EXHIBIT 10-56
FORM OF CHANGE-IN-CONTROL SEVERANCE AGREEMENT
This CHANGE-IN-CONTROL SEVERANCE AGREEMENT (the "Agreement") is made and
entered into by and between DTE Energy Company, a Michigan corporation (the
"Company"), and (the "Executive"), effective as of the date
the Agreement has been executed by both parties (the "Effective Date").
WITNESSETH:
WHEREAS, the Executive is an executive or a key employee of the Company or
one or more of its Subsidiaries and has made and is expected to continue to make
major contributions to the short- and long-term profitability, growth and
financial strength of the Company;
WHEREAS, the Company recognizes that, as is the case for most publicly
held companies, the possibility of a Change in Control (as defined below)
exists;
WHEREAS, the Company desires to assure itself of both present and future
continuity of management and to establish minimum severance benefits for certain
of its senior executives or key employees, including the Executive, in the event
of a Change in Control;
WHEREAS, the Company wishes to ensure that its senior executives and key
employees are able to discharge their duties in respect of a proposed or actual
transaction involving a Change in Control; and
WHEREAS, the Company desires to provide additional inducement for the
Executive to continue to remain in the ongoing employ of the Company.
NOW, THEREFORE, the Company and the Executive agree as follows:
1. Certain Defined Terms. In addition to terms defined elsewhere herein, the
following terms have the indicated meanings when used in this Agreement
with initial capital letters:
(a) "Annual Bonus" means the aggregate annual bonus, incentive or other
payments of cash compensation (determined without regard to any
deferral election) to which the Executive would have been entitled
under the bonus, incentive, profit-sharing, performance,
discretionary pay or similar agreement, policy, plan, program or
arrangement of the Company or Subsidiary in which the Executive was
participating in the year of reference.
(b) "Base Pay" means the Executive's annual base salary (prior to any
deferrals or reductions) at a rate not less than the Executive's
annual fixed or base compensation as in effect immediately prior to
the occurrence of a Change in Control or such higher rate as may be
determined thereafter from time to time by the Board or a committee
thereof.
(c) "Board" means the Board of Directors of the Company.
(d) "Cause" means that, prior to termination pursuant to Section 3(b),
the Executive shall have committed or engaged in:
(i) an intentional act of fraud, embezzlement or theft in
connection with the Executive's duties or in the course of the
Executive's employment with the Company or a Subsidiary;
(ii) intentional wrongful damage to property of the Company or a
Subsidiary;
(iii) intentional wrongful disclosure of secret processes or
confidential information of the Company or a Subsidiary;
(iv) intentional wrongful engagement in any Competitive Activity;
or
(v) other intentional activity which in the reasonable judgement
of the Board is significantly detrimental to the reputation,
goodwill or business of the Company or significantly disrupts
the workplace environment or operation of the Company's
business or administrative activities.
For purposes of this Agreement, no act or failure to act on the part
of the Executive shall be deemed "intentional" if it was due
primarily to an error in judgment or negligence. An act shall be
deemed "intentional" only if done or omitted to be done by the
Executive not in good faith and without reasonable belief that the
Executive's action or omission was in the best interest of the
Company. Notwithstanding the foregoing, the Executive shall not be
deemed to have been terminated for "Cause" hereunder unless and
until there shall have been delivered to the Executive a copy of a
resolution duly adopted by the affirmative vote of not less than
three-quarters of the Board then in office at a meeting of the Board
called and held for such purpose, after reasonable notice to the
Executive and an opportunity for the Executive, together with the
Executive's counsel (if the Executive chooses to have counsel
present at such meeting), to be heard before the Board, finding
that, in the good faith opinion of the Board, the Executive had
committed an act constituting "Cause" as herein defined and
specifying the particulars thereof in detail. Nothing herein limits
the right of the Executive or the Executive's beneficiaries to
contest the validity or propriety of any such determination.
