Exhibit 10.4

WISCONSIN ENERGY CORPORATION

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

As Amended and Restated as of April 1, 2004

 

 

 

WISCONSIN ENERGY CORPORATION

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

This Plan (the "Wisconsin Energy Corporation Supplemental Executive Retirement
Plan"), succeeds to and constitutes an amendment and restatement of the
Wisconsin Energy Corporation Supplemental Executive Retirement Plan, originally
effective January 1, 1996; such amendment and restatement is effective as of
April 1, 2004. All the provisions of this amended and restated Plan shall apply
to all active employee Participants. Retired Participants will continue to
receive the benefits under the provisions applicable at the time of their
retirement. Capitalized terms used in the Plan which are not defined in the text
are defined in Appendix A.

 I.    Purpose and Objective

       This Plan is intended to be a "top hat plan" under the provisions of the
       Employee Retirement Income Security Act of 1974, as amended.

       The objective of this Plan is to also provide an incentive to attract and
       retain key employees in the service of Wisconsin Energy Corporation (the
       "Company") and/or its subsidiaries by providing them with supplemental
       retirement benefits which are payable, except for the change in control
       provisions in this Plan, only if they remain in the service of Company
       and/or its subsidiaries until they die or retire or become disabled.

 II.   Participation
        1. Definition of a "Participant"
       
           The term "Participant" as used in this Plan refers to any key
           employee of the Company and/or its subsidiaries who is designated for
           participation in the Plan by the Chief Executive Officer of the
           Company, the Company's Board of Directors (the "Board") or the
           Compensation Committee of the Board (the "Committee") and who has not
           been removed from the Plan pursuant to Paragraph (2) below. An
           employee can be designated as a "Participant" for Benefit A, for
           Benefit B, the Disability Benefit or any combination of these
           benefits described by this Plan.
       
        2. Removal of a Participant

       A Participant may be removed from the Plan at any time by the Chief
       Executive Officer of the Company, the Board or the Committee, provided no
       such removal may eliminate or reduce any benefits which are protected
       under Article XI in the event of termination of this Plan.

 III.  Vesting

       A Participant becomes Vested in the benefits outlined in Article IV under
       the provisions of this Plan upon attaining age 60. A Participant who
       leaves service prior to age 60 may become Vested in the benefits outlined
       in Article IV with the approval of the Chief Executive Officer, the Board
       or the Committee and will be deemed Vested upon the commencement of such
       benefits.

 IV.   Amount of Supplemental Executive Retirement Benefit

       Eligible Participants may receive either or both of the following
       described supplemental pension benefits:

       Supplemental Pension Benefit A
       provides a "make whole" supplemental executive pension. This amount will
       be calculated as if it were held in a defined contribution account (the
       "Account Balance") for credit to the Participant under the WE Retirement
       Account Plan. 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.
       
       Benefit Credit
       
       : For each calendar year in which an employee is a Plan Participant,
       starting as early as 1995, the Participant's Account Balance will be
       credited with at least 5% of his/her Pension Eligible Earnings for the
       year, reduced by the amount credited to the cash balance account under
       the WE Retirement Account Plan applicable to the Participant for the
       year. This addition to the account is called the Benefit Credit.
       
       
       
       A Participant's Benefit Credit for a year will be between 5% and 7% of
       the Pension Eligible Earnings for the year less the amount credited to
       his/her cash balance account under the WE Retirement Account Plan. The
       actual percentage of the Benefit Credit will be the same percentage (the
       "Relevant Percentage") as is determined for the WE Retirement Account
       Plan for that year.
       
       If a Participant terminates employment during the year, a Benefit Credit
       of Relevant Percentage of the Participant's Pension Eligible Earnings to
       date for the year less the amount credited to the cash balance account
       under the WE Retirement Plan for the same time period will be credited to
       his or her Account Balance. To be eligible for a Benefit Credit of more
       than 5% for any year, the Participant must be actively employed on
       December 31 of that year.
       
