Exhibit 10.1

 

 

 

 

CMS INCENTIVE COMPENSATION PLAN

FOR CMS ENERGY AND CONSUMERS ENERGY OFFICERS

 

 

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CMS INCENTIVE COMPENSATION PLAN FOR CMS ENERGY AND CONSUMERS ENERGY OFFICERS

 

I.             GENERAL PROVISIONS

 

1.1         Purpose.  The purpose of the CMS Incentive Compensation Plan
(“CMSICP” or “Plan”) is to:

 

(a)          Provide an equitable and competitive level of compensation that
will permit CMS Energy and Consumers Energy to attract, retain and motivate
Officers.

 

(b)          No payments to Officers in the form of incentive compensation shall
be made unless pursuant to a plan approved by the Committee on Compensation and
Human Resources of the Board of Directors of CMS Energy and after express
approval of the Committee.  This plan shall be administered by the President and
CEO of CMS Energy and the Benefit Administration Committee.

 

1.2         Effective Date.  The initial effective date of the Plan is
January 1, 2004.  The Plan, as described herein, is amended and restated
effective as of January 1, 2014.

 

1.3         Definitions.  As used in this Plan, the following terms have the
meaning described below:

 

(a)          “Annual Award” means an annual incentive award granted under the
CMSICP.

 

(b)          “Base Salary” means the base salary on January 1 of a Performance
Year, except as impacted by a Change in Status as defined in Article V.  For
purposes of the Plan, an Officer’s Base Salary must be subject to annual review
and annual approval by the Committee.

 

(c)          “Benefit Administration Committee” means the committee as appointed
by the Chief Executive Officer and Chief Financial Officer of CMS Energy
Corporation to act as the Plan Administrator in accordance with authority
granted by the Board of Directors.

 

(d)          “CMS Energy” means CMS Energy Corporation.

 

(e)          “Code” means the Internal Revenue Code of 1986, as amended.

 

(f)           “Code Section 162(m) Employee” means a “covered employee” as that
term is defined under Code Section 162(m).  Generally, this is the CEO and the
three highest paid executive officers (other than the CEO and the CFO) of the
corporation.

 

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(g)          “Committee” means the Committee on Compensation and Human Resources
of the Board of Directors of CMS Energy Corporation.

 

(h)          “Company” means CMS Energy.

 

(i)           “Consumers Energy” means Consumers Energy Company, a wholly owned
subsidiary of CMS Energy.

 

(j)           “Deferred Annual Award” means the amount deferred pursuant to
Section 4.2.

 

(k)          “Disability” means that a participant has terminated employment
with the Company or Consumers Energy and is disabled, as that term is defined
under Code Section 409A and any applicable regulations.

 

(l)           “Leave of Absence” for purposes of this Plan means a leave of
absence that has been approved by the Company.

 

(m)         “Officer” means a United States of America employee of the Company
or Consumers Energy in Salary Grade “E-3” or higher.

 

(n)          “Payment Event” means the time at which a Deferred Annual Award may
be paid pursuant to Section 4.2.

 

(o)          “Payment Term” means the length of time for payment of a Deferred
Annual Award under Section 4.2.

 

(p)          “Pension Plan” means the Pension Plan for employees of Consumers
Energy and Other CMS Energy Companies.

 

(q)          “Performance Year” means the calendar year prior to the year in
which an Annual Award is made by the Committee.

 

(r)           “Plan Administrator” for Officer participants means the President
and Chief Executive Officer of CMS Energy, under the general direction of the
Committee.  For all other participants and for purposes of administering
Deferred Amounts under Section 4.2, the Plan Administrator is the Benefits
Administration Committee appointed by the Chief Executive Officer and the Chief
Financial Officer as authorized by the Board of Directors.

 

(s)           “Retirement” means that a Plan participant is no longer an active
Officer and qualifies for a retirement benefit other than a deferred vested
retirement benefit under the Pension Plan.  For a participant ineligible for
coverage under the Pension Plan and covered instead under the Defined

 

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Company Contribution Plan, retirement occurs when there is a Separation from
Service on or after age 55 with 5 or more years of service.

