Exhibit 10-71
CHANGE-IN-CONTROL SEVERANCE AGREEMENT
This
CHANGE-IN-CONTROL SEVERANCE AGREEMENT (the “Agreement”)
is entered into as of November 8, 2007 (the
“Effective Date”) between DTE Energy Company, a
Michigan corporation (the “Company”), and
(the “Executive”).
RECITALS
A. The Executive is an executive or a key employee of the
Company or one or more of its Subsidiaries and has made and is
expected to continue to make major contributions to the short- and
long-term profitability, growth and financial strength of the
Company.
B. The Company recognizes that, as is the case for most
publicly held companies, the possibility of a Change-in-Control
exists and that potential employment uncertainty resulting from a
Change-in-Control may distract management from conducting the
Company’s business or cause management employees to leave the
Company’s employ.
C. The Company wants to provide security to its senior
executives and key employees to enable them to discharge their
duties during the consideration and consummation of a
Change-in-Control in order to preserve the value of the Company for
its shareholders.
In
consideration of these objectives, the Company and the Executive
agree as follows:
1.
Term of Agreement. The term of this Agreement (the
“Term”) begins on the Effective Date and ends on the
earlier of:
(a) the
later of:
(1) the
Agreement Expiration Date; or
(2) the
last day of the Severance Period.
or
(b) the
date prior to a Change-in-Control on which the Executive ceases for
any reason to be an employee of the Company and any Subsidiary. For
purposes of this Section 1(b), the Executive does not cease to
be an employee of the Company and any Subsidiary if the
Executive’s employment is transferred between the Company and
any Subsidiary, or among any Subsidiaries.
2.
Right to Receive Severance Benefits and Other Consideration.
The Executive will become entitled to the severance benefits and
other consideration provided under this Agreement if the
Executive’s employment is terminated because of a Qualifying
Termination.
3.
Severance Benefits and Other Consideration.
(a)
Severance Benefits . The Severance Benefits payable under
this Agreement are all of the following:
(1) A lump
sum payment equal to the sum of:
(A) Base
Pay; plus
(B) the
greater of:
(i) the
Annual Bonus for the year in which the Change-in-Control occurs;
or
(ii) the
Annual Bonus for the year in which the Termination Date
occurs,
in either case
based on the assumption that target performance goals for the
applicable year would be met and the Executive was employed for the
entire year or until any later date required to receive the
payment;
multiplied
by:
(C) the
lesser of:
(i) 200%;
or
(ii) 200%
multiplied by a fraction, the numerator of which is the number of
full calendar months from the Executive’s Termination Date to
the Executive’s 65 th birthday, and
the denominator of which is 36.
(2) A lump
sum payment equal to:
(A) the
greater of:
(i) the
Annual Bonus for the year in which the Change-in-Control occurs;
or
(ii) the
Annual Bonus for the year in which the Termination Date
occurs,
in either case
calculated based on the assumption that target performance goals
for the applicable year would be met and the Executive was employed
for the entire year or until any later date required to receive
such payment,
(B) multiplied by the following fraction:
2
(i) the
numerator is the number of days prior to the Executive’s
Termination Date during the calendar year in which the Termination
Date occurs; and
(ii) the
denominator is 365,
(C) then
reduced by the Annual Bonus for the year in which the Termination
Date occurs that is payable to the Executive under the terms of the
Annual Plan because the Executive has attained age 55 and completed
10 years of service with the Company and all
Subsidiaries.
(3) For
Welfare Benefits provided to the Executive immediately prior to the
Executive’s Termination Date (or, if greater, immediately
prior to reduction, termination, or denial), a lump sum payment
equal to the present value of the cost of coverage for the Benefit
Continuation Period. The cost of coverage will be determined at
rates in effect as of the Termination Date. The present value of
the cost will be determined using an interest rate equal to the
composite prime rate in effect as of the Termination Date in the
Northeast Edition of The Wall Street Journal .
