Exhibit 10.7
UNION CARBIDE NON-EMPLOYEE DIRECTORS' COMPENSATION
DEFERRAL PROGRAM
(Effective February 1, 1997)
UNION CARBIDE NON-EMPLOYEE DIRECTORS' COMPENSATION
DEFERRAL PROGRAM
ARTICLE I
PURPOSE
1.1 The purpose of this Program is to (i) allow Eligible
Directors to defer a portion or all of their meeting and retainer
fees and (ii) automatically defer all of the lump sum payments
from the Non-Employee Directors' Plan otherwise payable to an
Eligible Director as a result of such Plan's termination.
1.2 This Program shall be effective for amounts payable on
or after February 1, 1997.
ARTICLE II
DEFINITIONS
2.1 "Applicable Equity Investment Fund Rate" means the
difference between the value of each of the applicable investment
funds elected by a Participant under Section 8.2 of this Program:
Fidelity Asset Manager, Fidelity Equity Income Fund, Fidelity
Growth Company Fund, Fidelity Contrafund and Fidelity Overseas
Fund, determined on a fund by fund basis, as of (i) the later of
the Date of Deferral or the effective date of a Participant's
election under Section 8.2(c), and (ii) the relevant valuation
date for determining the amount of earnings of such investment
fund in accordance with Article VIII. Such value shall include
any hypothetical dividends and hypothetical capital gains
distributions paid on such investment fund during the period for
which the Applicable Equity Investment Fund Rate is being
determined, as if such hypothetical dividends or hypothetical
capital gains distributions are reinvested when payable in
additional shares of such fund. The value of a respective
investment fund for purposes of this Section 2.1, shall mean the
net asset value of such investment fund as reported by such fund.
2.2 "Administrator" means the Board of Directors of the
Corporation or a committee of the Board or subcommittee thereof
designated by the Board.
2.3 "Beneficiary" means the person, persons or estate
entitled (as determined under Article VII) to receive payment
under this Program following a Participant's death.
2.4 "Board" means the Board of Directors of Union
Carbide Corporation.
2.5 "Change in Control" means the occurrence of any of
the following:
(i) any "person" or "group" within the
meaning of Sections 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934 ("Act")
becomes the "beneficial owner" as defined in
Rule 13d-3 under the Act of more than 20% of
the then outstanding voting securities of the
Corporation;
(ii) any "person" or "group" within the
meaning of Sections 13(d) and 14(d)(2) of the
Act acquires by proxy or otherwise the right
to vote for the election of directors, for
any merger or consolidation of the
Corporation or for any other matter or
question with respect to more than 20% of the
then outstanding voting securities of the
Corporation;
(iii) if during any period of twenty-four
consecutive months, Present Directors and/or
New Directors cease for any reason to
constitute a majority of the Board.
For these purposes, "Present Directors" shall
mean individuals who at the beginning of such
consecutive twenty-four month period were
members of the Board and "New Directors"
shall mean any director whose election by the
Board or whose nomination for election by the
Corporation's stockholders was approved by a
vote of at least two-thirds of the Directors
then still in office who were Present
Directors or New Directors;
(iv) the stockholders of the Corporation
approve a plan of complete liquidation or
dissolution of the Corporation; or
(v) there shall be consummated (x) a
reorganization, merger or consolidation of
all or substantially all of the assets of the
Corporation (a "Business Combination"),
unless, following such Business Combination,
(a) all or substantially all of the
individuals and entities who were the
beneficial owners, respectively, of the
outstanding Common Stock of the Corporation
and outstanding voting securities of the
Corporation immediately prior to such
Business Combination beneficially own,
directly or indirectly, more than 50% of,
respectively, the then outstanding shares of
common stock and the combined voting power of
the then outstanding voting securities
entitled to vote generally in the election of
directors, as the case may be, of the
corporation resulting from such Business
Combination (including, without limitation, a
corporation which as a result of such
transaction owns the Corporation or all or
substantially all of the Corporation's assets
either directly or through one or more
subsidiaries) in substantially the same
proportions as their ownership, immediately
prior to such Business Combination of the
outstanding Common Stock of the Corporation
and outstanding voting securities of the
Corporation, as the case may be, (b) no
Person (excluding any corporation resulting
from such Business Combination or any
employee benefit plan (or related trust) of
the Corporation or such corporation resulting
from such Business Combination) beneficially
owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of
common stock of the corporation resulting
from such Business Combination or the
combined voting power of the then outstanding
voting securities of such corporation except
to the extent that such ownership existed
prior to the Business Combination and (c) at
least a majority of the members of the board
of directors of the corporation resulting
from such Business Combination were members
of the Board at the time of the execution of
the initial agreement, or of the action of
the Board, providing for such Business
Combination; or (y) any sale, lease, exchange
or other transfer (in one transaction or a
series of related transactions) of all, or
substantially all, of the assets of the
Corporation, provided, that the divestiture
of less than substantially all of the assets
of the Corporation in one transaction or a
series of related transactions, whether
effected by sale, lease, exchange, spin-off,
sale of the stock or merger of a subsidiary
or otherwise, shall not constitute a Change
in Control.