(e) "Change-in-Control" means the occurrence during the Term of any of
the following events:
i) The Company is merged, consolidated or reorganized into or
with another corporation or other legal person, and as a
result of such merger, consolidation or reorganization less
than 55% of the combined voting power of the then-outstanding
Voting Stock of such corporation or person immediately after
such transaction is held in the aggregate by the holders of
Voting Stock of the Company immediately prior to such
transaction;
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(ii) The Company sells or otherwise transfers all or substantially
all of its assets to another corporation or other legal
person, and as a result of such sale or transfer less than 55%
of the combined voting power of the then-outstanding Voting
Stock of such corporation or person immediately after such
sale or transfer is held in the aggregate (directly or through
ownership of Voting Stock of the Company or a Subsidiary) by
the holders of Voting Stock of the Company immediately prior
to such sale or transfer;
(iii) There is a report filed on Schedule 13D or Schedule 14D-1 (or
any successor schedule, form or report), each as promulgated
pursuant to the Exchange Act, disclosing that any person (as
the term "person" is used in Section 13(d)(3) or Section
14(d)(2) of the Exchange Act) has become the beneficial owner
(as the term "beneficial owner" is defined under Rule 13d-3 or
any successor rule or regulation promulgated under the
Exchange Act) of securities representing 20% or more of the
combined voting power of the then-outstanding Voting Stock of
the Company;
(iv) The Company files a report or proxy statement with the
Securities and Exchange Commission pursuant to the Exchange
Act disclosing in response to Form 8-K or Schedule 14A (or any
successor schedule, form or report or item therein) that a
change in control of the Company will occur in the future
pursuant to a then-existing contract or transaction which when
consummated would be a Change in Control determined without
regard to this subsection (iv);
(v) If, during any period of two consecutive years, individuals
who at the beginning of any such period constitute the
Directors of the Company cease for any reason to constitute at
least a majority thereof; provided, however, that for purposes
of this clause (v) each Director who is first elected, or
first nominated for election by the Company's stockholders, by
a vote of at least two-thirds of the Directors of the Company
(or a committee thereof) then still in office who were
Directors of the Company at the beginning of any such period
will be deemed to have been a Director of the Company at the
beginning of such period; or
(vi) The approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
Notwithstanding the foregoing provisions of Section l(e)(iii) or
l(e)(iv), unless otherwise determined in a specific case by majority
vote of the Board, a "Change in Control" shall not be deemed to have
occurred for purposes of Section l(e)(iii) or l(e)(iv) solely
because (A) the Company, (B) a Subsidiary, or (C) any
Company-sponsored employee stock ownership plan or any other
employee benefit plan of the Company or a Subsidiary either files or
becomes obligated to file a report or a proxy statement under or in
response to Schedule 13D, Schedule 14D-1, Form 8-K or Schedule 14A
(or any successor schedule, form or report or item therein) under
the Exchange Act disclosing beneficial ownership by it of shares of
Voting Stock,
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whether in excess of 20% or otherwise, or because the Company
reports that a Change in Control of the Company has occurred or will
occur in the future by reason of such beneficial ownership.
(f) "Competitive Activity" means the Executive's participation, without
the written consent of the Chief Executive Officer of the Company
(or, if the Executive is the Chief Executive Officer, without the
affirmative vote of not less than a majority of the Board), in the
management of any business enterprise if such enterprise engages in
substantial and direct competition with the Company or any of its
Subsidiaries and such enterprise's sales of any product or service
competitive with any product or service of the Company or any of its
Subsidiaries amounted to 10% of such enterprise's net sales for its
most recently completed fiscal year and if the Company's or
Subsidiary's net sales of said product or service amounted to 10% of
the Company's or Subsidiary's net sales for its most recently
completed fiscal year. "Competitive Activity" will not include the
mere ownership of not more than 10% of the total combined voting
power or aggregate value of all classes of stock or other securities
in such enterprise and the exercise of rights appurtenant thereto.
It shall be Executive's responsibility to provide the Company with
information sufficient to make such determinations.
(g) "Employee Benefits" means the perquisites, benefits and service
credit for benefits as provided under any and all employee
retirement income and welfare benefit policies, plans, programs or
arrangements in which Executive is entitled to participate,
including without limitation any stock option, stock purchase, stock
appreciation, savings, pension, supplemental executive retirement,
or other retirement income or welfare benefit, deferred
compensation, incentive compensation, group or other life, health,
medical/hospital or other insurance (whether funded by actual
insurance or self-insured by the Company or a Subsidiary),
disability, salary continuation, expense reimbursement and other
employee benefit policies, plans, programs or arrangements that may
now exist or any equivalent successor policies, plans, programs or
arrangements that may be adopted hereafter by the Company or a
Subsidiary, providing perquisites, benefits and service credit for
benefits at least as great in the aggregate as are payable
thereunder prior to a Change in Control.
(h) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(i) "Incentive Pay" means an aggregate annual bonus, incentive or other
payments of cash compensation (determined without regard to any
deferral election), in addition to Base Pay, pursuant to any bonus,
incentive, profit-sharing, performance, discretionary pay or similar
agreement, policy, plan, program or arrangement (whether or not
funded) of the Company or a Subsidiary, or any successor thereto,
providing benefits on a basis at least as favorable to the
Executive, in terms of each of the amount of benefits, levels of
coverage and performance measures and levels of required
performance, as the benefits payable thereunder prior to the Change
in Control.
