan effective April 1, 2004. The Company amended the Legacy Plan to cease participation to new employees in the Legacy Plan effective as of January 1, 2005 and to preserve frozen legacy benefits. The terms and conditions of the Legacy Plan continue to govern any Legacy Plan benefits derived from compensation paid and credited to the Legacy Plan before January 1, 2005, provided the benefits were otherwise vested as of December 31, 2004.

In addition, the Company provides supplemental pension benefits (known as "pension make-whole benefits") under the Legacy Wisconsin Energy Corporation Executive Deferred Compensation Plan ("Legacy EDCP"), the Wisconsin Energy Short-Term Performance Plan ("STPP") and the 2003 Mezzanine Incentive Plan for We Power, LLC ("MEZ Plan"). When considered together, provisions of these plans coordinate to provide a single pension make-whole benefit to eligible employees. Similar to the Legacy Plan, the Company amended the Legacy EDCP, STPP and MEZ Plan to preserve legacy pension make-whole benefits derived from compensation paid and credited to such plans before January 1, 2005, provided the benefits were otherwise vested as of December 31, 2004 and to cease participation for such benefits to new employees effective as of such date. The terms and conditions of the Legacy EDCP, STPP and MEZ Plan shall continue to govern the pension make-whole benefits derived from compensation paid and credited to such plans before January 1, 2005.

Effective as of January 1, 2005, the Company hereby establishes the Wisconsin Energy Corporation Supplemental Pension Plan (the "Plan"), as set forth herein. The Plan operates as a replacement plan for any earned, but unvested benefts under the Legacy Plan as of December 31, 2004. Beginning January 1, 2005, the Plan also serves to consolidate provisions applicable to pension make-whole benefits that would have been earned under the EDCP, STPP and MEZ Plan on and after such date. As such, beginning January 1, 2005, all supplemental pension benefits accrued pursuant to the Legacy Plan formula and all pension make-whole benefits accrued pursuant to the EDCP, STPP and MEZ Plan formulas shall be provided under the Plan. Except as otherwise provided in the Plan, payment elections made at the end of the Code Section 409A transition period apply to benefits derived from compensation paid in 2005 and later and supersede any payment election or election to defer made during such period, in accordance with Code Section 409A relief provided in Notice 2006-79, Notice 2007-86 and proposed regulations promulgated under Code Section 409A.

The Plan is intended to comply with the provisions of Code Section 409A, and any guidance and regulations issued thereunder. The Plan shall be interpreted and administered consistent with this intent and shall apply to all amounts credited under the Plan on or after January 1, 2005. Such amounts include any amounts previously credited under the Legacy Plan,

but not vested as of December 31, 2004. Pension make-whole benefits accrued under the Legacy EDCP, STPP and MEZ Plans were immediately vested, therefore, all such benefits earned as of December 31, 2004 are preserved and considered exempt from Code Section 409A.

ARTICLE 1
Definitions

Whenever used herein, the following terms have the meanings set forth below, unless a different meaning is clearly required by the context:

1.1       "Annual Installment Method" shall mean equal annual installment payments over a specified number of years that is actuarially equivalent to the immediate life annuity that would have normally been payable to the Participant upon the Participant's benefit commencement date. To determine the annual installment payments, the Plan will utilize the actuarial assumptions set forth under the RAP for determining lump sum distributions from the RAP.

1.2       "Base Annual Salary" shall mean the annual cash compensation relating to services performed during a Plan Year, whether or not paid in, or included on the Form W-2 for, such Plan Year, excluding severance payments, non-qualified supplemental pension payments, performance awards, bonuses, commissions, overtime, fringe benefits, relocation expenses, incentive payments, non-monetary awards, directors' fees and other fees, automobile and other allowances paid to a Participant for employment services rendered (whether or not such allowances are included in the Participant's gross income), stock options, restricted stock, performance shares or units, dividends, dividend equivalents and any other equity-based award provided under a plan or arrangement of an Employer. Base Annual Salary shall be calculated before it is deferred or contributed by the Participant under a qualified or non-qualified plan of an Employer and shall include amounts not otherwise included in the Participant's gross income under Code Sections 125, 132(f)(4), 402(e)(3), 402(h) or 403(b) pursuant to plans established by an Employer; provided, however, that all such amounts shall be included in Base Annual Salary only to the extent that, had there been no such plan, the amount would have been payable in cash to the Participant.

