AMENDED AND RESTATED SENIOR OFFICER EMPLOYMENT AND NON-COMPETE AGREEMENT

Exhibit 10.25

AMENDED AND RESTATED SENIOR OFFICER EMPLOYMENT
AND NON-COMPETE AGREEMENT

THIS AMENDED AGREEMENT is made as of December 29, 2008 between WISCONSIN ENERGY CORPORATION (the "Company") and GALE KLAPPA (the "Executive").

WHEREAS, the Executive is currently employed by the Company as its President;

WHEREAS, the Executive and the Company originally entered into a Senior Officer Employment and Non-compete Agreement dated as of March 20, 2003 and an amended agreement as of December 3, 2003;

WHEREAS, the parties now desire to amend and restate the Agreement solely to comply with Section 409A of the Internal Revenue Code of 1986, as amended, with such changes effective January 1, 2005.

NOW, THEREFORE, in consideration of their mutual promises, the parties agree as follows:

1. Defined Terms . All of the capitalized terms not otherwise defined in this Agreement are defined in the attached Appendix.
2. Employment . Effective as of April 14, 2003 (the "Employment Starting Date"), the Company employed the Executive as the President and the Executive accepted and hereby again accepts such employment with the Company and agrees to serve in such position and to perform such other executive duties and serve in such other executive capacities not inconsistent with the position of President as the Board of Directors of the Company may request. The Executive's employment is not for any fixed term and the Executive acknowledges that he is an employee at-will. Further:
3. 1. Base Salary, Signing Bonus and Bonus Opportunity . Effective as of the Employment Starting Date, the Executive's annual base salary was initially established at an annual rate of $640,000. The Executive received a special lump sum signing bonus of $350,000, with $250,000 of this amount paid promptly after the Employment Starting Date and the balance of $100,000 payable six months later. The Executive's target bonus opportunity for 2003 under the Company's Short-Term Performance Plan (the "STPP") was fixed at 90% of base salary, with a minimum guaranteed bonus of $576,000 for 2003 and a maximum bonus opportunity of two times the target bonus. The Executive's target bonus opportunity under the STPP for 2004 and subsequent years will not be less than 90% of base salary, except under circumstances described in the next sentence. Circumstances under which an adjustment below the 90% target could take place would be limited to a general "Board Action" resulting in the lowering of targets for the entire senior executive group.
   2. Stock Based Incentives . Effective as of the Employment Starting Date, the Executive received a grant of non-qualified options for 250,000 shares of the Company's common stock (the "Stock") at an exercise price per share equal
      
      

to the average of the lowest and highest reported sale prices for the Stock on the Employment Starting Date, and on other terms and conditions as specified for other senior officers in the grants made to such officers in January of 2003. Additionally, effective as of the Employment Starting Date, the Executive was granted an award of restricted stock, with the number of shares awarded determined by dividing $1,000,000 by the average of the lowest and highest reported sale prices for the Stock on such date and then rounding the number of shares to the nearest 10. The restricted Stock will vest at the rate of 10% per year of service with the Company by the Executive, and with 100% vesting to occur upon the Executive's death or disability while in the Company's employ.

3. Other Benefits and Special Additional Pension Benefit . The Executive will be entitled to six weeks of vacation per year, to participate in all retirement and welfare benefit plans and programs generally available to employees in accordance with the terms of such plans and programs and to participate on a basis commensurate with other senior officers of the Company in any benefit plans and programs available to such officers, including the opportunity to participate in the Company's Executive Deferred Compensation Plan (the "EDCP") or such successor plan, as amended from time to time. Additionally, and provided the Executive's retirement occurs at or after age 60, the Executive shall be entitled to (i) participate in the Company's Supplemental Pension Plan ("SPP") or such successor plan, as amended from time to time, with respect to "SERP Benefit A," which is designed to make up for any limitations imposed on the amount of Executive's accrued benefit under the Company's tax-qualified defined benefit plan (the "Retirement Account Plan") because of statutory or regulatory limits relating to the Internal Revenue Code, and (ii) receive a special additional pension benefit. Such special additional pension benefit will be equal to the difference between (a) and (b) below, less the monthly lifetime retirement benefits payable to the Executive from all qualified and non-qualified defined benefit pension plans of previous employers of the Executive, calculated as if starting on the same date as the special additional pension benefit, where (a) and (b) are as follows:
4. 1. equals the monthly lifetime retirement benefit payable from the Company's Retirement Account Plan, plus any amount payable as "SERP Benefit A" under the SPP, and
   2. equals the monthly lifetime retirement benefit that would have been payable from the Management Employees' Retirement Plan of the Company as in effect on December 31, 1995 (the "1995 Management Plan") had the defined benefit formula then in effect continued until the Executive's retirement, calculated without regard to Internal Revenue Code limits, and as if the Executive had started participation in the 1995 Management Plan at age 27 and as if any deferrals elected by the Executive under the EDCP and any bonuses were all included in the Executive's compensation base for calculating benefits under the 1995 Management Plan.

