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EXHIBIT 10-14
FIFTH RESTATEMENT OF
THE DETROIT EDISON COMPANY
MANAGEMENT SUPPLEMENTAL BENEFIT PLAN
The Detroit Edison Company Management Supplemental Benefit Plan (the
"Plan"), established by The Detroit Edison Company (the "Company") effective
July 24, 1989, as amended and restated effective January 22, 1990, June 26,
1995, January 1, 1996 and October 28, 1996, is hereby amended and restated as of
October 27, 1997, by this Fifth Restatement.
PURPOSE
The Plan is designed to supplement pension benefits for eligible
management employees. The Plan has the objective of making the Company's
retirement program more competitive within the electric utility industry and
general industry, which will facilitate the attraction and retention of
management employees.
DEFINITION
AVERAGE FINAL COMPENSATION. Equals one-fifth of pay during the 260
weeks of Company service that results in the highest average, calculated without
regard to any limitation imposed by Section 401(a)(17) of the Internal Revenue
Code. In additional to normal pay, lump sum payments in lieu of April base pay
increases and Shareholder Value Improvement Plan awards with no restriction on
the year paid will be included when calculating the 260 weeks of benefit service
which result in the highest average.
AWARDED SERVICE. Years of service that may be imputed to an otherwise
eligible Plan participant by the Organization and Compensation Committee
("Committee") of the Board of Directors, having taken into account the value to
the Company of such participant's prior experience.
COMPANY. The Detroit Edison Company and any Controlled Group Member
which has adopted the Plan with the approval of the Chairman of the Board of
Directors and the Chairman of the board of directors of the Controlled Group
Member. As a condition to participating in the Plan, such Controlled Group
Member shall authorize the Chairman of the Board of Directors to act for it in
all matters arising under the Plan and shall agree to comply with such other
terms and conditions as may be imposed by the Chairman of the Board of
Directors. Where the context requires in respect of the liability for the
payment of any benefit to an eligible participant or beneficiary thereof, the
term "Company" shall mean The Detroit Edison Company or such other Controlled
Group Member employing or who employed such employee. Unless otherwise defined
herein, all defined terms shall have the same meaning as provided under the
Retirement Plan. All corporate officers and other administrative personnel
referred to herein refer to officers and administrative personnel of The Detroit
Edison Company.
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COMPANY SERVICE. All years of service with the Company calculated to
the nearest month.
EXECUTIVE POST-EMPLOYMENT INCOME ARRANGEMENT. Individual arrangements
that were entered into with certain executives upon initial employment with the
Company, specifically excluding, however, any Change-in-Control Severance
Arrangement entered into with DTE Energy Company and any offer of employment
letter agreement as they may be amended from time to time. The arrangements may
provide for additional benefits upon retirement.
KEY EMPLOYE DEFERRED COMPENSATION PLAN. The Key Employe Deferred
Compensation Plan initiated in 1964 which provides a supplemental pension
benefit to certain management employees. The Key Employe Deferred
Compensation Plan is sponsored by Detroit Edison for eligible employees.
CERTAIN MANAGEMENT OR HIGHLY-COMPENSATED EMPLOYEES. An employee of a
Company, other than The Detroit Edison Company, who is specifically designated
by written order of the Committee as a member of management eligible to
participate in the Plan, and who is a member of a select group of management or
highly-compensated employees of the Company within the meaning of ERISA Section
201(2). An employee's designation as a Certain Management or Highly Compensated
Employee shall terminate, however, on the date the Committee by written order
terminates such employee's designation for participation in the Plan.
NORMAL PAY. The employee's salary from the Company for a standard
forty-hour work week calculated without regard to any limitation imposed by
Section 401(a)(17) of the Internal Revenue Code including amounts deferred by
the employee under the Company's qualified and non-qualified savings plans. It
does not include any bonuses, special pay, or premium for overtime work.
RETIREMENT PLAN. The Employes' Retirement Plan of The Detroit Edison
Company ("Detroit Edison"). The Retirement Plan is a defined benefit pension
plan sponsored by Detroit Edison for eligible employees.
RETIREMENT ALLOWANCE FACTOR. The multiplier used in the basic formula
of the Retirement Plan.
ELIGIBILITY
Eligibility to participate in this Plan is determined no later than the
latest to occur of:
(1) 90 days from the date hereof; or
(2) 90 days subsequent to an otherwise eligible participant's 55th
birthday; or
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(3) In the case of an otherwise eligible participant who does not
have at least 10 years of Company service at age 55, 90 days
subsequent to the otherwise eligible participant's having 10
years of Company service.