 

(t)           “Separation from Service” means an Officer retires or otherwise
has a separation from service from the Company as defined under Code
Section 409A and any applicable regulations.  The Plan Administrator will
determine, consistent with the requirements of Code Section 409A and any
applicable regulations, to what extent a person on a leave of absence, including
on paid sick leave pursuant to Company policy, has incurred a Separation from
Service.  Notwithstanding the above, a Separation from Service will occur
consistent with the Regulation 1.409A-1(h) when it is reasonably anticipated
that the level of service provided by the Officer will be no more than 45% of
the average level of bona fide service performed by the Officer over the
immediately preceding 36 month period.

 

(u)          “Subsidiary” means any direct or indirect subsidiary of the
Company.

 

1.4         Eligibility.  Officers of CMS Energy and/or Consumers Energy who do
not participate in a broad based incentive plan contingent upon objectives and
performance unique to the Officers’ Subsidiary, affiliate, site and/or business
unit, are eligible for participation in the CMSICP. An individual listed on the
Company payroll records as a contract employee is not eligible for this Plan.

 

1.5         Administration of the Plan.

 

(a)          The Plan is administered by the President and Chief Executive
Officer of CMS Energy under the general direction of the Committee.

 

(b)          The Committee will normally approve performance goals in January of
the Performance Year, but no later than March 30th of the Performance Year.

 

(c)          The Committee, no later than March 1st of the calendar year
following the Performance Year, will review for approval proposed Annual Awards
for the total of all CMSICP Officer participants, as recommended by the
President and CEO of CMS Energy.  All proposed Annual Awards are subject to
approval of the Committee.  Before the payment of any Annual Awards, the
Company’s outside auditors and the Committee will certify in writing that the
performance goals were in fact satisfied in accordance with Code Section 162(m).

 

(d)          The Committee reserves the right to modify the performance goals
with respect to unforeseeable circumstances or otherwise exercise discretion
with respect to proposed Annual Awards as it deems necessary to maintain the
spirit and intent of the CMSICP, provided that such discretion will be to
decrease or eliminate, not increase, Annual Awards in the case of any

 

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Code Section 162(m) Employee.  The Committee also reserves the right in its
discretion to not pay Annual Awards for a Performance Year.  All decisions of
the Committee are final.

 

II.         CORPORATE PERFORMANCE GOALS

 

2.1         In General.  Corporate performance goals are established in two
areas:  (1) the adjusted net income per outstanding CMS Energy share (EPS); and
(2) the Cash Flow of CMS Energy (OCF).

 

2.2         Plan Performance Factor.  The plan performance factor used to
calculate an Annual Award is based on the results of the corporate performance
goals and is capped at two times the standard award amount.  The Plan
Performance Factor is established in a table relating specific performance
results in the areas of EPS and OCF to specific performance goals. This table
shall be created by the Committee for each Performance Year.

 

III.         ANNUAL AWARD FORMULA

 

3.1         Annual Awards.  Annual Awards for each eligible Officer will be
based upon a percentage of the Officer’s Base Salary for the Performance Year
times the Plan performance factor for the year as determined under 2.2 above. 
The standard award percentage for each eligible Officer will be approved
annually by the Committee for each Performance Year. The maximum amount that can
be awarded under this Plan for any Code Section 162(m) Employee will not exceed
$2.5 Million in any one Performance Year.  The total amount of a CMSICP
participant Officer’s Annual Award shall be computed according to the annual
award formula set forth in Section 3.2.

 

3.2         Calculation of Award.  Annual Awards for Officer CMSICP participants
will be calculated and made as follows:

 

Annual Award = Base Salary times

Standard Award Percentage times Plan Performance Factor

 

In addition, each Annual Award for Officers of Consumers Energy Company may be
modified based on the results achieved for the Consumers Energy Annual Employee
Incentive Compensation Plan.  If the Consumers Energy Annual Employee Incentive
Compensation Plan does not pay out an operational award for the same Performance
Year, then the Annual Award, if any, earned under this Plan will be reduced by
10%.  If the Consumers Energy Annual Employee Incentive Compensation Plan pays
out an operational award for the same Performance Year based on achievement of
some of the established objectives, but not at the maximum award percentage,
then there is no modification of awards

 

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under this Plan.  If however, the Consumers Energy Annual Employee Incentive
Compensation Plan pays out an operational award at the maximum award percentage
for the same Performance Year based on achievement of the established
objectives, then the Annual Award, if any, earned under this Plan will be
increased by up to 10%, provided, however, that no such increase will cause the
Annual Award to exceed the maximum of two times the standard award amount, or
exceed the maximum payout for a Code Section 162(m) Employee.