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(j) "Severance Period" means, in respect of the occurrence of each and
every Change in Control, the period of time commencing on the date
of the occurrence of such Change in Control and continuing until the
earlier of (i) the second anniversary of the occurrence of such
Change-in-Control and (ii) the Executive's death; provided, however,
that in the event of the occurrence of a Change in Control resulting
from a filing of a report or proxy statement described in subsection
1(e)(iv) of the definition of Change in Control, the Severance
Period in respect of such Change in Control shall continue until the
later of (A) the date provided in this subsection 1(j) determined
without regard to this proviso or (B) the earlier of (x) the date
any transaction, occurrence or event described in such report or
proxy statement (a "Transaction") is consummated or (y) the date it
is determined that such Transaction will not be consummated. The
Board may make the determination referred to in clause (y) by
resolution adopted in good faith.
(k) "Subsidiary" means an entity in which the Company directly or
indirectly beneficially owns 50% or more of the outstanding Voting
Stock.
(l) "Term" means the period commencing as of the Effective Date and
expiring as of the later of (i) the close of business on the day
before the third anniversary of the Effective Date or (ii) the
expiration of the Severance Period; provided, however, that (A)
commencing on the first anniversary of the Effective Date and each
anniversary of the Effective Date thereafter, the term of this
Agreement will automatically be extended for an additional year
unless, not later than 90 days preceding any anniversary of the
Effective Date, (1) the Company or the Executive shall have given
notice that it or the Executive, as the case may be, does not wish
to have the Term extended, or (2) the Company shall have given
notice that it wishes the Term to be extended for a period of less
than one year, in which case the term of this Agreement will
automatically be extended for such shorter period and will then
terminate if not further extended by written agreement between the
Company and the Executive and (B) if, prior to a Change in Control,
the Executive ceases for any reason to be an employee of the Company
and any Subsidiary, thereupon without further action the Term shall
be deemed to have expired and this Agreement will immediately
terminate and be of no further effect. For purposes of this Section
1(l), the Executive shall not be deemed to have ceased to be an
employee of the Company and any Subsidiary by reason of the transfer
of Executive's employment between the Company and any Subsidiary, or
among any Subsidiaries.
(m) Termination Date" means the date on which the Executive's employment
is terminated (the effective date of which shall be the date of
termination, or such other date that may be specified by the
Executive if the termination is pursuant to Section 3(b)).
(n) "Voting Stock," means securities entitled to vote generally in the
election of directors.
2. Operation of Agreement. This Agreement will be effective and binding
immediately upon its execution, but, anything in this Agreement to the
contrary notwithstanding, this
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Agreement will not be operative unless and until a Change in Control
occurs. Upon the occurrence of a Change in Control at any time during the
Term, without further action, this Agreement shall become immediately
operative.
3. Termination Following a Change in Control.
(a) In the event of the occurrence of a Change in Control, the
Executive's employment with the Company or a Subsidiary may be
terminated by the Company or a Subsidiary during the Severance
Period applicable to such Change in Control and the Executive shall
be entitled to the benefits provided under Section 4 unless such
termination is the result of the occurrence of one or more of the
following events:
(i) the Executive's death;
(ii) if the Executive becomes permanently disabled within the
meaning of, and begins receiving disability benefits pursuant
to, the Company or Subsidiary sponsored long-term disability
plan in effect for, or applicable to, Executive immediately
prior to such Change in Control; or
(iii) Cause.
If, during the Severance Period applicable to such Change in
Control, the Executive's employment is terminated by the Company or
a Subsidiary other than pursuant to Section 3(a)(i), 3(a)(ii), or
3(a)(iii), the Executive will be entitled to the benefits provided
under Section 4 hereof.