Participation in the Plan is limited to those management employees who
(1) Are members of Management Council (pursuant to OR3, Management
Groups, as may be amended from time to time) at the time of
termination from the Company (or death while actively employed
by the Company), or, with respect to management employees of a
Company other than The Detroit Edison Company, are Certain
Management or Highly Compensated Employees at the time of
termination from the Company (or death while actively employed
by the Company); and
(2) Are not personally eligible to receive a benefit from the Key
Employe Deferred Compensation (KEDC) Plan although a court of
competent jurisdiction may have recognized spousal rights; and
(3) Do not have an effective Executive Post-Employment Income
Arrangement; and
(4) At the time of termination from the Company (or death while
actively employed), are at least 55 years of age and have at
least 10 years of Company service.
Employees who are eligible to receive a benefit from KEDC or who have
entered into Post-Employment Income Arrangements with the Company may elect to
participate in this Plan in accordance with the first paragraph of this section
by filing an election to waive any rights to a benefit from KEDC and/or any
rights under a Post-Employment Income Arrangement with the Vice President-Human
Resources, who will provide an election form upon request, or, in the case of
KEDC, will in certain circumstances be deemed to have made such elections as
provided in KEDC.
TARGET PERCENTAGE OF AVERAGE FINAL COMPENSATION
Payments from the Plan are based upon the calculated target percentage
of average final compensation. The target percentage of average final
compensation is determined by years of Company service and awarded service, if
any, and by the management group in which the participant is a member at the
time of termination from the Company (or death while actively employed by the
Company) as specified in Exhibit A.
Participants awarded service under the Plan must certify any retirement
income expected or being received from a previous employer. Payments from the
Plan to participants with awarded service will be reduced by the
non-contributory portion of any retirement income expected or being received
from a previous employer.
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Payments from the Plan will be reduced by any KEDC spousal payments
required by a court of competent jurisdiction. Payments from the Plan may also
be affected by the employee's age at termination (see Early Retirement) and the
payment option selected by the employee (see Payment Options).
Payments from the Plan are not payable until the participant terminates
employment with the Company and all Controlled Group Members (by death or
otherwise), and references in the following provisions of the Plan to
"terminating employment" or "employment termination" or similar provisions shall
mean termination of employment with the Company and all Controlled Group
Members.
EARLY RETIREMENT
The Plan provides for an unreduced target percentage for those
terminating employment at age 60 or older. A reduced or adjusted target
percentage is provided for those terminating employment (including death)
who are at least age 55 but prior to age 60. The early retirement adjustment
schedule is as follows:
AGE AT EARLY RETIREMENT
TERMINATION ADJUSTMENT PERCENTAGE
55 60%
56 68%
57 76%
58 84%
59 92%
60 or older 100%
Age at termination is calculated to the nearest whole month and the
early retirement adjustment percentage is determined accordingly.
PAYMENT OPTIONS
At the time of employment termination, an eligible employee must elect
one of the following payment options: (a) Guaranteed Term Plus Life, (b)
Actuarial-Adjusted Life with a 100% Joint and Survivor Benefit and (c)
Actuarial-Adjusted Life with a 50% Joint and Survivor Benefit. In the event that
an employee dies during active employment, and at the time of death was eligible
for a benefit as provided herein, the payment option is deemed to be Guaranteed
Term Plus Life.
GUARANTEED TERM PLUS LIFE
If the employee elects the Guaranteed Term Plus Life payment option,
the employee, at the time of employment termination, must also elect a survivor
benefit of either monthly payments or an adjusted lump sum payment. In the event
that such an election is not made by the employee,
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or in the event that the employee dies during active employment and at the
time of death was eligible for a Plan benefit as provided herein, the survivor
benefit is assumed to be the adjusted lump sum payment.
The Guaranteed Term Plus Life payment option provides for a minimum of
15 years of payments to the employee or, if the employee lives beyond the
15-year period, the payments continue to be made to the employee for the life of
the employee.
If the employee elects the monthly payment survivor benefit and dies
prior to the end of the 15-year period, payments will continue to be made to the
employee's beneficiary or estate for the balance of the 15-year period. At the
end of this 15-year period, all payments cease and liability of the Company
under the Plan is terminated.