 

 

IV.         PAYMENT OF ANNUAL AWARDS

 

4.1         Cash Annual Award.  All Annual Awards for a Performance Year will be
paid in cash after certification by the outside auditors of the Company and the
Committee that the performance goals have been satisfied, but not later than
March 15th of the calendar year following the Performance Year provided that the
Annual Award for a particular Performance Year has not been deferred voluntarily
pursuant to Section 4.2. The amounts required by law to be withheld for income
and employment taxes will be deducted from the Annual Award payments.  All
Annual Awards become the obligation of the company on whose payroll the Officer
is enrolled at the time the Committee makes the Annual Award.

 

4.2         Deferred Annual Awards.

 

(a)          The payment of all or any portion (rounded to an even multiple of
10%) of a cash Annual Award may be deferred voluntarily at the election of an
individual Plan participant in salary grades E-3 – E-9.  Any such deferral will
be net of any applicable FICA or FUTA taxes.  A separate irrevocable election
must be made prior to the Performance Year.  Any Annual Award made by the
Committee after termination of employment of a participant or retirement of a
participant will be paid in accordance with any deferral election made within
the enrollment period.

 

(b)          At the time the participant makes a deferral election he or she
must select the payment options (including the Payment Event as set forth at
(c) below and the Payment Term as set forth at (d) below) applicable to the
Deferred Annual Award for the Performance Year, as well as any earnings or
income attributable to such amounts.  The payment options elected will apply
only to that year’s Deferred Annual Award and will not apply to any previous
Deferred Annual Award or to any subsequent Deferred Annual Award.  Any
participant who elects to defer all or a portion of an Annual Award and who
fails to select a Payment Event or a Payment Term will be presumed to have
elected a Payment Event of Separation from Service in accordance with paragraph
(c)(i) below and/or a Payment Term of a single sum.

 

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(c)          The Payment Event elected can be either:

 

(i)           Separation from Service for any reason other than death.  Payment
will be made, or begin, in the later of: (1) January of the year following the
year of the Separation from Service; or (2) the seventh month after the month of
the Separation from Service.  Later installments, if any, will be paid in
January of the succeeding years;

 

(ii)          Payment upon attainment of a date certain that is more than 1 year
after the last day of the applicable Performance Year.  Later installments, if
any, will be paid in January of the succeeding years; or

 

(iii)         The earlier of (i) or (ii) above.

 

(d)          Payment Term.  At the time of electing to defer an Annual Award,
the participant must also elect how he or she wishes to receive any such payment
from among the following options (the participant may elect a separate Payment
Term for each Payment Event elected):

 

(i)           Payment in a single sum upon occurrence of the Payment Event.

 

(ii)          Payment of a series of annual installment payments over a period
from two (2) years to fifteen (15) years following the Payment Event.  Each
installment payment shall be equal to a fractional amount of the balance in the
account the numerator of which is one and the denominator of which is the number
of installment payments remaining.  Although initially such installment payments
will be identical, actual payments may vary based upon investment performance. 
For example, a series of 5 installment payments will result in a payout of 1/5
of the account balance in the first installment, 1/4 of the account balance
(including investment gains or losses since the first installment date) in the
second installment, etc.

 

(e)          Changes to Payment Options.  Once a payment option has been
elected, subsequent changes which would accelerate the receipt of benefits from
the Plan are not permitted, except that the Plan Administrator may at its
discretion accelerate payments to the extent permitted by Code Section 409A and
applicable regulations.  A subsequent election to change the payment options
related to a Payment Event, in order to delay a payment or to change the form of
a payment, can only be made when all of the following conditions are satisfied:

 

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(i)           such election may not take effect until at least 12 months after
the date on which the election is made;

 

(ii)          the payment(s) with respect to which such election is made is
deferred for a period of not less than 5 years from the date such payment would
otherwise have been made (or, in the case of installment payments under
Section 4.2(d)(ii), 5 years from the date the first installment was scheduled to
be paid); and

 

(iii)         such election must be made not less than 12 months before the date
the payment was previously scheduled to be made (or, in the case of installment
payments under Section 4.2(d)(ii), 12 months before the first installment was
scheduled to be paid), if the participant’s previous commencement date was a
specified date.

