EXHIBIT 10(b)
CMS ENERGY CORPORATION POLICY ON CHANGE IN CONTROL AGREEMENTS
AND EMPLOYMENT CONTRACTS
As of November 2003, pursuant to past practice, CMS Energy Corporation has in
place various forms of change in control agreements and/or employment contracts
with 29 current officers of CMS Energy Corporation ("CMS") and its subsidiaries.
In the case of recent hires or promotions, these are unwritten commitments
resulting from past practice. This entire situation has been subject to review
and recommendations by the Organization and Compensation Committee of the Board
of Directors (Committee). Effective January 29, 2004, the policy with respect to
these matters will be as follows:
A. Tier I - - Existing Senior Officers
The 15 existing senior officers shall be offered for execution the form of the
Executive Severance Agreement for Senior Officers (the "Tier I Agreement") that
was recommended by the Committee and approved by the Board on January 29, 2004.
The Tier I Agreement provides for change-in-control severance benefits when
there is a change in control of CMS and general severance benefits outside of
such a change in control. To encourage senior officers with existing agreements
that are in writing to exchange their existing agreements for the Tier I
Agreement, the initial term of the Tier I Agreement is set at three years and an
alternative paragraph would be added to provide the officer with the right to
extend the term.
B. Tier II - - Existing Junior Officers
The 14 existing junior officers shall be offered for execution the form of
Officer Severance Agreement (the "Tier II Agreement") that was recommended by
the Committee and approved by the Board on January 29, 2004. The Tier II
Agreement provides for change-in-control severance benefits when there is a
change in control of CMS and general severance benefits outside of such a change
in control, but at reduced levels as compared to senior officers. Like the Tier
I Agreement, the Tier II Agreement is terminable after three years. As is the
case with senior officers, the same alternative paragraph on the term is
available for the Tier II Agreement for junior officers with existing agreements
that are in writing.
C. Tier III - - New Officers
In the future, a more limited number of new officers, namely those occupying the
positions of chief executive officer, chief operating officer, chief financial
officer and president of CMS Energy Corporation and president of Consumers
Energy Company or alternatively, the president of the electric SBU and the
president of the gas SBU of Consumers Energy Company, (whether hired from
outside or promoted from within) shall be eligible for, and be offered for
execution, the form of Change-in-Control Agreement (the "Tier III Agreement")
that was recommended by the Committee and approved by the Board on January 29,
2004 and which provides change-in-control severance benefits when there is a
change in control of CMS. The Tier III Agreement is for a two-year term with
renewal options. New officers (whether hired from outside or promoted from
within) in positions other than those identified above in this policy shall not
be offered the Tier III Agreement unless the Committee has first approved the
necessity or advisability of such an offer. In addition, the CIC excludes the
provision of any general severance benefits for situations not involving a
change in control. Those benefits, if they are provided at all and if they are
to be different to those generally available to the employee population as a
whole, would only be provided in a separate contract with the new officer that
had been approved by the Committee prior to its execution.
D. Exclusive Policy
The Board authorizes no other policy with respect to the provision of
change-in-control severance benefits and provision of general severance benefits
to officers of CMS Energy Corporation and its subsidiaries.
EXECUTIVE OFFICER FORM OF SEVERANCE AGREEMENT
Ken Whipple Tier III
Glenn P. Barba Tier II
John F. Drake Tier I
Thomas W. Elward Tier I
Carl L. English Tier I
(through 7/31/04)
David W. Joos Tier I
David G. Mengebier Tier I
John G. Russell Tier I
S. Kinnie Smith, Jr. Tier I
Thomas J. Webb Tier I
EXECUTIVE SEVERANCE AGREEMENT
FOR SENIOR OFFICERS
TIER I
CONTENTS
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Article 1. Establishment, Term, and Purpose 1
Article 2. Definitions 2
Article 3. Severance Benefits 7
Article 4. Other Terminations 12
Article 5. Noncompetition and Confidentiality 13
Article 6. Excise Tax Equalization Payment 15
Article 7. Dispute Resolution and Notice 16
Article 8. Successors and Assignment 16
Article 9. Miscellaneous 17
EXECUTIVE SEVERANCE AGREEMENT
THIS EXECUTIVE SEVERANCE AGREEMENT ("Agreement") is made, entered into,
and is effective as of ______ , 2004 (hereinafter referred to as the "Effective
Date"), by and between,________________ , a Michigan corporation, (hereinafter
referred to as the "Employer") and ___________________________ (hereinafter
referred to as the "Executive").
WHEREAS, the Board of Directors of CMS Energy Corporation has approved
entering into severance agreements with certain key executives as being
necessary and advisable for the success of CMS Energy Corporation;
WHEREAS, the Executive is currently employed at __________________, by the
Employer in a key management position as _______________________________;
WHEREAS, the Board of Directors of CMS Energy Corporation wants to provide
the Executive with a measure of financial security in the event of certain
terminations of employment; and
WHEREAS, both the Employer and the Executive are desirous that any
proposal involving Change in Control as defined in this Agreement will be
considered by the Executive objectively and with reference only to the business
interests of CMS Energy Corporation and its shareholders.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements of the parties set forth in this Agreement and of other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intended to be legally bound, agree as
follows:
ARTICLE 1. ESTABLISHMENT, TERM, AND PURPOSE
This Agreement will commence on the Effective Date and shall continue in
effect for three (3) full years through March _____, 2007. However, at the end
of such three (3) year period and, if extended, at the end of each additional
year thereafter, the term of this Agreement shall be extended automatically for
one (1) additional year, unless the Executive delivers written notice six (6)
months prior to the end of such term, or extended term, to the Committee,
stating that the Agreement will not be extended by Executive. In such case, the
Agreement will terminate at the end of the term, or extended term, then in
progress. However, in the event of a Change in Control (as defined in Section
2.7 herein) of CMS Energy Corporation, the term of this Agreement shall
automatically be extended for two (2) years from the date of the Change in
Control if the current term of the Agreement has less than two (2) full years
remaining until its expiration. If the term of this Agreement is not extended,
the Employer is not obligated to pay any severance benefits under Section 3.2
for a Change in Control that happens after the expiration of the term and is not
obligated to pay any severance benefits under Section 3.3 with respect to any
other termination that happens after the expiration of the term.
ARTICLE 2. DEFINITIONS
Whenever used in this Agreement, the following terms shall have the
meanings set forth below and, when the meaning is intended, the initial letter
of the word is capitalized.
2.1 "AFFILIATE" shall have the meaning set forth in Rule 12B-2
promulgated under Section 12 of the Exchange Act.
2.2 "BASE SALARY" means the greater of the Executive's full annual
rate of salary, whether or not any portion thereof is paid on a
deferred basis, at: (i) the Effective Date of Termination, or (ii)
at the date of the Change in Control. It does not include any
incentive compensation in any form, bonuses of any type or any
other form of monetary or nonmonetary compensation other than
salary.
2.3 "BENEFICIAL OWNER" shall have the meaning ascribed to such term in
Rule 13d-3 of the General Rules and Regulations under the Exchange
Act.
2.4 "BENEFICIARY" means the persons or entities designated or deemed
designated by the Executive pursuant to Section 9.5 herein.
2.5 "BOARD" means the Board of Directors of CMS Energy Corporation.
2.6 "CAUSE" shall be determined solely by the Committee in the
exercise of good faith and reasonable judgment, and shall mean the
occurrence of any one or more of the following:
(a) The willful and continued failure by the Executive to
substantially perform his or her duties of employment
(other than any such failure resulting from the
Executive's Disability), after a written demand for
substantial performance is delivered to the Executive that
specifically identifies the manner in which the Committee
believes that the Executive has not substantially
performed his or her duties, and the Executive has failed
to remedy the situation within a reasonable period of time
specified by the Committee which shall not be less than 30
days; or
(b) The Executive's arrest for committing an act of fraud,
embezzlement, theft, or other act constituting a felony
involving moral turpitude; or
(c) The willful engaging by the Executive in misconduct
materially and demonstrably injurious to CMS Energy
Corporation or its Affiliates, monetarily or otherwise.
However, for purposes of clauses (a) and (c), no act or failure to
act on the Executive's part shall be considered "willful" unless
done, or omitted to be done, by the Executive not in good faith
and without reasonable belief that his or her action or omission
was in the best interest of CMS Energy Corporation or its
Affiliates.
2.7 "CHANGE IN CONTROL" means a change in control of CMS Energy
Corporation, and shall be deemed to have occurred upon the first
to occur of any of the following events:
(a) Any Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of CMS Energy Corporation (not
including in the securities beneficially owned by such
Person any securities acquired directly from CMS Energy
Corporation or its Affiliates) representing twenty-five
percent (25%) or more of the combined voting power of CMS
Energy Corporation's then outstanding securities,
excluding any Person who becomes such a Beneficial Owner
in connection with a transaction described in clause (i)
of paragraph (c) below; or
(b) The following individuals cease for any reason to
constitute a majority of directors then serving:
individuals who, on the Effective Date, constitute the
Board and any new director (other than a director whose
initial assumption of office is in connection with an
actual or threatened election contest, including but not
limited to a consent solicitation, relating to the
election of directors of CMS Energy Corporation) whose
appointment or election by the Board or nomination for
election by CMS Energy Corporation's stockholders was
approved or recommended by a vote of at least two-thirds
(2/3) of the directors then still in office who either
were directors on the Effective Date or whose appointment,
election or nomination for election was previously so
approved or recommended; or
(c) The consummation of a merger or consolidation of CMS
Energy Corporation or any direct or indirect subsidiary of
CMS Energy Corporation with any other corporation or other
entity, other than: (i) any such merger or consolidation
which involves either CMS Energy Corporation or any such
subsidiary and would result in the voting securities of
CMS Energy Corporation outstanding immediately prior
thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities
of the surviving entity or any parent thereof), in
combination with the ownership of any trustee or other
fiduciary holding securities under an employee benefit
plan of CMS Energy Corporation or its Affiliates, at least
sixty percent (60%) of the combined voting power of the
voting securities of CMS Energy Corporation or the
surviving entity or any parent thereof outstanding
immediately after such merger or consolidation and
immediately following which the individuals who comprise
the Board immediately prior thereto constitute at least a
majority of the board of directors of CMS Energy
Corporation, the entity surviving such merger or
consolidation or, if CMS Energy Corporation or the entity
surviving such merger is then a subsidiary, the ultimate
parent thereof; or (ii) a merger or consolidation effected
to implement a recapitalization of CMS Energy Corporation
(or similar transaction) in which no Person is or becomes
the Beneficial Owner, directly or indirectly, of
securities of CMS Energy Corporation (not including in the
securities beneficially owned by such Person any
securities acquired directly from CMS Energy Corporation
or its Affiliates) representing twenty-five percent (25%)
or more of the combined voting power of CMS Energy
Corporation's then outstanding securities; or
(d) Either (1) the stockholders of CMS Energy Corporation
approve a plan of complete liquidation or dissolution of
CMS Energy Corporation, or (2) there is consummated an
agreement for the sale, transfer or disposition by CMS
Energy Corporation of all or substantially all of CMS
Energy Corporation's assets (or any transaction having a
similar effect). For purposes of clause (d)(2), (i) the
sale, transfer or disposition
of a majority of the shares of common stock of Consumers
Energy Company shall constitute a sale, transfer or
disposition of substantially all of the assets of CMS
Energy Corporation and (ii) the sale, transfer or
disposition of subsidiaries or affiliates of CMS Energy
Corporation, singly or in combinations, or their assets,
only qualifies as a Change in Control if it satisfies the
substantiality test contained in that clause and the Board
of CMS Energy Corporation's determination in that regard
is final. In addition, for purposes of clause (d)(2), the
sale, transfer or disposition of assets has to be in a
transaction or series of transactions closing within six
months after the closing of the first transaction in the
series, other than with an entity in which at least 60% of
the combined voting power of the voting securities is
owned by stockholders of CMS Energy Corporation in
substantially the same proportions as their ownership of
CMS Energy Corporation immediately prior to such
transaction or transactions and immediately following
which the individuals who comprise the Board immediately
prior thereto constitute at least a majority of the board
of directors of the entity to which such assets are sold,
transferred or disposed or, if such entity is a
subsidiary, the ultimate parent thereof.
Notwithstanding the foregoing clauses (a), (c) and (d), a "Change
in Control" shall not be deemed to have occurred by virtue of the
consummation of any transaction or series of integrated
transactions closing within six months after the closing of the
first transaction in the series immediately following which the
record holders of the common stock of CMS Energy Corporation
immediately prior to such transaction or series of transactions
continue to have substantially the same proportionate ownership in
an entity which owns all or substantially all of the assets of CMS
Energy Corporation immediately following such transaction or
series of transactions.
2.8 "CODE" means the United States Internal Revenue Code of 1986, as
amended, and any successors thereto.
2.9 "COMMITTEE" means the Organization and Compensation Committee of
the Board of CMS Energy Corporation or any other committee
appointed by the Board of CMS Energy Corporation to perform the
functions of the Organization and Compensation Committee.
2.10 "DISABILITY" means for all purposes of this Agreement, the
incapacity of the Executive, due to injury, illness, disease, or
bodily or mental infirmity, which causes the Executive not to
engage in the performance of a substantial or material portion of
the Executive's usual duties of employment associated with such
Executive's position. Such Disability shall be determined based
on competent medical advice.
2.11 "EFFECTIVE DATE" means the date of this Agreement as specified in
the opening sentence of this Agreement.
2.12 "EFFECTIVE DATE OF TERMINATION" means the date on which a
Qualifying Termination occurs, as provided under Section 2.17
hereunder, which triggers the payment of Severance Benefits
hereunder.
2.13 "EXCHANGE ACT" means the United States Securities Exchange Act of
1934, as amended.
2.14 "GOOD REASON" exists only on the date of a Change in Control or
during the twenty-four (24) months which follow a Change in
Control and shall mean, without the Executive's express written
consent, the occurrence of any one or more of the following:
(a) The assignment to the Executive of duties materially
inconsistent with the Executive's position (including
status, offices, titles, and reporting requirements),
authority, or responsibilities as in effect on the
Effective Date, or any action by the Employer which results
in a diminution of the Executive's position, authority,
duties, or responsibilities as constituted as of the
Effective Date (excluding an isolated, insubstantial, and
inadvertent action which is remedied by the Employer
promptly after receipt of notice thereof given by the
Executive); or
(b) Reducing the Executive's Base Salary; or
(c) Reducing the Executive's targeted annual incentive
opportunity; or
(d) Failing to maintain the Executive's participation in a
long-term incentive plan in a manner that is consistent
with the Executive's position, authority, or
responsibilities; or
(e) Failing to maintain the Executive's amount of benefits
under, or relative level of participation in, employee
benefit or retirement plans, policies, practices, or
arrangements of a material nature available to employees of
CMS Energy Corporation and its Affiliates and in which the
Executive participates as of the Effective Date; or
(f) A material breach of this Agreement by the Employer which
is not remedied by the Employer within ten (10) business
days of receipt of written notice of such breach delivered
by the Executive to the Committee; or
(g) Any successor company fails or refuses to assume the
obligations owed to Executive under this Agreement in their
entirety, as required by Section 8.1 hereunder; or
(h) The Executive is required to be based at a location in
excess of thirty-five (35) miles from the location of the
Executive's principal job location or office immediately
prior to a Change in Control except for required travel on
the Employer's or CMS Energy Corporation's business to an
extent substantially consistent with the
Executive's prior business travel obligations; or
(i) The Executive ceases being an executive officer of a
company (other than by reason of death, Disability or
Cause) whose common stock is publicly owned if immediately
prior to the Change in Control the Executive was an
executive officer of a company whose common stock was
publicly owned.
For purposes of applying clauses (a) through (i) of this
Agreement, the Executive's Retirement shall not constitute a
waiver of the Executive's rights with respect to any circumstance
constituting Good Reason, and the Executive's continued
employment shall not constitute a waiver of the Executive's
rights with respect to any circumstance constituting Good Reason
or constitute Executive's consent to the circumstances
constituting Good Reason unless Executive has provided express
written consent to the circumstance that would otherwise
constitute Good Reason under this Agreement. Finally, for
purposes of implementing this Agreement, any claim by Executive
that Good Reason exists shall be presumed to be correct unless
the Committee determines by clear and convincing evidence that
Good Reason does not exist, which evidence shall be presented by
the person disputing the claim that Good Reason exists.