If the employee elects the lump sum payment survivor benefit and dies
prior to the end of the 15-year period, an adjusted lump sum payment is made to
the employee's designated beneficiary or estate. The adjusted lump sum payment
is determined by a standard annuity calculation where the adjusted lump sum is
the present worth of the remaining monthly benefits in the 15-year period. The
methodology and other relevant factors for determining the amount of the
adjusted lump sum payment are provided in Exhibit B. Upon payment of the lump
sum payment, all payments cease and liability of the Company under the Plan is
terminated.
ACTUARIAL-ADJUSTED LIFE WITH A 100% JOINT AND SURVIVOR BENEFIT
This option provides for the actuarial equivalent to the benefit
payment under the Guaranteed Term Plus Life option. Upon the death of the
employee and the designated beneficiary, all payments cease and the liability of
the Company under the Plan is terminated. The actuarial equivalent benefit is
provided for the life of the employee and upon the death of the employee, 100%
of the benefit is provided to the employee's designated beneficiary for the
duration of the beneficiary's life. If the employee's designated beneficiary
should die prior to the employee, payments continue from the life of the
employee and upon the death of the employee all payments cease and liability of
the Company under the Plan is terminated. If the employee and designated
beneficiary are the same age, the actuarial equivalent benefit equals 97.94% of
the Guaranteed Term Plus Life benefit.
If the beneficiary is younger than the employee, this percentage is
reduced by 1.2% for each 12 full months of difference in age. If the beneficiary
is older than the employee, this percentage is increased 1.2% for each 12 full
months in difference in age up to a maximum of 100%.
ACTUARIAL-ADJUSTED LIFE WITH A 50% JOINT AND SURVIVOR BENEFIT
This option provides for the actuarial equivalent to the benefit
payable under the Guaranteed Term Plus Life option. Upon the death of the
employee and the designated beneficiary, all payments cease and the liability of
the Company under the Plan is terminated. The actuarial equivalent benefit is
provided for the life of the employee and upon the death of the
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employee, 50% of the benefit is provided to the employee's designated
beneficiary for the duration of the beneficiary's life. If the employee's
designated beneficiary should die prior to the employee, payments continue for
the life of the employee and upon the death of the employee all payments cease
and liability of the Company under the Plan is terminated. If the employee and
designated beneficiary are the same age, the actuarial equivalent benefit equals
107.72% of the Guaranteed Term Plus Life benefit. If the beneficiary is younger
than the employee, this percentage is reduced by 1% for each 12 full months of
difference in age. If the beneficiary is older than the employee, there is no
adjustment to the percentage. If the employee does not designate a beneficiary,
the actuarial equivalent benefit equals 107.72% of the Guaranteed Term Plus Life
benefit, and upon the death of the employee all payments cease and the liability
of the Company under the Plan is terminated.
PAYMENT CALCULATION
Monthly payments from the Plan are determined as follows:
STEP 1. DETERMINE GROSS TARGET AMOUNT
The gross target amount results from multiplying the target percentage
by Average Final Compensation as defined in this Plan (see Exhibit A to
determine the target percentage).
STEP 2. DETERMINE RETIREMENT PLAN BENEFIT
The Retirement Plan benefit results from multiplying the retirement
allowance factor by average final compensation as defined under the
Retirement Plan, calculated for purposes hereof, without regard to any
limitations imposed by Section 401(a)(17) or Section 415 of the
Internal Revenue Code, by Company service and, if applicable, by the
early retirement adjustment percentage required under the Retirement
Plan.
STEP 3. DETERMINE BASE ANNUAL TARGET BENEFIT AMOUNT
The base annual target benefit amount results from subtracting the
Retirement Plan benefit that would be payable at retirement (without
regard to whether the employee elects to defer receipt of the benefit)
from the gross target amount.
STEP 4. DETERMINE ADJUSTED ANNUAL TARGET BENEFIT AMOUNT
The adjusted annual target benefit amount results from multiplying the
base annual target benefit amount by the early retirement adjustment
percentage (see page 5 to determine the early retirement adjustment
percentage).
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STEP 5. DETERMINE MONTHLY TARGET BENEFIT AMOUNT UNDER THE
GUARANTEED TERM PLUS LIFE PAYMENT OPTION
The monthly target benefit amount under the Guaranteed Term Plus Life
payment option is determined by dividing the adjusted annual target
benefit amount by 12.
STEP 6. ACTUARIAL-ADJUSTED PAYMENT OPTION
If an actuarial-adjusted payment option is selected, the actuarial
adjustment is applied to the monthly target benefit amount under the
Guaranteed Term Plus Life payment option.
