1
EXHIBIT 10.9
CHANGE-IN-CONTROL SEVERANCE AGREEMENT
THIS CHANGE-IN-CONTROL SEVERANCE AGREEMENT (this "Agreement"), dated as of
October 1, 1997, is made and entered by and between DTE Energy Company, a
Michigan corporation (the "Company"), and (the "Executive").
WITNESSETH:
WHEREAS, the Executive is a senior 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 desires to establish certain minimum severance
benefits for certain of its senior executives or key employees, including the
Executive, applicable in the event of a Change in Control;
WHEREAS, the Company wishes to ensure that its senior executives and key
employees are not practically disabled from discharging 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 following meanings when used in this Agreement
with initial capital letters:
(a) "Base Pay" means the Executive's annual base salary (prior to
any deferrals or reductions under qualified or non-qualified plans) at a
rate not less than the Executive's annual fixed or base compensation as
in effect for Executive immediately prior to the occurrence of the Change
in Control or such higher rate as may be determined thereafter from time
to time by the Board or a committee thereof.
(b) "Board" means the Board of Directors of the Company.
(c) "Cause" means that, prior to any termination pursuant to Section
3(b), the
2
Executive shall have committed:
(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 any Subsidiary;
(ii) intentional wrongful damage to property of the Company or any
Subsidiary;
(iii) intentional wrongful disclosure of secret processes or
confidential information of the Company or any Subsidiary; or
(iv) intentional wrongful engagement in any Competitive Activity;
and any such act shall have been materially harmful to the Company. 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, but 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 will
limit the right of the Executive or the Executive's beneficiaries to contest the
validity or propriety of any such determination.
(d) "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 are held in the aggregate by the holders of Voting Stock
of the Company immediately prior to such transaction;
(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
2
3
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 1(d)(iii) or
1(d)(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 1(d)(iii) or 1(d)(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 any 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, 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.
(e) "Competitive Activity" means the Executive's participation, without the
written consent of an officer of the Company who is an executive vice president
or above,
3
4
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 (i) the mere ownership of
securities in any such enterprise and the exercise of rights appurtenant thereto
or (ii) participation in the management of any such enterprise other than in
connection with the competitive operations of such enterprise.
(f) "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 the Change in
Control.
(g) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(h) "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.
(i) "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 or (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(d)(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(i) determined without regard
to this
4
5
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.
(j) "Subsidiary" means an entity in which the Company directly or
indirectly beneficially owns 50% or more of the outstanding Voting Stock.
(k) "Term" means the period commencing as of the date hereof and
expiring as of the later of (i) the close of business on September 30,
2000, or (ii) the expiration of the Severance Period; provided, however,
that (A) commencing on October 1, 1998 and each October 1 thereafter, the
term of this Agreement will automatically be extended for an additional
year unless, not later than the immediately preceding June 30, 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 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(k),
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.
(l) "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)).
(m) "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 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
and any Subsidiary may be terminated by the Company and the Subsidiary during
the Severance Period applicable to such Change in Control and the Executive
shall be entitled to the benefits provided by Section 4 unless such termination
is the result of the occurrence of one or more of the following events:
(i) The Executive's death;
5
6
(ii) If the Executive becomes permanently disabled within the meaning
of, and begins actually to receive disability benefits pursuant to, the
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 any 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 by Section 4 hereof.