2.15 "NOTICE OF TERMINATION" shall be provided for a Qualifying
Termination and shall mean a written notice which shall indicate
the specific termination provision in this Agreement relied upon,
and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated. The
notice shall provide a specific date on which a Qualifying
Termination has occurred and is effective for purposes of this
Agreement.
2.16 "PERSON" shall have the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d)
thereof, including a "group" as provided in Section 13(d).
2.17 "QUALIFYING TERMINATION" MEANS:
(a) An involuntary termination of the Executive's employment
by the Employer on the date of a Change in Control or
during the twenty-four (24) months which follow a Change
in Control for reasons other than death, Disability,
Retirement, or Cause pursuant to a Notice of Termination
delivered to the Executive by the Employer; or
(b) A voluntary termination by the Executive for Good Reason
on the date of a Change in Control or during the
twenty-four (24) months which follow a Change in Control
pursuant to a Notice of Termination delivered to the
Employer by the Executive.
(c) A termination (not involving death, Disability,
Retirement or Cause), which takes place before the date of
a Change in Control or after the first twenty-four (24)
months immediately following a Change in Control, pursuant
to a Notice of Termination delivered to Executive or
pursuant to a request that Executive submit a resignation
as an officer. A termination for failure of the Executive
to comply in material respects with CMS Energy's Code of
Conduct and Statement of Ethics Handbook (June 2003
edition) or other corporate policies, as the handbook and
those documents may be amended from time to time, does not
satisfy the definition of a Qualifying Termination under
this clause (c).
2.18 "RELEASE DATE" occurs after the delivery of the Notice of
Termination required by Section 2.15 and means the date on which
the release contained in Exhibit A to this Agreement is first
provided to Executive for signature.
2.19 "RETIREMENT" shall have the meanings ascribed under the terms of
the pension plan applicable to Executive and entitled "Pension
Plan for Employees of Consumers Energy Company," dated September
1, 2000, as amended, other than under Section 7 thereof, or
under the successor or replacement of such pension plan if it is
then no longer in effect.
2.20 "SERP" shall mean the retirement plan applicable to Executive and
entitled "Supplemental Executive Retirement Plan for Employees of
CMS Energy/Consumers Energy Company," dated May 1, 1998, as
amended, or under the successor or replacement of such retirement
plan if it is then no longer in effect.
2.21 "SEVERANCE BENEFITS" means the payment of Change-in-Control
Severance Benefits or General Severance Benefits as provided in
Article 3 herein.
ARTICLE 3. SEVERANCE BENEFITS
3.1 RIGHT TO SEVERANCE BENEFITS.
(a) CHANGE-IN-CONTROL SEVERANCE BENEFITS. The Executive
shall be entitled to receive from the Employer
Change-in-Control Severance Benefits, as described in
Section 3.2 herein, if a Qualifying Termination of the
Executive's employment satisfying the definitions
contained in Section 2.17(a) or (b) has occurred on the
date of a Change in Control of CMS Energy Corporation or
within twenty-four (24) months immediately following a
Change in Control of CMS Energy Corporation. Further,
Executive's Retirement under the pension plan and SERP
shall not constitute a waiver of the Executive's rights
with respect to receipt of Change-in-Control Severance
Benefits. Nor shall benefits received for Retirement under
the pension plan and SERP (or any replacement or successor
plans thereto) be used as an offset to the level of
Change-in-Control Severance Benefits owed to Executive.
(b) GENERAL SEVERANCE BENEFITS. The Executive shall be
entitled to receive from the Employer General Severance
Benefits, as described in Section 3.3 herein, if the
Executive's employment is terminated for reasons
satisfying the definition contained in Section 2.17(c) and
such termination has occurred either before a Change of
Control of CMS Energy Corporation or during the period
that begins after the expiration of twenty-four (24)
months immediately following a Change in Control of CMS
Energy Corporation. Further, Executive's Retirement under
the pension plan and SERP shall not constitute a waiver of
the Executive's rights with respect to receipt of General
Severance Benefits. Nor shall benefits received for
Retirement under the pension plan and SERP (or any
replacement or successor plans thereto) be used as an
offset to the level of General Severance Benefits owed to
Executive.
(c) NO SEVERANCE BENEFITS. Other than in a situation
involving a Retirement, the Executive shall not be
entitled to receive Severance Benefits if the Executive's
employment with the Employer ends for reasons other than a
Qualifying Termination.
(d) GENERAL RELEASE. As a condition precedent to receiving
Severance Benefits under Section 3.3 herein, the Executive
shall be obligated to execute and deliver to the Employer
on a timely basis duplicate originals of a general release
of claims in the form included as Exhibit A hereto.
(e) WAIVER AND RELEASE. The Executive's act of accepting
payment of Severance Benefits payable under Section 3.2 of
this Agreement shall constitute and is deemed an express
waiver, release and discharge by Executive of any and all
claims for damages or other remedies, regardless of when
they arose or when they are discovered, against CMS Energy
Corporation and its Affiliates arising out of or in any
way connected with Executive's employment relationship
with them or the termination of such employment
relationship except for claims and rights of Executive
preserved under Section 3.2 of this Agreement and
applicable rights to indemnification.
(f) NO DUPLICATION OF SEVERANCE BENEFITS. If the Executive
becomes entitled to Change-in-Control Severance Benefits,
the benefits provided for under Section 3.2 hereunder
shall be in lieu of all other benefits provided to the
Executive under the provisions of this Agreement
including, but not limited to, the benefits under Section
3.3. Likewise, if the Executive becomes entitled to
General Severance Benefits, the benefits provided under
Section 3.3 hereunder shall be in lieu of all other
benefits provided to the Executive under the provisions of
this Agreement including, but not limited to, the benefits
under Section 3.2. If the Executive receives either
Change-in-Control Severance Benefits under Section 3.2 or
General Severance Benefits under Section 3.3, any other
severance benefits received by employees not covered by
this Agreement to which the Executive is entitled will be
subtracted from the Severance Benefits paid pursuant to
this Agreement.
3.2 DESCRIPTION OF CHANGE-IN-CONTROL SEVERANCE BENEFITS. In the event
the Executive becomes entitled to receive Change-in-Control
Severance Benefits, as provided in Section 3.1(a) herein, the
Employer shall provide the Executive with the following:
(a) A lump-sum amount paid within fifteen (15) calendar days
following delivery to the Employer or delivery to the
Executive, as applicable, of a Notice of Termination,
equal to the sum of the Executive's unpaid Base Salary,
accrued vacation pay, unreimbursed business expenses, and
unreimbursed allowances owed to the Executive through and
including the Effective Date of Termination.
(b) A lump-sum amount, paid within fifteen (15) calendar days
following delivery to the Employer or delivery to the
Executive, as applicable, of a Notice of Termination, equal
to two (2) times the sum of the following: (A) the
Executive's Base Salary and (B) the greater of the
Executive's: (i) annual target bonus opportunity in the
year in which the Qualifying Termination occurs or (ii) the
actual annual bonus payment paid or due to be paid the
Executive in respect of the year prior to the year in which
the Qualifying Termination occurs.
(c) A lump-sum amount, paid within fifteen (15) calendar days
following delivery to the Employer or delivery to the
Executive, as applicable, of a Notice of Termination, equal
to the Executive's then current target bonus opportunity
established under the bonus plan in which the Executive is
then participating, for the plan year in which the
Qualifying Termination occurs, adjusted on a pro rata basis
for the number of days that have elapsed to the Effective
Date of Termination during the bonus plan year in which the
Qualifying Termination occurs.
(d) A lump-sum amount, paid within fifteen (15) calendar
days following delivery to the Employer or delivery to the
Executive, as applicable, of a Notice of Termination,
equal to one (1) times the sum of the following: (A) the
Executive's Base Salary and (B) the greater of the
Executive's: (i) annual target bonus opportunity in the
year in which the Qualifying Termination occurs or (ii)
the actual annual bonus payment paid or due to be paid the
Executive in respect of the year prior to the year in
which the Qualifying Termination occurs. Such amount shall
be consideration for the Executive entering into the
noncompete agreement as described in Section 5(a).
(e) Equivalent payment to Executive in a lump sum amount
within forty-five (45) calendar days following delivery of
the Notice of Termination for continued medical coverage
for a period of thirty-six (36) months. Such equivalent
payment shall be computed based on the same coverage level
as in effect for Executive under the general health care
plan available to all employees on the Effective Date of
Termination by providing a lump sum payment of the
Employer's portion of the monthly COBRA premium in effect
on the Effective Date of Termination times thirty-six
(36). Nothing herein amends or provides Executive any
rights to health care coverage other than as provided in
the applicable group health care plan. If the Executive
has waived coverage under the applicable group health care
plan, no equivalent payment shall be made under this
Agreement.
(f) Immediate extension (as allowable by Section 6.10 of
Article VI of the plan entitled "CMS Energy Corporation
Performance Incentive Stock Plan," dated December 3, 1999,
as amended) by one year after the Effective Date of
Termination of the period for Executive to exercise any
outstanding stock options or stock appreciation rights
granted by the Committee to Executive pursuant to said
Article VI. Otherwise, the terms of said plan shall govern
and be applied.
(g) Immediate vesting and distribution to Executive (as
allowable by the second sentence of Section 7.2(h) of
Article VII of the plan entitled "CMS Energy Corporation
Performance Incentive Stock Plan," dated December 3, 1999,
as amended) within forty-five (45) days after delivery of
the Notice of Termination of all outstanding shares of
restricted stock previously awarded to Executive pursuant
to said Article VII. For any award of restricted stock to
which there are future performance goals attached, the
number of shares distributed to Executive shall assume that
the goals have been achieved in full and the award fully
earned based on target performance without deductions or
additions to the number of shares then held by Executive.
For any award of restricted stock that is tenure based, the
number of shares distributed to Executive shall assume that
all requirements with respect to tenure are satisfied by
Executive. Otherwise, the terms of said plan shall govern
and be applied.
(h) For an Executive included in SERP, the Executive's
retirement benefits under the SERP will become fully vested
as of the Effective Date of Termination and shall not be
subject to further vesting requirements or to any
forfeiture provisions. In addition, said Executive shall be
provided the following: (i) an additional thirty-six (36)
months of Preference Service (as defined in SERP) for
purposes of the SERP in accordance with Section III(1) of
SERP, subject, however, to the total of Preference Service
plus Accredited Service being limited to a maximum of
thirty-five (35) years under SERP, and (ii) only the
amounts paid to Executive pursuant to clauses (a), (b), (c)
and (d) of this Section 3.2 shall be considered a
"severance payment under an employment agreement" for
purposes of computing Final Executive Pay under SERP. Since
the Executive is over the age of 55, the provisions of the
last complete paragraph of Section V(3) of SERP shall not
be operative. The enhanced SERP benefits under this Section
3.2(h) shall be in lieu of any Change-in-Control
enhancements provided for in the SERP.
(i) For purposes of (1) Retirement, (2) SERP and (3) benefits
not expressly discussed in clauses (a) through (h) of this
Section 3.2, but which are available to the general
employee population or available only to officers and
implemented with contracts with third parties, the benefit
plan descriptions covering all employees and the retirement
plan and SERP plan descriptions and contracts with third
parties covering officers in place at the time of the
Effective Date of Termination control Executive's treatment
under those plans and contracts. For any other benefits
only available to officers, if those benefits are not
expressly discussed in clauses (a) through (h) of this
Section 3.2, those benefits are terminated for Executive as
of the Effective Date of Termination.
3.3 DESCRIPTION OF GENERAL SEVERANCE BENEFITS. In the event the
Executive becomes entitled to receive General Severance Benefits
as provided in Section 3.1(b) herein, the Employer shall provide
the Executive with the following:
(a) A lump-sum amount paid within fifteen (15) calendar days
following delivery to the Executive of a Notice of
Termination with respect to a Qualifying Termination as
described in Section 2.17 (c) of this Agreement, equal to
the sum of the Executive's unpaid Base Salary, accrued
vacation pay, unreimbursed business expenses, and
unreimbursed allowances owed to the Executive through and
including the Effective Date of Termination.
(b) An amount, paid following the Release Date on an
installment basis over a period of twelve (12) months on a
twice a month schedule in accordance with the normal
payroll procedures of the Employer, equal to two (2) times
the sum of: (A) the Executive's Base Salary and (B) the
greater of the Executive's: (i) annual target bonus
opportunity in the year in which the Qualifying Termination
occurs or (ii) the actual annual bonus payment paid or due
to be paid the Executive in respect of the year prior to
the year in which the Qualifying Termination occurs. The
first of the twenty-four (24) installment payments called
for by this section shall be made within forty-five (45)
days following the Release Date.
(c) A lump-sum amount, paid within forty-five (45) calendar
days following the Release Date, equal to the Executive's
then current target bonus opportunity established under the
bonus plan in which the Executive is then participating,
for the plan year in which the Qualifying Termination
occurs, adjusted on a pro rata basis for the number of days
that have elapsed to the Effective Date of Termination
during the bonus plan year in which the Qualifying
Termination occurs.
(d) Equivalent payment to Executive in a lump-sum amount within
forty-five (45) days following the Release Date for
continued medical coverage for a period of twenty-four (24)
months. Such equivalent payment shall be computed based on
the same coverage level as in effect for Executive under
the general health care plan available to all employees on
the Effective Date of Termination by providing a lump-sum
payment of the Employer's portion of the monthly COBRA
premium in effect on the Effective Date of Termination
times twenty-four (24). Nothing herein amends or provides
Executive any rights to health care coverage other than as
provided in the applicable group health care plan. If the
Executive has waived coverage under the applicable group
health care plan, no equivalent payment shall be made under
this Agreement.
(e) Outstanding stock options and stock appreciation rights
previously granted by the Committee to Executive pursuant
to Article VI of the plan entitled "CMS Energy Corporation
Performance Incentive Stock Plan," dated December 3, 1999,
as amended, shall be treated as a "termination of
employment" in accordance with Section 6.10 of Article VI,
provided however that Employee will not be eligible to
seek or receive from the Committee any extensions of the
period for their exercise. For outstanding shares of
restricted stock held by Executive, they shall be forfeited
to CMS Energy Corporation in accordance with the provisions
of the first sentence of Section 7.2(h) of Article VII of
said plan.) For purposes of (1) Retirement, (2) SERP and
(3) benefits not expressly discussed in clauses (a) through
(d) of this Section 3.3, but which are available to the
general employee population or available only to officers
and implemented with contracts with third parties, the
benefit plan descriptions covering all employees and the
retirement plan and SERP plan descriptions and contracts
with third parties covering officers in place at the time
of the Effective Date of Termination control Executive's
treatment under those plans and contracts. For any other
benefits only available to officers, if those benefits are
not expressly discussed in clauses (a) through (d) of this
Section 3.3, those benefits are terminated for Executive as
of the Effective Date of Termination.
ARTICLE 4. OTHER TERMINATIONS
4.1 TERMINATION FOR DISABILITY. If the Executive's employment is
terminated with the Employer due to Disability, the Executive's
benefits shall be determined in accordance with the Employer's
retirement, insurance, and other applicable plans and programs
then in effect.
4.2 TERMINATION FOR RETIREMENT OR DEATH. If the Executive's
employment with the Employer is terminated by reason of his
Retirement or death, the Executive's benefits shall be determined
in accordance with the Employer's retirement and SERP plans,
survivor's benefits, insurance, and other applicable programs
then in effect.
4.3 TERMINATION FOR CAUSE OR BY EMPLOYER OR THE EXECUTIVE FOR OTHER
THAN GOOD REASON. If the Executive's employment is terminated
either: (a) by the Employer for Cause as defined in Section 2.6
of this Agreement; or (b) voluntarily by the Executive for
reasons other than those specified in Section 2.14 herein, or (c)
by the Employer for the reasons stated in the last sentence of
Section 2.17(c) of this Agreement, the Employer shall pay the
Executive the sum of any unpaid Base Salary, accrued vacation,
unreimbursed business expenses and unreimbursed allowances owed
to the Executive through the effective date of termination. The
terms of the benefit plan descriptions, compensation plan
descriptions and contracts with third parties covering officers
shall control the disposition to Executive and timing of all
other amounts to which the Executive may be entitled, and neither
the Employer nor CMS Energy Corporation nor any of its Affiliates
shall have any further obligations to the Executive thereunder as
a result of the existence of this Agreement. No other severance
benefits of any type shall be made available to Executive.