(b) In the event of the occurrence of a Change in Control, the Executive
may terminate employment with the Company and all Subsidiaries
during the Severance Period applicable to such Change in Control,
with the right to severance compensation as provided in Section 4,
upon, or at any time (during such Severance Period) after, the
occurrence of one or more of the following events (regardless of
whether any other reason, other than Cause as herein above provided,
for such termination exists or has occurred, including without
limitation other employment):
(i) failure to elect or reelect to the office, or otherwise
maintain the Executive in the position, or a substantially
equivalent office or position, of or with the Company and/or a
Subsidiary, as the case may be, which the Executive held
immediately prior to such Change in Control, or the removal of
the Executive as a Director of the Company (or any successor
thereto) if the Executive shall have been a Director of the
Company immediately prior to such Change in Control;
(ii) (A) a significant adverse change in the nature or scope of the
authorities, powers, functions, responsibilities or duties
attached to the position with the Company and its Subsidiaries
which the Executive held immediately prior to such Change in
Control, or (B) a reduction in the Executive's Base Pay or the
opportunity to earn Incentive Pay from the Company, its
Subsidiaries or the
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failure to pay the Executive Base Pay or Incentive Pay earned
when due, or (C) the termination or denial of the Executive's
rights to Employee Benefits or a reduction in the scope or
value thereof (unless, in the case of an insured "welfare
plan," within the meaning of Section 3(1) of the Employee
Retirement Income Security Act of 1974, as amended, such
termination, denial or reduction is pursuant to or the result
of a change in insurers or by an insurer in the terms or cost
of coverage under an insurance policy or other contract
relating to the plan, provided that such termination, denial
or reduction is applicable to all similarly situated employees
of the Company and its Subsidiaries), any of which is not
remedied by the Company within 10 calendar days after receipt
by the Company of written notice from the Executive of such
change, reduction or termination, as the case may be;
(iii) a determination by the Executive (which determination will be
conclusive and binding upon the parties hereto provided it has
been made in good faith and in all events will be presumed to
have been made in good faith unless otherwise shown by the
Company by clear and convincing evidence) that a change in
circumstances has occurred following such Change in Control,
including, without limitation, a change in the scope of the
business or other activities for which the Executive was
responsible immediately prior to such Change in Control, which
has rendered the Executive substantially unable to carry out,
has substantially hindered Executive's performance of, or has
caused Executive to suffer a substantial reduction in, any of
the authorities, powers, functions, responsibilities or duties
attached to the position held by the Executive immediately
prior to such Change in Control, which situation is not
remedied within 10 calendar days after written notice to the
Company from the Executive of such determination;
(iv) the liquidation, dissolution, merger, consolidation or
reorganization of the Company or transfer of all or
substantially all of its business and/or assets, unless the
successor or successors (by liquidation, merger,
consolidation, reorganization, transfer or otherwise) to which
all or substantially all of its business and/or assets have
been transferred (directly or by operation of law) assumed all
duties and obligations of the Company under this Agreement
pursuant to Section 11(a);
(v) the Company relocates its principal executive offices and the
Executive's principal location of work is then in such
offices, or requires the Executive to have the Executive's
principal location of work changed, to any location that is in
excess of 50 miles from the location thereof immediately prior
to such Change in Control, or requires the Executive to travel
away from the Executive's office in the course of discharging
the Executive's responsibilities or duties hereunder at least
20% more (in terms of aggregate days in any calendar year or
in any calendar quarter when annualized for purposes of
comparison to any prior year) than the average number of
travel days per calendar year that was required of Executive
in the three full calendar years
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immediately prior to such Change in Control, without , in
either case, the Executive's prior written consent; or
(vi) without limiting the generality or effect of the foregoing,
any material breach of this Agreement by the Company or any
successor thereto.
(c) A termination by the Company pursuant to Section 3(a) or by the
Executive pursuant to Section 3(b) will not affect any rights that
the Executive may have pursuant to any agreement, policy, plan,
program or arrangement of the Company or Subsidiary providing
Employee Benefits, which rights shall be governed by the terms
thereof.
4. Severance Compensation.
(a) If, following the occurrence of a Change in Control, the Company or
a Subsidiary, as the case may be, terminates the Executive's
employment during the Severance Period applicable to such Change in
Control other than pursuant to Section 3(a)(i), 3(a)(ii) or
3(a)(iii), or if the Executive terminates employment pursuant to
Section 3(b), the Company will pay the Executive the amounts and
benefits:
(i) a lump sum payment in an amount equal to three (3) times the
sum of (A) Base Pay, plus (B) the greater of (1) the Annual
Bonus for the year in which the Change in Control occurs or
(2) the Annual Bonus for the year in which the Termination
Date occurs, in either case based on the assumption that
target performance goals for such year would be met and such
payments would be made assuming Executive was employed for the
entire year or until such later date as may be required to
receive such payment. Such lump sum payment shall be paid
within five business days after the Termination Date.
(ii) a lump sum payment in an amount equal to the (A) the greater
of (1) the Annual Bonus for the year in which the Change in
Control occurs or (2) the Annual Bonus for the year in which
the Termination Date occurs, in either case based on the
assumption that target performance goals for such year would
be met and such payments would be made assuming Executive was
employed for the entire year or until such later date as may
be required to receive such payment, (B) multiplied by a
fraction, the numerator of which is the number of days prior
to the Executive's Termination Date during the calendar year
in which the Termination Date occurs, and the denominator of
which is 365. Such lump sum payment shall be paid within five
business days after the Termination Date.