1.3       "Beneficiary" shall mean one or more persons, trusts, estates or other entities designated by the Participant in accordance with Article 6 that are entitled to receive benefits under this Plan upon the death of a Participant.

1.4       "Board" shall mean the board of directors of the Company.

1.5       "Change in Control" shall mean, with respect to the Company, the occurrence of any one of the following dates, interpreted consistent with Treasury Regulation Section-1.409A-3(i)(5).

a. Change in Ownership . The date any one Person, or more than one Person Acting as a Group, acquires ownership of stock of the Company that, together with stock held by such Person or Group, constitutes more than 50% of the total fair market value or total voting power of the stock of the Company. Notwithstanding the

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foregoing, for purposes of this paragraph, if any one Person, or more than one Person Acting as a Group, is considered to own more than 50% of the total fair market value or total voting power of the stock of the Company, the acquisition of additional stock by the same Person or Persons is not considered to cause a Change in Control.

b. Change in Effective Control .

i. The date any one Person, or more than one Person Acting as a Group, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such Person or Persons) ownership of stock of the Company possessing 30% or more of the total voting power of the stock of the Company. Notwithstanding the foregoing, for purposes of this subparagraph, if any one Person, or more than one Person Acting as a Group, is considered to effectively control the Company, the acquisition of additional control of the Company by the same Person or Persons is not considered to cause a Change in Control; or

ii. The date a majority of the members of the Company's Board is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Company's Board before the date of the appointment or election.

c. Change in Ownership of a Substantial Portion of the Company's Assets . The date any one Person, or more than one Person Acting as a Group, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such Person or Persons) assets from the Company that have a total gross fair market value equal to or more than 40% of the total gross fair market value of all of the assets of the Company immediately before such acquisition or acquisitions. For purposes of this paragraph (c), "gross fair market value" means the value of the assets of the Company, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets. Notwithstanding the foregoing, a transfer of assets is not treated as a Change in Control if the assets are transferred to:

i. An entity that is controlled by the shareholders of the transferring corporation;

ii. A shareholder of the Company (immediately before the asset transfer) in exchange for or with respect to its stock;

iii. An entity, 50% or more of the total value or voting power of which is owned, directly or indirectly, by the Company;

iv. A Person, or more than one Person Acting as a Group, that owns, directly or indirectly, 50% or more of the total value or voting power of all the outstanding stock of the Company; or

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v. An entity, at least 50% of the total value or voting power of which is owned, directly or indirectly, by a Person described in clause (iv).

d. " Person" and "Acting as a Group. "

i. For purposes of this Section, "Person" shall have the meaning set forth in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended.

ii. For purposes of this Section, Persons shall be considered to be "Acting as a Group" if they are owners of a corporation that enter into a merger, consolidation, purchase or acquisition of stock, or similar business transaction with the Company. If a Person, including an entity, owns stock in both corporations that enter into a merger, consolidation, purchase or acquisition of stock, or similar transaction, such shareholder is considered to be Acting as a Group with the other shareholders only with respect to the ownership in that corporation before the transaction giving rise to the change and not with respect to the ownership interest in the other corporation. Notwithstanding the foregoing, Persons shall not be considered to be Acting as a Group solely because they purchase or own stock of the same corporation at the same time, or as a result of the same public offering.

1.6        "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time.

1.7        "Committee" shall mean an internal administrative committee appointed by the Chief Executive Officer of the Company to administer the Plan in accordance with Article 8.