Notwithstanding the above, if the Executive's employment
terminates pursuant to this Section 4.3, the Executive shall be
bound by the provisions contained in Article 5(a), 5(b), 5(c),
5(d), and 5(e) hereof.
4.4 NOTICE OF TERMINATION. Any termination of the Executive's
employment in accordance with Section 4.3 of this Agreement shall
be communicated by Notice of Termination
delivered to the other party, which shall include a specific date
on which the termination has occurred and is effective.
ARTICLE 5. NONCOMPETITION AND CONFIDENTIALITY
In the event the Executive becomes entitled to receive Change-in-Control
Severance Benefits as provided in Section 3.2 herein or General Severance
Benefits as provided in Section 3.3 herein, the following shall apply:
(a) NONCOMPETITION. During the term of employment and for a
period of twelve (12) months after the Effective Date of
Termination, the Executive shall not: (i) directly or
indirectly act in concert or conspire with any person
employed by CMS Energy Corporation or any of its
Affiliates in order to engage in or prepare to engage in
or to have a financial or other interest in any business
which is a Direct Competitor (as defined below); or (ii)
serve as an employee, agent, partner, shareholder,
director or consultant for, or in any other capacity
participate, engage, or have a financial or other interest
in any business which is a Direct Competitor (provided,
however, that notwithstanding anything to the contrary
contained in this Agreement, the Executive may own up to
two percent (2%) of the outstanding shares of the capital
stock of a company whose securities are registered under
Section 12 of the Exchange Act.
For purposes of this Agreement, the term "Direct
Competitor" shall mean any person or entity engaged in the
business of selling electric power or natural gas at
retail within the State of Michigan.
The Committee also reserves the right to designate, prior
to the termination date specified in a Notice of
Termination, any Person that it believes, in good faith,
is a significant competitive threat to CMS Energy
Corporation or its Affiliates.
(b) CONFIDENTIALITY. The Employer has advised the Executive
and the Executive acknowledges that it is the policy of
CMS Energy Corporation and its Affiliates to maintain as
secret and confidential all Protected Information (as
defined below), and that Protected Information has been
and will be developed at substantial cost and effort to
CMS Energy Corporation and its Affiliates. The Executive
shall not at any time, directly or indirectly, divulge,
furnish, or make accessible to any person, firm,
corporation, association, or other entity (other than as
may be required in the regular course of the Executive's
employment), nor use in any manner, either during the term
of employment or after termination, for any reason, any
Protected Information, or cause any such information of
CMS Energy Corporation and its Affiliates to enter the
public domain. For purposes of this Agreement, "Protected
Information" means trade secrets, confidential and
proprietary business information of CMS Energy Corporation
and its Affiliates and any other information of CMS Energy
Corporation and its Affiliates, including, but not limited
to, customer lists (including potential customers),
sources of supply, processes, plans, materials, pricing
information, internal memoranda, marketing plans, internal
policies, and products and services which may be developed
from time to time by CMS Energy Corporation and its
Affiliates and their agents or
employees, including the Executive; provided, however,
that information that is in the public domain (other than
as a result of a breach of this Agreement), approved for
release by CMS Energy Corporation or its Affiliates or
lawfully obtained from third parties who are not bound by
a confidentiality agreement with CMS Energy Corporation or
its Affiliates, is not Protected Information.
Notwithstanding the foregoing, nothing in this subsection
is to be construed as prohibiting Executive from freely
providing information to a state or federal agency,
legislative body or one of its committees or a court with
jurisdiction when Executive is requested or required to do
so by such entity.
(c) NONSOLICITATION. During the term of employment and for a
period of twelve (12) months after the Effective Date of
Termination, the Executive shall not: (i) employ or retain
or solicit for employment or arrange to have any other
person, firm, or other entity employ or retain or solicit
for employment or otherwise participate in the employment
or retention of any person who is an employee or
consultant of CMS Energy Corporation or its Affiliates; or
(ii) solicit suppliers or customers of CMS Energy
Corporation or its Affiliates or induce any such person to
terminate their relationship with them.
(d) COOPERATION. Executive agrees to fully and unconditionally
cooperate with CMS Energy Corporation and its Affiliates
and their attorneys in connection with any and all
lawsuits, claims, investigations, or similar proceedings
that have been or could be asserted at any time arising
out of or related in any way to Executive's employment or
activities on behalf of CMS Energy Corporation and its
Affiliates.
(e) NONDISPARAGEMENT. At all times, the Executive agrees not
to disparage CMS Energy Corporation or its Affiliates or
otherwise make comments harmful to their reputations.
While receiving any payments pursuant to this Agreement,
Executive further agrees not to testify or act in any
capacity as a paid or unpaid expert witness, advisor or
consultant on behalf of any person, individual,
partnership, firm, corporation or any other person or
entity that has or may have any claim, demand, action,
suit, cause of action, or judgment against CMS Energy
Corporation or its Affiliates, or from agreeing to do so
after the payments under this Agreement have ceased.
Further, CMS Energy Corporation and its Affiliates agree
not to disparage Executive or otherwise make comments
harmful to Executive's reputation. Notwithstanding the
foregoing, nothing in this Section prohibits Executive or
representatives of CMS Energy Corporation or its
Affiliates from testifying truthfully under oath in any
judicial, administrative or legislative proceedings or in
any arbitration, mediation or other similar proceedings.
ARTICLE 6. EXCISE TAX EQUALIZATION PAYMENT
6.1 EXCISE TAX EQUALIZATION PAYMENT. In the event that the Executive
becomes entitled to Severance Benefits or any other payment or
benefit under this Agreement, or under any
other agreement, plan or arrangement for which Executive is
eligible with (1) the Employer, (2) any Person whose actions
result in a Change in Control, or (3) CMS Energy Corporation or
any of its Affiliates (all of such payments and benefits
collectively referred to as the "Total Payments"), and if all or
any part of the Total Payments will be subject to the tax (the
"Excise Tax") imposed by Sections 280G and 4999 of the Code (or
any similar tax that may hereafter be imposed), the Employer
shall pay to the Executive in cash an additional amount (the
"Gross-Up Payment") such that the net amount retained by the
Executive after deduction of any Excise Tax upon the Total
Payments and any federal, state, and local income tax, penalties,
interest, and Excise Tax upon the Gross-Up Payment provided for
by this Section 6.1 (including FICA and FUTA), shall be equal to
the Total Payments. Such payment shall be made by the Employer to
the Executive within forty-five (45) calendar days following the
Effective Date of Termination.
For purposes of determining the amount of the Gross-Up Payment,
the Executive shall be deemed to pay federal income taxes at the
highest marginal rate of federal income taxation in the calendar
year in which the Gross-Up Payment is to be made, and state and
local income taxes at the highest marginal rate of taxation in
the state and locality of the Executive's residence on the
Effective Date of Termination, net of the maximum reduction in
federal income taxes which could be obtained from deduction of
such state and local taxes.
6.2 SUBSEQUENT RECALCULATION. In the event the Internal Revenue
Service adjusts the computation under Section 6.1 herein so that
the Executive did not receive the greatest net benefit, the
Employer shall reimburse the Executive for the full amount
necessary to make the Executive whole, plus interest on the
reimbursed amount at 120% of the rate provided in section
1274(b)(2)(B) of the Code. In the event that the Excise Tax is
finally determined to be less than the amount taken into account
hereunder in calculating the Gross-Up Payment, the Executive
shall repay the Employer within thirty (30) business days
following the time that the amount of such reduction in the
Excise Tax is finally determined, the portion of the Gross-Up
Payment attributable to such reduction (plus that portion of the
Gross-Up Payment attributable to the Excise Tax and federal,
state and local income and employment taxes imposed on the
Gross-Up Payment being repaid by the Executive) to the extent
that such repayment results in a reduction in the Excise Tax and
a dollar-for-dollar reduction in the Executive's taxable income
and wages for purposes of federal, state and local income and
employment taxes, plus interest on the amount of such repayment
at 120% of the rate provided in section 1274(b)(2)(B) of the
Code.
ARTICLE 7. DISPUTE RESOLUTION AND NOTICE
7.1 DISPUTE RESOLUTION. Any dispute or controversy between the
parties arising under or in connection with this Agreement shall
be settled by final and binding arbitration after first being
submitted in writing to the Committee for attempted resolution.
If that does not result in mutually agreeable resolution, the
arbitration proceeding shall be conducted before a single
arbitrator selected by the parties to be conducted in Jackson,
Michigan. The arbitration will be conducted in accordance with
the rules of the American Arbitration Association then in effect
and be finished within ninety (90) days after the selection of
the
arbitrator. The arbitrator shall not have authority to fashion a
remedy that includes consequential, exemplary or punitive damages
of any type whatsoever, and the arbitrator is hereby prohibited
from awarding injunctive relief of any kind, whether mandatory or
prohibitory. Judgment may be entered on the award of the
arbitrators in any court having competent jurisdiction. The
parties shall share equally the cost of the arbitrator and of
conducting the arbitration proceeding, but each party shall bear
the cost of its own legal counsel and experts and other
out-of-pocket expenditures.
7.2 NOTICE. Any notices, requests, demands, or other communications
provided for by this Agreement shall be in writing and sent by
registered or certified mail to the Executive at the last address
he or she has filed in writing with the Employer or, in the case
of the Employer, at One Energy Plaza, Jackson, Michigan 49201,
Attention: Corporate Secretary. Notices, requests, demands or
other communications may also be delivered by messenger, courier
service or other electronic means and are sufficient if actually
received by the party for whom it is intended.
ARTICLE 8. SUCCESSORS AND ASSIGNMENT
8.1 SUCCESSORS. Any successor (whether direct or indirect, by
purchase, merger, reorganization, consolidation, acquisition of
property or stock, liquidation, or otherwise) to the business of
CMS Energy Corporation or purchaser of all or substantially all
of the assets of CMS Energy Corporation shall be required to
expressly assume and agree to perform under this Agreement in the
same manner and to the same extent that the Employer would be
required to perform if no such succession had taken place.
Failure to obtain such assumption and agreement prior to the
effectiveness of any such succession or asset sale shall entitle
the Executive to the Change-in-Control Severance Benefits
specified in Section 3.2 of this Agreement. The effective date of
the succession or the sale shall be deemed the date of delivery
to Executive of the Notice of Termination for purposes of
administering Section 3.2. Regardless of whether such agreement
is executed, this Agreement shall be binding upon any successor
in accordance with the operation of law.
8.2 ASSIGNMENT BY THE EXECUTIVE. This Agreement shall inure to the
benefit of and be enforceable by the Executive's personal or
legal representatives, executors, administrators, successors,
heirs, distributees, devisees, and legatees. If the Executive
dies while any amount would still be payable to him or her
hereunder had he or she continued to live, all such amounts,
unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to the Executive's Beneficiary.
If the Executive has not named a Beneficiary, then such amounts
shall be paid to the Executive's devisee, legatee, or other
designee, or if there is no such designee, to the Executive's
estate.
ARTICLE 9. MISCELLANEOUS
9.1 EMPLOYMENT STATUS. The employment of the Executive by the
Employer is "at will" and
may be terminated by either the Executive or the Employer at any
time, subject to applicable law. Further, Executive has no right
to be an officer of CMS Energy Corporation or any of its
Affiliates and serves as an officer entirely at the discretion of
the Board.
9.2 ENTIRE AGREEMENT. This Agreement supersedes any prior agreements
or understandings, oral or written, between the parties hereto,
with respect to the subject matter hereof, and constitutes the
entire agreement of the parties with respect thereto. Without
limiting the generality of the foregoing sentence, this Agreement
completely supersedes, cancels, voids and renders of no further
force and effect any and all employment agreements, change in
control agreements, and other similar agreements, communications,
representations, promises, covenants and arrangements, whether
oral or written, between the Employer and Executive and between
the Executive and CMS Energy Corporation or any of its Affiliates
that may have taken place or been executed prior to the Effective
Date of this Agreement and which may address the subject matters
contained herein, including but not by way of limitation
Employment Agreement between CMS Energy Corporation and Executive
dated the 13th day of March, 2000.
9.3 SEVERABILITY. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for
any reason, the remaining provisions of this Agreement shall be
unaffected thereby and shall remain in full force and effect.
9.4 TAX WITHHOLDING. The Employer may withhold from any benefits
payable under this Agreement any authorized deductions and all
federal, state, city, or other taxes as may be required pursuant
to any law or governmental regulation or ruling.
9.5 BENEFICIARIES. The Executive may designate one (1) or more
persons or entities as the primary and/or contingent
beneficiaries of any amounts to be received under this Agreement.
Such designation must be in the form of a signed writing on a
form provided by the Employer. The Executive may make or change
such designation at any time.
9.6 PAYMENT OBLIGATION ABSOLUTE. Except as provided in the last
sentence of this paragraph, the Employer's and CMS Energy
Corporation's obligations to make the payments and provide the
benefits to Executive specified herein shall be absolute and
unconditional, and shall not be affected by any circumstances,
including, without limitation, any offset, counterclaim,
recoupment, defense, or other right which the Employer, CMS
Energy Corporation or any of its Affiliates may have against the
Executive or anyone else. All amounts payable by the Employer
hereunder shall be paid without notice or demand. Each and every
payment made hereunder by the Employer shall be final, but
subject to the provisions of the next sentence. If the Executive
should seek to bypass arbitration and litigate about this
Agreement or the subject matters addressed herein in a state or
federal court, Executive agrees (i) at least 10 days prior to
filing in court to tender back to the Employer all cash
consideration paid to Executive under this Agreement prior
thereto and (ii) any payments due Executive under this Agreement
after said tender shall be suspended until said litigation is
finally resolved.
The Executive shall not be obligated to seek other employment in
mitigation of the amounts payable or arrangements made under any
provision of this Agreement, and the obtaining of any such other
employment shall in no event effect any reduction of the
Employer's obligations to make the payments and arrangements
required to be made under this Agreement.
9.7 CONTRACTUAL RIGHTS TO BENEFITS. Subject to approval and
ratification by the Committee, this Agreement establishes and
vests in the Executive a contractual right to the benefits to
which he or she is entitled hereunder. However, nothing herein
contained shall require or be deemed to require, or prohibit or
be deemed to prohibit, the Employer to segregate, earmark, or
otherwise set aside any funds or other assets, in trust or
otherwise, to provide for any payments to be made or required
hereunder.
9.8 MODIFICATION. This Agreement shall not be varied, altered,
modified, canceled, changed, or in any way amended except by
mutual agreement of the parties in a written instrument executed
by the parties hereto or their legal representatives.
9.9 COUNTERPARTS. This Agreement may be executed in one (1) or more
counterparts, each of which shall be deemed to be an original,
but all of which together will constitute one and the same
Agreement. Signatures transmitted via facsimile shall be regarded
by the parties as original signatures.
9.10 APPLICABLE LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Michigan, without regard
to its conflicts of laws principles.
IN WITNESS WHEREOF, the parties have executed this Agreement as
of this day of ________, 2004.
EXECUTIVE:
By:________________________________ Signature: ____________________________
Its: _____________________________ Printed Name: _________________________
OFFICER SEVERANCE AGREEMENT
TIER II
CONTENTS
- --------------------------------------------------------------------------
Article 1. Establishment, Term, and Purpose 1
Article 2. Definitions 2
Article 3. Severance Benefits 7
Article 4. Other Terminations 13
Article 5. Noncompetition and Confidentiality 13
Article 6. Excise Tax Equalization Payment 15
Article 7. Dispute Resolution and Notice 16
Article 8. Successors and Assignment 17
Article 9. Miscellaneous 18
OFFICER SEVERANCE AGREEMENT
THIS OFFICER SEVERANCE AGREEMENT ("Agreement") is made, entered into, and
is effective as of _____, 2004 (hereinafter referred to as the "Effective
Date"), by and between ________________, a Michigan corporation, (hereinafter
referred to as the "Employer") and ____________________________ (hereinafter
referred to as the "Officer").