STEP 7. ADJUSTMENT TO PAYMENT OPTION
If an employee is not immediately eligible for a benefit under the
Retirement Plan, the gross target amount will not be adjusted in Step 3
above. In those cases, the payment option determined in Step 6 above
will be adjusted by the actuarial adjusted Retirement Plan benefit when
it is paid to the employee.
The payment determined in Step 6 above for employees with awarded
service will be reduced by the non-contributory portion of any
retirement income from a previous employer when it is paid to the
employee.
Exhibit C displays examples of the Plan payment calculation procedure.
In the event an employee receives an assessment of income taxes from
the Internal Revenue Service which treats any amount under this Plan as
includible in such employee's gross income prior to payment of such amount to
such employee, the Company shall pay an amount equal to such income taxes to
such employee within 30 days after receipt of written notice from such employee
about such assessment. The base annual target benefit amount (Step 3) shall be
reduced by an amount equal to such income taxes and Steps 4, 5 and 6 shall be
reduced accordingly.
Each payment under this Plan shall be reduced by any federal, state or
local taxes which The Detroit Edison Company determines should be withheld from
such payment.
SCHEDULE OF PAYMENTS
Plan payments, if any, are made to the employee or to the designated
beneficiary on a monthly basis. The schedule will follow the provisions for
payment under the Retirement Plan. The accompanying examples show the effect of
Retirement Plan benefits at different times.
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BENEFICIARY DESIGNATION
Each eligible participant may name any beneficiary to whom payments
under the Plan are to be paid in case of the employee's death. Each designation
will revoke all prior designations by the employee and shall be on a form
prescribed by The Detroit Edison Company and will be effective only when filed
by the employee with the Treasurer. In the absence of any such designation,
payments due shall be paid to the employee's estate.
TAXATION
The Company makes no representation as to the tax consequences of
individual payment options. Plan participants are urged to consult tax advisors
of their choice for information and advice.
NON-SECURED PROMISE; AMENDMENTS
Eligible participants have the status of general unsecured creditors of
the Company. This Plan constitutes a promise by the Company to make benefit
payments in the future. The Company intends that this Plan be unfunded for tax
purposes and for purposes of Title I of ERISA. The Company intends that this
Plan be maintained primarily for a select group of management or highly
compensated employees.
Payments as they become due under the Plan to or in respect of a
Company's former employees shall be paid by such Company from its general
assets; provided, however, that no provision of the Plan shall preclude a
Company from segregating assets which are intended to be a source for payment of
benefits under the Plan.
The Detroit Edison Company reserves the right to amend, modify, or
discontinue this Plan at any time; provided, however, that no such amendment,
modification, or termination shall adversely affect the rights of participants
or beneficiaries who are receiving or are immediately eligible to receive
benefits from this Plan at the time of such amendment, modification, or
termination, without such person's prior written consent.
Any Controlled Group Member which has adopted the Plan may as to itself
withdraw from the Plan at any time by action of the Chairman of its board of
directors. In the event of dissolution, merger, consolidation or reorganization
of a Company, the Plan shall terminate as to such Company unless the Plan is
continued by a successor thereto (subject to the consent of the Chairman of the
Board of Directors).
Notwithstanding the foregoing provisions of this section, no amendment,
modification, termination or withdrawal may be made after the occurrence of a
Change in Control, as defined in Addendum I, that shall adversely affect the
rights of any person who is receiving or upon termination would thereupon be
entitled to receive benefits under the Plan, without such person's prior written
consent.
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ADMINISTRATION; ARBITRATION
The Vice President-Human Resources is responsible for the
administration of the Plan. The Vice President-Human Resources has the authority
to interpret the provisions of the Plan and prescribe any regulations relating
to its administration. The decisions of the Vice President-Human Resources with
respect thereto made prior to the occurrence of a Change in Control shall be
conclusive. The Vice President-Human Resources shall review the Plan from time
to time and as part of such review is hereby directed and authorized to amend
such Plan to the extent necessary for ease of administration and/or to comply
with applicable federal and state laws.
The Treasurer of the Company shall be responsible for the
administration of benefits under the Plan.