       Interest Credit
       
       : For each calendar year, the Participant's Account Balance will receive
       an interest credit equal to a certain percentage of his or her Account
       Balance at the beginning of the year. This interest credit will be
       guaranteed at a minimum of 4%, but the actual percentage will be the same
       percentage that has been applied to the WE Retirement Account Plan 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 distribution from
       his or her Account Balance, either in whole or in part (through an
       annuity) before December 31, an Interest Credit will be granted on such
       distribution for the year of 1/12 of 4% for each month prior to the
       commencement of payment. Interest credits cease with the commencement of
       payment.
       
       
       
       Participants who were actively employed by the Company and/or its
       subsidiaries on December 31, 1995 and who were covered on that date under
       the WE Retirement Account Plan are eligible for determination of
       Supplemental Pension Benefit A under a grandfathered minimum benefit
       basis (the "Benefit A Grandfather Alternative"), as detailed in
       Appendix B.
       
       Supplemental Pension Benefit B
       provides Participants with a life annuity of 10% of the monthly average
       of the Participant's Pension Eligible Earnings received from the Company
       and/or its subsidiaries 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 (i) any performance award determined under the Company's
       Short-Term Performance Plan 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 (ii) any amounts of base salary that would have been
       paid to the Participant during such 36-month period but are not paid
       because of deferral elections made by the Participant under a savings or
       other deferred compensation plan.

 V.    Form of Payment
       In General
       . Supplemental Pension Benefits A (including the Benefit A Grandfather
       Alternative) and B will be paid commencing at the same time as the
       benefit payable to the Participant under the WE Retirement Account Plan
       in life annuity form to unmarried Participants and in a 50% joint and
       survivor annuity form to married Participants. However, notwithstanding
       any other provision of this Plan, a Participant may at any time prior to
       the commencement of benefits under this Plan make a written request to
       the Chief Executive Officer of the Company, the Board, or the Committee
       for payment of any benefits under this Plan in any of the forms allowed
       under the WE Retirement Account Plan and such party may, in his or its
       sole and absolute discretion, grant or deny such request. If such request
       is for a lump sum and such request is granted, the Supplemental Pension
       Benefit A, if determined without reference to the Benefit A Grandfather
       Alternative, shall be equal to the Account Balance; the Supplemental
       Pension Benefit B and Benefit A Grandfather Alternative lump sum forms
       shall be the actuarial equivalent of a life annuity for the life of the
       Participant commencing at the later of the Participant's current age or
       age 60, but actuarial equivalency determined for this purpose by using
       the 36 Month Average Rate and mortality table referenced in Article VII
       (with such 36 Month Average Rate to be calculated as of the last business
       day of the month prior to the month in which the benefit under the Plan
       is to be paid).
       Deferral of Distributions
       .

       (a) Prior to April 1, 2004, a Participant entitled to receive a
       distribution under this Plan had the ability to elect to defer such
       distribution into the Wisconsin Energy Corporation Executive Deferred
       Compensation Plan ("EDCP"), to have the amount of such distribution
       credited with investment earnings under the EDCP and to have such
       deferred amounts and investment earnings thereon distributed at such
       times and in such form as provided in the EDCP. From and after April 1,
       2004, such deferral and ultimate distribution shall be accomplished under
       this Plan. As a result, any payments which a Participant would otherwise
       have received from this Plan on or after April 1, 2004 in the absence of
       a deferral election made by the Participant shall be deferred and held in
       a special account under this Plan (the Participant's "Deferral Account")
       rather than the EDCP.

       (b) From and after April 1, 2004, this Plan hereby incorporates by
       reference all provisions in the EDCP which would be in effect thereunder
       if the last sentence of Section 3.2(d) thereof did not exist and which
       relate to deferral of payments which would otherwise be made from this
       Plan, including procedures for electing deferral, the making and changing
       of investment elections with respect to the amounts so deferred, the
       crediting of investment returns as a result of such investment elections,
       the manner in which distribution shall be made (including the power of
       the internal administrative committee (the "EDCP Committee") appointed by
       the CEO of Wisconsin Energy Corporation to administer the EDCP to
       accelerate distributions, subject to the power of the Compensation
       Committee or the Board of Directors of the Company to approve certain
       changes pursuant to Section 3.14(g) of the EDCP) and, further, the
       Company shall have the power to amend or terminate the portion of this
       Plan applicable to such deferred amounts in accordance with the same
       rules as would be applicable if such deferred amounts were held in the
       EDCP.