1.8        "Company" shall mean Wisconsin Energy Corporation, a Wisconsin corporation, and any successor to all or substantially all of the Company's assets or business.

1.9       "Compensation Committee" shall mean the Compensation Committee of the Board.

1.10       "EDCP" shall mean the Wisconsin Energy Corporation Executive Deferred Compensation Plan, effective as of January 1, 2005, as may be amended from time to time or any successor to such plan.

1.11 "Election Form" shall mean the form or forms established from time to time by the Committee that a Participant completes, signs and returns to the Committee to designate a form of payment pursuant to Article 4. To the extent authorized by the Committee, such form may be electronic or set forth in some other media.

1.12 "Employer" shall mean the Company and/or any of its subsidiaries (now in existence or hereafter formed or acquired).

1.13 "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time.

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1.14 "IRS Limitations" shall mean the limitation on tax-qualified benefits imposed by Code Section 415, Code Section 401(a)(17), or any other limitation on tax-qualified benefits to which a participant may be entitled under a plan sponsored by the Company.

1.15 "MEZ Plan" shall mean the 2003 Mezzanine Incentive Plan For We Power, LLC, as amended and restated effective as of January 1, 2005, and as may be amended from time to time thereafter or any successor to such plan.

1.16 "Participant" shall mean an individual selected to participate in the Plan and earn a benefit under either Article 2 or Article 3. A spouse or former spouse of a Participant shall not be treated as a Participant in the Plan, even if she has an interest in the Participant's benefit as a result of applicable law or property settlements resulting from legal separation or divorce.

1.17 "Pension Eligible Earnings" shall mean a Participant's established base salary for assigned responsibilities including payments for absences, without regard for any limitations imposed by the Code on benefits or compensation and including any amounts of base salary that would have been paid to the Participant, but were not paid because of deferral elections made by the Participant under a savings or other deferred compensation plan, and including the total of any incentive performance award determined under the STPP or other bonus plan of the Company which has been approved by the Board, Committee or Chief Executive Officer of the Company for inclusion into Pension Eligible Earnings for this Plan. Amounts of base salary and annual incentive shall be calculated without regard to any amounts deferred from such base salary or annual incentive compensation. For purposes of this definition, base salary shall be defined with reference to the RAP, as modified above, as in effect from time to time for a Plan Year.

1.18 "Pension Make-Whole Benefit" shall mean the benefit provided pursuant to Article 3.

1.19 "Plan Year" shall mean the calendar year.

1.20 "RAP" shall mean the Wisconsin Energy Corporation Retirement Account Plan, as amended from time to time or any successor to such plan, the Company's tax-qualified defined benefit plan under Code Section 401(a).

1.21 "SERP Benefit" shall mean SERP Benefit A and/or SERP Benefit B provided pursuant to Article 2.

1.22 "SERP Benefit A" means the benefit provided pursuant to Section 2.3.

1.23 "SERP Benefit B" means the benefit provided pursuant to Section 2.4.

1.24 "Separation from Service" shall mean the Participant's termination of employment with all Employers and other entities affiliated with the Company, voluntarily or involuntarily, for any reason other than on account of death, or as otherwise provided by the Department of Treasury in regulations promulgated under Code Section 409A. For purposes of the foregoing, whether an entity is affiliated with the Company shall be determined pursuant to the controlled group rules of Code Section 414, as modified

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by Code Section 409A. Unless the employment relationship is terminated earlier by the Employer or the Participant, the following shall apply for determining a Separation from Service for Code Section 409A only:

a. Except as provided in paragraph (b), the Participant's employment relationship with the Employer shall be treated as continuing intact while the individual is on a military leave, sick leave or other bona fide leave of absence if the period of such leave does not exceed six months (or longer, if required by statute or contract). If the period of the leave exceeds six months and the Participant's right to reemployment is not provided either by statute or contract, the employment relationship is deemed to terminate on the first date immediately following such six-month period.

b. Where a leave of absence is due to any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than six months, where such impairment causes the Participant to be unable to perform the duties of her position of employment or any substantially similar position of employment, the Participant's relationship with the Employer shall be treated as continuing intact for a period of 29 months and will be deemed to terminate on the first date immediately following such 29 month period.