Notwithstanding any provision in this Plan to the contrary, in the
event of any dispute, claim or controversy (hereinafter referred to as a
"Grievance") between an employee who is eligible to receive benefits under this
Plan and the Company with respect to the payment of benefits to such employee
under this Plan, the computation of benefits under this Plan, or any of the
terms or conditions of this Plan, such Grievance shall be resolved by
arbitration. Arbitration shall be the sole exclusive remedy to redress any
Grievance. The arbitration decision shall be final and binding, and a judgment
on the arbitration award may be entered in any court of competent jurisdiction
and enforcement may be had according to its terms. The arbitration shall be
conducted by American Arbitration Association in accordance with the Commercial
Arbitration Rules of the American Arbitration Association and expenses of the
arbitrator(s) and the American Arbitration Association shall be borne by the
Company. Neither the Company nor such employee shall be entitled to attorneys'
fees, expert witness fees, or other expenses expended in the course of such
arbitration or the enforcement of any award rendered thereunder. The place of
the arbitration shall be the offices of the American Arbitration Association in
the Detroit Metropolitan area, Michigan. The arbitrator(s) shall not have the
jurisdiction or authority to change any of the provisions of this Plan by
alteration of, addition to, or subtraction from the terms thereof. The
arbitrator(s)' sole authority shall be to apply any terms and conditions of this
Plan. Since arbitration is the exclusive remedy with respect to any Grievance,
no employee eligible to receive benefits under this Plan has the right to resort
to any federal court, state court, local court, or administrative agency
concerning breaches of any terms and provisions hereunder, and the decision of
the arbitrator(s) shall be a complete defense to any suit, action, or proceeding
instituted in any federal court, state court, local court, or administrative
agency by such employee or the Company with respect to any Grievance which is
arbitrable as herein set forth. The arbitration provisions shall, with respect
to any Grievance, survive the termination of this Plan.
NON-ALIENABILITY AND NON-TRANSFERABILITY
The right of a participant, participant's spouse or beneficiary to
payment of any benefit hereunder shall not be alienated, assigned, transferred,
pledged or encumbered and shall not be subject to execution, attachment or
similar process. No account shall be subject in any manner to alienation, sale,
transfer, assignment, pledge, encumbrance, charge, garnishment, execution or
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levy of any kind, whether voluntary or involuntary, including but not limited to
any liability which is for alimony or other payments for the support of a spouse
or former spouse, or for any other relative of any employee. Any attempted
assignment, pledge, levy or similar process shall be null and void and without
effect.
CHANGE-IN-CONTROL BENEFIT FOR CERTAIN PERSONS
Notwithstanding the foregoing provisions of the Plan, a participant or
other employee of a Company who has entered into a Change-in-Control Severance
Agreement with DTE Energy Company ("Change-in-Control Severance Agreement")
shall receive a benefit as provided in Addendum I to the Plan upon termination
of employment in certain circumstances following a Change in Control, as defined
in Addendum I. In addition, any participant or beneficiary receiving a benefit
under the Plan at the time of the occurrence of a Change in Control, as defined
in Addendum I, shall receive payment as provided in Addendum I. If a benefit is
payable to a participant or other employee or any beneficiary pursuant to
Addendum I, neither the participant nor such employee, or any beneficiary
thereof, shall be entitled to any payments or further payments, as the case may
be, under the foregoing provisions of the Plan.
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EXHIBIT A
TARGET PERCENTAGE
TARGET PERCENTAGE
MANAGEMENT OF AVERAGE FINAL SERVICE
GROUP COMPENSATION INDEX
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1. Chairman of the Board 60% 25
President
Executive Vice President
Participants who are Certain Management
or Highly Compensated Employees designated
as being in Group 1 by the Committee
2. Senior Vice President 60% 30
Vice President
Participants who are Certain Management
or Highly Compensated Employees designated
as being in Group 2 by the Committee
3. Management Council members 55% 35
other than those included
in Groups 1 and 2 above and
Participants who are Certain
Management or Highly Compensated
Employees, other than those included
in Groups 1 and 2 above, designated by
the Committee as eligible to participate in the
Plan
If the sum of Company service and awarded service is greater than the
corresponding service index, the target percentage is increased by 0.5% for each
year of service above the index. If the sum of Company service and awarded
service is less than the corresponding service index, the target percentage is
reduced by 1% for each year of service below the index for employees in Groups 1
and 2 and by 1.5% for each year of service below the index for employees in
Group 3.
Company service is calculated to the nearest whole month. Awarded
service is determined by the sole discretion of the Committee. The target
percentage is adjusted accordingly if the service index results in fractional
years.