       (c) Notwithstanding any other provision of this Plan or the EDCP to the
       contrary, any deferral nominally made by a Participant to the EDCP of
       payments from this Plan which would otherwise have been made to the
       Participant on or after April 1, 2004, and any actions of the EDCP
       Committee or the Compensation Committee with respect to distributions of
       such deferred amounts shall be treated as deferrals to and actions with
       respect to this Plan notwithstanding the fact that such deferrals and
       actions may recite on their face that they are deferrals to or actions
       with respect to the EDCP.

 VI.   Death Benefit

       Each Participant from time to time may designate any person or persons to
       receive such benefits as may be payable under the Plan upon or after the
       Participant's death, and such designation may be changed from time to
       time by the Participant by filing a new designation. Each designation
       will revoke all prior designations by the same Participant, shall be in a
       form prescribed by the Company, and will be effective only when filed in
       writing with the Company during the Participant's lifetime. If the
       Participant has failed to designate a beneficiary, or if the beneficiary
       predeceases the Participant, benefits as may be payable under the Plan
       will be paid to the Participant's estate.

        1. Death Benefits Respecting Benefit A
       
           Supplemental Pension Benefit A (including the Benefit A Grandfather
           Alternative) will be payable in a life annuity form to any designated
           beneficiary who is a natural person or in a lump sum form to the
           estate (or to any beneficiary which is not a natural person) of a
           Participant upon the death of such Participant (whether before or
           after age 60) while in the service of the Company or any of its
           subsidiaries before retirement. However, notwithstanding any other
           provisions of this Plan, a beneficiary who is a natural person may at
           any time prior to the commencement of benefits under this Plan make a
           written request to the Chief Executive Officer of the Company, the
           Board, or the Committee for payment of benefits under this Plan in
           any of the forms allowed under the WE Retirement Account Plan and
           such party may, in his or its sole and absolute discretion, grant or
           deny such request. If such request is for an alternative annuity
           benefit form and such request is granted, the alternative annuity
           form shall be the actuarial equivalent of a life annuity for the life
           of the Participant commencing immediately, with actuarial equivalency
           determined for this purpose by using the interest rate and mortality
           tables then in use for determining optional forms of annuity under
           the WE Retirement Account Plan and reflecting the age of the
           beneficiary as of the benefit commencement date. If such request is
           for a lump sum and such request is granted, if the death benefit is
           determined without reference to the Benefit A Grandfather
           Alternative, such lump sum shall be equal to the Account Balance; if
           the death benefit is determined with reference to the Benefit A
           Grandfather Alternative, such lump sum shall be the actuarial
           equivalent of a life annuity for the life of the Participant
           commencing on the later of the Participant's age at death or the date
           when the Participant would have attained age 60, with actuarial
           equivalency determined for this purpose by using the interest rate
           and mortality table referenced in Article VII (with such interest
           rate to be that in effect on the last business day of the month prior
           to the date of death). If a Participant dies after the commencement
           of the receipt of monthly benefits under this Plan, whether any
           payments continue thereafter will depend on the form of payment such
           Participant has elected prior to their commencement of receipt of
           benefits.
       
        2. Death Benefits Respecting Benefit B

       If a Participant dies (whether before or after age 60) while in the
       service of the Company or any of its subsidiaries before payments of
       Supplemental Pension Benefit B commence, the beneficiary or beneficiaries
       designated by the Participant shall become entitled to receive a lump sum
       amount equal to the actuarial equivalent of a life annuity for the life
       of the Participant commencing on the later of the Participant's age at
       death or the date when the Participant would have attained age 60, with
       actuarial equivalency determined for this purpose by using the interest
       rate and mortality table referenced in Article VII (with such interest
       rate to be that in effect on the last business day of the month prior to
       the month in which the benefit under this Plan is to be paid).