 

(f)           Investments. At the time of electing to voluntarily defer payment,
the participant must elect how the Deferred Annual Award will be treated by the
Company or Consumers Energy.  To the extent that any amounts deferred are placed
in a rabbi trust with an independent record keeper, a participant who has
previously deferred amounts under this Plan will automatically have his or her
existing investment profile apply to this deferral also.  All determinations of
the available investment options by the Plan Administrator are final and binding
upon participants.  A participant may change the investment elections at any
time prior to the payment of the benefit, subject to any restrictions imposed by
the Plan Administrator, the plan record keeper or by any applicable laws and
regulations.  A participant not making an election will have amounts deferred
treated as if in a Lifestyle Fund under the Savings Plan for Employees of
Consumers Energy and other CMS Energy Companies (the “Savings Plan”) applicable
to the participant’s age 65, rounded up, or such other investment as determined
by the Benefit Administration Committee.  All gains and losses will be based
upon the performance of the investments selected by the participant from the
date the deferral is first credited to the nominal account.  If the Company
elects to fund its obligation as discussed below, then investment performance
will be based on the balance as determined by the record keeper.

 

(g)          The amount of any Deferred Annual Award is to be satisfied from the
general corporate funds of the company on whose payroll the Plan participant was
enrolled prior to the payout beginning and are subject to the claims of general
creditors.  This is an unfunded nonqualified deferred compensation plan.  To the
extent the Company or Consumers Energy, as applicable, elects to place funds
with a trustee to pay its future obligations under this Plan, such amounts are
placed for the convenience of the Company or Consumers Energy, remain the
property of the Company or Consumers Energy and the participant shall have no
right to such funds

 

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until properly paid in accordance with the provisions of this Plan.  For
administrative ease and convenience, such amounts may be referred to as
participant accounts, but as such are a notional account only and are not the
property of the participant.  Such amounts remain subject to the claims of the
creditors of the Company or Consumers Energy.

 

(h)          Payment in the Event of an Unforeseeable Emergency. The participant
may request that payments commence immediately upon the occurrence of an
unforeseeable emergency as that term is defined in Code Section 409A and any
applicable regulations.  Generally, an unforeseeable emergency is a severe
financial hardship resulting from an illness or accident of the participant or
the participant’s spouse or dependent, loss of the participant’s property due to
casualty, or other similar extraordinary and unforeseeable circumstances arising
as a result of events beyond the control of the participant.  A distribution on
account of unforeseeable emergency may not be made to the extent that such
emergency is or may be relieved through reimbursement or compensation from
insurance or otherwise, by liquidation of the participant’s assets (without
causing severe financial hardship), or by cessation of deferrals under this
arrangement, the Savings Plan or other arrangements. Distributions because of an
unforeseeable emergency shall not exceed the amount permitted under Section 409A
and accordingly are limited to the amount reasonably necessary to satisfy the
emergency need (after use of insurance proceeds, liquidation of assets, etc.)
plus an amount to pay taxes reasonably anticipated as a result of the
distribution. In the event any payment is made due to an unforeseeable
emergency, all deferral elections for the current Performance Year will cease
and the participant will not be eligible to make any deferral elections under
this Plan for the following Performance Year.  For any participant receiving a
hardship withdrawal under the Savings Plan, all deferral elections under this
Plan for the current Performance Year will cease and the participant will not be
eligible to make any deferral elections under this Plan for the following
Performance Year.

 

4.3         Payment in the Event of Death.

 

(a)          A participant may name the beneficiary of his or her choice on a
beneficiary form provided by the Company or record keeper, and the beneficiary
shall receive, within 90 days of the participant’s death, in a single sum, all
payments credited to the participant in the event that the participant dies
prior to receipt of Deferred Annual Awards.  If a beneficiary is not named or
does not survive the participant, the payment will be made to the participant’s
estate. In no event may any recipient designate a year of payment for an amount
payable upon the death of the participant.

 

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(b)          A participant may change beneficiaries at any time, and the change
will be effective as of the date the plan record keeper or Company accepts the
form as complete.  Neither the Company nor Consumers Energy will be liable for
any payments made before receipt and acceptance of a written beneficiary
request.