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Such special additional pension benefit will be paid at the time and in the form provided under the terms of the SPP (including, if any, the Executive's last completed and timely filed payment election under the SPP and the SPP provision requiring a six-month delay in payment to a "specified employee" upon a "separation from service," both within the meaning of Code Section 409A).

4. Additional Preretirement Spouse's Benefit . In the event of the Executive's death while in the Company's employ, the Company will pay to the Executive's surviving spouse, if any, a monthly benefit equal to the difference between (a) and (b) below, but reduced as provided below to reflect the vested value of all qualified and nonqualified defined benefit pension plans of previous employers of the Executive, where (a) and (b) are as follows:
5. 1. equals the monthly spouse's benefit that is payable from the Retirement Account Plan of the Company, plus any monthly amount payable under "SERP Benefit A" under the SPP, and
   2. equals the monthly spouse's benefit that would have been payable from the 1995 Management Plan had the defined benefit formula in effect on December 31, 1995 continued until the Executive's death, calculated on all the same assumptions as set forth in Section 3(b) above.

            The spouse's benefit will be paid in a monthly annuity for her life and will begin as soon as administratively practicable following the Executive's death, but no later than December 31 of the calendar year in which the Executive dies or, if later, the 15 ^th day of the third month following the Executive's death. Notwithstanding the foregoing, on or before December 31, 2008, the Executive may elect to have such benefit paid to the spouse in a lump sum.

            The reduction attributable to plans of previous employers as referenced above in the event the additional preretirement spouse's benefit becomes payable is to be applied by reducing the monthly surviving spouse benefit calculation as above set forth by one-half of the dollar amount of offset attributable to the plans of previous employers that would have resulted under the third sentence of Section 3 above if Section 3 were applicable.

            For the life of the spouse, the spouse shall be entitled to coverage under the Company's retiree medical and dental program upon the same terms as generally available to surviving spouses of retirees of the Company. To the extent that the medical and dental benefits for the spouse described in the preceding sentence cannot be provided pursuant to the retiree medical and dental program maintained by the Company or its affiliates, the Company shall provide such benefits outside the program at no cost (including, without limitation, tax cost) to the spouse.

5. Covered Termination Not Associated with a Change in Control. In the event of a Covered Termination Not Associated with a Change in Control, then the Company shall provide the Executive with the following compensation and benefits:

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5. 1. General Compensation and Benefits . The Company shall pay the Executive's full salary to the Executive from the time notice of termination is given through the date of Termination of Employment at the rate in effect at the time such notice is given or, if higher, at an annual rate not less than twelve times the Executive's highest monthly base salary for the twelve-month period immediately preceding the month in which the Effective Date occurs, together with all compensation and benefits payable to the Executive through the date of Termination of Employment under the terms of any compensation or benefit plan, program or arrangement maintained by the Company during such period. Such payments shall be made in a lump sum not later than ten business days after such termination. The Company shall also pay the Executive's normal post-termination compensation and benefits to the Executive as such payments become due, except that any normal cash severance benefits shall be superseded and replaced entirely by the benefits provided under this Agreement. Such post-termination compensation and benefits shall be determined under, and paid in accordance with, the Company's retirement, insurance and other compensation or benefit plans, programs and arrangements most favorable to the Executive in effect at any time during the 180-day period immediately preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to executives of the Company of comparable status and position to the Executive.
   2. Incentive Compensation . Notwithstanding any provision of any cash bonus or incentive compensation plan of the Company, the Company shall pay to the Executive, within ten business days after the Executive's Termination of Employment, a lump sum amount, in cash, equal to the sum of (i) any bonus or incentive compensation which has been allocated or awarded to the Executive for a fiscal year or other measuring period under the plan that ends prior to the date of Termination of Employment, but which has not yet been paid, and (ii) a pro rata portion of the Highest Bonus Amount for all uncompleted periods under any bonus or incentive compensation plan.
   3. Special Compensation . The Company shall pay to the Executive a lump sum equal to three times the sum of (a) the highest per annum base rate of salary in effect with respect to the Executive during the three-year period immediately prior to the Termination of Employment plus (b) the Highest Bonus Amount. Such lump sum shall be paid by the Company to the Executive within ten business days after the Executive's Termination of Employment, unless the provisions of Section 5(f) below apply. Notwithstanding the foregoing, in the event of the Executive's voluntary Termination of Employment without Good Reason, as described in Section (c)(iv) of the Appendix to this Agreement, payment shall occur on the first day of the seventh month following the Executive's Termination of Employment, unless the provisions of Section 5(f) below apply. The amount of the aggregate
      