 VII.  Payments Upon Change in Control

       For purposes of this Article VII, a "Change in Control" with respect to
       the Company shall mean the occurrence of any of the following events, as
       a result of one transaction or a series of transactions:

        1. any "person" (as such term is used in Sections 13(d) and 14(d) of the
           Securities Exchange Act of 1934, but excluding the Company its
           affiliates and any qualified or nonqualified plan maintained by the
           Company or its affiliates) becomes the "beneficial owner" (as defined
           in Rule 13d-3 promulgated under such Act), directly or indirectly, of
           securities of the Company representing more than 20% of the combined
           voting power of the Company's then outstanding securities;
        2. individuals who constitute a majority of the Board immediately prior
           to a contested election for positions on the Board cease to
           constitute a majority as a result of such contested election;
        3. the Company is combined (by merger, share exchange, consolidation, or
           otherwise) with another corporation and as a result of such
           combination, less than 60% of the outstanding securities of the
           surviving or resulting corporation are owned in the aggregate by the
           former shareholders of the Company;
        4. the Company sells, leases, or otherwise transfers all or
           substantially all of its properties or assets not in the ordinary
           course of business to another person or entity; or
        5. the Board determines in its sole and absolute discretion that there
           has been a Change in Control of the Company.

       These Change in Control provisions shall apply to successive Changes in
       Control on an individual transaction basis.

       Upon the occurrence of a Change in Control, then notwithstanding any
       other provision of this Plan, the Company shall promptly cause to be paid
       to each active and retired Participant or beneficiary receiving benefits
       under this Plan a lump sum amount equal to the then present value of all
       benefits then accrued under this Plan, calculated using (i) 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 (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 month in which a Change in
       Control event described in subparagraphs (1) through (5) above has
       occurred as such yield is reported in the Wall Street Journal or
       comparable publication, and (ii) the mortality table used for purposes of
       determining lump sum amounts then in use under the qualified defined
       benefit plan of the Company or its subsidiaries applicable to the
       Participant. 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. Such payments shall be made
       without regard to whether the Participant's employment with the Company
       or any of its subsidiaries is continuing. However, if the Participant in
       fact so continues and this Plan continues, appropriate provisions shall
       be made so that any subsequent payments made from this Plan are reduced
       to reflect the value of such lump sum payments.

 VIII. Government Regulations

       It is intended that the Plan will comply with all applicable laws and
       governmental regulations, and the Company and/or its subsidiaries shall
       not be obligated to perform an obligation hereunder in any case where, in
       the opinion of the Company's counsel, such performance would result in
       violation of any law or regulation. All amounts payable under this Plan
       shall be subject to all applicable withholding taxes.

 IX.   Nonassignment

       No benefit(s) under the Plan, nor any other interest hereunder of any
       Participant or beneficiary shall be assignable, transferable, or subject
       to sale, mortgage, pledge, hypothecation, anticipation, garnishment,
       attachment, execution, or levy of any kind.

 X.    Provision of Benefits

       Payments due hereunder to a Participant (or the Participant's beneficiary
       in the case of death) shall be the obligation of the Participant's
       employer, i.e., the Company if employed by the Company, or, if employed
       by a subsidiary of the Company, such subsidiary. If a Participant has
       been employed both by a subsidiary and the Company, each employer shall
       be obligated to pay that portion of the benefit the Participant has
       accrued attributable to service with and compensation from that employer.
       The Company may establish a grantor trust (a "rabbi trust") to serve as a
       vehicle to hold such contributions as the Company and its subsidiaries
       may choose to make to prefund their obligations to pay benefits
       hereunder, but the trust shall be designed so that all assets therein are
       subject to the claims of the creditors of the Company or any of its
       subsidiaries which have used such rabbi trust in the event of insolvency,
       consistent with the provisions of Revenue Procedure 92-64.
       Notwithstanding the existence of such grantor trust, the Plan shall
       remain an unfunded plan. A Participant's rights to benefits under the
       Plan shall be those of an unsecured creditor of the Company and/or its
       subsidiaries.