1.25 "STPP" shall mean shall mean the Wisconsin Energy Corporation Short-Term Performance Plan, as amended and restated effective as of January 1, 2005, and as may be amended from time to time thereafter or any successor to such plan.

1.26 "Trust" shall mean the Wisconsin Energy Corporation Rabbi Trust Agreement dated December 1, 2000 between the Company and The Northern Trust Company, and as amended from time to time.

1.27 "Vest" or "Vested" shall mean the Participant has a nonforfeitable right to the SERP Benefit and/or Pension Make-Whole Benefit, as the case may be, as determined under Section 2.2 or Section 3.2.

ARTICLE 2
SERP BENEFIT

2.1 Eligibility and Participation . The Chief Executive Officer of the Company, the Board or the Compensation Committee of the Board may designate those key employees of the Employer as a Participant for a SERP Benefit, provided that participation in the Plan shall be limited to a select group of management and highly compensated employees of the Employer (as defined in ERISA Sections 201(2), 301(a)(3) and 401(a)(1)). An employee may be designated as a Participant for purposes of SERP Benefit A and/or SERP Benefit B.

The Chief Executive Officer of the Company, the Board or the Compensation Committee of the Board shall have the discretion to exclude a Participant from continued participation in the SERP Benefit with such exclusion becoming effective as of the first

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day of the immediately following Plan Year. In such event, the Participant shall be eligible to receive a Pension Make-Whole Benefit in lieu of any SERP Benefit that accrued before such exclusion to avoid any duplication of benefits under the Plan.

2.2 Vesting . A Participant shall become Vested in her SERP Benefit upon the earlier of (i) attaining age 60 while employed with an Employer, (ii) death or (iii) a Change in Control. The Chief Executive Officer of the Company, the Board or the Compensation Committee of the Board has the authority to Vest a Participant who experiences a Separation from Service before age 60 or incurs a disability. "Disability" shall mean the Participant is eligible for a benefit under the Company's long-term disability program, as may be in effect from time to time. In the event a Participant forfeits her SERP benefit due to a Separation from Service before she is Vested, the Participant shall be entitled to a Pension Make-Whole Benefit, if any, pursuant to Article 3.

2.3 SERP Benefit A . SERP Benefit A provides a supplemental pension benefit, the amount of which shall be equal to the greater of (a) or (b), if applicable, subject to (c) below.

a. The benefit formula described in this paragraph (a) is intended to calculate a supplemental cash balance benefit that will be calculated as if it were held in an account (the "Account Balance") for the Participant's credit under the RAP. This Account Balance is a lump sum amount that increases each year as additional amounts are credited in two ways: a benefit credit and an interest credit.

i. Benefit Credit . Beginning as early as 1995, for each Plan Year in which a Participant is eligible to accrue a SERP Benefit A, the Participant's Account Balance will be credited with a benefit credit equal to (i) the "relevant percentage" of her Pension Eligible Earnings for the Plan Year less (ii) the amount credited to the Participant's RAP cash balance account for such year. Notwithstanding the foregoing, if a Participant experiences a Separation from Service during the Plan Year, the Participant's benefit credit will equal the relevant percentage of the Participant's Pension Eligible Earnings through the Participant's Separation from Service less the amount credited to her RAP cash balance account for the same time period.