 

V.         CHANGE OF STATUS

 

Payments in the event of a change in status will not be made if no Annual Awards
are made for the Performance Year.

 

5.1         Pro-Rata Annual Awards.  A new Officer participant, whether hired or
promoted to the position, or an Officer promoted to a higher salary grade during
the Performance Year will receive a pro rata Annual Award based on the
percentage of the Performance Year in which the Officer is in a particular
salary grade.  An Officer participant whose salary grade has been lowered, but
whose employment is not terminated during the Performance Year will receive a
pro rata Annual Award based on the percentage of the Performance Year in which
the Officer is in a particular salary grade.

 

5.2         Termination.  An Officer participant whose employment is terminated
pursuant to a violation of the Company code of conduct or other corporate
policies will not be considered for or receive an Annual Award.

 

5.3         Resignation.  An Officer participant who resigns prior to payment
(during or after a Performance Year) will not be eligible for an Annual Award. 
If the resignation is due to reasons such as a downsizing or reorganization, or
the ill health of the Officer or ill health in the immediate family, the Officer
may petition the Plan Administrator and may be considered, in the discretion of
the Plan Administrator, for a pro rata Annual Award.  The Plan Administrator’s
decision to approve or deny the request for a pro rata Annual Award shall be
final.

 

5.4         Death, Disability, Retirement, Leave of Absence.  An Officer
participant whose status as an active employee is changed during the Performance
Year due to death, Disability, Retirement, or Leave of Absence will receive a
pro rata Annual Award.  An Officer participant whose employment is terminated
following the Performance Year but prior to payment due to death, Disability or
Retirement will continue to be eligible for an Annual Award for the Performance
Year.  Any such payment or Annual Award payable due to the death of the Officer
participant will be made to the named beneficiary, or if no beneficiary is named
or if the beneficiary doesn’t survive the Officer participant, then to the
Officer participant’s estate no later than March 15 following the applicable
Performance Year.  Notwithstanding the above, an Officer participant who
retires, is on Disability or Leave of Absence and who becomes employed by a
competitor of CMS Energy or Consumers Energy or their subsidiaries or affiliates
prior to award payout will forfeit all rights to an Annual Award, unless prior
approval of

 

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such employment has been granted by the Committee.  A “competitor” shall mean an
entity engaged in the business of (1) selling (a) electric power or natural gas
at retail or wholesale within the State of Michigan or (b) electric power at
wholesale within the market area in which an electric generating plant owned by
a subsidiary or affiliate of CMS Energy is located or (2) developing an electric
generating plant within the State of Michigan or a market area in which an
electric generating plant owned by a subsidiary or affiliate of CMS Energy is
located.

 

5.5         Clawback.

 

(a)          If, due to a restatement of CMS Energy’s or an affiliate’s publicly
disclosed financial statements or otherwise, an Officer is subject to an
obligation to make a repayment or return of benefits to CMS Energy or an
affiliate pursuant to a clawback provision contained in this Plan, a
supplemental executive retirement plan, the Performance Incentive Stock Plan, or
any other benefit plan (a “benefit plan clawback provision”) of the Company, the
Committee may determine that it shall be a precondition to the payment of any
award under this Plan, that the Officer fully repay or return to the Company any
amounts owing under such benefit plan clawback provision (taking into account
the requirements of Code Section 409A, to extent applicable).  Any and all
awards under this Plan are further subject to any provision of law, which may
require the Officer to forfeit or return any benefits provided hereunder, in the
event of a restatement of the Company’s publicly disclosed accounting statements
or other illegal act, whether required by Section 304 of the Sarbanes-Oxley Act
of 2002, Section 954 of the Dodd-Frank Wall Street Reform and Consumer
Protection Act, federal securities law (including any rule or regulation
promulgated by the Securities and Exchange Commission), any state law, or any
rule or regulation promulgated by the applicable listing exchange or system on
which the Company lists its traded shares.