 XI.   Termination or Modification of Plan

       The Board or the Committee shall have the right to terminate or modify
       this Plan for specific individuals at any time and from time to time,
       provided that no such action may eliminate or reduce or change the time
       or manner of payment of any benefits which: (i) have already become
       payable to any Participant or beneficiary; or (ii) would have become
       payable to any Participant or beneficiary without the Board's, the
       Committee's or the Chief Executive Officer's approval under the terms of
       Article III hereof if such Participant had retired immediately before
       such action is taken. The Chief Executive Officer may also make
       amendments to this Plan at any time, consistent with the authority
       delegated to the Chief Executive Officer by the Board regarding such
       amendments. Although this Plan is jointly sponsored by the Company and
       its subsidiaries, all power to modify or terminate the Plan rests with
       the Board, the Committee or the Chief Executive Officer; provided,
       however, that a subsidiary may terminate the portion of the Plan
       applicable to Participants which it employs.

 XII.  Claim Procedures

       A Participant or beneficiary (a 'Claimant') may file a written request
       for benefits or claim with the Company under the Plan. In the event of
       any dispute with respect to such a claim, the following claim procedures
       shall apply:

       Timing of notification of claim determination
       . The Company, acting as the administrator for this Plan, will consider
       Claimant's claim and notify Claimant of its decision with respect to
       Claimant's claim within a reasonable period of time, but not later than
       90 days after receipt of the claim by the Company, unless the Company
       determines that special circumstances require an extension of time for
       processing the claim. If the Company determines that an extension of time
       for processing is required, written notice of the extension will be
       furnished to Claimant prior to the termination of the initial 90-day
       period. In no event will the extension exceed a period of 90 days from
       the end of the initial 90-day period. The extension notice will indicate
       the special circumstances requiring an extension of time and the date by
       which the Company expects to render the claim determination.
       Manner and content of notification of claim determination
       . The Company will provide Claimant with written or electronic
       notification of any adverse claim determination. The notification will
       set forth:
        i.   The specific reason or reasons for the adverse determination;
        ii.  Reference to the specific plan provisions on which the
             determination is based;
        iii. A description of any additional material or information necessary
             for Claimant to perfect the claim and an explanation of why such
             material or information is necessary; and
        iv.  A description of the Plan's claim appeal procedures and the time
             limits applicable to such procedures, including a statement of
             Claimant's right to bring a civil action under Section 502(a) of
             ERISA following an adverse claim determination on appeal.
       
       Appeal of claim denial
       . Claimant has 60 days following receipt of notification of an adverse
       claim determination within which to appeal the determination by filing a
       written appeal with the Company. The appeal will be decided by the Board
       or the Committee. Absent a request for review within the 60-day period,
       the claim will be deemed to be conclusively denied. In connection with
       Claimant's appeal Claimant may submit written comments, documents,
       records and other information relating to Claimant's claim. Upon request
       Claimant will be provided, free of charge, reasonable access to, and
       copies of, all documents, records and other information relevant to
       Claimant's claim. The decision of the Board or Committee regarding
       Claimant's appeal will take into account all comments, documents, records
       and other information Claimant submits relating to Claimant's claim,
       without regard to whether such information was submitted or considered in
       the initial claim determination.
       Timing of notification of claim determination on appeal
       . The Board or the Committee will notify Claimant of its determination of
       Claimant's claim on appeal within a reasonable period of time, but not
       later than 60 days after receipt of Claimant's request for review, unless
       the Board or the Committee determines that special circumstances require
       an extension of time for processing the claim. If the Board or the
       Committee determines that an extension of time for processing is
       required, written notice of the extension will be furnished to Claimant
       prior to the termination of the initial 60-day period. In no event will
       the extension exceed a period of 60 days from the end of the initial
       60-day period. The extension notice will indicate the special
       circumstances requiring an extension of time and the date by which the
       Board or the Committee expects to render the determination on review.
       Manner and content of notification of claim determination on appeal
       . The Board or the Committee will provide Claimant with written or
       electronic notification of its determination with respect to Claimant's
       appeal of Claimant's claim. In the case of an adverse claim determination
       on appeal, the notification will set forth:
        i.   The specific reason or reasons for the adverse determination;
        ii.  Reference to the specific plan provisions on which the
             determination is based;
        iii. A statement that 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 Claimant's claim for
             benefits; and
        iv.  A statement of Claimant's right to bring an action under section
             502(a) of ERISA.
       