(4) Additional age, service, and compensation credit for the
length of the Benefit Continuation Period for determining the
Executive’s benefits under the following plans (or any
successors to these plans):
(A) DTE
Energy Company Supplemental Retirement Plan; and
(B) DTE
Energy Company Executive Supplemental Retirement Plan (including
the Management Supplemental Benefit Plan, if applicable to the
Executive).
If the
Executive’s Qualifying Termination was for Good Reason as
described in Section 18(m)(4), the Executive’s benefits
under the above plans will be the greater of the Executive benefits
under the terms of the plans as of the Executive’s
Termination Date or before the termination, denial, or material
reduction.
(5) Outplacement services by a firm selected by the Executive,
at a cost to the Company in an amount up to 15% of the
Executive’s Base Pay. No payments by the Company for
outplacement services will be made after December 31
st of
the calendar year following the calendar year including the
Termination Date.
(6) An
excise tax gross-up payment as determined under
Section 19.
(b) Other
Consideration . The consideration for the restrictive covenant
in Section 9(d) (Competitive Activity) is a lump sum payment equal
to:
(1) the
sum of:
3
(A) Base
Pay; plus
(B) the
greater of:
(i) the
Annual Bonus for the year in which the Change-in-Control occurs;
or
(ii) the
Annual Bonus for the year in which the Termination Date
occurs,
in either case
based on the assumption that target performance goals for the
applicable year would be met and the Executive was employed for the
entire year or until any later date required to receive the
payment;
multiplied
by
(C) the
lesser of:
(i) 100%;
or
(ii) 100%
multiplied by a fraction, the numerator of which is the number of
full calendar months from the Executive’s Termination Date to
the Executive’s 65 th birthday, and
the denominator of which is 36.
4.
Timing of Payments.
(a) Payments under the following Sections will be paid on the
later of 60 days after the Executive’s Termination Date
or any later date required by Code Section 409A or any other
law:
(1) Section 3(a)(1);
(2) Section 3(a)(2);
(3) Section 3(a)(3);
(4) Section 3(a)(6); and
(5) Section 3(b).
(b)
Withholding of Taxes . The Company will withhold from any
amounts payable under this Agreement all federal, state, city or
other taxes that the Company is required to withhold under any law
or government regulation or ruling.
4
(c)
Interest . If the Company fails to make any payment or
provide any benefit required to be made or provided under this
Agreement on a timely basis, the Company will pay interest on the
amount or value at an annualized rate of interest equal to the
composite prime rate as quoted from time to time during the
relevant period in the Northeast Edition of The Wall Street
Journal . The interest is payable as it accrues on demand, but
the Company is not required to pay interest more frequently than
monthly. Any change in the prime rate will be effective on and as
of the date of the change.
5.
Non-Duplication of Severance Benefits and Other
Consideration.
(a)
Qualifying Termination During Concurrent Severance Periods .
If the Executive experiences a Qualifying Termination when two or
more Severance Periods are running concurrently (because two or
more Changes-in-Control have occurred), the Executive will have a
Qualifying Termination with respect to each Severance Period. A
determination of the payments and benefits to be provided under the
Agreement will be made for each Qualifying Termination. However,
the Executive will receive only:
(1) the
greatest lump sum payment under Section 3(a)(1) payable for
any Qualifying Termination;
(2) the
greatest lump sum payment under Section 3(a)(2) for any
Qualifying Termination;
(3) the
greatest lump sum payment under Section 3(a)(3) for any
Qualifying Termination;
(4) the
greatest benefits under Section 3(a)(4) for any Qualifying
Termination; and
(5) the
greatest lump sum payment under Section 3(b) for any Qualifying
Termination.
(b) Effect
on Other Employee Benefits . The Executive’s Qualifying
Termination will not affect any rights the Executive may have under
any agreement, policy, plan, program or arrangement of the Company
or Subsidiary providing Employee Benefits (other than Severance
Pay), which rights are governed by the terms of the agreement,
policy, plan, program or arrangement. The benefits received by an
Executive under this Agreement because of a Qualifying Termination
supersede and are in lieu of any other Severance Pay to which the
Executive may be entitled.
6.