WHEREAS, the Board of Directors of CMS Energy Corporation has approved
entering into severance agreements with certain key officers as being necessary
and advisable for the success of CMS Energy Corporation;
WHEREAS, the Officer is currently employed at ____________________, by the
Employer in a key management position as ___________________________;
WHEREAS, the Board of Directors of CMS Energy Corporation wants to provide
the Officer with a measure of financial security in the event of certain
terminations of employment; and
WHEREAS, both the Employer and the Officer are desirous that any proposal
involving Change in Control as defined in this Agreement will be considered by
the Officer objectively and with reference only to the business interests of CMS
Energy Corporation and its shareholders.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements of the parties set forth in this Agreement and of other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intended to be legally bound, agree as
follows:
ARTICLE 1. ESTABLISHMENT, TERM, AND PURPOSE
This Agreement will commence on the Effective Date and shall continue in
effect for two (2) full years through March ____, 2006. However, at the end of
such two (2) year period and, if extended, at the end of each additional year
thereafter, the term of this Agreement shall be extended automatically for one
(1) additional year, unless the Committee delivers written notice six (6) months
prior to the end of such term, or extended term, to the Officer, stating that
the Agreement will not be extended. In such case, the Agreement will terminate
at the end of the term, or extended term, then in progress. However, in the
event of a Change in Control (as defined in Section 2.7 herein) of CMS Energy
Corporation, the term of this Agreement shall automatically be extended for two
(2) years from the date of the Change in Control if the current term of the
Agreement has less than two (2) full years remaining until its expiration. If
the term of this agreement is not extended, the Employer is not obligated to pay
any severance benefits under Section 3.2 for a Change in Control that happens
after the expiration of the term and is not obligated to pay any severance
benefits under Section 3.3 with respect to any other termination that happens
after the expiration of the term.
ARTICLE 2. DEFINITIONS
Whenever used in this Agreement, the following terms shall have the
meanings set forth below and, when the meaning is intended, the initial letter
of the word is capitalized.
2.1 "AFFILIATE" shall have the meaning set forth in Rule 12B-2
promulgated under Section 12 of the Exchange Act.
2.2 "BASE SALARY" means the greater of the Officer's full annual rate
of salary, whether or not any portion thereof is paid on a
deferred basis, at: (i) the Effective Date of Termination, or (ii)
at the date of the Change in Control. It does not include any
incentive compensation in any form, bonuses of any type or any
other form of monetary or nonmonetary compensation other than
salary.
2.3 "BENEFICIAL OWNER" shall have the meaning ascribed to such term in
Rule 13d-3 of the General Rules and Regulations under the Exchange
Act.
2.4 "BENEFICIARY" means the persons or entities designated or deemed
designated by the Officer pursuant to Section 9.5 herein.
2.5 "BOARD" means the Board of Directors of CMS Energy Corporation.
2.6 "CAUSE" shall be determined solely by the Committee in the
exercise of good faith and reasonable judgment, and shall mean the
occurrence of any one or more of the following:
(a) The willful and continued failure by the Officer to
substantially perform his or her duties of employment
(other than any such failure resulting from the Officer's
Disability), after a written demand for substantial
performance is delivered to the Officer that specifically
identifies the manner in which the Committee believes that
the Officer has not substantially performed his or her
duties, and the Officer has failed to remedy the situation
within a reasonable period of time specified by the
Committee which shall not be less than 30 days; or
(b) The Officer's arrest for committing an act of fraud,
embezzlement, theft, or other act constituting a felony
involving moral turpitude; or
(e) The willful engaging by the Officer in misconduct
materially and demonstrably injurious to CMS Energy
Corporation or its Affiliates, monetarily or otherwise.
However, for purposes of clauses (a) and (c), no act or failure to
act on the Officer's part shall be considered "willful" unless
done, or omitted to be done, by the Officer not in good faith and
without reasonable belief that his or her action or omission was
in the best interest of CMS Energy Corporation or its Affiliates.
2.7 "CHANGE IN CONTROL" means a change in control of CMS Energy
Corporation, and shall be deemed to have occurred upon the first
to occur of any of the following events:
(a) Any Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of CMS Energy Corporation (not
including in the securities beneficially owned by such
Person any securities acquired directly from CMS Energy
Corporation or its Affiliates) representing twenty-five
percent (25%) or more of the combined voting power of CMS
Energy Corporation's then outstanding securities,
excluding any Person who becomes such a Beneficial Owner
in connection with a transaction described in clause (i)
of paragraph (c) below; or
(b) The following individuals cease for any reason to
constitute a majority of directors then serving:
individuals who, on the Effective Date, constitute the
Board and any new director (other than a director whose
initial assumption of office is in connection with an
actual or threatened election contest, including but not
limited to a consent solicitation, relating to the
election of directors of CMS Energy Corporation) whose
appointment or election by the Board or nomination for
election by CMS Energy Corporation's stockholders was
approved or recommended by a vote of at least two-thirds
(2/3) of the directors then still in office who either
were directors on the Effective Date or whose appointment,
election or nomination for election was previously so
approved or recommended; or
(c) The consummation of a merger or consolidation of CMS
Energy Corporation or any direct or indirect subsidiary of
CMS Energy Corporation with any other corporation or other
entity, other than: (i) any such merger or consolidation
which involves either CMS Energy Corporation or any such
subsidiary and would result in the voting securities of
CMS Energy Corporation outstanding immediately prior
thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities
of the surviving entity or any parent thereof), in
combination with the ownership of any trustee or other
fiduciary holding securities under an employee benefit
plan of CMS Energy Corporation or its Affiliates, at least
sixty percent (60%) of the combined voting power of the
voting securities of CMS Energy Corporation or the
surviving entity or any parent thereof outstanding
immediately after such merger or consolidation and
immediately following which the individuals who comprise
the Board immediately prior thereto constitute at least a
majority of the board of directors of CMS Energy
Corporation, the entity surviving such merger or
consolidation or, if CMS Energy Corporation or the entity
surviving such merger is then a subsidiary, the ultimate
parent thereof; or (ii) a merger or consolidation effected
to implement a recapitalization of CMS Energy Corporation
(or similar transaction) in which no Person is or becomes
the Beneficial Owner, directly or indirectly, of
securities of CMS Energy Corporation (not including in the
securities beneficially owned by such Person any
securities acquired directly from CMS Energy Corporation
or its Affiliates) representing twenty-five percent (25%)
or more of the combined voting power of CMS Energy
Corporation's then outstanding securities; or
(d) Either (1) the stockholders of CMS Energy Corporation
approve a plan of complete liquidation or dissolution of
CMS Energy Corporation, or (2) there is consummated an
agreement for the sale, transfer or disposition by CMS
Energy Corporation of all
or substantially all of CMS Energy Corporation's assets
(or any transaction having a similar effect). For purposes
of clause (d)(2), (i) the sale, transfer or disposition of
a majority of the shares of common stock of Consumers
Energy Company shall constitute a sale, transfer or
disposition of substantially all of the assets of CMS
Energy Corporation and (ii) the sale, transfer or
disposition of subsidiaries or affiliates of CMS Energy
Corporation, singly or in combinations, or their assets,
only qualifies as a Change in Control if it satisfies the
substantiality test contained in that clause and the Board
of CMS Energy Corporation's determination in that regard
is final. In addition, for purposes of clause (d)(2), the
sale, transfer or disposition of assets has to be in a
transaction or series of transactions closing within six
months after the closing of the first transaction in the
series, other than with an entity in which at least 60% of
the combined voting power of the voting securities is
owned by stockholders of CMS Energy Corporation in
substantially the same proportions as their ownership of
CMS Energy Corporation immediately prior to such
transaction or transactions and immediately following
which the individuals who comprise the Board immediately
prior thereto constitute at least a majority of the board
of directors of the entity to which such assets are sold,
transferred or disposed or, if such entity is a
subsidiary, the ultimate parent thereof.
Notwithstanding the foregoing clauses (a), (c) and (d), a "Change
in Control" shall not be deemed to have occurred by virtue of the
consummation of any transaction or series of integrated
transactions closing within six months after the closing of the
first transaction in the series immediately following which the
record holders of the common stock of CMS Energy Corporation
immediately prior to such transaction or series of transactions
continue to have substantially the same proportionate ownership
in an entity which owns all or substantially all of the assets of
CMS Energy Corporation immediately following such transaction or
series of transactions.
2.8 "CODE" means the United States Internal Revenue Code of 1986, as
amended, and any successors thereto.
2.9 "COMMITTEE" means the Organization and Compensation Committee of
the Board of CMS Energy Corporation or any other committee
appointed by the Board of CMS Energy Corporation to perform the
functions of the Organization and Compensation Committee.
2.10 "DISABILITY" means for all purposes of this Agreement, the
incapacity of the Officer, due to injury, illness, disease, or
bodily or mental infirmity, which causes the Officer not to
engage in the performance of a substantial or material portion of
the Officer's usual duties of employment associated with such
Officer's position. Such Disability shall be determined based on
competent medical advice.
2.11 "EFFECTIVE DATE" means the date of this Agreement as specified
in the opening sentence of this Agreement.
2.12 "EFFECTIVE DATE OF TERMINATION" means the date on which a
Qualifying Termination occurs, as provided under Section 2.17
hereunder, which triggers the payment of
Severance Benefits hereunder.
2.13 "EXCHANGE ACT" means the United States Securities Exchange Act
of 1934, as amended.
2.14 "GOOD REASON" exists only on the date of a Change in Control or
during the twenty-four (24) months which follow a Change in
Control and shall mean, without the Officer's express written
consent, the occurrence of any one or more of the following:
(a) The assignment to the Officer of duties materially
inconsistent with the Officer's position (including status,
offices, titles, and reporting requirements), authority, or
responsibilities as in effect on the Effective, or any
action by the Employer which results in a diminution of the
Officer's position, authority, duties, or responsibilities
as constituted as of the Effective Date (excluding an
isolated, insubstantial, and inadvertent action which is
remedied by the Employer promptly after receipt of notice
thereof given by the Officer); or
(b) Reducing the Officer's Base Salary; or
(c) Reducing the Officer's targeted annual incentive
opportunity; or
(d) Failing to maintain the Officer's participation in a
long-term incentive plan in a manner that is consistent
with the Officer's position, authority, or
responsibilities; or
(e) Failing to maintain the Officer's amount of benefits under
or relative level of participation in employee benefit or
retirement plans, policies, practices, or arrangements of a
material nature available to employees of CMS Energy
Corporation and its Affiliates and in which the Officer
participates as of the Effective Date; or
(f) A material breach of this Agreement by the Employer which
is not remedied by the Employer within ten (10) business
days of receipt of written notice of such breach delivered
by the Officer to the Committee; or
(g) Any successor company fails or refuses to assume the
obligations owed to Officer under this Agreement in their
entirety, as required by Section 8.1 hereunder; or
(h) The Officer is required to be based at a location in excess
of thirty-five (35) miles from the location of the
Officer's principal job location or office immediately
prior to a Change in Control except for required travel on
the Employer's or CMS Energy Corporation's business to an
extent substantially consistent with the Officer's prior
business travel obligations; or
(i) The Officer ceases being an officer of a company (other
than by reason of death, Disability or Cause) whose common
stock is publicly owned if immediately prior to the Change
in Control the Officer was an officer of a company whose
common stock was publicly owned.
For purposes of applying clauses (a) through (i) of this
Agreement, the Officer's Retirement shall not constitute a waiver
of the Officer's rights with respect to any circumstance
constituting Good Reason, and the Officer's continued employment
shall not constitute a waiver of the Officer's rights with
respect to any circumstance constituting Good Reason or
constitute Officer's consent to the circumstances constituting
Good Reason unless Officer has provided express written consent
to the circumstance that would otherwise constitute Good Reason
under this Agreement. Finally, for purposes of implementing this
Agreement, any claim by Officer that Good Reason exists shall be
presumed to be correct unless the Committee determines by clear
and convincing evidence that Good Reason does not exist, which
evidence shall be presented by the person disputing the claim
that Good Reason exists.
2.15 "NOTICE OF TERMINATION" shall be provided for a Qualifying
Termination and shall mean a written notice which shall indicate
the specific termination provision in this Agreement relied upon,
and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the
Officer's employment under the provision so indicated. The notice
shall provide a specific date on which a Qualifying Termination
has occurred and is effective for purposes of this Agreement.
2.16 "PERSON" shall have the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d)
thereof, including a "group" as provided in Section 13(d).
2.17 "QUALIFYING TERMINATION" MEANS:
(a) An involuntary termination of the Officer's employment by
the Employer on the date of a Change in Control or during
the twenty-four (24) months which follow a Change in
Control for reasons other than death, Disability,
Retirement, or Cause pursuant to a Notice of Termination
delivered to the Officer by the Employer; or
(b) A voluntary termination by the Officer for Good Reason on
the date of a Change in Control or during the twenty-four
(24) months which follow a Change in Control pursuant to a
Notice of Termination delivered to the Employer by the
Officer.
(c) A termination (not involving death, Disability,
Retirement or Cause), which takes place before the date of
a Change in Control or after the first twenty-four (24)
months immediately following a Change in Control, pursuant
to a Notice of Termination delivered to Officer or
pursuant to a request that Officer submit a resignation as
an officer. A termination for failure of the Officer to
comply in material respects with CMS Energy's Code of
Conduct and Statement of Ethics Handbook (June 2003
edition) or other corporate policies, as the handbook and
those documents may be amended from time to time, does not
satisfy the definition of a Qualifying Termination under
this clause (c).
2.18 "RELEASE DATE" occurs after the delivery of the Notice of
Termination required by Section
2.15 and means the date on which the release contained in
Exhibit A to this Agreement is first provided to Officer
for signature.
2.19 "RETIREMENT" shall have the meanings ascribed under the terms of
the pension plan applicable to Officer and entitled "Pension
Plan for Employees of Consumers Energy Company," dated September
1, 2000, as amended, other than under Section 7 thereof, or
under the successor or replacement of such pension plan if it is
then no longer in effect.
2.20 "SERP" shall mean the retirement plan applicable to Officer and
entitled "Supplemental Executive Retirement Plan for Employees of
CMS Energy/Consumers Energy Company," dated May 1, 1998, as
amended, or under the successor or replacement of such retirement
plan if it is then no longer in effect.
2.21 "SEVERANCE BENEFITS" means the payment of Change-in-Control
Severance Benefits or General Severance Benefits as provided in
Article 3 herein.
ARTICLE 3. SEVERANCE BENEFITS
3.1 RIGHT TO SEVERANCE BENEFITS.
(a) CHANGE-IN-CONTROL SEVERANCE BENEFITS. The Officer shall be
entitled to receive from the Employer Change-in-Control
Severance Benefits, as described in Section 3.2 herein, if
a Qualifying Termination of the Officer's employment
satisfying the definitions contained in Section 2.17(a) or
(b) has occurred on the date of a Change in Control of CMS
Energy Corporation or within twenty-four (24) months
immediately following a Change in Control of CMS Energy
Corporation. Further, Officer's Retirement under the
pension plan and SERP shall not constitute a waiver of the
Officer's rights with respect to receipt of
Change-in-Control Severance Benefits. Nor shall benefits
received for Retirement under the pension plan and SERP
(or any replacement or successor plans thereto) be used as
an offset to the level of Change-in-Control Severance
Benefits owed to Officer.
(b) GENERAL SEVERANCE BENEFITS. The Officer shall be entitled
to receive from the Employer General Severance Benefits,
as described in Section 3.3 herein, if the Officer's
employment is terminated for reasons satisfying the
definition contained in Section 2.17(c) and such
termination has occurred either before a Change of Control
of CMS Energy Corporation or during the period that begins
after the expiration of twenty-four (24) months
immediately following a Change in Control of CMS Energy
Corporation. Further, Officer's Retirement under the
pension plan and SERP shall not constitute a waiver of the
Officer's rights with respect to receipt of General
Severance Benefits. Nor shall benefits received for
Retirement under the pension plan and SERP (or any
replacement or successor plans thereto) be used as an
offset to the level of General Severance Benefits owed to
Officer.
(c) NO SEVERANCE BENEFITS. Other than in a situation
involving a Retirement, the Officer shall not be entitled
to receive Severance Benefits if the Officer's employment
with the Employer ends for reasons other than a Qualifying
Termination.
(d) GENERAL RELEASE. As a condition precedent to receiving
Severance Benefits under Section 3.3 herein, the Officer
shall be obligated to execute and deliver to the Employer
on a timely basis duplicate originals of a general release
of claims in the form included as Exhibit A hereto.