       Effect of Final Determination
       . The Company (with respect to initial claim determination) and the Board
       or the Committee, as the case may be, (with respect to claim
       determination on appeals) shall have full and complete discretionary
       authority to determine eligibility for benefits, to construe the terms of
       the Plan and to decide any matter presented through the claims review
       procedure. Any final determination shall be binding on all parties. If
       challenged in court, such determination shall not be subject to
       de novo
       review and shall not be overturned unless proven to be arbitrary and
       capricious upon the evidence considered at the time of such
       determination.

 XIII. Miscellaneous
        1. The Chief Executive Officer, the Board or the Committee may
           establish, amend or rescind from time to time rules and regulations
           which are necessary or desirable in connection with the Plan. The
           Chief Executive Officer may not act on any matter involving his own
           participation in this Plan. The Company shall have the right to
           withhold from any amounts payable under this Plan any taxes or other
           amounts required to be withheld by any governmental authority.
        2. Every person receiving or claiming payments under this Plan shall be
           conclusively presumed to be mentally competent until the date on
           which the Company receives a written notice, in form and manner
           acceptable to it, that such person is incompetent and that a
           guardian, conservator, or other person legally vested with the care
           of such person's estate has been appointed. In the event a guardian
           or conservator of the estate of any person receiving or claiming
           payments under this Plan shall be appointed by a court of competent
           jurisdiction, payments may be made to such guardian or conservator
           provided that proper proof of appointment and continuing
           qualification is furnished in a form and manner acceptable to the
           Company. Any such payment so made shall be a complete discharge of
           any liability therefor.
        3. Participation in this Plan, or any modifications thereof, or the
           payment of any benefits hereunder, shall not be construed as giving
           to the Participant any right to be retained in the service of the
           Company or its subsidiaries, limiting in any way the right of the
           Company or its subsidiaries to terminate the Participant's employment
           at any time, evidencing any agreement or understanding, express or
           implied, that the Company or its subsidiaries will employ the
           Participant in any particular position or at any particular rate of
           compensation and/or guaranteeing the Participant any right to receive
           a salary increase in any year, such increase being granted only at
           the sole discretion of the Compensation Committee of the Board.
        4. The Company, or its subsidiaries, or their Boards of Directors or any
           committees thereof, or any officer or director of the Company or its
           subsidiaries or any other person shall not be liable for any act or
           failure to act hereunder, except for fraud.
        5. This Plan shall be governed by and construed in accordance with the
           laws of the State of Wisconsin, to the extent not preempted by
           federal law, without reference to conflicts of law principles.

APPENDIX A

 

DEFINITIONS

:

VESTED: The Participant has an enforceable legal right to receipt of the
benefits described in this Plan. Participants become Vested in their
Supplemental Executive Retirement Benefit when they reach age 60 (or in Mr. R.A.
Abdoo's case, age 58 and if his actual retirement occurs at or after age 58 but
prior to age 60, he shall be deemed to be age 60 for purposes of all
calculations respecting Supplemental Provision Benefits A and B hereof), or when
prior to age 60 (or in Mr. R.A. Abdoo's case, age 58) with the approval of the
Chief Executive Officer and the Board of Directors of the Company, the
Participant retires and commences receipt of benefits. A Participant becomes
Vested in the Disability Benefits after such payments of the benefits have
commenced. Vesting also occurs upon the occurrence of a Change in Control as
defined in Article VII.

PENSION ELIGIBLE EARNINGS: Established base salary for assigned responsibilities
including payments for absences, without regard for any limitations imposed by
the Internal Revenue 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 Company's Short-Term Performance Plan or other
short-term plan which has been approved by the Board for inclusion into Pension
Eligible Earnings for this Plan. Amounts of base salary and annual incentive
will be calculated without regard to any amounts deferred from such base salary
or annual incentive compensation.

