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EXHIBIT 10.13
EXECUTIVE INCENTIVE PLAN
EFFECTIVE OCTOBER 27, 1997
OVERVIEW
The Executive Incentive Plan ("Plan") supplements possible annual financial
incentives provided under the Shareholder Value Improvement Plan - A for
eligible members of Detroit Edison Company's ("Company") senior management. It
rewards such employees for the accomplishment of financial and strategic
objectives that improve DTE Energy Company's ("DTE") operating results and
positions DTE for long term profitability. Recipients of Plan awards may, under
specified conditions, defer the payment of awards.
The Plan measures calendar year performance. The current year's targets,
measures and weights will be communicated annually following approval.
ADMINISTRATION
The Organization and Compensation Committee ("Committee") of the Detroit Edison
Board of Directors ("Board of Directors") is Plan Administrator with
responsibility for the administration of the Plan. The Committee has the
authority to interpret the provisions of the Plan and prescribe any regulations
relating to its administration. The decisions of the Committee with respect to
the administration of the Plan made prior to the occurrence of a Change in
Control, as defined herein, shall be conclusive.
The Committee, on an annual basis, will review and, if appropriate, recommend
to the Board of Directors for approval, the specific criteria for eligibility,
the type and timing of awards and the manner of payment of awards (current
and/or deferred), the performance measures and related weights to be used in
computing award amounts and amounts in the Performance Fund, as defined herein,
and the performance levels for each performance measure. The Board of Directors
reserves the right to amend, suspend or terminate the Plan at any time (See
"Awards"); provided, however, that on or after the occurrence of a Change in
Control, as defined herein, no amendment, suspension or termination of the Plan
may be made that adversely affects the rights of any person without his or her
prior written consent.
Current awards calculated under the terms of the Plan are not payable until
such time as the Board of Directors' approval has been granted; provided,
however, that notwithstanding the foregoing or any other provision of the Plan,
after a Change in Control, as defined herein, such approval is not required
with respect to awards thereafter payable in respect of any Plan year ending
prior to the occurrence of the Change in Control. The Board of Directors
reserves the right to reduce or cancel any awards that might otherwise be made
if, in its sole discretion, it determines that the performance achieved is not
indicative of an improvement in DTE's overall performance. If such a
determination is made, the Plan may be canceled or substantially modified with
the result of terminating or decreasing any awards that might otherwise be made
hereunder. Notwithstanding the foregoing or any other provision of the Plan, no
award in respect of a Plan year ending prior to the occurrence of a Change in
Control, as defined herein, may be reduced or canceled, nor may the Plan be so
canceled or substantially modified, following the occurrence of a Change in
Control.
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The Treasurer will be responsible for making award payments, for establishing
and maintaining the deferred accounts for award recipients, and for maintaining
all necessary records regarding the valuation and payment of awards.
The Vice President-Human Resources will assist the Committee in the
development, administration and communication of the Plan.
ELIGIBILITY
Any person who is elected to the position of Vice President and above at
Detroit Edison (i.e., senior management) and who holds and actively performs in
one or more such eligible positions for a total of at least seven months during
the Plan year will become eligible to participate in the Plan. "Hold and
actively perform" excludes all temporary assignments. Any key employee of
Detroit Edison may be designated by the Committee to become a participant in
the Plan. Participants' performance must be considered at least satisfactory
or equivalent for the applicable calendar year to be eligible to receive an
award under the Plan.
Employees of the Company are not eligible to participate in the Plan if they
are eligible to participate in any other Company incentive program other than
the Long Term Incentive Plan and the Shareholder Value Improvement Plan - A.
Exceptions to the eligibility criteria may be authorized by the Board of
Directors.
Participation in the Plan does not guarantee continued employment with the
Company.
PLAN YEAR
The Plan year will be a calendar year.
AWARD OPPORTUNITY
Awards, if any, will be payable from a fund ("Performance Fund") established by
multiplying the base salary (including applicable amounts deferred under
Company-sponsored benefit plans) of each otherwise eligible participant as of
the last day of the payroll year by a target percent of salary by position and
then by a percent based upon the achievement of specific performance measures
and combining such individual amounts into one collective fund.
PERFORMANCE MEASURES, LEVELS AND WEIGHTS
The target percentages, measures of performance and weights applicable to each
Plan year will be communicated annually to all eligible employees.
AWARDS
Award amounts will be payable from the Performance Fund and will be granted, in
the sole discretion of the Board of Directors, to otherwise eligible
participants, in such amounts, if any, as are determined to be appropriate by
the Board of Directors.
Awards under the Plan are not considered basic compensation for purposes of the
Company's qualified and non-qualified savings plans, the Company's qualified
and non-qualified retirement plans, insurance
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or any other Company-sponsored qualified or non-qualified employee benefit
programs.
AWARD PAYMENT
No awards will be paid under this Plan if no awards are paid under the
Shareholder Value Improvement Plan - A regardless of whether other terms and
conditions are met.
Annual awards, if any, will be paid as soon as practicable following approval
by the Board of Directors unless deferred as permitted herein.
Eligible participants will be permitted to defer the payment of 50% to 100% of
an approved award that is payable prior to the occurrence of a Change in
Control, as defined herein, for a period of from one to five years ("Deferred
Awards"). A Deferred Award Account will be established for each award recipient
with a timely Deferral Notice on file with the Company. For the calendar year
during which this Plan is adopted, deferrals must be irrevocably submitted
within 30 calendar days of the date of adoption. Thereafter, deferrals must be
irrevocably submitted prior to the commencement of the Plan year during which
the services giving rise to the award will be performed on a form ("Deferral
Notice") to be furnished by the Company. For example, a Deferral Notice for an
award to be based on 1998 performance must be filed with the Company by the end
of 1997. Once filed with the Company, the Deferral Notice may not be changed or
revoked.