(iii) (A) for a period of twenty-four (24) months following the
Termination Date (the "Continuation Period"), the Company will
continue to provide the Executive with benefits substantially
similar to those insured "welfare benefits" within the meaning
of Section 3(1) of the Employee Retirement Income Security Act
of 1974, as amended ("Welfare Benefits") that the
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Executive was receiving or entitled to receive immediately
prior to the Termination Date (or, if greater, immediately
prior to the reduction, termination, or denial described in
Section 3(b)(ii)), but only to the extent permitted, on terms
acceptable to the Company in its sole discretion, by the
Company's insurance carriers (which permission the Company
will use its best efforts to secure); and (B) for (1)
uninsured or self-insured Welfare Benefits and (2) insured
Welfare Benefits with respect to which continued coverage is
not permitted by the Company's insurance carriers on terms
acceptable to the Company, the Company will provide a lump sum
payment equal to the present value of the cost of coverage,
for a period beginning on the Termination Date (or such later
date that continued insurance coverage ceases) and ending
twenty-four (24) months after the Termination Date, of the
types of welfare benefits referenced in Section
4(a)(iii)(B)(1) and (2) substantially similar to those that
the Executive was receiving or entitled to receive immediately
prior to the Termination Date (or, if greater, immediately
prior to the reduction, termination, or denial described in
Section 3(b)(ii)); provided, that the cost of such coverage
shall be determined at rates in effect as of the Termination
Date (or such later date that continued insurance coverage
ceases), and the present value of such cost shall be
determined using an interest rate equal to the so-called
composite "prime rate" in effect as of the Termination Date
(or such later date that continued insurance coverage ceases)
in the Northeast Edition of The Wall Street Journal. Such lump
sum payment shall be paid within five business days after the
Termination Date (or, if later, within five business days
after continued insurance coverage ceases). Employee Benefits
otherwise receivable by the Executive pursuant to subsection
(A) of this Section 4(a)(iii) will be reduced to the extent
comparable Welfare Benefits are actually received by or in
respect of the Executive from another employer during the
Continuation Period following the Executive's Termination
Date, and any such benefits actually received shall be
reported by the Executive or other recipient to the Company.
(iv) the length of such Continuation Period will be considered as
additional age and service with the Company for the purpose of
determining age and service credits (but not for the purpose
of determining compensation) and benefits due and payable to
or in respect of the Executive under the Management
Supplemental Benefit Plan or Key Employee Deferred
Compensation Plan, or any successor thereto, of the Company or
a Subsidiary applicable to the Executive immediately prior to
the Termination Date (or, if greater, immediately prior to the
reduction, termination, or denial described in Section
3(b)(ii)). In addition, the Company shall provide the
Executive with outplacement services by a firm selected by the
Executive, at the expense of the Company in an amount up to
15% of the Executive's Base Pay.
In the event the Executive's employment is terminated or the
Executive terminates employment during more than one Severance
Period under the circumstances described above in this Section 4
with entitlement to severance compensation under
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this Section 4, a determination of the payments and benefits to be
provided under this Section 4 shall be made with respect to each
Severance Period, but the Executive shall receive only: (i) the
greatest lump sum payment under Section 4(a)(i) determined with
respect to all such Severance Periods; (ii) the greatest lump sum
payment under 4(a)(ii) determined with respect to all such Severance
Periods; (iii) the greatest lump sum payment under Section 4(a)(iii)
determined with respect to all such Severance Periods; and (iv) the
greatest benefits under Section 4(a)(iv) determined with respect to
all such Severance Periods.
(b) Without limiting the rights of the Executive at law or in equity, if the
Company fails to make any payment or provide any benefit required to be
made or provided hereunder on a timely basis, the Company will pay
interest on the amount or value thereof at an annualized rate of interest
equal to the so-called composite "prime rate" as quoted from time to time
during the relevant period in the Northeast Edition of The Wall Street
Journal. Such interest is payable as it accrues on demand, but in no event
must interest be paid more frequently than monthly. Any change in such
prime rate will be effective on and as of the date of such change.
(c) Notwithstanding any provision of this Agreement to the contrary, the
parties' respective rights and obligations under this Section 4 and under
Sections 5 and 7 will survive any termination or expiration of this
Agreement or the termination of the Executive's employment following a
Change in Control for any reason whatsoever.
5. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary notwithstanding, in the
event that this Agreement shall become operative and it shall be
determined (as hereafter provided) that any payment or distribution
by the Company or any of its affiliates to or for the benefit of the
Executive, whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise pursuant to or
by reason of any other agreement, policy, plan, program or
arrangement, including without limitation any stock option, stock
appreciation right or similar right, or the lapse or termination of
any restriction on or the vesting or exercisability of any of the
foregoing (a "Payment"), would be subject to the excise tax imposed
by Section 4999 of the Internal Revenue Code of 1986, as amended
(the "Code") (or any successor provision thereto) by reason of being
considered "contingent on a change in ownership or control" of the
Company, within the meaning of Section 280G of the Code (or any
successor provision thereto) or to any similar tax imposed by state
or local law, or any interest or penalties with respect to such tax
(such tax or taxes, together with any such interest and penalties,
being hereafter collectively referred to as the "Excise Tax"), then
the Executive shall be entitled to receive an additional payment or
payments (collectively, a "Gross-Up Payment"). The Gross-Up Payment
shall be in an amount such that, after payment by the Executive of
all taxes (including any interest or penalties imposed with respect
to such taxes), including any Excise Tax imposed upon the Gross-Up
Payment, the Executive retains an
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amount of the Gross-Up Payment equal to the Excise Tax imposed upon
the Payment.
(b) Subject to the provisions of Section 5(f), all determinations
required to be made under this Section 5, including whether an
Excise Tax is payable by the Executive and the amount of such Excise
Tax and whether a Gross-Up Payment is required to be paid by the
Company to the Executive and the amount of such Gross-Up Payment, if
any, shall be made by a nationally recognized accounting firm (the
"Accounting Firm") selected by the Company in the Company's sole
discretion. The Executive shall direct the Accounting Firm to submit
its determination and detailed supporting calculations to both the
Company and the Executive within 30 calendar days after the
Termination Date, if applicable, and any such other time or times as
may be requested by the Company or the Executive. If the Accounting
Firm determines that any Excise Tax is payable by the Executive, the
Company shall pay the required Gross-Up Payment to the Executive
within five business days after receipt of such determination and
calculations with respect to any Payment to the Executive. If the
Accounting Firm determines that no Excise Tax is payable by the
Executive, it shall, at the same time as it makes such
determination, furnish the Company and the Executive an opinion that
the Executive has substantial authority not to report any Excise Tax
on the Executive's federal, state or local income or other tax
return. As a result of the uncertainty in the application of Section
4999 of the Code (or any successor provision thereto) and the
possibility of similar uncertainty regarding applicable state or
local tax law at the time of any determination by the Accounting
Firm hereunder, it is possible that Gross-Up Payments which will not
have been made by the Company should have been made (an
"Underpayment"). In the event that the Company exhausts or fails to
pursue its remedies pursuant to Section 5(f) and the Executive
thereafter is required to make a payment of any Excise Tax, the
Executive shall direct the Accounting Firm to determine the amount
of the Underpayment that has occurred and to submit its
determination and detailed supporting calculations to both the
Company and the Executive as promptly as possible. Any such
Underpayment shall be promptly paid by the Company to, or for the
benefit of, the Executive within five business days after receipt of
such determination and calculations.
(c) The Company and the Executive shall each provide the Accounting Firm
access to and copies of any books, records and documents in the
possession of the Company or the Executive, as the case may be,
reasonably requested by the Accounting Firm, and otherwise cooperate
with the Accounting Firm in connection with the preparation and
issuance of the determinations and calculations contemplated by
Section 5(b). Any determination by the Accounting Firm as to the
amount of the Gross-Up Payment shall be binding upon the Company and
the Executive.
(d) The federal, state and local income or other tax returns filed by
the Executive shall be prepared and filed on a consistent basis with
the determination of the Accounting Firm with respect to the Excise
Tax payable by the Executive. The Executive shall make proper
payment of the amount of any Excise Tax, and at the request of the
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Company, provide to the Company true and correct copies (with any
amendments) of the Executive's federal income tax return as filed
with the Internal Revenue Service and corresponding state and local
tax returns, if relevant, as filed with the applicable taxing
authority, and such other documents reasonably requested by the
Company, evidencing such payment. If prior to the filing of the
Executive's federal income tax return, or corresponding state or
local tax return, if relevant, the Accounting Firm determines that
the amount of the Gross-Up Payment should be reduced, the Executive
shall within five business days pay to the Company the amount of
such reduction.
(e) The fees and expenses of the Accounting Firm for its services in
connection with the determinations and calculations contemplated by
Section 5(b) shall be borne by the Company. If such fees and
expenses are initially paid by the Executive, the Company shall
reimburse the Executive the full amount of such fees and expenses
within five business days after receipt from the Executive of a
statement therefor and reasonable evidence of the Executive's
payment thereof.