Notwithstanding the foregoing, a Change
in Control shall not be deemed to occur
pursuant to Subparagraphs (i) and (ii) above,
solely because twenty percent (20%) or more
of the combined voting power of the
Corporation's then outstanding securities is
acquired by one or more employee benefit
plans maintained by the Corporation."
2.6 "Code" means the Internal Revenue Code of 1986, as
amended from time to time.
2.7 "Compensation" means, solely for purposes of this
Program, the retainer fees and the meeting fees paid to an
Eligible Director in connection with his or her service as a
member of the Board.
2.8 "Corporation" means Union Carbide Corporation, a New
York Corporation, any predecessor thereof and any successor
thereof by merger, consolidation or otherwise.
2.9 "Date of Deferral" means (i) with respect to
director fees deferral, the date on which the relevant fees would
be paid, and (ii) with respect to amounts which are paid from the
Non-Employee Directors' Plan, the date on which lump sum payments
under such Plan would otherwise be paid.
2.10 "Deferred Compensation" means the amount of
Compensation deferred by a Participant under this Program
pursuant to Section 5.3(a) of this Program.
2.11 "Disability" means a Participant's total physical
or mental inability to perform any work for compensation or
profit in any occupation for which the Participant is reasonably
qualified by reason of training, education or ability, and which
inability is adjudged to be permanent, as determined by the
Administrator.
2.12 "Eligible Director" means a non-employee director
who receives Compensation from the Corporation.
2.13 "Fixed Income Rate" means the rate of interest for
the Fixed Income Fund under the Savings Program, in effect from
time to time.
2.14 "Non-Employee Directors' Plan" means The Union
Carbide Corporation Non-Employee Directors' Retirement Plan.
2.15 "Participant" means an Eligible Director who (i)
elects in advance to defer all or a portion of his or her
director fees in accordance with Section 5.2(a) of this Program
and/or (ii) receives an automatic deferral to this Program of his
or her lump sum distribution from the Non-Employee Directors'
Plan in accordance with Section 5.2(b) of this Program.
2.16 "Program" means this Union Carbide Non-Employee
Directors' Compensation Deferral Program.
2.17 "Savings Program" means The Savings and Investment
Program for Employees of Union Carbide Corporation and
Participating Subsidiary Companies.
2.18 "Service Year" means one of the calendar years on
and after 1997, as to which an election may be made in accordance
with Article V.
2.19 "UCC Discounted Stock Value Rate" means the UCC
Stock Value Rate except that the value of the Corporation's
common stock as of the Date of Deferral, pursuant to which
earnings shall accrue at the UCC Stock Value Rate, shall be
determined as if purchased at a ten percent (10%) discount.
2.20 "UCC Stock Value Rate" means the difference between
the value of the Corporation's common stock as of the later of
(i) the Date of Deferral or the effective date of a Participant's
election under Section 8.2 pursuant to which earnings shall
accrue at the UCC Stock Value Rate and (ii) the relevant date of
determination of the amount of earnings in accordance with
Section 8.2(c) of this Program. Such value shall include the
value of any hypothetical dividends paid on the common stock
during the period for which the UCC Stock Value Rate is being
determined, as if such hypothetical dividends were reinvested
when payable (at a five percent (5%) discount) in additional
shares of the Corporation's common stock as determined on the
later of the Date of Deferral or the effective date of a
Participant's election under Section 8.2(c) pursuant to which
earnings shall accrue at the UCC Stock Value Rate. The value of
the Corporation's common stock for purposes of this Section 2.20,
shall mean the closing price of the stock on the New York Stock
Exchange - Composite Transaction on the relevant date of
determination.