 

(b)         To the degree any benefits hereunder are not otherwise forfeitable
pursuant to the preceding sentences of this Section 5.5, the Board or a
Committee delegated authority by the Board (“delegated Committee”), may require
the Officer to return to the Company or forfeit any amounts granted under this
Plan, if:

 

1.            the grant of such compensation was predicated upon achieving
certain financial results which were subsequently the subject of a substantial
accounting restatement of the Company’s financial statements filed under the
securities laws (a “financial restatement”),

 

2.            a lower payout or Annual Award (“reduced financial results”),
would have occurred based upon the financial restatement, and

 

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3.           in the reasonable opinion of the Board or the delegated Committee,
the circumstances of the financial restatement justify such a modification of
the Annual Award.  Such circumstances may include, but are not limited to,
whether the financial restatement was caused by misconduct, whether the
financial restatement affected more than one period and the reduced financial
results in one period were offset by increased financial results in another
period, the timing of the financial restatement or any required repayment, and
other relevant factors.

 

Unless otherwise required by law, the provisions of this Subsection (b) relating
to the return of previously paid Plan benefits shall not apply unless a claim is
made therefore by the Company within three years of the payment of such
benefits.

 

(c)          The Board or delegated Committee shall also have the discretion to
require a clawback in the event of a mistake or accounting error in the
calculation of a benefit or an award that results in a benefit to an eligible
individual to which he/she was not otherwise entitled.  The rights set forth in
this Plan concerning the right of the Company to a clawback are in addition to
any other rights to recovery or damages available at law or equity and are not a
limitation of such rights.

 

VI.         MISCELLANEOUS

 

6.1         Impact on Benefit Plans.  Payments made under the Plan will be
considered as earnings for the Supplemental Executive Retirement Plans but not
for purposes of the Employees’ Savings Plan, Pension Plan, or other Officer
benefit programs.

 

6.2         Impact on Employment.  Neither the adoption of the Plan nor the
granting of any Annual Award under the Plan will be deemed to create any right
in any individual to be retained or continued in the employment of the Company
or any corporation within the Company’s control group.

 

6.3         Termination or Amendment of the Plan.  The Board of Directors of CMS
Energy may amend or terminate the Plan at any time.  Upon termination, any
Deferred Annual Award accrued under the Plan will remain in the Plan and be paid
out in accordance with the payment options previously selected.  The Plan
Administrator is authorized to make any amendments that are deemed necessary or
desirable to comply with any applicable laws, regulations or orders or as may be
advised by counsel or to clarify the terms and operation of the Plan.  The
Company may terminate the Plan and accelerate payment of any deferred benefits
under the Plan if it acts consistent in all respects with the requirements of
Code Section 409A and any applicable regulations with respect to when a
terminated plan may accelerate payment to a participant.

 

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6.4         Governing Law.  The Plan will be governed and construed in
accordance with the laws of the State of Michigan.

 

6.5         Dispute Resolution.  Any disputes related to the Plan must be
brought to the Plan Administrator.  The Plan Administrator is granted full
discretionary authority to apply the terms of the Plan, make administrative
rulings, interpret the Plan and make any other determinations with respect to
the Plan.  If the Plan Administrator makes an adverse determination and the
participant disagrees with or wishes to appeal the determination, the
participant must appeal the decision to the Plan Administrator, in writing and
not later than 60 days from when the determination was mailed to the
participant.  If the participant does not timely appeal the original
determination, the participant has no further rights under the Plan with respect
to the matter presented in the claim.  If the participant appeals the original
determination and that appeal does not result in a mutually agreeable
resolution, then the dispute shall be subject to final and binding arbitration
before a single arbitrator selected by the parties to be conducted in Jackson,
Michigan, provided the participant makes such request for arbitration in writing
within 30 days of the final decision by the Plan Administrator. The arbitration
will be conducted and finished within 90 days of the selection of the
arbitrator.  The parties shall share equally the cost of the arbitrator and of
conducting the arbitration proceeding, but each party shall bear the cost of its
own legal counsel and experts and other out-of-pocket expenditures.  The
arbitrator must use an arbitrary and capricious standard of review when
considering any determinations and findings by the Plan Administrator.

 

VII.       AMENDMENT TO REFLECT CODE SECTION 409A

 

7.1         Code Section 409A.  This Plan has been amended, effective as of
January 1, 2005, to comply with the requirements of Code Section 409A.  To the
extent counsel determines additional amendments may be reasonable or desirable
in order to comply with Code Section 409A, and any other applicable rules, laws
and regulations, such changes shall be authorized with the approval of the Plan
Administrator.

 

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