(f) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service or any other taxing authority that, if
successful, would require the payment by the Company of a Gross-Up
Payment. Such notification shall be given as promptly as practicable
but no later than 10 business days after the Executive actually
receives notice of such claim and the Executive shall further
apprise the Company of the nature of such claim and the date on
which such claim is requested to be paid (in each case, to the
extent known by the Executive). The Executive shall not pay such
claim prior to the earlier of (i) the expiration of the
30-calendar-day period following the date on which the Executive
gives such notice to the Company and (ii) the date that any payment
of amount with respect to such claim is due. If the Company notifies
the Executive in writing prior to the expiration of such period that
it desires to contest such claim, the Executive shall:
(i) provide the Company with any written records or documents in
the Executive's possession relating to such claim reasonably
requested by the Company;
(ii) take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to
time, including without limitation accepting legal
representation with respect to such claim by an attorney
competent in respect of the subject matter and reasonably
selected by the Company;
(iii) cooperate with the Company in good faith in order effectively
to contest such claim; and
(iv) permit the Company to participate in any proceedings relating
to such claim;
provided, however, that the Company shall bear and pay directly all
costs and expenses (including interest and penalties) incurred in
connection with such contest
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and shall indemnify and hold harmless the Executive, on an after-tax
basis, for and against any Excise Tax or income tax, including
interest and penalties with respect thereto, imposed as a result of
such representation and payment of costs and expenses. Without
limiting the foregoing provisions of this Section 5(f), the Company
shall control all proceedings taken in connection with the contest
of any claim contemplated by this Section 5(f) and, at its sole
option, may pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in
respect of such claim (provided, however, that the Executive may
participate therein at the Executive's own cost and expense) and
may, at its option, either direct the Executive to pay the tax
claimed and sue for a refund or contest the claim in any permissible
manner, and the Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the
Company shall determine; provided, however, that if the Company
directs the Executive to pay the tax claimed and sue for a refund,
the Company shall advance the amount of such payment to the
Executive on an interest-free basis and shall indemnify and hold the
Executive harmless, on an after-tax basis, from any Excise Tax or
income or other tax, including interest or penalties with respect
thereto, imposed with respect to such advance; and provided further,
however, that any extension of the statute of limitations relating
to payment of taxes for the taxable year of the Executive with
respect to which the contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the Company's
control of any such contested claim shall be limited to issues with
respect to which a Gross-Up Payment would be payable hereunder and
the Executive shall be entitled to settle or contest, as the case
may be, any other issue raised by the Internal Revenue Service or
any other taxing authority.
(g) If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 5(f), the Executive receives any refund
with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section 5(f)) promptly
pay to the Company the amount of such refund (together with any
interest paid or credited thereon less any taxes applicable
thereto). If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 5(f), a determination is
made that the Executive shall not be entitled to any refund with
respect to such claim and the Company does not notify the Executive
in writing of its intent to contest such denial or refund prior to
the expiration of 30 calendar days after such determination, then
such advance shall be forgiven and shall not be required to be
repaid and the amount of any such advance shall offset, to the
extent thereof, the amount of Gross-Up Payment required to be paid
by the Company to the Executive pursuant to this Section 5.
6. No Mitigation Obligation. The Company hereby acknowledges that it will be
difficult and may be impossible for the Executive to find reasonably
comparable employment following the Termination Date and that the
non-competition covenant contained in Section 8 will further limit the
employment opportunities for the Executive. Accordingly, the payment of
the severance compensation by the Company to the Executive in
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accordance with the terms of this Agreement is hereby acknowledged by the
Company to be reasonable, and the Executive will not be required to
mitigate the amount of any payment provided for in this Agreement by
seeking other employment or otherwise, nor will any profits, income,
earnings or other benefits from any source whatsoever create any
mitigation, offset, reduction or any other obligation on the part of the
Executive hereunder or otherwise, except as expressly provided in the last
sentence of Section 4(a)(iii) and except as may have been otherwise paid
to the Executive by the Company or a Subsidiary in connection with or in
consideration of Executive's release and settlement of any or all claims
arising out of the Executive's employment or termination thereof.
7. Legal Fees and Expenses. It is the intent of the Company that the
Executive not be required to incur legal fees and the related expenses
associated with the interpretation, enforcement or defense of Executive's
rights under this Agreement by litigation or otherwise because the cost
and expense thereof would substantially detract from the benefits intended
to be extended to the Executive hereunder. Accordingly, if it should
appear to the Executive that the Company has failed to comply with any of
its obligations under this Agreement or in the event that the Company or
any other person takes or threatens to take any action to declare this
Agreement void or unenforceable, or institutes any litigation or other
action or proceeding designed to deny, or to recover from, the Executive
the benefits provided or intended to be provided to the Executive
hereunder, the Company irrevocably authorizes the Executive from time to
time to retain counsel of Executive's choice, at the expense of the
Company as hereafter provided, to advise and represent the Executive in
connection with any such interpretation, enforcement or defense, including
without limitation the initiation or defense of any litigation or other
legal action, whether by or against the Company or any Director, officer,
stockholder or other person affiliated with the Company, in any
jurisdiction. Notwithstanding any existing or prior attorney-client
relationship between the Company and such counsel, the Company irrevocably
consents to the Executive's entering into an attorney-client relationship
with such counsel, and in that connection the Company and the Executive
agree that a confidential relationship shall exist between the Executive
and such counsel. Without respect to whether the Executive prevails, in
whole or in part, in connection with any of the foregoing, the Company
will pay and be solely financially responsible for any and all reasonable
attorneys' and related fees and expenses incurred by the Executive in
connection with any of the foregoing.