2.21 "Unforeseen Emergency" means an event beyond the
control of the Participant that would result in severe financial
hardship to the Participant if early withdrawal of the
Participant's director fees deferral or lump sum payment from the
Non-Employee Directors Plan were not permitted. Whether a
Participant has an Unforeseen Emergency shall be determined by
the Administrator.
ARTICLE III
ADMINISTRATION
3.1 Except as otherwise indicated, the Administrator or its
designee shall supervise the administration and interpretation of
this Program, may establish administrative regulations to further
the purpose of this Program and shall take any other action
necessary to ensure the proper operation of this Program. All
decisions and acts of the Administrator shall be final and
binding upon all Participants, their Beneficiaries and all other
persons.
The Corporation's Human Resources Department shall be
the Administrator's designee with respect to all non-
discretionary administrative and ministerial functions under this
Program.
ARTICLE IV
ELIGIBILITY
4.1 To be eligible to participate in this Program for a
given year, a person must have become an Eligible Director not
later than the day on or before the date which an Eligible
Director must make the election provided for in Article V of this
Program for that year and be a member of the Board on the Date of
Deferral for that year.
ARTICLE V
DEFERRALS
5.1 During each of the years this Program is in effect,
Eligible Directors shall be informed of the opportunity to
participate in this Program. An Eligible Director choosing to
participate in this Program must make an election to do so on or
before the date designated by the Administrator and otherwise in
accordance with such procedures as may be established by the
Administrator.
5.2 (a) An Eligible Director must elect to defer his or
her Compensation which has not yet been paid to him for services
performed in calendar year 1997 during the period which
immediately follows the date this Program is approved by the
Board. Participation in this Program shall become effective only
on the Date of Deferral and only if, on such date, the Eligible
Director remains a member of the Board. Compensation for
services performed in calendar years 1998, and beyond, must be
deferred during the annual election period immediately preceding
the calendar year in which such services will be performed. A
Participant may suspend his or her election to defer his or her
Compensation (but may not otherwise reduce or change an election
mid-year) at any time; provided, however, that such Eligible
Director may not resume deferrals of Compensation until the
following calendar year. Notwithstanding the foregoing, an
Eligible Director who becomes eligible to participate in this
Program after the date this Program is approved by the Board, may
elect to defer a portion of his or her Compensation during the
calendar year in which services will be performed; provided he or
she makes an election to defer within 31 days after becoming
eligible to participate in this Program.
(b) If an Eligible Director is entitled to receive a
lump sum payment from the Non-Employee Director's Plan as a
result of that Plan's termination, such payment shall be deferred
to this Program.
5.3 On or before the date designated by the
Administrator, and otherwise in accordance with such procedures
as may be established, an Eligible Director may elect voluntarily
to defer up to 100% of his or her Compensation (in 10%
increments).
ARTICLE VI
PAYMENTS TO PARTICIPANTS AND BENEFICIARIES
6.1 Time of Payment. (a) Subject to subsections (b), (c)
and (d) of this Section 6.1, a Participant shall begin to receive
payment of his or her deferrals, and any earnings accruals
credited under Article VIII, during the January next following
the date he or she ceases to be a member of the Board.
(b) (i) Notwithstanding any provision in this Program to
the contrary, a Participant may elect to commence receipt of
payments of any amounts deferred upon a specific future payment
date which is at least five years after the Date of Deferral or
such shorter schedule as the Administrator may determine. Such
payments must begin no later than the calendar year after which
the Participant attains age 72. A Participant making such an
election shall receive his or her lump sum payment in the January
next following his or her future payment date or, if applicable,
such Participant shall receive installment payments in accordance
with Section 6.2.
(ii) With respect to a Participant who has attained
age 55 at the time of the election of his or her deferral, the
five year period described in subsection (i) shall instead be one
year.
(iii) A Participant is limited to four future fixed
year payments.
(c) A Participant who has not yet ceased to be a member of
the Board, but has an Unforeseen Emergency, may receive any or
all of his or her director fee deferrals, excluding any earning
accruals credited to him or her pursuant to Article VIII of this
Program; provided that the Participant may not receive an amount
greater than the amount necessary to meet the Unforeseen
Emergency and any amounts necessary to pay federal, state and
local income taxes or penalties reasonably anticipated to result
from a withdrawal under this Section 6.1. Earning accruals will
remain in the Program and continue to accrue earnings under
Article VIII until the payment date or dates described in
Article VI.