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EXHIBIT B
Table for Determining the Adjusted Lump Sum Payment Under the
Guaranteed Term Plus Life Payment Option (Per $1,000 of Adjusted Annual Target
Benefit Amount)
Remaining
Years Of
Guaranteed
Term
Payment
Interest Rate
6% 7% 8% 9% 10% 11% 12%
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15 $9,875 $9,271 $8,720 $8,216 $7,755 $7,332 $6,943
14 9,456 8,909 8,406 7,945 7,520 7,128 6,767
13 9,012 8,520 8,067 7,648 7,260 6,901 6,569
12 8,540 8,103 7,699 7,323 6,973 6,648 6,345
11 8,038 7,656 7,300 6,967 6,656 6,365 6,093
10 7,506 7,177 6,868 6,578 6,306 6,050 5,808
9 6,941 6,663 6,401 6,153 5,919 5,698 5,488
8 6,341 6,112 5,895 5,688 5,492 5,305 5,127
7 5,704 5,521 5,347 5,179 5,020 4,867 4,721
6 5,028 4,888 4,753 4,623 4,498 4,378 4,263
5 4,310 4,208 4,110 4,014 3,922 3,833 3,746
4 3,548 3,480 3,413 3,349 3,286 3,224 3,164
3 2,739 2,699 2,659 2,621 2,583 2,545 2,509
2 1,880 1,861 1,843 1,824 1,806 1,788 1,770
1 968 963 958 953 948 943 938
0 0 0 0 0 0 0 0
NOTES:
(1) Interest rate is determined by the current prime interest
rate of the NBD Bank less 2%.
(2) Apply linear interpolation for partial years remaining in
guaranteed term period and adjustments for fractional interest
rates.
(3) Exhibit B shows the information to perform a standard annuity
due calculation. It is the present worth of a stream of
monthly payments of $1,000/12 per month made at the end of the
month and continuing for the number of months remaining.
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EXHIBIT B (CONTINUED)
The formula is:
-n
Adjusted Lump Sum = Pmt x (1 -(1 + i) )/i
Where i is the NBD Bank Prime rate less 2% divided by 12 and n is the
number of months remaining. Pmt is $1,000/12 or $83.33.
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EXHIBIT C
EXAMPLE 1
Assumptions:
Date of Termination: January 31, 1998
Age at Termination: 65 Years, 0 Months
Position: Vice President
MSBP Average Final Compensation: $216,000
Retirement Plan Average Final Compensation: $180,000
Company Service: 25 Years, 0 Months
Retirement Allowance Factor: .014
Payment Option: Guaranteed Term Plus Life
(Survivor benefit - monthly
payments)
(Given the above, the target percentage is 55%)
Step 1: 55% x $216,000 = $118,800
Step 2: .014 x $180,000 x 25 = $63,000
Step 3: $118,800 - $63,000 = $55,800
Step 4: $55,800 x 100% = $55,800
Step 5: $55,800/12 = $4,650
Monthly payments of $4,650 will be made for 15 years, or for the life
of the employee if greater than 15 years.
EXAMPLE 1A
Assumptions listed for Example 1 apply with the exception of the
following:
Payment Option: Guaranteed Term Plus Life
(Survivor benefit - lump sum payment)
NBD Bank 9%
Prime Interest Rate:
Date of Employee's Death: January 31, 2003
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EXHIBIT C (CONTINUED)
Monthly payments of $4,650 are made for the life of the employee (see
Example 1). Upon the death of the employee (January 31, 2003), a lump
sum payment of $400,476.60 is made to the beneficiary (see Exhibit B).
EXAMPLE 2
Assumptions:
Date of Termination: January 31, 1998
Age at Termination: 58 Years, 6 Months
Position: Vice President
MSBP Average Final Compensation: $216,000
Retirement Plan Average Final Compensation: $180,000
Company Service: 25 Years, 6 Months
Retirement Allowance Factor: .014
Payment Option: Guaranteed Term Plus Life
(Survivor benefit-monthly
payments)
(Given the above, the target percentage is 55.5%)
Step 1: .555 x $216,000 = $119,880
Step 2: .014 x $180,000 x 25.5 x .91 = $58,477
Step 3: $119,880 - $58,477 = $61,403
Step 4: $61,403 x .88 = $54,035
Step 5: $54,035/12 = $4,503
Monthly payments of $4,503 will be made for 15 years, or for the life
of the employee if greater than 15 years.