8. Competitive Activity. During a period ending one year following the
Termination Date, if the Executive shall have received or shall be
receiving benefits under Section 4, and, if applicable, Section 5, the
Executive shall not, without the prior written consent of the Chief
Executive Officer of the Company, engage in any Competitive Activity.
9. Employment Rights. Nothing expressed or implied in this Agreement will
create any right or duty on the part of the Company or the Executive to
have the Executive remain in the employment of the Company or any
Subsidiary prior to or following any Change in Control.
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10. Withholding of Taxes. The Company may withhold from any amounts payable
under this Agreement all federal, state, city or other taxes as the
Company is required to withhold pursuant to any law or government
regulation or ruling.
11. Successors and Binding Agreement.
(a) The Company will require any successor (whether direct or indirect,
by purchase, merger, consolidation, reorganization or otherwise) to
all or substantially all of the business or assets of the Company,
by agreement in form and substance satisfactory to the Executive, to
expressly assume and agree to perform this Agreement in the same
manner and to the same extent the Company would be required to
perform it if no such succession had taken place. This Agreement
will be binding upon and inure to the benefit of the Company and any
successor to the Company, including without limitation any persons
acquiring directly or indirectly all or substantially all of the
business or assets of the Company whether by purchase, merger,
consolidation, reorganization or otherwise (and such successor shall
thereafter be deemed the "Company" for the purposes of this
Agreement), but will not otherwise be assignable, transferable or
delegable by the Company.
(b) This Agreement will inure to the benefit of and be enforceable by
the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees and legatees
(c) This Agreement is personal in nature and neither of the parties
hereto shall, without the consent of the other, assign, transfer or
delegate this Agreement or any rights or obligations hereunder
except as expressly provided in Sections 11(a) and 11(b). Without
limiting the generality or effect of the foregoing, the Executive's
right to receive payments hereunder will not be assignable,
transferable or delegable, whether by pledge, creation of a security
interest, or otherwise, other than by a transfer by Executive's will
or by the laws of descent and distribution and, in the event of any
attempted assignment or transfer contrary to this Section 11(c), the
Company shall have no liability to pay any amount so attempted to be
assigned, transferred or delegated.
12. Notices. For all purposes of this Agreement, all communications, including
without limitation notices, consents, requests or approvals, required or
permitted to be given hereunder will be in writing and will be deemed to
have been duly given when hand delivered or dispatched by electronic
facsimile transmission (with receipt thereof orally confirmed), or five
business days after having been mailed by United States registered or
certified mail, return receipt requested, postage prepaid, or three
business days after having been sent by a nationally recognized overnight
courier service such as Federal Express or UPS, addressed to the Company
(to the attention of the Corporate Secretary of the Company) at its
principal executive office and to the Executive at the Executive's
principal residence, or to such other address as any party may have
furnished to the other in writing and in accordance herewith, except that
notices of changes of address shall be effective only upon receipt.
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13. Governing Law. The validity, interpretation, construction and performance
of this Agreement will be governed by and construed in accordance with the
substantive laws of the State of Michigan, without giving effect to the
principles of conflict of laws of such State.
14. Validity. If any provision of this Agreement or the application of any
provision hereof to any person or circumstances is held invalid,
unenforceable or otherwise illegal, the remainder of this Agreement and
the application of such provision to any other person or circumstances
will not be affected and the provision so held to be invalid unenforceable
or otherwise illegal will be reformed to the extent (and only to the
extent) necessary to make it enforceable, valid or legal.
15. Miscellaneous. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in
writing signed by the Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto or compliance
with any condition or provision of this Agreement to be performed by such
other party will be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements
or representations, oral or otherwise, expressed or implied with respect
to the subject matter hereof have been made by either party which are not
set forth expressly in this Agreement. References to Sections are to
references to Sections of this Agreement.
16. Prior Agreements. As of the effective date hereof, this Agreement
supersedes and replaces any prior change-in-control severance agreement
between the Company or any of its Subsidiaries and the Executive.
17. Counterparts. This Agreement may be executed in one 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.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
and delivered as of the dates set forth below.
DTE ENERGY COMPANY
______________________________________
Susan M. Beale Date: _________________________
Vice President and Corporate Secretary
______________________________________
[Executive's Name] Date: _________________________
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