(e) WAIVER AND RELEASE. The Officer's act of accepting
payment of Severance Benefits payable under Section 3.2 of
this Agreement shall constitute and is deemed an express
waiver, release and discharge by Officer of any and all
claims for damages or other remedies, regardless of when
they arose or when they are discovered, against CMS Energy
Corporation and its Affiliates arising out of or in any
way connected with Officer's employment relationship with
them or the termination of such employment relationship
except for claims and rights of Officer preserved under
Section 3.2 of this Agreement and applicable rights to
indemnification.
(f) NO DUPLICATION OF SEVERANCE BENEFITS. If the Officer
becomes entitled to Change-in-Control Severance Benefits,
the benefits provided for under Section 3.2 hereunder
shall be in lieu of all other benefits provided to the
Officer under the provisions of this Agreement including,
but not limited to, the benefits under Section 3.3.
Likewise, if the Officer becomes entitled to General
Severance Benefits, the benefits provided under Section
3.3 hereunder shall be in lieu of all other benefits
provided to the Officer under the provisions of this
Agreement including, but not limited to, the benefits
under Section 3.2. If the Officer receives either
Change-in-Control Severance Benefits under Section 3.2 or
General Severance Benefits under Section 3.3, any other
severance benefits received by employees not covered by
this Agreement to which the Officer is entitled will be
subtracted from the Severance Benefits paid pursuant to
this Agreement.
3.2 DESCRIPTION OF CHANGE-IN-CONTROL SEVERANCE BENEFITS. In the event
the Officer becomes entitled to receive Change-in-Control
Severance Benefits, as provided in Section 3.1(a) herein, the
Employer shall provide the Officer with the following:
(a) A lump-sum amount paid within fifteen (15) calendar days
following delivery to the Employer or delivery to the
Officer, as applicable, of a Notice of Termination, equal
to the sum of the Officer's unpaid Base Salary, accrued
vacation pay, unreimbursed business expenses, and
unreimbursed allowances owed to the Officer through and
including the Effective Date of Termination.
(b) A lump-sum amount, paid within fifteen (15) calendar
days following delivery to the Employer or delivery to the
Officer, as applicable, of a Notice of Termination, equal
to one and one half (1.5) times the sum of the following:
(A) the Officer's Base Salary and (B) the greater of the
Officer's: (i) annual target bonus opportunity in the year
in which the Qualifying Termination occurs or (ii) the
actual annual bonus
payment paid or due to be paid the Officer in respect of
the year prior to the year in which the Qualifying
Termination occurs.
(c) A lump-sum amount, paid within fifteen (15) calendar days
following delivery to the Employer or delivery to the
Officer, as applicable, of a Notice of Termination, equal
to the Officer's then current target bonus opportunity
established under the bonus plan in which the Officer is
then participating, for the plan year in which the
Qualifying Termination occurs, adjusted on a pro rata
basis for the number of days that have elapsed to the
Effective Date of Termination during the bonus plan year
in which the Qualifying Termination occurs.
(d) A lump-sum amount, paid within fifteen (15) calendar days
following delivery to the Employer or delivery to the
Officer, as applicable, of a Notice of Termination, equal
to one half (0.5) times the sum of the following: (A) the
Officer's Base Salary and (B) the greater of the
Officer's: (i) annual target bonus opportunity in the year
in which the Qualifying Termination occurs or (ii) the
actual annual bonus payment paid or due to be paid the
Officer in respect of the year prior to the year in which
the Qualifying Termination occurs. Such amount shall be
consideration for the Officer entering into the noncompete
agreement as described in Section 5(a).
(e) Equivalent payment to Officer in a lump sum amount within
forty-five (45) calendar days following delivery of the
Notice of Termination for continued medical coverage for a
period of twenty four (24) months. Such equivalent payment
shall be computed based on the same coverage level as in
effect for Officer under the general health care plan
available to all employees on the Effective Date of
Termination by providing a lump sum payment of the
Employer's portion of the monthly COBRA premium in effect
on the Effective Date of Termination times twenty-four
(24). Nothing herein amends or provides Officer any rights
to health care coverage other than as provided in the
applicable group health care plan. If the Officer has
waived coverage under the applicable group health care
plan, no equivalent payment shall be made under this
Agreement.
(f) Immediate extension (as allowable by Section 6.10 of
Article VI of the plan entitled "CMS Energy Corporation
Performance Incentive Stock Plan," dated December 3, 1999,
as amended) by one year after the Effective Date of
Termination of the period for Officer to exercise any
outstanding stock options or stock appreciation rights
granted by the Committee to Officer pursuant to said
Article VI. Otherwise, the terms of said plan shall govern
and be applied.
(g) Immediate vesting and distribution to Officer (as
allowable by the second sentence of Section 7.2(h) of
Article VII of the plan entitled "CMS Energy Corporation
Performance Incentive Stock Plan," dated December 3, 1999,
as amended) within forty-five (45) days after delivery of
the Notice of Termination of all outstanding shares of
restricted stock previously awarded to Officer pursuant to
said Article VII. For any award of restricted stock to
which there are future performance goals attached, the
number of shares distributed to Officer shall assume that
the goals have
been achieved in full and the award fully earned based on
target performance without deductions or additions to the
number of shares then held by Officer. For any award of
restricted stock that is tenure based, the number of
shares distributed to Officer shall assume that all
requirements with respect to tenure are satisfied by
Officer. Otherwise, the terms of said plan shall govern
and be applied.
(h) For an Officer included in SERP, the Officer's retirement
benefits under the SERP will become fully vested as of the
Effective Date of Termination and shall not be subject to
further vesting requirements or to any forfeiture
provisions. In addition, said Officer shall be provided
the following: (i) an additional twenty-four (24) months
of Preference Service (as defined in SERP) for purposes of
the SERP in accordance with Section III (1) of SERP,
subject, however, to the total of Preference Service plus
Accredited Service being limited to a maximum of
thirty-five (35) years under SERP; (ii) only the amounts
paid to Officer pursuant to clauses (a), (b), (c) and (d)
of this Section 3.2 shall be considered a "severance
payment under an employment agreement" for purposes of
computing Final Officer Pay under SERP; and (iii) for an
Officer that receives Change-in-Control Severance Benefits
under this Agreement within twenty four (24) months prior
to attaining the age of 55, Officer shall receive 65% of
Officer's Accrued Supplemental Officer Retirement Income
under SERP if Officer elects to retire at age 55
notwithstanding the fact that the Effective Date of
Termination for Officer pursuant to this Agreement is
before he or she attains the age of 55. If it should occur
that Officer retires under SERP after the age of 55,
clause (iii) of the preceding sentence and the provisions
of the last complete paragraph of Section V(3) of SERP
shall not be operative. The enhanced SERP benefits under
this Section 3.2(h) shall be in lieu of any
Change-in-Control enhancements provided for in the SERP.
(i) For purposes of (1) Retirement, (2) SERP and (3) benefits
not expressly discussed in clauses (a) through (h) of this
Section 3.2, but which are available to the general
employee population or available only to officers and
implemented with contracts with third parties, the benefit
plan descriptions covering all employees and the
retirement plan and SERP plan descriptions and contracts
with third parties covering officers in place at the time
of the Effective Date of Termination control Officer's
treatment under those plans and contracts. For any other
benefits only available to officers, if those benefits are
not expressly discussed in clauses (a) through (h) of this
Section 3.2, those benefits are terminated for Officer as
of the Effective Date of Termination.
3.3 DESCRIPTION OF GENERAL SEVERANCE BENEFITS. In the event the
Officer becomes entitled to receive General Severance Benefits as
provided in Section 3.1(b) herein, the Employer shall provide the
Officer with the following:
(a) A lump-sum amount paid within fifteen (15) calendar
days following delivery to the Officer of a Notice of
Termination with respect to a Qualifying Termination as
described in Section 2.17 (c) of this Agreement, equal to
the sum of the Officer's unpaid Base Salary, accrued
vacation pay, unreimbursed business expenses, and
unreimbursed allowances owed to the Officer through and
including the Effective Date of Termination.
(b) An amount, paid following the Release Date on an
installment basis over a period of twelve (12) months on a
twice a month schedule in accordance with the normal
payroll procedures of the Employer, equal to one (1) times
the sum of: (A) the Officer's Base Salary and (B) the
greater of the Officer's: (i) annual target bonus
opportunity in the year in which the Qualifying
Termination occurs or (ii) the actual annual bonus payment
paid or due to be paid the Officer in respect of the year
prior to the year in which the Qualifying Termination
occurs. The first of the twenty-four (24) installment
payments called for by this section shall be made within
forty-five (45) days following the Release Date.
(c) A lump-sum amount, paid within forty-five (45) calendar
days following the Release Date, equal to the Officer's
then current target bonus opportunity established under
the bonus plan in which the Officer is then participating,
for the plan year in which the Qualifying Termination
occurs, adjusted on a pro rata basis for the number of
days that have elapsed to the Effective Date of
Termination during the bonus plan year in which the
Qualifying Termination occurs.
(d) Equivalent payment to Officer in a lump-sum amount within
forty-five (45) days following the Release Date for
continued medical coverage for a period of twelve (12)
months. Such equivalent payment shall be computed based on
the same coverage level as in effect for Officer under the
general health care plan available to all employees on the
Effective Date of Termination by providing a lump-sum
payment of the Employer's portion of the monthly COBRA
premium in effect on the Effective Date of Termination
times twelve (12). Nothing herein amends or provides
Officer any rights to health care coverage other than as
provided in the applicable group health care plan. If the
Officer has waived coverage under the applicable group
health care plan, no equivalent payment shall be made
under this Agreement.
(e) Outstanding stock options and stock appreciation
rights previously granted by the Committee to Officer
pursuant to Article VI of the plan entitled "CMS Energy
Corporation Performance Incentive Stock Plan," dated
December 3, 1999, as amended, shall be treated as a
"termination of employment" in accordance with Section
6.10 of Article VI, provided however that Employee will
not be eligible to seek or receive from the Committee any
extensions of the period for their exercise. For
outstanding shares of restricted stock held by Officer,
they shall be forfeited to CMS Energy Corporation in
accordance with the provisions of the first sentence of
Section 7.2(h) of Article VII of said plan.) For purposes
of (1) Retirement, (2) SERP and (3) benefits not expressly
discussed in clauses (a) through (d) of this Section 3.3,
but which are available to the general employee population
or available only to officers and implemented with
contracts with third parties, the benefit plan
descriptions covering all employees and the retirement
plan and SERP plan descriptions and contracts with third
parties covering officers in place at the time of
the Effective Date of Termination control Officer's
treatment under those plans and contracts. For any other
benefits only available to officers, if those benefits are
not expressly discussed in clauses (a) through (d) of this
Section 3.3, those benefits are terminated for Officer as
of the Effective Date of Termination.
ARTICLE 4. OTHER TERMINATIONS
4.1 TERMINATION FOR DISABILITY. If the Officer's employment is
terminated with the Employer due to Disability, the Officer's
benefits shall be determined in accordance with the Employer's
retirement, insurance, and other applicable plans and programs
then in effect.
4.2 TERMINATION FOR RETIREMENT OR DEATH. If the Officer's employment
with the Employer is terminated by reason of his or her
Retirement or death, the Officer's benefits shall be determined
in accordance with the Employer's retirement and SERP plans,
survivor's benefits, insurance, and other applicable programs
then in effect.
4.3 TERMINATION FOR CAUSE OR BY EMPLOYER OR THE OFFICER FOR OTHER
THAN GOOD REASON. If the Officer's employment is terminated
either: (a) by the Employer for Cause as defined in Section 2.6
of this Agreement; or (b) voluntarily by the Officer for reasons
other than those specified in Section 2.14 herein, or (c) by the
Employer for the reasons stated in the last sentence of Section
2.17(c) of this Agreement, the Employer shall pay the Officer the
sum of any unpaid Base Salary, accrued vacation, unreimbursed
business expenses and unreimbursed allowances owed to the Officer
through the effective date of termination. The terms of the
benefit plan descriptions, compensation plan descriptions and
contracts with third parties covering officers shall control the
disposition to Officer and timing of all other amounts to which
the Officer may be entitled, and neither the Employer nor CMS
Energy Corporation nor any of its Affiliates shall have any
further obligations to the Officer thereunder as a result of the
existence of this Agreement. No other severance benefits of any
type shall be made available to Officer. Notwithstanding the
above, if the Officer's employment terminates pursuant to this
Section 4.3, the Officer shall be bound by the provisions
contained in Article 5(a), 5(b), 5(c), 5(d), and 5(e) hereof.
4.4 NOTICE OF TERMINATION. Any termination of the Officer's
employment in accordance with Section 4.3 of this Agreement shall
be communicated by Notice of Termination delivered to the other
party, which shall include a specific date on which the
termination has occurred and is effective.
ARTICLE 5. NONCOMPETITION AND CONFIDENTIALITY
In the event the Officer becomes entitled to receive Change-in-Control
Severance Benefits as provided in Section 3.2 herein or General Severance
Benefits as provided in Section 3.3 herein, the following shall apply:
(a) NONCOMPETITION. During the term of employment and for a
period of twelve (12)
months after the Effective Date of Termination, the
Officer shall not: (i) directly or indirectly act in
concert or conspire with any person employed by CMS Energy
Corporation or any of its Affiliates in order to engage in
or prepare to engage in or to have a financial or other
interest in any business which is a Direct Competitor (as
defined below); or (ii) serve as an employee, agent,
partner, shareholder, director or consultant for, or in
any other capacity participate, engage, or have a
financial or other interest in any business which is a
Direct Competitor (provided, however, that notwithstanding
anything to the contrary contained in this Agreement, the
Officer may own up to two percent (2%) of the outstanding
shares of the capital stock of a company whose securities
are registered under Section 12 of the Exchange Act.
For purposes of this Agreement, the term "Direct
Competitor" shall mean any person or entity engaged in the
business of selling electric power or natural gas at
retail within the State of Michigan.
The Committee also reserves the right to designate, prior
to the termination date specified in a Notice of
Termination, any Person that it believes, in good faith,
is a significant competitive threat to CMS Energy
Corporation or its Affiliates.
(b) CONFIDENTIALITY. The Employer has advised the Officer and
the Officer acknowledges that it is the policy of CMS
Energy Corporation and its Affiliates to maintain as
secret and confidential all Protected Information (as
defined below), and that Protected Information has been
and will be developed at substantial cost and effort to
CMS Energy Corporation and its Affiliates. The Officer
shall not at any time, directly or indirectly, divulge,
furnish, or make accessible to any person, firm,
corporation, association, or other entity (other than as
may be required in the regular course of the Officer's
employment), nor use in any manner, either during the term
of employment or after termination, for any reason, any
Protected Information, or cause any such information of
CMS Energy Corporation and its Affiliates to enter the
public domain.
For purposes of this Agreement, "Protected Information"
means trade secrets, confidential and proprietary business
information of CMS Energy Corporation and its Affiliates
and any other information of CMS Energy Corporation and
its Affiliates, including, but not limited to, customer
lists (including potential customers), sources of supply,
processes, plans, materials, pricing information, internal
memoranda, marketing plans, internal policies, and
products and services which may be developed from time to
time by CMS Energy Corporation and its Affiliates and
their agents or employees, including the Officer;
provided, however, that information that is in the public
domain (other than as a result of a breach of this
Agreement), approved for release by CMS Energy Corporation
or its Affiliates or lawfully obtained from third parties
who are not bound by a confidentiality agreement with CMS
Energy Corporation or its Affiliates, is not Protected
Information. Notwithstanding the foregoing, nothing in
this subsection is to be construed as prohibiting Officer
from freely providing information to a state or federal
agency, legislative body or one of its committees or a
court with jurisdiction when Officer is requested or
required to do so by such entity.
(c) NONSOLICITATION. During the term of employment and for a
period of twelve (12) months after the Effective Date of
Termination, the Officer shall not: (i) employ or retain
or solicit for employment or arrange to have any other
person, firm, or other entity employ or retain or solicit
for employment or otherwise participate in the employment
or retention of any person who is an employee or
consultant of CMS Energy Corporation or its Affiliates; or
(ii) solicit suppliers or customers of CMS Energy
Corporation or its Affiliates or induce any such person to
terminate their relationship with them.