For purposes of the above, the relevant percentage will be the same percentage as is determined under the RAP for the Plan Year of determination except that to be eligible for a relevant percentage of more than the minimum guaranteed benefit credit as determined under the RAP, the Participant must be actively employed on December 31 of that year.

ii. Interest Credit . For each Plan Year, the Participant's Account Balance will receive an interest credit on her Account Balance at the beginning of the year. This interest credit will be the same percentage that has been applied to the RAP for that year. If the Participant did not have an Account Balance at the beginning of the year, the Account Balance will not receive an interest credit at the end of the year. If the Participant has a

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distribution from her Account Balance, either in whole or in part (under an installment payment or annuity) before December 31, a prorata Interest Credit will be credited for the Plan Year that includes the distribution, determined in the same manner as under the RAP. Interest credits cease with the commencement of payment.

b. The benefit formula described in this paragraph (b) will be calculated for Participants who were actively employed by an Employer on December 31, 1995 and who were covered under the RAP as of such date, thereby entitling them to a grandfathered pension benefit. Such Participants will be eligible to have their SERP Benefit A determined under the grandfathered minimum benefit, as described in Appendix A.

c. The SERP Benefit A provides a benefit for Participants who otherwise would lose benefits under the RAP due to certain limitations for included compensation under the RAP. Effective January 1, 2008, eligible compensation for determining benefits under the RAP for both the cash balance and grandfathered minimum benefit formulas was expanded to include STPP awards. As a result of this change, for certain participants, the total benefit payable as a final retirement benefit from both the RAP and this Plan may be fully payable from the RAP under the formula for the grandfathered minimum benefit. In this case, no further benefit would be payable from this Plan.

2.4 SERP Benefit B . SERP Benefit B provides Participants with a life annuity of 10% of the monthly average of the Participant's Pension Eligible Earnings received from the Employer during whichever period of 36 consecutive months produces the highest monthly average. The monthly average of Pension Eligible Earnings during such 36 month period includes the monthly average of:

a. any performance award determined under the STPP or any other plan as designated by the Board, calculated as of the date of determination as if then paid in full as base salary, and

b. any amounts of base salary that would have been paid to the Participant during such 36-month period but are not paid due to deferral elections made by the Participant under a savings or other deferred compensation plan.

Effective as of January 1, 2005, no new individuals are eligible to earn a SERP B Benefit. The provisions relating to SERP Benefit B shall only apply to those Participants who were designated as eligible to earn a SERP Benefit B before January 1, 2005.

ARTICLE 3
PENSION MAKE_WHOLE BENEFIT

3.1 Eligibility and Participation . Participation in the Pension Make-Whole Benefit shall be limited to a select group of management and highly-compensated employees of the Employers, as determined by the Chief Executive Officer of the Company, the Board or the Compensation Committee. From that group, the Chief Executive Officer of the

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Company, the Board or the Compensation Committee shall select employees to participate in the Pension Make-Whole Benefit and shall have the discretionary authority to exclude a Participant from continued participation in the Pension Make-Whole Benefit. Any such exclusion shall become effective as of the first day of the immediately following Plan Year. Such Participant shall remain a Participant until her accrued Pension Make-Whole Benefit is paid in full, unless such Participant becomes designated as eligible to earn a SERP Benefit.

3.2 Vesting. Pension Make-Whole Benefits are immediately vested, unless a Participant becomes designated as eligible for a SERP Benefit and Vested in the SERP Benefit. If a Participant becomes eligible to earn a SERP Benefit and becomes Vested in such benefit, no Pension Make-Whole Benefit shall be paid to such Participant in order to avoid any duplication of supplemental pension benefits provided under the Plan.

3.3 Pension Make-Whole Benefit . The Pension Make-Whole Benefit provided pursuant to this Article shall equal (a) less (b), subject to (c) below:

a. The pension benefit which would have accrued to the Participant's credit under the RAP, calculated without regard to IRS Limitations and taking into account:

i. all Base Annual Salary, whether paid and/or deferred to the EDCP,

ii. STPP awards, whether paid and/or deferred to the EDCP;

iii. any other bonus aw