DEFERRED AWARD ACCOUNTS
Deferred Award Accounts will be established for each recipient with a timely
Deferral Notice on file as soon as practicable following the Board of
Directors' approval of an award. Amounts in Deferred Award accounts will be
deemed to earn interest at a rate calculated on the last business day of each
month (commencing with the first month following the deferral of an award) with
reference to the Five-Year United States Treasury Bond rate, as reported in a
nationally-recognized financial service.
Deferred Awards, including deemed earnings thereon, will be payable as soon as
practicable in the calendar year selected by an award recipient in the Deferral
Notice. In the event that a participant with a Deferred Account dies, retires
or terminates employment with the Company and its Affiliates prior to the time
established for payment in the Deferral Notice, such participant's Deferred
Account, plus earnings thereon, shall be paid to such participant or
participant's designated beneficiary as soon as possible thereafter. For
purposes of the Plan, the term "Affiliate" shall mean any parent of the Company
or any entity in which the Company or any parent of the Company directly or
indirectly beneficially owns more than 50% of the voting securities.
The Committee may, in its discretion, terminate any Deferral and immediately
pay out such award in cash.
FORFEITURE
Otherwise eligible participants who are discharged or resign from the Company
and its Affiliates prior to the end of the Plan Year (December 31) will forfeit
an annual award unless the termination is the result of disability (where
disability is defined as being eligible to receive a benefit under a long-term
disability plan of the Company or an Affiliate), death or retirement (where
retirement is defined as a resignation at age 55 or older and with at least 10
years of service with the Company and its Affiliates or at age 65 or older).
Deferred Accounts are not subject to forfeiture.
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FUNDING STATUS
Benefits under the Plan, including any Deferred Accounts, are payable solely
from the general assets of the Company and shall remain unfunded and unsecured
(under federal income tax laws and Title I of the Employee Retirement Income
Security Act of 1974, as amended) during the entire period of the Plan's
existence. The participant, the participant's spouse or beneficiary are merely
general creditors of the Company and the obligations of the Company hereunder
are purely contractual and shall not be funded or secured in any way. Nothing
herein, however, shall preclude the Company from segregating assets which are
intended to be a source of payment of benefits under the Plan.
NON-ALIENABILITY AND NON-TRANSFERABILITY
The right of a participant and participant's spouse or beneficiary to payment
of any benefit or deferred compensation hereunder shall not be alienated,
assigned, transferred, pledged or encumbered and shall not be subject to
execution, attachment or similar process. No participant may borrow against the
deferred account established for his or her benefit hereunder. No account shall
be subject in any manner to alienation, sale, transfer, assignment, pledge,
encumbrance, charge, garnishment, execution or 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.
BENEFICIARY DESIGNATION
Each eligible participant may name any beneficiary to whom awards under the
Plan are to be paid in case of the eligible participant's death. Each
designation will revoke all prior designations by the eligible participant and
shall be on a form prescribed by the Plan Administrator and will be effective
only when filed by the eligible participant with the Treasurer. In the absence
of any such designation, awards due shall be paid to the participant's (1) life
insurance beneficiary designated by the participant with respect to life
insurance maintained by the Company for the benefit of the participant, or, in
the absence of a designated life insurance beneficiary, (2) to the
participant's estate.
GOVERNING LAW
The Plan shall be governed by the laws of the State of Michigan and, to the
extent that may be applicable, the Federal laws of the United States.
CHANGE IN CONTROL
A change in control ("Change in Control") for purposes of the Plan shall have
occurred if at any time on or after October 1, 1997 any of the following events
shall occur:
(1) 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;
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(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) 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 (4) 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
(5) The approval of the shareholders of DTE of a complete
liquidation or dissolution of DTE.
Notwithstanding the foregoing provisions of paragraph (3)
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) 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 or Schedule 14D-1 (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.
In the event a Change in Control occurs during a Plan year, then,
notwithstanding anything to the contrary in the foregoing provisions of the
Plan, including but not limited to the Section entitled "Administration", no
payments of Awards shall be made under the foregoing provisions of the Plan for
such Plan year, but instead,
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(a) each Vice President and above at Detroit Edison during the
Plan year employed by the Company or an Affiliate immediately
prior to the date on which the Change in Control occurs,
(b) and each Vice President and above at Detroit Edison who had
terminated employment with the Company and its Affiliates
during the Plan year by reason of retirement or disability
(as such terms are defined above under "Forfeiture") or death
prior to the occurrence of the Change in Control but after
having held and actively performed in one or more such
positions for a total of at least seven months during the
Plan year,
shall have a right (or, in the case of the person's death, his or her
beneficiary shall have the right) to an immediate cash payment of an amount
determined by multiplying (i) the individual's actual base salary (including
applicable amounts deferred under Company-sponsored benefit plans) earned
during the Plan year while a Vice President and above at Detroit Edison prior
to the occurrence of the Change in Control or earlier termination by
retirement, disability or death, by (ii) the individual's applicable target
percent of salary by position for the Plan year based on the assumption that
established performance targets were met. Such payments shall be made within 30
days after the date on which the Change in Control occurs without the necessity
of approval of the Board of Directors.
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