(d) COOPERATION. Officer agrees to fully and unconditionally
cooperate with CMS Energy Corporation and its Affiliates
and their attorneys in connection with any and all
lawsuits, claims, investigations, or similar proceedings
that have been or could be asserted at any time arising
out of or related in any way to Officer's employment or
activities on behalf of CMS Energy Corporation and its
Affiliates.
(e) NONDISPARAGEMENT. At all times, the Officer agrees not to
disparage CMS Energy Corporation or its Affiliates or
otherwise make comments harmful to their reputations.
While receiving any payments pursuant to this Agreement,
Officer further agrees not to testify or act in any
capacity as a paid or unpaid expert witness, advisor or
consultant on behalf of any person, individual,
partnership, firm, corporation or any other person or
entity that has or may have any claim, demand, action,
suit, cause of action, or judgment against CMS Energy
Corporation or its Affiliates, or from agreeing to do so
after the payments under this Agreement have ceased.
Further, CMS Energy Corporation and its Affiliates agree
not to disparage Officer or otherwise make comments
harmful to Officer's reputation. Notwithstanding the
foregoing, nothing in this Section prohibits Officer or
representatives of CMS Energy Corporation or its
Affiliates from testifying truthfully under oath in any
judicial, administrative or legislative proceedings or in
any arbitration, mediation or other similar proceedings.
ARTICLE 6. EXCISE TAX EQUALIZATION PAYMENT
6.1 EXCISE TAX EQUALIZATION PAYMENT. In the event that the Officer
becomes entitled to Severance Benefits or any other payment or
benefit under this Agreement, or under any other agreement, plan
or arrangement for which Officer is eligible with (1) the
Employer, (2) any Person whose actions result in a Change in
Control, or (3) CMS Energy Corporation or any of its Affiliates
(all of such payments and benefits collectively referred to as the
"Total Payments"), and if all or any part of the Total Payments
will be subject to the tax (the "Excise Tax") imposed by Sections
280G and 4999 of the Code (or any similar tax that may hereafter
be imposed), the Employer shall pay to the Officer in cash an
additional amount (the "Gross-Up Payment") such that the net
amount retained by the Officer after deduction of any Excise Tax
upon the Total Payments and any federal, state, and local income
tax, penalties, interest, and Excise Tax upon the Gross-Up Payment
provided for by this Section
6.1 (including FICA and FUTA), shall be equal to the Total
Payments. Such payment shall be made by the Employer to the Officer
within forty-five (45) calendar days following the Effective Date
of Termination.
For purposes of determining the amount of the Gross-Up Payment, the
Officer shall be deemed to pay federal income taxes at the highest
marginal rate of federal income taxation in the calendar year in
which the Gross-Up Payment is to be made, and state and local
income taxes at the highest marginal rate of taxation in the state
and locality of the Officer's residence on the Effective Date of
Termination, net of the maximum reduction in federal income taxes
which could be obtained from deduction of such state and local
taxes.
6.2 SUBSEQUENT RECALCULATION. In the event the Internal Revenue Service
adjusts the computation under Section 6.1 herein so that the
Officer did not receive the greatest net benefit, the Employer
shall reimburse the Officer for the full amount necessary to make
the Officer whole, plus interest on the reimbursed amount at 120%
of the rate provided in section 1274(b)(2)(B) of the Code. In the
event that the Excise Tax is finally determined to be less than the
amount taken into account hereunder in calculating the Gross-Up
Payment, the Officer shall repay the Employer within thirty (30)
business days following the time that the amount of such reduction
in the Excise Tax is finally determined, the portion of the
Gross-Up Payment attributable to such reduction (plus that portion
of the Gross-Up Payment attributable to the Excise Tax and federal,
state and local income and employment taxes imposed on the Gross-Up
Payment being repaid by the Officer) to the extent that such
repayment results in a reduction in the Excise Tax and a
dollar-for-dollar reduction in the Officer's taxable income and
wages for purposes of federal, state and local income and
employment taxes, plus interest on the amount of such repayment at
120% of the rate provided in section 1274(b)(2)(B) of the Code.
ARTICLE 7. DISPUTE RESOLUTION AND NOTICE
7.1 DISPUTE RESOLUTION. Any dispute or controversy between the parties
arising under or in connection with this Agreement shall be settled
by final and binding arbitration after first being submitted in
writing to the Committee for attempted resolution. If that does not
result in mutually agreeable resolution, the arbitration proceeding
shall be conducted before a single arbitrator selected by the
parties to be conducted in Jackson, Michigan. The arbitration will
be conducted in accordance with the rules of the American
Arbitration Association then in effect and be finished within
ninety (90) days after the selection of the arbitrator. The
arbitrator shall not have authority to fashion a remedy that
includes consequential, exemplary or punitive damages of any type
whatsoever, and the arbitrator is hereby prohibited from awarding
injunctive relief of any kind, whether mandatory or prohibitory.
Judgment may be entered on the award of the arbitrators in any
court having competent jurisdiction. The parties shall share
equally the cost of the arbitrator and of conducting the
arbitration proceeding, but each party shall bear the cost of its
own legal counsel and experts and other out-of-pocket expenditures.
7.2 NOTICE. Any notices, requests, demands, or other communications
provided for by this Agreement shall be in writing and sent by
registered or certified mail to the Officer at the last address he
or she has filed in writing with the Employer or, in the case of
the Employer, at One Energy Plaza, Jackson, Michigan 49201,
Attention: Corporate Secretary. Notices, requests, demands or other
communications may also be delivered by messenger, courier service
or other electronic means and are sufficient if actually received
by the party for whom it is intended.
ARTICLE 8. SUCCESSORS AND ASSIGNMENT
8.1 SUCCESSORS. Any successor (whether direct or indirect, by purchase,
merger, reorganization, consolidation, acquisition of property or
stock, liquidation, or otherwise) to the business of CMS Energy
Corporation or purchaser of all or substantially all of the assets
of CMS Energy Corporation shall be required to expressly assume and
agree to perform under this Agreement in the same manner and to the
same extent that the Employer would be required to perform if no
such succession had taken place. Failure to obtain such assumption
and agreement prior to the effectiveness of any such succession or
asset sale shall entitle the Officer to the Change-in-Control
Severance Benefits specified in Section 3.2 of this Agreement. The
effective date of the succession or the sale shall be deemed the
date of delivery to Officer of the Notice of Termination for
purposes of administering Section 3.2. Regardless of whether such
agreement is executed, this Agreement shall be binding upon any
successor in accordance with the operation of law.
8.2 ASSIGNMENT BY THE OFFICER. This Agreement shall inure to the
benefit of and be enforceable by the Officer's personal or legal
representatives, executors, administrators, successors, heirs,
distributees, devisees, and legatees. If the Officer dies while any
amount would still be payable to him or her hereunder had he or she
continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this
Agreement to the Officer's Beneficiary. If the Officer has not
named a Beneficiary, then such amounts shall be paid to the
Officer's devisee, legatee, or other designee, or if there is no
such designee, to the Officer's estate.
ARTICLE 9. MISCELLANEOUS
9.1 EMPLOYMENT STATUS. The employment of the Officer by the Employer is
"at will" and may be terminated by either the Officer or the
Employer at any time, subject to applicable law. Further, Officer
has no right to be an officer of CMS Energy Corporation or any of
its Affiliates and serves as an officer entirely at the discretion
of the Board.
9.2 ENTIRE AGREEMENT. This Agreement supersedes any prior
agreements or understandings, oral or written, between the parties
hereto, with respect to the subject matter hereof, and constitutes
the entire agreement of the parties with respect thereto. Without
limiting the generality of the foregoing sentence, this Agreement
completely supersedes, cancels, voids
and renders of no further force and effect any and all employment
agreements, change in control agreements, and other similar
agreements, communications, representations, promises, covenants
and arrangements, whether oral or written, between the Employer and
Officer and between the Officer and CMS Energy Corporation or any
of its Affiliates that may have taken place or been executed prior
to the Effective Date of this Agreement and which may address the
subject matters contained herein.
9.3 SEVERABILITY. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for
any reason, the remaining provisions of this Agreement shall be
unaffected thereby and shall remain in full force and effect.
9.4 TAX WITHHOLDING. The Employer may withhold from any benefits
payable under this Agreement any authorized deductions and all
federal, state, city, or other taxes as may be required pursuant to
any law or governmental regulation or ruling.
9.5 BENEFICIARIES. The Officer may designate one (1) or more persons or
entities as the primary and/or contingent beneficiaries of any
amounts to be received under this Agreement. Such designation must
be in the form of a signed writing on a form provided by the
Employer. The Officer may make or change such designation at any
time.
9.6 PAYMENT OBLIGATION ABSOLUTE. Except as provided in the last
sentence of this paragraph, the Employer's and CMS Energy
Corporation's obligations to make the payments and provide the
benefits to Officer specified herein shall be absolute and
unconditional, and shall not be affected by any circumstances,
including, without limitation, any offset, counterclaim,
recoupment, defense, or other right which the Employer, CMS Energy
Corporation or any of its Affiliates may have against the Officer
or anyone else. All amounts payable by the Employer hereunder shall
be paid without notice or demand. Each and every payment made
hereunder by the Employer shall be final, but subject to the
provisions of the next sentence. If the Officer should seek to
bypass arbitration and litigate about this Agreement or the subject
matters addressed herein in a state or federal court, Officer
agrees (i) at least 10 days prior to filing in court to tender back
to the Employer all cash consideration paid to Officer under this
Agreement prior thereto and (ii) any payments due Officer under
this Agreement after said tender shall be suspended until said
litigation is finally resolved.
The Officer shall not be obligated to seek other employment in
mitigation of the amounts payable or arrangements made under any
provision of this Agreement, and the obtaining of any such other
employment shall in no event effect any reduction of the Employer's
obligations to make the payments and arrangements required to be
made under this Agreement.
9.7 CONTRACTUAL RIGHTS TO BENEFITS. Subject to approval and
ratification by the Committee, this Agreement establishes and vests
in the Officer a contractual right to the benefits to which he or
she is entitled hereunder. However, nothing herein contained shall
require or be deemed to require, or prohibit or be deemed to
prohibit, the Employer to segregate, earmark, or otherwise set
aside any funds or other assets, in trust or otherwise, to provide
for any
payments to be made or required hereunder.
9.8 MODIFICATION. This Agreement shall not be varied, altered,
modified, canceled, changed, or in any way amended except by mutual
agreement of the parties in a written instrument executed by the
parties hereto or their legal representatives.
9.9 COUNTERPARTS. This Agreement may be executed in one (1) or more
counterparts, each of which shall be deemed to be an original, but
all of which together will constitute one and the same Agreement.
Signatures transmitted via facsimile shall be regarded by the
parties as original signatures.
9.10 APPLICABLE LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Michigan, without regard
to its conflicts of laws principles.
IN WITNESS WHEREOF, the parties have executed this Agreement as of this
____day of ___________, 2004.
OFFICER:
By: ___________________________ Signature: ____________________________
Its: _________________________ Printed Name: ____________________________
CHANGE-IN-CONTROL AGREEMENT
TIER III
<Table>
<Caption>
CONTENTS
- -------------------------------------------------------------------------------
Article 1. Establishment, Term, and Purpose 1
Article 2. Definitions 2
Article 3. Severance Benefits 8
Article 4. Other Terminations 11
Article 5. Noncompetition and Confidentiality 11
Article 6. Excise Tax Equalization Payment 13
Article 7. Dispute Resolution and Notice 14
Article 8. Successors and Assignment 14
Article 9. Miscellaneous 15
</Table>
CHANGE-IN-CONTROL AGREEMENT
THIS CHANGE-IN-CONTROL AGREEMENT ("Agreement") is made, entered into, and
is effective as of _______ , 2004 (hereinafter referred to as the "Effective
Date"), by and between __________, a Michigan corporation, (hereinafter referred
to as the "Employer") and _____________________ (hereinafter referred to as the
"Executive").
WHEREAS, the Board of Directors of CMS Energy Corporation has approved
entering into change-in-control agreements with certain key executives as being
necessary and advisable for the success of CMS Energy Corporation;
WHEREAS, the Executive is currently employed at _________________, by the
Employer in a key management position as Chairman of the Board and Chief
Executive Officer;
WHEREAS, the Board of Directors of CMS Energy Corporation wants to provide
the Executive with a measure of financial security in the event of a change in
control of CMS Energy Corporation; and
WHEREAS, both the Employer and the Executive are desirous that any
proposal involving Change in Control as defined in this Agreement will be
considered by the Executive objectively and with reference only to the business
interests of CMS Energy Corporation and its shareholders.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements of the parties set forth in this Agreement and of other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intended to be legally bound, agree as
follows:
ARTICLE 1. ESTABLISHMENT, TERM, AND PURPOSE
This Agreement will commence on the Effective Date and shall continue in
effect for three (3) full years through March ____, 2007. However, at the end of
such three (3) year period and, if extended, at the end of each additional year
thereafter, the term of this Agreement shall be extended automatically for one
(1) additional year, unless the Committee delivers written notice six (6) months
prior to the end of such term, or extended term, to the Executive, stating that
the Agreement will not be extended. In such case, the Agreement will terminate
at the end of the term, or extended term, then in progress. However, in the
event of a Change in Control (as defined in Section 2.7 herein) of CMS Energy
Corporation, the term of this Agreement shall automatically be extended for two
(2) years from the date of the Change in Control if the current term of the
Agreement has less than two (2) full years remaining until its expiration.
Notwithstanding the foregoing, this Agreement shall automatically terminate and
thereafter be of no force and effect at the same time that the First Amended and
Restated Employment Agreement, dated as of September 1, 2003, between Executive
and CMS Energy Corporation ("Employment Agreement") is terminated pursuant to
its Section 6. If the term of this Agreement is not extended or if the Agreement
is terminated, the Employer is not obligated to pay any severance benefits under
Section 3.2 for a Change in Control that happens after the
expiration of the term or after the termination of this Agreement.
ARTICLE 2. DEFINITIONS
Whenever used in this Agreement, the following terms shall have the
meanings set forth below and, when the meaning is intended, the initial letter
of the word is capitalized.
2.1 "AFFILIATE" shall have the meaning set forth in Rule 12B-2
promulgated under Section 12 of the Exchange Act.
2.2 "BASE SALARY" means the greater of the Executive's full annual
rate of salary, whether or not any portion thereof is paid on a
deferred basis, at: (i) the Effective Date of Termination, or (ii)
at the date of the Change in Control. It does not include any
incentive compensation in any form, bonuses of any type or any
other form of monetary or nonmonetary compensation other than
salary.
2.3 "BENEFICIAL OWNER" shall have the meaning ascribed to such term in
Rule 13d-3 of the General Rules and Regulations under the Exchange
Act.
2.4 "BENEFICIARY" means the persons or entities designated or deemed
designated by the Executive pursuant to Section 9.5 herein.
2.5 "BOARD" means the Board of Directors of CMS Energy Corporation.
2.6 "CAUSE" shall be determined solely by the Committee in the
exercise of good faith and reasonable judgment, and shall mean the
occurrence of any one or more of the following:
(a) The willful and continued failure by the Executive to
substantially perform his or her duties of employment
(other than any such failure resulting from the
Executive's Disability), after a written demand for
substantial performance is delivered to the Executive that
specifically identifies the manner in which the Committee
believes that the Executive has not substantially
performed his or her duties, and the Executive has failed
to remedy the situation within a reasonable period of time
specified by the Committee which shall not be less than 30
days; or
(b) The Executive's arrest for committing an act of fraud,
embezzlement, theft, or other act constituting a felony
involving moral turpitude; or
(c) The willful engaging by the Executive in misconduct
materially and demonstrably injurious to CMS Energy
Corporation or its Affiliates, monetarily or otherwise.
However, for purposes of clauses (a) and (c), no act or failure to
act on the Executive's part shall be considered "willful" unless
done, or omitted to be done, by the Executive not in good faith
and without reasonable belief that his or her action or
omission was in the best interest of CMS Energy Corporation or
its Affiliates.