(b) In the event of the occurrence of a Change in Control, the
Executive may terminate employment with the Company and any Subsidiary during
the Severance Period applicable to such Change in Control with the right to
severance compensation as provided in Section 4 upon the occurrence of one or
more of the following events (regardless of whether any other reason, other than
Cause as hereinabove provided, for such termination exists or has occurred,
including without limitation other employment):
(i) Failure to elect or reelect to the office, or otherwise to
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
and/or a Subsidiary (or any successor thereto) if the Executive shall have
been a Director of the Company and/or a Subsidiary 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 any Subsidiary 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 and any Subsidiary (unless such reduction is pursuant to an
across-the-board reduction applicable to senior executives of the Company
and its Subsidiaries and of any entity, directly or indirectly, in control
of the Company or that will be in control of the Company upon consummation
of a transaction constituting a Change in Control), or the 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 such reduction is pursuant
to an across-the-board reduction applicable to senior executives of the
Company and its Subsidiaries and of any entity, directly or indirectly, in
control of the Company or that will be in control of the Company upon
consummation of a transaction constituting a Change in Control), 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
6
7
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 was
required of Executive in any of the three full years 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 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
to the Executive the following lump sum payment within five business days after
the Termination Date and continue to provide to the Executive the
7
8
following benefits:
(i) A lump sum payment in an amount equal to [THREE] [TWO] [ONE]1
times the sum of (A) Base Pay, plus (B) 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 for the year in
which the Change in Control (or Termination Date, if greater) occurs based
on the assumption that target performance goals for such year would be met
and such payments would be made.
(ii) (A) For a period of 24 months following the Termination Date (the
"Continuation Period"), the Company will arrange to provide the Executive
with Employee Benefits that are welfare benefits (but not stock option,
stock purchase, stock appreciation or similar compensatory benefits or
disability or income continuation benefits) 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)) and (B)
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 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.
If and to the extent that any benefit described in subsection (A) or (B) of
this Section 4(a)(ii) is not or cannot be paid or provided under any
policy, plan, program or arrangement of the Company or any Subsidiary, as
the case may be, then the Company will itself pay or provide for the
payment to the Executive, the Executive's dependents or beneficiaries, as
the case may be, of such Employee Benefits. Employee Benefits otherwise
receivable by the Executive pursuant to subsection (A) of this Section
4(a)(ii) 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. Without limiting the purposes or effect
of Section 5, the Company does not guarantee a favorable tax consequence to
the Executive or the Executive's dependents or beneficiaries for any
coverage or benefits provided pursuant to this Section 4(a)(ii) nor will it
indemnify any such person for such results.
- -----------------
1 Include multiple applicable to the Executive executing the Agreement.
8
9
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 this Section 4, only one lump sum payment under Section
4(a)(i) shall be paid to the Executive hereunder, and the amount of such lump
sum payment under Section 4(a)(i) and benefits described in Section 4(a)(ii) to
be provided the Executive shall be the greatest amounts determined with respect
to the Severance Periods in which the Executive's termination occurs.
(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 will
be payable as it accrues on demand. 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"); provided, however, that no
Gross-up Payment shall be made with respect to the Excise Tax, if any,
attributable to (i) any incentive stock option, as defined by Section 422 of the
Code ("ISO") granted prior to the execution of this Agreement, or (ii) any stock
appreciation or similar right, whether or not limited, granted in tandem with
any ISO described in clause (i). 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 amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Payment.
9
10
(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 Executive in
the Executive'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"),
consistent with the calculations required to be made hereunder. 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 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
10
11
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 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
11
12
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 after 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 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)(ii) 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
12
13
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 Company, which consent shall not
be unreasonably withheld, 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.
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, expressly to assume and agree to perform this Agreement in the same
manner and to the same extent the Company would be required to perform 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
13
14
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, UPS, or Purolator, addressed to the Company (to the attention of the
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.
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
14
15
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. 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.
17. Prior Agreement. To the extent the Executive receives a lump sum
payment under Section 4(a) (i) or continued Employee Benefits under Section
4(a) (ii) of this Agreement, the amount of such payment or benefits so received
by the Executive shall reduce dollar-for-dollar the amount of any severance
payment or comparable continued welfare benefits, as the case may be, to which
the Executive is entitled as the result of termination of employment pursuant
to the terms of the offer of employment letter, dated as of ______________(the
"Prior Agreement"), between The Detroit Edison Company and the Executive, and
the Prior Agreement is hereby amended, without further action, to so provide.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the date first above written.
DTE ENERGY COMPANY
By: ______________________________
[NAME AND TITLE]
______________________________
[EXECUTIVE]
15