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EXHIBIT C (CONTINUED)
EXAMPLE 2A
Assumptions listed for Example 2 apply with the exception of the
following:
Payment Option: Actuarial-Adjusted Life with a
100% Joint and Survivor Benefit
Employee/Beneficiary Beneficiary is two years younger
Age Difference: than the employee
Step 1 - Step 5: Same as Example 2. The monthly
benefit under the Guaranteed
Term Plus Life option is $4,503
Step 6: $4,503 x .9554 = $4,302
Monthly payments of $4,302 are made for the life of the employee. Upon
the death of the employee, monthly payments of $4,302 are made for the
life of the designated beneficiary. Upon the death of the designated
beneficiary, all payments cease.
EXAMPLE 2B
Assumptions listed for Example 2A apply with the exception of the
following:
Payment Option: Actuarial-Adjusted Life with a 50%
Joint and Survivor Benefit
Step 1 - Step 5: Same as Example 2. The monthly
benefit under the Guaranteed
Term Plus Life option is $4,503
Step 6: $4,503 x 1.0572 = $4,760
Monthly payments of $4,760 are made for the life of the employee. Upon
the death of the employee, monthly payments of $2,380($4,760 x 50%) are
made for the life of the designated beneficiary. Upon the death of the
designated beneficiary, all payments cease.
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EXHIBIT C (CONTINUED)
EXAMPLE 3
Assumptions:
Date of Termination: January 31, 1998
Age at Termination: 60 Years, 0 Months
Position: Vice President
MSBP Average Final Compensation: $216,000
Retirement Plan Average Final Compensation: $180,000
Company Service: 14 Years, 0 Months
Awarded Service: 10 Years, 0 Months
Retirement Allowance Factor: .014
Employee/Beneficiary Age Difference: Beneficiary is two years younger
than the employee
Payment Option: Actuarial-Adjusted Life with a
100% Joint and Survivor Benefit
Monthly Pension from Previous Employer
at age 65: $2,000
(Given the above, the target percentage is 54%)
Step 1: 54% x $216,000 = $116,640
Step 2: $0 (Employee is ineligible for an immediate benefit
under the Retirement Plan)
Step 3: $116,640 - $0 = $116,640
Step 4: $116,640 x 100% = $116,640
Step 5: $116,640/12 = $9,720
Step 6: $9,720 x .9554 = $9,286
Monthly payments of $9,286 will be made until a benefit is payable (age
65 in Example 3) under the Retirement Plan and from the previous
employer. At that time the benefit payable under the MSBP will be offset
by an amount equivalent to the benefit paid under the Retirement Plan
(Step 7-Option II assumed) and the benefit paid by the previous employer
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EXHIBIT C (CONTINUED)
Step 7: Monthly Retirement Plan Benefit:
.014 x $180,000 x 14 x .88 = $31,046/12 = $2,587
Reductions to MSBP Benefit:
Retirement Plan $9,286 - $2,587 = $6,699
Previous Employer $6,699 - $2,000 = $4,699
Monthly payments of $4,699 are made for the life of the employee. Upon
the death of the employee, monthly payments of $4,699 are made for the
life of the designated beneficiary. Upon the death of the designated
beneficiary, all payments cease.
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ADDENDUM I
CHANGE-IN-CONTROL BENEFITS
A change in control ("Change in Control") for purposes of the
Plan and this Addendum I shall have occurred if at any time on or after October
1, 1997 any of the following events shall occur:
(1) DTE Energy Company ("DTE") 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 securities of such corporation or person
immediately after such transaction is held in the aggregate by
the holders of the then-outstanding securities entitled to
vote generally in the election of directors (the "Voting
Stock") of DTE immediately prior to such transaction;
(2) DTE 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 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 DTE or a Subsidiary (as hereinafter defined))
by the holders of Voting Stock of DTE immediately prior to
such sale or transfer;
(3) 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 Securities Exchange Act of 1934, as amended
(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 DTE;
(4) DTE 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 DTE 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
paragraph 4;
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(5) If, during any period of two consecutive years, individuals
who at the beginning of any such period constitute the
directors of DTE cease for any reason to constitute at least a
majority thereof; provided, however, that for purposes of this
paragraph (5) each director who is first elected, or first
nominated for election, by DTE's stockholders, by a vote of at
least two-thirds of the directors of DTE (or a committee
thereof) then still in office who were directors of DTE at the
beginning of any such period will be deemed to have been a
director of DTE at the beginning of such period; or
(6) The approval of the shareholders of DTE of a complete
liquidation or dissolution of DTE.