      

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lump sum provided by this Section 5(c) shall not be counted as compensation for purposes of any other benefit plan or program applicable to the Executive.

5. 4. Special Retirement Plans Lump Sum . The Company shall pay to the Executive an aggregate lump sum equal to the total of the amounts described in (a) and (b) herein. Amount (a) is a lump sum equal to the difference between (i) the actuarial equivalent of the benefit under the Retirement Account Plan, the SPP "SERP Benefit A" and the special additional pension benefit provided under Section 3 above, which the Executive would receive if his employment continued for a three-year period following Termination of Employment, assuming that the Executive's compensation during such three-year period would have been equal to the Executive's salary as in effect immediately before the termination or, if higher, as in effect at any time during the 180-day period immediately preceding the termination date, and the Highest Bonus Amount with all non-qualified pension benefits determined on a fully vested basis and waiving the requirement that Executive have attained age 60, and (ii) the actuarial equivalent of the Executive's actual benefit (paid or payable) under the Retirement Account Plan, the SPP "SERP Benefit A" and the special additional pension benefit under Section 3 above. Actuarial equivalency for this purpose shall be determined using an interest rate equal to a 36 consecutive month (or shorter period, as explained in the next sentence) average, using the rates as of the last business day of each month starting with January 31, 2002 (the "Month End Rate") of the five year United States Treasury Note yields (the "36 Month Average Rate") in effect ending with the Month End Rate immediately prior to the Effective Date, as such yield is reported in the Wall Street Journal or comparable publication, and the mortality table used for purposes of determining lump sum amounts then in use under the Retirement Account Plan. Prior to January 31, 2005, the 36 Month Average Rate shall mean only the average of the Month End Rates which have occurred since January 31, 2002, even though less than 36. Amount (b) is a lump sum equal to the total of (i) the additional contributions which would have been made to the Executive's account under the Company's tax-qualified 401(k) plan, plus (ii) the additional contributions which would have been credited to the bookkeeping account balance of the Executive attributable to the 401(k) match feature of the EDCP, had the Executive continued in employment for a three-year period following Termination of Employment and assuming that the Executive's compensation would have been the same as set forth above and that the Executive had made maximum utilization of the pre-tax and after-tax opportunity in the qualified 401(k) plan and obtained the maximum matching contributions in such plan. The amount of the aggregate lump sum under this Section 5(d) shall be paid by the Company to the Executive within ten business days after the Executive's Termination of Employment, unless the provisions of Section 5(f) below apply. Notwithstanding the foregoing, in the event

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of the Executive's voluntary Termination of Employment without Good Reason, as described in Section (c)(iv) of the Appendix to this Agreement, payment shall occur on the first day of the seventh month following the Executive's Termination of Employment, unless the provisions of Section 5(f) below apply. The amount of the lump sum provided by this Section 5(d) shall not be treated as compensation for purposes of any other benefit plan or program applicable to the Executive.