WE RETIREMENT ACCOUNT PLAN: The Wisconsin Electric qualified defined benefit
retirement plan, a cash balance pension plan, as amended and restated effective
as of January 1, 1996, as amended from time to time.

APPENDIX B

 

GRANDFATHERED MINIMUM BENEFITS FOR PARTICIPANTS WHO ON DECEMBER 31, 1995 WERE
BOTH ACTIVELY EMPLOYED BY THE COMPANY AND COVERED UNDER THE WE RETIREMENT
ACCOUNT PLAN

A Participant who was actively employed by the Company on December 31, 1995 and
who was then covered by the WE Retirement Account Plan and who continued as an
active employee of the Company until his or her commencement of benefits under
this Plan, shall be eligible for the Benefit A Grandfather Alternative. The
Benefit A Grandfather Alternative will be equal to the greater of (x) or (y),
where:

(x) is the benefit that would have accrued for such Participant under the
provisions of the special formula minimum retirement income grandfather sections
(the "Grandfathered Benefit Provisions") of the WE Retirement Account Plan, if
the WE Retirement Account Plan were administered using all Pension Eligible
Earnings as defined in this Plan, less the amount of the qualified pension
benefit that such Participant would be actually entitled to receive were the
Grandfathered Benefit Provisions of the WE Retirement Account Plan applied, and

(y) is the benefit that would have accrued for such Participant under the
provisions of the cash balance formula of the WE Retirement Account Plan, if the
WE Retirement Account Plan was administered using all Pension Eligible Earnings
as defined in this Plan, less the amount of the qualified benefit that such
Participant would be actually entitled to receive under the cash balance formula
of the WE Retirement Account Plan were such formula applied.

Credited service and Pension Eligible Earnings after December 31, 2010, will not
be used to calculate this Benefit A Grandfather Alternative, but existing early
retirement reductions based upon the Participant's age and service applicable to
the Grandfathered Benefit Provisions will continue in accordance with the terms
of the WE Retirement Account Plan.

An example of the Benefit A Grandfather Alternative is as follows:

Assume the Participant actually receives a cash payment at retirement from the
WE Retirement Account Plan of $380,000. At the time the Participant receives
that benefit, calculations are made to convert the formula (x) benefit above
into a lump sum amount that is the actuarial equivalent of a life annuity for
the life of the Participant commencing at the later of age 60 or the
Participant's age at benefit commencement. This is accomplished in three steps.
First, the portion of the formula (x) benefit calculated using all Pension
Eligible Earnings is multiplied by the early retirement reduction factor as
determined under the WE Retirement Account Plan. Secondly, the resulting benefit
is converted into a lump sum actuarial equivalent ($1,450,000 in the
illustration below) of the life annuity form described above, with actuarial
equivalency determined for this purpose by using the interest rate and mortality
table referenced in Article VII (with such interest rate to be that in effect on
the last business day on the month prior to payment), Thirdly, the value of the
lump sum to which the Participant would actually be entitled under the WE
Retirement Account were the Grandfathered Benefit Provisions applied is
subtracted ($350,000 in the illustration below) to obtain the formula (x) net
lump sum amount ($1,100,000 in the illustration below). Calculations are also
made under formula (y) which compare the lump sum account balance that would
have been generated for the Participant using all Pension Eligible Earnings
under the regular cash balance formula of the WE Retirement Account Plan
($520,000 in the illustration below) with the actual lump sum account balance
that would be payable to the Participant were the regular cash balance formula
applied ($380,000 in the illustration below). The following comparisons result:

1) WE Retirement Account Plan:

(a) Cash Balance Formula $380,000

(b) Grandfather Formula 350,000

2) SERP Benefit A Grandfather Alternative, calculated under:

(a) Cash Balance Formula $ 520,000

(b) Grandfather Formula 1,450,000

3) Actual SERP Benefit A Grandfather is $1,100,000, which is the greater of 2(a)
- 1(a) [$140,000] or 2(b) - 1(b) [$1,100,000].