2.7 "CHANGE IN CONTROL" means a change in control of CMS Energy
Corporation, and shall be deemed to have occurred upon the first
to occur of any of the following events:
(a) Any Person is or becomes the Beneficial Owner, directly
or indirectly, of securities of CMS Energy Corporation
(not including in the securities beneficially owned by
such Person any securities acquired directly from CMS
Energy Corporation or its Affiliates) representing
twenty-five percent (25%) or more of the combined voting
power of CMS Energy Corporation's then outstanding
securities, excluding any Person who becomes such a
Beneficial Owner in connection with a transaction
described in clause (i) of paragraph (c) below; or
(b) The following individuals cease for any reason to
constitute a majority of directors then serving:
individuals who, on the Effective Date, constitute the
Board and any new director (other than a director whose
initial assumption of office is in connection with an
actual or threatened election contest, including but not
limited to a consent solicitation, relating to the
election of directors of CMS Energy Corporation) whose
appointment or election by the Board or nomination for
election by CMS Energy Corporation's stockholders was
approved or recommended by a vote of at least two-thirds
(2/3) of the directors then still in office who either
were directors on the Effective Date or whose appointment,
election or nomination for election was previously so
approved or recommended; or
(c) The consummation of a merger or consolidation of CMS
Energy Corporation or any direct or indirect subsidiary of
CMS Energy Corporation with any other corporation or other
entity, other than: (i) any such merger or consolidation
which involves either CMS Energy Corporation or any such
subsidiary and would result in the voting securities of
CMS Energy Corporation outstanding immediately prior
thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities
of the surviving entity or any parent thereof), in
combination with the ownership of any trustee or other
fiduciary holding securities under an employee benefit
plan of CMS Energy Corporation or its Affiliates, at least
sixty percent (60%) of the combined voting power of the
voting securities of CMS Energy Corporation or the
surviving entity or any parent thereof outstanding
immediately after such merger or consolidation and
immediately following which the individuals who comprise
the Board immediately prior thereto constitute at least a
majority of the board of directors of CMS Energy
Corporation, the entity surviving such merger or
consolidation or, if CMS Energy Corporation or the entity
surviving such merger is then a subsidiary, the ultimate
parent thereof; or (ii) a merger or consolidation effected
to implement a recapitalization of CMS Energy Corporation
(or similar transaction) in which no Person is or becomes
the Beneficial Owner, directly or indirectly, of
securities of CMS Energy Corporation (not including in the
securities beneficially owned by such Person any
securities acquired directly from CMS
Energy Corporation or its Affiliates) representing
twenty-five percent (25%) or more of the combined voting
power of CMS Energy Corporation's then outstanding
securities; or
(d) Either (1) the stockholders of CMS Energy Corporation
approve a plan of complete liquidation or dissolution of
CMS Energy Corporation, or (2) there is consummated an
agreement for the sale, transfer or disposition by CMS
Energy Corporation of all or substantially all of CMS
Energy Corporation's assets (or any transaction having a
similar effect). For purposes of clause (d)(2), (i) the
sale, transfer or disposition of a majority of the shares
of common stock of Consumers Energy Company shall
constitute a sale, transfer or disposition of
substantially all of the assets of CMS Energy Corporation
and (ii) the sale, transfer or disposition of subsidiaries
or affiliates of CMS Energy Corporation, singly or in
combinations, or their assets, only qualifies as a Change
in Control if it satisfies the substantiality test
contained in that clause and the Board of CMS Energy
Corporation's determination in that regard is final. In
addition, for purposes of clause (d)(2), the sale,
transfer or disposition of assets has to be in a
transaction or series of transactions closing within six
months after the closing of the first transaction in the
series, other than with an entity in which at least 60% of
the combined voting power of the voting securities is
owned by stockholders of CMS Energy Corporation in
substantially the same proportions as their ownership of
CMS Energy Corporation immediately prior to such
transaction or transactions and immediately following
which the individuals who comprise the Board immediately
prior thereto constitute at least a majority of the board
of directors of the entity to which such assets are sold,
transferred or disposed or, if such entity is a
subsidiary, the ultimate parent thereof.
Notwithstanding the foregoing clauses (a), (c) and (d), a "Change
in Control" shall not be deemed to have occurred by virtue of the
consummation of any transaction or series of integrated
transactions closing within six months after the closing of the
first transaction in the series immediately following which the
record holders of the common stock of CMS Energy Corporation
immediately prior to such transaction or series of transactions
continue to have substantially the same proportionate ownership
in an entity which owns all or substantially all of the assets of
CMS Energy Corporation immediately following such transaction or
series of transactions.
2.8 "CODE" means the United States Internal Revenue Code of 1986, as
amended, and any successors thereto.
2.9 "COMMITTEE" means the Organization and Compensation Committee of
the Board of CMS Energy Corporation or any other committee
appointed by the Board of CMS Energy Corporation to perform the
functions of the Organization and Compensation Committee.
2.10 "DISABILITY" means for all purposes of this Agreement, the
incapacity of the Executive, due to injury, illness, disease, or
bodily or mental infirmity, which causes the Executive not to
engage in the performance of a substantial or material portion of
the Executive's usual duties of employment associated with such
Executive's
position. Such Disability shall be determined based on competent
medical advice.
2.11 "EFFECTIVE DATE" means the date of this Agreement as specified
in the opening sentence of this Agreement.
2.12 "EFFECTIVE DATE OF TERMINATION" means the date on which a
Qualifying Termination occurs, as provided under Section 2.17
hereunder, which triggers the payment of Severance Benefits
hereunder.
2.13 "EXCHANGE ACT" means the United States Securities Exchange Act of
1934, as amended.
2.14 "GOOD REASON" exists only on the date of a Change in Control or
during the twenty-four (24) months which follow a Change in
Control and shall mean, without the Executive's express written
consent, the occurrence of any one or more of the following:
(a) The assignment to the Executive of duties materially
inconsistent with the Executive's position (including
status, offices, titles, and reporting requirements),
authority, or responsibilities as in effect on the
Effective Date, or any action by the Employer which
results in a diminution of the Executive's position,
authority, duties, or responsibilities as constituted as
of the Effective Date (excluding an isolated,
insubstantial, and inadvertent action which is remedied by
the Employer promptly after receipt of notice thereof
given by the Executive); or
(b) Reducing the Executive's Base Salary; or
(c) Reducing the Executive's targeted annual incentive
opportunity; or
(d) Failing to maintain the Executive's participation in a
long-term incentive plan in a manner that is consistent
with the Executive's position, authority, or
responsibilities; or
(e) Failing to maintain the Executive's amount of benefits
under or relative level of participation in employee
benefit or retirement plans, policies, practices, or
arrangements of a material nature available to employees of
CMS Energy Corporation and its Affiliates and in which the
Executive participates as of the Effective Date; or
(f) A material breach of this Agreement by the Employer which
is not remedied by the Employer within ten (10) business
days of receipt of written notice of such breach delivered
by the Executive to the Committee; or
(g) Any successor company fails or refuses to assume the
obligations owed to Executive under this Agreement in their
entirety, as required by Section 8.1 hereunder; or
(h) The Executive is required to be based at a location in
excess of thirty-five (35) miles from the location of the
Executive's principal job location or office
immediately prior to a Change in Control except for
required travel on the Employer's or CMS Energy
Corporation's business to an extent substantially
consistent with the Executive's prior business travel
obligations; or
(i) The Executive ceases being an executive officer of a
company (other than by reason of death, Disability or
Cause) whose common stock is publicly owned if immediately
prior to the Change in Control the Executive was an
executive officer of a company whose common stock was
publicly owned.
For purposes of applying clauses (a) through (i) of this
Agreement, the Executive's Retirement shall not constitute a
waiver of the Executive's rights with respect to any circumstance
constituting Good Reason, and the Executive's continued
employment shall not constitute a waiver of the Executive's
rights with respect to any circumstance constituting Good Reason
or constitute Executive's consent to the circumstances
constituting Good Reason unless Executive has provided express
written consent to the circumstance that would otherwise
constitute Good Reason under this Agreement. Finally, for
purposes of implementing this Agreement, any claim by Executive
that Good Reason exists shall be presumed to be correct unless
the Committee determines by clear and convincing evidence that
Good Reason does not exist, which evidence shall be presented by
the person disputing the claim that Good Reason exists.
2.15 "NOTICE OF TERMINATION" shall be provided for a Qualifying
Termination and shall mean a written notice which shall indicate
the specific termination provision in this Agreement relied upon,
and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated. The
notice shall provide a specific date on which a Qualifying
Termination has occurred and is effective for purposes of this
Agreement.
2.16 "PERSON" shall have the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d)
thereof, including a "group" as provided in Section 13(d).
2.17 "QUALIFYING TERMINATION" MEANS:
(a) An involuntary termination of the Executive's employment
by the Employer on the date of a Change in Control or
during the twenty-four (24) months which follow a Change
in Control for reasons other than death, Disability,
Retirement, or Cause pursuant to a Notice of Termination
delivered to the Executive by the Employer; or
(b) A voluntary termination by the Executive for Good Reason
on the date of a Change in Control or during the
twenty-four (24) months which follow a Change in Control
pursuant to a Notice of Termination delivered to the
Employer by the Executive.
(c) A termination for failure of the Executive to comply
in material respects with CMS Energy's Code of Conduct
and Statement of Ethics Handbook (June
2003 edition) or other corporate policies, as the
handbook and those documents may be amended from time to
time, does not satisfy the definition of a Qualifying
Termination under clauses (a) and (b).
2.18 "RETIREMENT" shall have the meanings ascribed under the terms of
the pension plan applicable to Executive and entitled "Pension
Plan for Employees of Consumers Energy Company," dated September
1, 2000, as amended, other than under Section 7 thereof, or
under the successor or replacement of such pension plan if it is
then no longer in effect.
2.19 "SERP" shall mean the retirement plan applicable to Executive and
entitled "Supplemental Executive Retirement Plan for Employees of
CMS Energy/Consumers Energy Company," dated May 1, 1998, as
amended, or under the successor or replacement of such retirement
plan if it is then no longer in effect.
2.20 "SEVERANCE BENEFITS" means the payment of Change-in-Control
Severance Benefits as provided in Article 3 herein.
ARTICLE 3. SEVERANCE BENEFITS
3.1 RIGHT TO CHANGE-IN-CONTROL SEVERANCE BENEFITS.
(a) CHANGE-IN-CONTROL SEVERANCE BENEFITS. The Executive shall
be entitled to receive from the Employer Change-in-Control
Severance Benefits, as described in Section 3.2 herein, if
a Qualifying Termination of the Executive's employment
satisfying the definitions contained in Section 2.17(a) or
(b) has occurred on the date of a Change in Control of CMS
Energy Corporation or within twenty-four (24) months
immediately following a Change in Control of CMS Energy
Corporation. Further, Executive's Retirement under the
pension plan and SERP shall not constitute a waiver of the
Executive's rights with respect to receipt of
Change-in-Control Severance Benefits. Nor shall benefits
received for Retirement under the pension plan and SERP
(or any replacement or successor plans thereto) be used as
an offset to the level of Change-in-Control Severance
Benefits owed to Executive.
(b) NO SEVERANCE BENEFITS. Other than in a situation involving
a Retirement, the Executive shall not be entitled to
receive Severance Benefits pursuant to this Agreement if
the Executive's employment with the Employer ends for
reasons other than a Qualifying Termination.
(c) WAIVER AND RELEASE. The Executive's act of accepting
payment of Severance Benefits payable under Section 3.2 of
this Agreement shall constitute and is deemed an express
waiver, release and discharge by Executive of any and all
claims for damages or other remedies, regardless of when
they arose or when they are discovered, against CMS Energy
Corporation and its Affiliates arising out of or in any
way connected with Executive's employment relationship
with them or the termination of such employment
relationship except for claims and
rights of Executive preserved under Section 3.2 of this
Agreement and applicable rights to indemnification.
(d) NO DUPLICATION OF SEVERANCE BENEFITS. If the Executive
receives Change-in-Control Severance Benefits under
Section 3.2, any other severance benefits received by
employees not covered by this Agreement to which the
Executive is entitled will be subtracted from the
Severance Benefits paid pursuant to this Agreement.
3.2 DESCRIPTION OF CHANGE-IN-CONTROL SEVERANCE BENEFITS. In the event
the Executive becomes entitled to receive Change-in-Control
Severance Benefits, as provided in Section 3.1(a) herein, the
Employer shall provide the Executive with the following:
(a) A lump-sum amount paid within fifteen (15) calendar days
following delivery to the Employer or delivery to the
Executive, as applicable, of a Notice of Termination,
equal to the sum of the Executive's unpaid Base Salary,
accrued vacation pay, unreimbursed business expenses, and
unreimbursed allowances owed to the Executive through and
including the Effective Date of Termination.
(b) A lump-sum amount, paid within fifteen (15) calendar days
following delivery to the Employer or delivery to the
Executive, as applicable, of a Notice of Termination, equal
to two (2) times the sum of the following: (A) the
Executive's Base Salary and (B) the greater of the
Executive's: (i) annual target bonus opportunity in the
year in which the Qualifying Termination occurs or (ii) the
actual annual bonus payment paid or due to be paid the
Executive in respect of the year prior to the year in which
the Qualifying Termination occurs.
(c) A lump-sum amount, paid within fifteen (15) calendar days
following delivery to the Employer or delivery to the
Executive, as applicable, of a Notice of Termination, equal
to the Executive's then current target bonus opportunity
established under the bonus plan in which the Executive is
then participating, for the plan year in which the
Qualifying Termination occurs, adjusted on a pro rata basis
for the number of days that have elapsed to the Effective
Date of Termination during the bonus plan year in which the
Qualifying Termination occurs.
(d) A lump-sum amount, paid within fifteen (15) calendar days
following delivery to the Employer or delivery to the
Executive, as applicable, of a Notice of Termination,
equal to one (1) times the sum of the following: (A) the
Executive's Base Salary and (B) the greater of the
Executive's: (i) annual target bonus opportunity in the
year in which the Qualifying Termination occurs or (ii)
the actual annual bonus payment paid or due to be paid the
Executive in respect of the year prior to the year in
which the Qualifying Termination occurs. Such amount shall
be consideration for the Executive entering into the
noncompete agreement as described in Section 5(a).
(e) Equivalent payment to Executive in a lump sum amount
within forty-five (45) calendar days following delivery of
the Notice of Termination for continued
medical coverage for a period of thirty-six (36) months.
Such equivalent payment shall be computed based on the
same coverage level as in effect for Executive under the
general health care plan available to all employees on the
Effective Date of Termination by providing a lump sum
payment of the Employer's portion of the monthly COBRA
premium in effect on the Effective Date of Termination
times thirty-six (36). Nothing herein amends or provides
Executive any rights to health care coverage other than as
provided in the applicable group health care plan. If the
Executive has waived coverage under the applicable group
health care plan, no equivalent payment shall be made
under this Agreement.
(f) Immediate extension (as allowable by Section 6.10 of
Article VI of the plan entitled "CMS Energy Corporation
Performance Incentive Stock Plan," dated December 3, 1999,
as amended) by one year after the Effective Date of
Termination of the period for Executive to exercise any
outstanding stock options or stock appreciation rights
granted by the Committee to Executive pursuant to said
Article VI. Otherwise, the terms of said plan shall govern
and be applied.
(g) Immediate vesting and distribution to Executive (as
allowable by the second sentence of Section 7.2(h) of
Article VII of the plan entitled "CMS Energy Corporation
Performance Incentive Stock Plan," dated December 3, 1999,
as amended) within forty-five (45) days after delivery of
the Notice of Termination of all outstanding shares of
restricted stock previously awarded to Executive pursuant
to said Article VII. For any award of restricted stock to
which there are future performance goals attached, the
number of shares distributed to Executive shall assume
that the goals have been achieved in full and the award
fully earned based on target performance without
deductions or additions to the number of shares then held
by Executive. For any award of restricted stock that is
tenure based, the number of shares distributed to
Executive shall assume that all requirements with respect
to tenure are satisfied by Executive. Otherwise, the terms
of said plan shall govern and be applied.
(h) For an Executive included in SERP, the Executive's
retirement benefits under the SERP will become fully
vested as of the Effective Date of Termination and shall
not be subject to further vesting requirements or to any
forfeiture provisions. In addition, said Executive shall
be provided the following: (i) an additional thirty-six
(36) months of Preference Service (as defined in SERP) for
purposes of the SERP in accordance with Section III(1) of
SERP, subject, however, to the total of Preference Service
plus Accredited Service being limited to a maximum of
thirty-five (35) years under SERP, and (ii) only the
amounts paid to Executive pursuant to clauses (a), (b),
(c) and (d) of this Section 3.2 shall be considered a
"severance payment under an employment agreement" for
purposes of computing Final Executive Pay under SERP.