5. 5. Special Additional Monthly Pension Benefit . The Company shall pay to the Executive an additional monthly pension benefit equal to the difference between (i) the pension benefits the Executive would have received under all qualified and non-qualified defined benefit pension plans of his former employer immediately prior to his employment with the Company had he remained with such former employer until age 60, calculated as if his pay with such employer had continued at its 2003 level, increased by 3% annually thereafter, and (ii) the sum of the pension benefits actually payable to the Executive under the Retirement Account Plan and under Section 3 above, which will become vested upon the Executive's termination under this Section 5 without regard to the Executive's age, plus the actuarial equivalent (calculated as provided in subsection (d) above) of the special retirement plans lump sum benefit provided in subsection (d) above, provided that the benefit calculated under (i) above is greater than the benefit calculated under (ii) above. Such additional monthly pension benefit shall be calculated as of the first day of the month following the Executive's Termination of Employment and be payable in the form of a monthly annuity for the Executive's life. Payment of the annuity shall commence on the first day of the seventh month following the Executive's Termination of Employment. The first payment shall also include a lump sum payment equal to the aggregate of the monthly payments otherwise scheduled to be made pending such six-month delay. No interest shall be payable on any amounts delayed due to the Participant's status as a specified employee for purposes of implementing the foregoing six-month delay.
   6. Election Pursuant to Section 409A Transition Relief . Notwithstanding any other provision of this Agreement, on or before December 31, 2008, the Executive may elect to have all or part of the special compensation provided by Section 5(c) and the special retirement plans lump sum otherwise provided for in Section 5(d) paid pursuant to his election filed under the EDCP that relates to amounts deferred in 2009. The amounts to which the election applies shall be credited with earnings in the manner as elected by the Executive under the terms of the EDCP. EDCP provisions shall apply to such amounts except that (i) any provisions for a mandatory lump sum payment upon separation from service following a "Change in Control" as defined in the EDCP shall not apply to deferrals made hereunder and (ii) the entire amount subject to the election made under this
      
      

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Section 5(f) shall be paid in a lump sum by the Company immediately prior to the occurrence of a Change in Control to such grantor or "rabbi" trust as the Company shall have established as a vehicle to hold such amount pending payment, but with such trust designed so that the Executive's rights to payment of such benefits are no greater than those of an unsecured creditor.

5. 7. Welfare Benefits . Subject to Section 5(h) below, for a three-year period following Termination of Employment, the Company shall provide the Executive (and his family) with health, life and other welfare benefits (but excluding disability benefits) substantially similar to the benefits received by the Executive (and his family) pursuant to welfare benefit programs of the Company or its affiliates as in effect immediately during the 180 days preceding the Effective Date (or, if more favorable to the Executive, as in effect at any time thereafter until the Termination of Employment); provided, however, that no compensation or benefits provided hereunder shall be treated as compensation for purposes of any of the programs or shall result in the crediting of additional service thereunder. For purposes of determining the amount of such welfare benefits, any part of which shall be based on compensation, the Executive's compensation during the relevant three-year period shall be deemed to be equal to the Executive's salary as in effect immediately before the Termination of Employment or, if higher, as in effect at any time during the 180-day period immediately preceding the termination date, and the Highest Bonus Amount. To the extent that any of the welfare benefits covered by this Section 5(g) cannot be provided pursuant to the plan or program maintained by the Company or its affiliates, the Company shall provide such benefits outside the plan or program at no additional cost (including, without limitation, tax cost) to the Executive and his family. The Executive shall be entitled to be covered by a retiree medical and dental program at the end of the relevant three-year period, at a cost to the Executive not to exceed the lesser of the cost, if any, charged to other retirees or the COBRA continuation premium charged to terminees who elect to continue in the Company's health plan at their expense under applicable law. The Company shall become obligated to continue such benefits for the remainder of the Executive's life and that of his surviving spouse, notwithstanding any contrary provision or power of amendment or termination reserved to the Company in any otherwise applicable document.

To the extent that the period during which the continued provision of medical and dental benefits falls within the applicable COBRA continuation period, such continued provision of medical and dental benefits is exempt from Code Section 409A under Treasury Regulation Section 1.409A-1(b)(9)(v)(B). To the extent that the period during which the continued provision of medical and dental benefits extends beyond the applicable COBRA continuation period, the

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following shall apply: (i) the premiums for continued medical and dental coverage shall be paid on a monthly basis; (ii) any amounts paid to or on behalf of the Executive as reimbursement for medical and/or dental expenses shall be paid on or before the last day of the year following the year in which such expense was incurred; (iii) any amounts paid to or on behalf of the Executive as reimbursement for medical and/or dental expenses during one year will not affect the Executive's eligibility for amounts paid to or on behalf of the Executive as reimbursement for medical and/or denta