Mitigation. The Company acknowledges that it will be difficult
and may be impossible for the Executive to find reasonably
comparable employment following the Termination Date. Accordingly,
the Company acknowledges that payment of the severance compensation
by the Company to the Executive under this Agreement is reasonable.
The Executive is not required to mitigate the amount of any payment
provided for in this Agreement by seeking other employment or
otherwise. No profits, income, earnings or other benefits from any
source will create any mitigation, offset, reduction or other
obligation on the part of the Executive, except as
5
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 claims arising out of the Executive’s
employment or the termination of the Executive’s
employment.
7.
Arbitration; Legal Fees and Expenses.
(a) Except
for legal proceedings brought by the Executive or the Company for
injunctive relief, any dispute or claim involving this Agreement
will be submitted to final and binding arbitration. The arbitration
will take place in Oakland County, Michigan before a single neutral
arbitrator under the then-current National Rules for the Resolution
of Employment Disputes of the American Arbitration Association. The
arbitrator will issue a written opinion and will not have authority
to render an award beyond the scope and specific terms of this
Agreement. Judgment upon the arbitrator’s award may be
entered in any court of competent jurisdiction. Any demand for
arbitration must be made within 30 days of when the party knew
or should have known of the alleged dispute or claim. Failure to
timely demand arbitration makes the dispute or claim
non-arbitrable. The Executive and the Company expressly waive their
rights to institute or prosecute any lawsuits or other court
proceedings and waive their right to a jury trial, except for the
legal proceedings excluded above.
(b) It is
the intent of the Company that the Executive not be required to
incur legal fees and the related expenses associated with the
interpretation, enforcement or defense of Executive’s rights
under this Agreement because the legal fees and related expenses
would substantially detract from the benefits intended to be
extended to the Executive under this Agreement.
(c) If it
appears to the Executive that the Company has failed to comply with
any of its obligations under this Agreement or if the Company or
any other person takes or threatens to take any action to declare
this Agreement void or unenforceable, or institutes any action or
proceeding designed to deny, or to recover from, the Executive the
benefits provided or intended to be provided to the Executive under
this Agreement, the Company irrevocably authorizes the Executive to
retain counsel of Executive’s choice, at the expense of the
Company as provided in this Section 7, to advise and represent
the Executive in connection with any interpretation, enforcement or
defense of the Executive’s rights under this Agreement.
(d) The
Executive may pursue any legal defense of the Executive’s
rights under this Agreement whether by or against the Company or
any Director, officer, stockholder or other person affiliated with
the Company, in any jurisdiction.
(e) Whether or not the Executive prevails in connection with
any defense of the Executive’s rights under this Agreement,
the Company will pay and be solely financially responsible for
reasonable hourly attorneys’ fees and related fees and
expenses incurred by the Executive under this Section 7, but
only if the arbitrator determines the Executive’s claim was
brought in good faith and was not frivolous. If the
Executive’s request for injunctive
6
relief is
denied and the Executive does not timely demand arbitration for the
dispute or claim underlying the Executive’s request for
injunctive relief, the Executive’s request for injunctive
relief is deemed to be frivolous and not brought in good faith for
purposes of this Section 7(e).
(f) The
Company’s payment of the Executive’s legal fees and
expenses under this Section 7 following termination of the
Executive’s employment (whether or not in a Qualifying
Termination) will be made during the first calendar year beginning
after the date the Executive’s employment terminated.
8.
Survival of Rights and Obligations. The rights and obligations
of the Executive and the Company under the following Sections will
survive the termination or expiration of this Agreement and the
termination of the Executive’s employment after a
Change-in-Control for any reason:
(a) Section 3 (Severance Benefits and Other
Consideration);
(b) Section 4 (Timing of Payments);
(c) Section 5 (Non-Duplication of Severance Benefits and
Other Consideration);
(d) Section 6 (Mitigation); and
(e) Section 7 (Legal Fees).
9.
Confidential Information; Non-Disparagement; Non-Solicitation;
Competitive Activity.