Since the Executive is over the age of 55, the provisions
of the last complete paragraph of Section V(3) of SERP
shall not be operative. The enhanced SERP benefits under
this Section 3.2(h) shall be in lieu of any
Change-in-Control enhancements provided for in the SERP.
(i) For purposes of (1) Retirement, (2) SERP and (3) benefits
not expressly discussed in clauses (a) through (h) of this
Section 3.2, but which are available to the general
employee population or available only to officers and
implemented with contracts with third parties, the benefit
plan descriptions covering all employees and the retirement
plan and SERP plan descriptions and contracts with third
parties covering officers in place at the time of the
Effective Date of Termination control Executive's treatment
under those plans and contracts. For any other benefits
only available to officers, if those benefits are not
expressly discussed in clauses (a) through (h) of this
Section 3.2, those benefits are terminated for Executive as
of the Effective Date of Termination.
ARTICLE 4. OTHER TERMINATIONS
4.1 TERMINATION FOR RETIREMENT. If the Executive's employment with
the Employer is terminated by reason of his Retirement, the
Executive's benefits shall be determined in accordance with the
Employer's retirement and SERP plans, survivor's benefits,
insurance, and other applicable programs then in effect.
4.2 TERMINATION FOR CAUSE UNDER THIS AGREEMENT OR PURSUANT TO SECTION
6 OF THE EMPLOYMENT AGREEMENT OR BY EMPLOYER OR THE EXECUTIVE FOR
OTHER THAN GOOD REASON. If the Executive's employment is
terminated either: (a) by the Employer for Cause as defined in
Section 2.6 of this Agreement; or (b) under the circumstances
specified in Section 6 of the Employment Agreement, the Employer
shall pay the Executive the compensation provided in Section 7 of
the Employment Agreement. The terms of the benefit plan
descriptions, compensation plan descriptions and contracts with
third parties covering officers shall control the disposition to
Executive and timing of all other amounts to which the Executive
may be entitled, and neither the Employer nor CMS Energy
Corporation nor any of its Affiliates shall have any further
obligations to the Executive thereunder as a result of the
existence of this Agreement. No other severance benefits of any
type shall be made available to Executive. Notwithstanding the
above, if the Executive's employment terminates pursuant to this
Section 4.2, the Executive shall be bound by the provisions
contained in Article 5(a), 5(b), 5(c), 5(d), and 5(e) hereof.
4.3 NOTICE OF TERMINATION. Any termination of the Executive's
employment in accordance with Section 4.2 of this Agreement shall
be communicated by Notice of Termination delivered to the other
party, which shall include a specific date on which the
termination has occurred and is effective.
ARTICLE 5. NONCOMPETITION AND CONFIDENTIALITY
During the term of this Agreement and also in the event the Executive
becomes entitled to receive Change-in-Control Severance Benefits as provided in
Section 3.2 herein, the following shall apply:
(a) SECTION 8 OF THE EMPLOYMENT AGREEMENT. All the provisions
of Section 8 of the Employment Agreement shall apply.
(b) CONFIDENTIALITY. In addition to the confidentiality
provisions contained in Section 8(c) of the Employment
Agreement, the Employer has advised the Executive and the
Executive acknowledges that it is the policy of CMS Energy
Corporation and its Affiliates to maintain as secret and
confidential all Protected Information (as defined below),
and that Protected Information has been and will be
developed at substantial cost and effort to CMS Energy
Corporation and its Affiliates. The Executive shall not at
any time, directly or indirectly, divulge, furnish, or make
accessible to any person, firm, corporation, association,
or other entity (other than as may be required in the
regular course of the Executive's employment), nor use in
any manner, either during the term of employment or after
termination, for any reason, any Protected Information, or
cause any such information of CMS Energy Corporation and
its Affiliates to enter the public domain.
For purposes of this Agreement, "Protected Information"
means trade secrets, confidential and proprietary business
information of CMS Energy Corporation and its Affiliates
and any other information of CMS Energy Corporation and its
Affiliates, including, but not limited to, customer lists
(including potential customers), sources of supply,
processes, plans, materials, pricing information, internal
memoranda, marketing plans, internal policies, and products
and services which may be developed from time to time by
CMS Energy Corporation and its Affiliates and their agents
or employees, including the Executive; provided, however,
that information that is in the public domain (other than
as a result of a breach of this Agreement), approved for
release by CMS Energy Corporation or its Affiliates or
lawfully obtained from third parties who are not bound by a
confidentiality agreement with CMS Energy Corporation or
its Affiliates, is not Protected Information.
Notwithstanding the foregoing, nothing in this subsection
is to be construed as prohibiting Executive from freely
providing information to a state or federal agency,
legislative body or one of its committees or a court with
jurisdiction when Executive is requested or required to do
so by such entity.
(c) COOPERATION. Executive agrees to fully and unconditionally
cooperate with CMS Energy Corporation and its Affiliates
and their attorneys in connection with any and all
lawsuits, claims, investigations, or similar proceedings
that have been or could be asserted at any time arising out
of or related in any way to Executive's employment or
activities on behalf of CMS Energy Corporation and its
Affiliates.
(d) NONDISPARAGEMENT. At all times, the Executive agrees not
to disparage CMS Energy Corporation or its Affiliates or
otherwise make comments harmful to their reputations. While
receiving any payments pursuant to this Agreement or the
Employment Agreement, Executive further agrees not to
testify or act in any capacity as a paid or unpaid expert
witness, advisor or consultant on behalf of any person,
individual, partnership, firm, corporation or any other
person or entity that has or may have any claim, demand,
action, suit, cause of action, or
judgment against CMS Energy Corporation or its Affiliates,
or from agreeing to do so after the payments under this
Agreement have ceased. Further, CMS Energy Corporation and
its Affiliates agree not to disparage Executive or
otherwise make comments harmful to Executive's reputation.
Notwithstanding the foregoing, nothing in this Section
prohibits Executive or representatives of CMS Energy
Corporation or its Affiliates from testifying truthfully
under oath in any judicial, administrative or legislative
proceedings or in any arbitration, mediation or other
similar proceedings.
ARTICLE 6. EXCISE TAX EQUALIZATION PAYMENT
6.1 EXCISE TAX EQUALIZATION PAYMENT. In the event that the Executive
becomes entitled to Severance Benefits or any other payment or
benefit under this Agreement, or under the Employment Agreement, or
under any other agreement, plan or arrangement for which Executive
is eligible with (1) the Employer, (2) any Person whose actions
result in a Change in Control, or (3) CMS Energy Corporation or any
of its Affiliates (all of such payments and benefits collectively
referred to as the "Total Payments"), and if all or any part of the
Total Payments will be subject to the tax (the "Excise Tax")
imposed by Sections 280G and 4999 of the Code (or any similar tax
that may hereafter be imposed), the Employer shall pay to the
Executive in cash an additional amount (the "Gross-Up Payment")
such that the net amount retained by the Executive after deduction
of any Excise Tax upon the Total Payments and any federal, state,
and local income tax, penalties, interest, and Excise Tax upon the
Gross-Up Payment provided for by this Section 6.1 (including FICA
and FUTA), shall be equal to the Total Payments. Such payment shall
be made by the Employer to the Executive within forty-five (45)
calendar days following the Effective Date of Termination.
For purposes of determining the amount of the Gross-Up Payment, the
Executive shall be deemed to pay federal income taxes at the
highest marginal rate of federal income taxation in the calendar
year in which the Gross-Up Payment is to be made, and state and
local income taxes at the highest marginal rate of taxation in the
state and locality of the Executive's residence on the Effective
Date of Termination, net of the maximum reduction in federal income
taxes which could be obtained from deduction of such state and
local taxes.
6.2 SUBSEQUENT RECALCULATION. In the event the Internal Revenue
Service adjusts the computation under Section 6.1 herein so that
the Executive did not receive the greatest net benefit, the
Employer shall reimburse the Executive for the full amount
necessary to make the Executive whole, plus interest on the
reimbursed amount at 120% of the rate provided in section
1274(b)(2)(B) of the Code. In the event that the Excise Tax is
finally determined to be less than the amount taken into account
hereunder in calculating the Gross-Up Payment, the Executive shall
repay the Employer within thirty (30) business days following the
time that the amount of such reduction in the Excise Tax is finally
determined, the portion of the Gross-Up Payment attributable to
such reduction (plus that portion of the Gross-Up Payment
attributable to the Excise Tax and federal, state and local income
and employment taxes imposed on the Gross-Up Payment being repaid
by the Executive) to the extent that such repayment
results in a reduction in the Excise Tax and a dollar-for-dollar
reduction in the Executive's taxable income and wages for purposes
of federal, state and local income and employment taxes, plus
interest on the amount of such repayment at 120% of the rate
provided in section 1274(b)(2)(B) of the Code.
ARTICLE 7. DISPUTE RESOLUTION AND NOTICE
7.1 DISPUTE RESOLUTION. Any dispute or controversy between the parties
arising under or in connection with this Agreement shall be settled
by final and binding arbitration after first being submitted in
writing to the Committee for attempted resolution. If that does not
result in mutually agreeable resolution, the arbitration proceeding
shall be conducted before a single arbitrator selected by the
parties to be conducted in Jackson, Michigan. The arbitration will
be conducted in accordance with the rules of the American
Arbitration Association then in effect and be finished within
ninety (90) days after the selection of the arbitrator. The
arbitrator shall not have authority to fashion a remedy that
includes consequential, exemplary or punitive damages of any type
whatsoever, and the arbitrator is hereby prohibited from awarding
injunctive relief of any kind, whether mandatory or prohibitory.
Judgment may be entered on the award of the arbitrators in any
court having competent jurisdiction. The parties shall share
equally the cost of the arbitrator and of conducting the
arbitration proceeding, but each party shall bear the cost of its
own legal counsel and experts and other out-of-pocket expenditures.
7.2 NOTICE. Any notices, requests, demands, or other communications
provided for by this Agreement shall be in writing and sent by
registered or certified mail to the Executive at the last address
he or she has filed in writing with the Employer or, in the case of
the Employer, at One Energy Plaza, Jackson, Michigan 49201,
Attention: Corporate Secretary. Notices, requests, demands or other
communications may also be delivered by messenger, courier service
or other electronic means and are sufficient if actually received
by the party for whom it is intended.
ARTICLE 8. SUCCESSORS AND ASSIGNMENT
8.1 SUCCESSORS. Any successor (whether direct or indirect, by
purchase, merger, reorganization, consolidation, acquisition of
property or stock, liquidation, or otherwise) to the business of
CMS Energy Corporation or purchaser of all or substantially all of
the assets of CMS Energy Corporation shall be required to expressly
assume and agree to perform under this Agreement in the same manner
and to the same extent that the Employer would be required to
perform if no such succession had taken place. Failure to obtain
such assumption and agreement prior to the effectiveness of any
such succession or asset sale shall entitle the Executive to the
Change-in-Control Severance Benefits specified in Section 3.2 of
this Agreement. The effective date of the succession or the sale
shall be deemed the date of delivery to Executive of the Notice of
Termination for purposes of administering Section 3.2. Regardless
of whether such agreement is executed, this Agreement shall be
binding
upon any successor in accordance with the operation of law.
8.2 ASSIGNMENT BY THE EXECUTIVE. This Agreement shall inure to the
benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs,
distributees, devisees, and legatees. If the Executive dies while
any amount would still be payable to him or her hereunder had he or
she continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this
Agreement to the Executive's Beneficiary. If the Executive has not
named a Beneficiary, then such amounts shall be paid to the
Executive's devisee, legatee, or other designee, or if there is no
such designee, to the Executive's estate.
ARTICLE 9. MISCELLANEOUS
9.1 EMPLOYMENT STATUS. The employment of the Executive by the Employer
is "at will" and may be terminated by either the Executive or the
Employer at any time, subject to applicable law. Further, Executive
has no right to be an officer of CMS Energy Corporation or any of
its Affiliates and serves as an officer entirely at the discretion
of the Board.
9.2 ENTIRE AGREEMENT. This Agreement supersedes any prior agreements or
understandings, oral or written, between the parties hereto, with
respect to the subject matter hereof, and constitutes the entire
agreement of the parties with respect thereto. Without limiting the
generality of the foregoing sentence, and except for the Employment
Agreement which remains in full force and effect unless expressly
modified or amended herein, this Agreement completely supersedes,
cancels, voids and renders of no further force and effect any and
all other employment agreements, change in control agreements, and
other similar agreements, communications, representations,
promises, covenants and arrangements, whether oral or written,
between the Employer and Executive and between the Executive and
CMS Energy Corporation or any of its Affiliates that may have taken
place or been executed prior to the Effective Date of this
Agreement and which may address the subject matters contained
herein. Executive expressly agrees that only the first two
sentences of Section 9 of the Employment Agreement shall survive
the execution of this Agreement and the balance of Section 9 after
those first two sentences is superseded in its entirety by this
Agreement and no longer has any legal force and effect whatsoever.
Executive forever releases the Employer, CMS Energy Corporation,
and its affiliates from the duty to comply with the superseded
provisions of Section 9.
9.3 SEVERABILITY. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for
any reason, the remaining provisions of this Agreement shall be
unaffected thereby and shall remain in full force and effect.
9.4 TAX WITHHOLDING. The Employer may withhold from any benefits
payable under this Agreement any authorized deductions and all
federal, state, city, or other taxes as may be required pursuant to
any law or governmental regulation or ruling.
9.5 BENEFICIARIES. The Executive may designate one (1) or more persons
or entities as the primary and/or contingent beneficiaries of any
amounts to be received under this Agreement. Such designation must
be in the form of a signed writing on a form provided by the
Employer. The Executive may make or change such designation at any
time.
9.6 PAYMENT OBLIGATION ABSOLUTE. Except as provided in the last
sentence of this paragraph, the Employer's and CMS Energy
Corporation's obligations to make the payments and provide the
benefits to Executive specified herein shall be absolute and
unconditional, and shall not be affected by any circumstances,
including, without limitation, any offset, counterclaim,
recoupment, defense, or other right which the Employer, CMS Energy
Corporation or any of its Affiliates may have against the Executive
or anyone else. All amounts payable by the Employer hereunder shall
be paid without notice or demand. Each and every payment made
hereunder by the Employer shall be final, but subject to the
provisions of the next sentence. If the Executive should seek to
bypass arbitration and litigate about this Agreement or the subject
matters addressed herein in a state or federal court, Executive
agrees (i) at least 10 days prior to filing in court to tender back
to the Employer all cash consideration paid to Executive under this
Agreement and the Employment Agreement prior thereto and (ii) any
payments due Executive under this Agreement and the Employment
Agreement after said tender shall be suspended until said
litigation is finally resolved.
The Executive shall not be obligated to seek other employment in
mitigation of the amounts payable or arrangements made under any
provision of this Agreement, and the obtaining of any such other
employment shall in no event effect any reduction of the Employer's
obligations to make the payments and arrangements required to be
made under this Agreement and the Employment Agreement.
9.7 CONTRACTUAL RIGHTS TO BENEFITS. Subject to approval and
ratification by the Committee, this Agreement establishes and vests
in the Executive a contractual right to the benefits to which he or
she is entitled hereunder. However, nothing herein contained shall
require or be deemed to require, or prohibit or be deemed to
prohibit, the Employer to segregate, earmark, or otherwise set
aside any funds or other assets, in trust or otherwise, to provide
for any payments to be made or required hereunder.
9.8 MODIFICATION. This Agreement shall not be varied, altered,
modified, canceled, changed, or in any way amended except by mutual
agreement of the parties in a written instrument executed by the
parties hereto or their legal representatives.
9.9 COUNTERPARTS. This Agreement may be executed in one (1) or more
counterparts, each of which shall be deemed to be an original, but
all of which together will constitute one and the same Agreement.
Signatures transmitted via facsimile shall be regarded by the
parties as original signatures.
9.10 APPLICABLE LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Michigan, without regard
to its conflicts of laws principles.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
this________ day of _________, 2004.
EXECUTIVE:
By: ___________________________ Signature: ____________________________
Its: _________________________ Printed Name: ____________________________