(d) Notwithstanding any provision in this Program to the
contrary, a Participant may, on the applicable Date of Deferral
or at any time thereafter prior to a Change in Control, elect to
receive payment of his or her entire account balance under this
Program at such time as the Board determines that a Change in
Control has occurred. Such payment shall be made in a lump sum
within 45 days after the Change in Control.
6.2 Form of Payments. (a) A Participant may elect
to receive payments under this Program in annual or quarterly
installments. Such installments must commence as described in
Section 6.1, and must be completed by the calendar year in which
the Participant attains age 85.
(b) A Participant may elect to receive installment
payments either (i) annually during each January or
(ii) quarterly, commencing in the January that payment was
otherwise due in accordance with Section 6.1. If a Participant
does not elect the form of his or her installment payments, such
installment payments shall be made annually during each January.
(c) If a Participant does not elect the form of his or her
payments, such payments shall be made in a lump sum payment.
(d) A Participant may change the form and timing of payment
previously elected only one time and subject to the following
restrictions:
(i) such election is made in the calendar
year that the Participant ceases to be a
member of the Board, to be effective no
earlier than the following calendar year; and
(ii) the election is subject to the consent
of the Administrator.
(e) 1. If a Participant dies at any time prior to
receiving any portion of his or her account balance under this
Program, payment shall be made to the Participant's Beneficiary
as follows:
(A) If the Participant's Beneficiary is his or her
surviving spouse, such Participant's entire account balance under
this Program shall be paid as follows:
(i) ten annual installments or a shorter
schedule, if so elected by the surviving
spouse, or
(ii) a lump sum payment payable on or about
the January 1st following the Participant's
death.
(B) If the Participant's Beneficiary is someone other
than his or her surviving spouse, such Participant's entire
account balance under this Program shall be paid in a lump sum
payment as soon as practical following the Participant's death.
2. If a Participant dies at any time after payment of
his or her account balance under this Program has begun, such
Participant's Beneficiary shall continue to receive payment of
the Participant's account in the same manner as the Participant
elected, or such shorter payment schedule as elected by the
Beneficiary.
6.3 Payment Medium. All payments under this Program
with respect to amounts which at the time of such payment were
accruing at the Fixed Income Rate, or an Applicable Equity
Investment Fund Rate, shall be made in U.S. dollars. Any
payments made to a Participant with respect to amounts which were
accruing under either the UCC Stock Value Rate or the UCC
Discounted Stock Value Rate shall be made in shares of common
stock of the Corporation.
6.4 Reduction of Payments; Share Withholding. (a) All
payments under this Program shall be reduced by any and all
amounts that the Corporation is required to withhold pursuant to
applicable law.
(b) In order to enable the Corporation to meet any
applicable federal, state or local tax withholding requirements,
a Participant (or Beneficiary) who is receiving payment in shares
of common stock of the Corporation, may elect to have the
Corporation withhold shares that would otherwise be delivered to
such Participant, or by delivering to the Corporation other
shares of common stock of the Corporation owned by the
Participant. The value of any such shares of common stock to be
withheld by the Corporation, or so delivered to the Corporation,
shall be the mean of the high and low prices of the common stock
of the Corporation as reported in the New York Stock Exchange -
Composite Transactions on the date of payment.
ARTICLE VII
BENEFICIARIES
7.1 A Participant may at any time, and from time to time,
prior to his or her death designate one or more Beneficiaries to
receive any payments to be made following the Participant's
death. If a Participant has not effectively designated a
beneficiary, or if no designated beneficiary has survived the
Participant, the Participant's Beneficiary shall be the
Participant's surviving spouse, or, if no spouse has survived the
Participant, the estate of the deceased Participant. If an
individual Beneficiary cannot be located for a period of one year
following the Participant's death, despite mail notification to
the Beneficiary's last known address, and if the Beneficiary has
not made a written claim for benefits within such period, the
Beneficiary shall be treated as having predeceased the
Participant. The Administrator may require such proof of death
and such evidence of the right of any person to receive all or
part of a deceased Participant account balance, as the
Administrator may consider appropriate. The Administrator may
rely upon any direction by the legal representatives of the
estate of a deceased Participant, without liability to any other
person.