(a)
Confidential Information . At all times following the
Termination Date, the Executive will not, without the prior written
consent of the Company, either directly or indirectly use,
appropriate, or disseminate, disclose, or communicate to any person
or entity any confidential information of the Company or any
Subsidiary that is now known or later becomes known to the
Executive because of the Executive’s employment with the
Company or any Subsidiary, unless the disclosure is required by a
valid subpoena or order issued by a court or governmental
body.
(1) For
purposes of this Section 9(a), “confidential
information” is any confidential, proprietary, or trade
secret information, including concepts, ideas, information, and
materials related to the Company or any Subsidiary, customer
records, customer lists, economic and financial analyses, financial
data, customer contracts, marketing plans, notes, memoranda, lists,
books, correspondence, manuals, reports or research, whether
developed by the Company or a Subsidiary or developed by the
Executive while employed by the Company or a Subsidiary.
(2) This
Section 9(a) does not apply to any confidential information that
becomes publicly disseminated by means other than a breach of this
provision.
(b)
Non-Disparagement . The Executive will not make any verbal
or written comments to any third party that are defamatory,
disparaging, or critical of the Company
7
or any
Subsidiary or its products, management, employees, officers or
operations or that would otherwise adversely affect the finances or
business reputation of the Company or any Subsidiary.
(c)
Non-Solicitation .
(1) For a
period of two years after the Termination Date, the Executive will
not solicit, divert, take away, or attempt to take away any
customer of the Company or any Subsidiary or the business of any
customer of the Company or any Subsidiary.
(A) A
“customer” of the Company or any Subsidiary is any
person or other entity to which the Company or any Subsidiary has
sold services or products during the 24-month period immediately
preceding the Termination Date, any person or other entity that the
Company or any Subsidiary is in the process of selling services or
products, or any person or other entity to which the Company or any
Subsidiary has submitted or is in the process of submitting a bid
to sell services or products. `
(2) For a
period of two years after the Termination Date, the Executive will
not solicit, attempt to employ, or employ any individual who is an
employee, consultant, or agent of the Company or any
Subsidiary.
(d)
Competitive Activity . For a period of one year following
the Termination Date, the Executive will not engage in any
Competitive Activity. If the Executive engages in any Competitive
Activity earlier than one year following the Termination Date, the
Executive must repay to the Company the consideration paid to the
Executive under Section 3(b).
10.
Employment Rights. Nothing in this Agreement creates 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.
11.
Successors and Binding Agreement.
(a) The
Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation, reorganization or otherwise) to
all or substantially all of the business or assets of the Company,
by agreement in form and substance satisfactory to the Executive,
to expressly assume and agree to perform this Agreement in the same
manner and to the same extent the Company would be required to
perform it if the succession had not 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
person acquiring directly or indirectly all or substantially all of
the business or assets of the Company by purchase, merger,
consolidation, reorganization or otherwise, with the successor
thereafter deemed to be the “Company” for the purposes
of this Agreement. Other than as permitted under this
Section 11(a), this Agreement is not assignable, transferable
or delegable by the Company.
8
(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 may,
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). The
Executive’s right to receive payments under the Agreement is
not assignable, transferable or delegable, including 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. If any assignment or transfer not permitted by this
Section 11(c) is attempted, the Company will have no liability to
pay any amount attempted to be assigned, transferred or
delegated.
12.
Notices.
(a) All
communications, including notices, consents, requests or approvals,
required or permitted to be given under this Agreement must be in
writing.
(b) All
notices must be provided by:
(1) hand
delivery (deemed provided when delivered);
(2) electronic facsimile transmission, with verbal
confirmation of receipt (deemed provided when transmitted);
(3) United
States registered or certified mail, return receipt requested,
postage prepaid (deemed provided five business days after mailing);
or
(4) a
nationally recognized overnight courier service such as Federal
Express or UPS (deemed provided three business days after deposit
with courier service).
(c) Notices to the Company must be addressed to the attention
of the Vice President – Human Resources of the Company at the
Company’s principal executive office.
(d) Notices to the Executive must be addressed to the
Executive at the Executive’s principal residence.
(e) The
Company or the Executive can change the address to which notices to
that party are to be addressed by providing notice to the other
party as required under this Section 12, except that notices
of changes of address are effective only upon actual 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 gi
|