Notwithstanding the foregoing provisions of paragraph (3) or
(4) above, unless otherwise determined in a specific case by
majority vote of the Board of Directors of DTE, a "Change in
Control" shall not be deemed to have occurred for purposes of
paragraph (3) or (4) solely because (i) DTE, (ii) an entity in
which DTE directly or indirectly beneficially owns 50% or more
of the outstanding Voting Stock (a "Subsidiary"), or (iii) any
DTE-sponsored employee stock ownership plan or any other
employee benefit plan of DTE 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 DTE reports that a Change in
Control of DTE has occurred or will occur in the future by
reason of such beneficial ownership.
In the event a Change in Control (as determined without regard
to paragraph (4) above) occurs, any participant or former employee, or
beneficiary thereof, who as of the date of the occurrence of the Change in
Control is receiving benefits under the Plan shall be paid in cash in a lump sum
an amount equal to the actuarial equivalent present value of the remaining
benefits, determined as of the date of payment, that are payable to or in
respect of such person under the Plan (including survivor benefits, if
applicable).
In the event a Change in Control occurs, any participant or
employee of a Company who has entered into a Change-in-Control Severance
Agreement and whose employment is terminated after the occurrence of the Change
in Control in circumstances entitling the individual to severance compensation
under Section 4 of the Change-in-Control Severance Agreement shall be entitled
to a cash lump sum payment under the Plan if (i) the participant or employee is
at least age 47 and 7 months (after the application of the additional age credit
as provided in paragraph (2) below) and (ii) the participant or employee
otherwise meets the requirements for participation in the Plan set forth under
"Eligibility" (except that the participant or employee need not be at least age
55 and have at least 10 years of Company service and for purposes of clause (1)
under the second paragraph under "Eligibility" the participant or employee
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need only have been a member of Management Council or, if applicable, be a
Certain Management or Highly Compensated Employee immediately prior to the
occurrence of the Change in Control or at any time thereafter). The amount of
such payment shall be equal to the actuarial equivalent present value of the
benefit, if any, that would otherwise be payable to the participant or employee
under the Plan under the Guaranteed Term Plus Life payment option determined as
otherwise provided in the Plan but with the following modifications:
(1) Awarded service and the management group in which the
participant or employee is a member shall be
determined immediately prior to the time of
termination, or the time of the occurrence of the
Change in Control, if greater.
(2) The Plan benefit shall be determined by assuming the
participant has two additional years each of age and
Company service for purposes of the Plan, as provided
in Section 4(a)(ii) of the Change-in-Control
Severance Agreement.
(3) If the participant or employee is not eligible for
immediate payment of a benefit under the Retirement
Plan, the Plan benefit to which the participant or
employee is entitled shall be determined without
regard to Step 2 under "Payment Calculation", but
instead the lump sum payable under this Addendum I
shall be reduced by the actuarial equivalent of the
Retirement Plan benefit as provided in paragraph (6)
below.
(4) If the participant or employee is under age 55 (after
the application of paragraph (2) above), the
applicable early retirement adjustment percentage
shall be determined as follows:
AGE AT EARLY RETIREMENT
TERMINATION ADJUSTMENT PERCENTAGE
55 60%
54 52%
53 44%
52 36%
51 28%
50 20%
49 12%
48 4%
47.5 0%
(5) If the participant or employee has received awarded
service under the Plan, the lump sum payable shall be
reduced by the actuarial
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equivalent of the non-contributory portion of the
retirement income expected or being received from the
participant's or employee's previous employer.
(6) If a participant or employee is not eligible for
immediate payment of a benefit under the Retirement
Plan, the lump sum payable shall be reduced by the
actuarial equivalent of the benefit to which the
employee is entitled at age 65 under the Retirement
Plan as determined without regard to any limitation
imposed by Section 401(a)(17) or Section 415 of the
Internal Revenue Code.
Upon the foregoing payment, no further benefits shall be
payable under the Plan to such participant or employee or beneficiary thereof.
Payments under this Addendum I shall be made within 30 days after the date on
which the Change in Control occurs or, if later, the date the participant or
employee terminates employment.
For purposes of this Addendum I, the interest/discount rate
and mortality table used to determine actuarial equivalence shall be as follows:
(1) Interest/discount Rate - an annual rate equal to the
Fed's Fund Rate (as of the first business day of the
calendar month in which the Change in Control or
termination, if later, occurs) plus 1%, but in no
event shall the interest/discount rate exceed 8% or
be less than 5%.
(2) Mortality Table - the unisex version of the mortality
table used for funding purposes of the most recent
actuarial valuation for the Plan issued prior to the
date of the Change in Control as defined in the DTE
Change-in-Control Severance Agreements.
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