ARTICLE VIII
EARNINGS ACCRUALS
8.1 Each Participant's account balance under this Program
shall be credited with earnings from the Date of Deferral through
the date such deferral is paid out or withdrawn pursuant to
Article VI. Earnings under this Section 8.1 shall accrue at the
rate elected in accordance with Section 8.2.
8.2 (a) Earnings accruing in accordance with Section 8.1
shall accrue at (i) the Fixed Income Rate, (ii) the UCC Stock
Value Rate, (iii) the UCC Discounted Stock Value Rate, (iv) the
Applicable Equity Investment Fund Rate or (v) a combination of
the four rates. An election to use the UCC Discounted Stock
Value Rate shall be effective for not less than one (1) year.
Amounts deferred pursuant to Section 5.2(b) cannot accrue at the
UCC Discounted Stock Rate. Notwithstanding the foregoing, if a
Participant has elected under Section 6.1 to receive payment of
his or her account balance upon ceasing to be a member of the
Board, such Participant may then receive a distribution based on
the UCC Discounted Stock Value Rate even if one (1) year has not
yet passed since the relevant Date of Deferral.
(b) Subject to subparagraph (c), a Participant shall
designate at the time of his or her election to defer any amounts
under this Program which accrual rate or rates shall apply to his
or her deferrals; provided such elections must be in whole
percentage points. Such elections shall be effective as of the
Date of Deferral through the date such deferral is paid out or
withdrawn pursuant to Article VI.
(c) A Participant may, one time each calendar month, elect
to change the accrual rate under this Section 8.2 with respect to
any or all previous deferrals under this Program; provided,
however, that Participants may elect to utilize the UCC
Discounted Stock Value Rate with respect to future deferrals
only, and not for the reallocation of any prior deferrals.
Participants may utilize the UCC Stock Value Rate only for
reallocation of previous deferrals.
(d) Any amounts initially deferred into either the UCC
Stock Value Rate or the UCC Discounted Stock Value Rate may not
be reallocated or withdrawn from the Program for at least six
months from the Date of Deferral, even where such reallocation or
withdrawal would otherwise be permitted under the terms of the
Program.
ARTICLE IX
GENERAL PROVISIONS
9.1 Prohibition of Assignment of Transfer. Any
assignment, hypothecation, pledge or transfer of a Participant's
or Beneficiary's right to receive payments under this Program
shall be null and void and shall be disregarded, except to the
extent required by law.
9.2 Program Not to Be Funded. The Corporation is not
required, for the purpose of funding this Program, to segregate
any monies from its general funds, create any trusts, or make any
special deposits, and the right of a Participant or Beneficiary
to receive a payment under this Program shall be no greater than
the right of an unsecured general creditor of the Corporation.
9.3 Communications To Be in Writing. All elections,
requests and communications to the Corporation or its designated
agent from Participants and Beneficiaries, and all communications
to such persons from the Corporation, shall be in writing, and in
such form and manner, and within such time, as the Corporation
shall determine. In lieu of the foregoing, the Corporation may
install a telephonic voice response system for such elections,
requests and communications.
9.4 Absence of Liability. No officer, director or
employee of the Corporation shall be personally liable for any
acts or omission to act under this Program or, except in
circumstances involving bad faith, for such officer's, director's
or employee's own act or omission to act.
9.5 Titles for Reference Only. The titles given herein
to sections and subsections are for reference only and are not to
be used to interpret the provisions of this Program.
9.6 New York Law To Govern. All questions pertaining to
the construction, regulation, validity and effect of the
provisions of this Program shall be determined in accordance with
New York law.
9.7 Amendment. The Administrator may amend this Program
at any time, but no amendment may be adopted which alters the
payments due Participants or Beneficiaries, as of the date of the
amendment, or the times at which payments are due, without the
consent of each Participant affected by the amendment and of each
Beneficiary (of a then deceased Participant) affected by the
amendment.
9.8 Program Termination. The Board may terminate this
Program for any reason and at any time. In the event of such
termination, the accounts of each Participant or Beneficiary
under this Program shall become immediately payable in accordance
with Section 6.1; provided that the Administrator, in its sole
discretion, upon Program termination or at any time thereafter,
may decide to make lump sum payments in lieu of annual payments.
UNION CARBIDE CORPORATION