EXHIBIT 10.7
UNION CARBIDE NON-EMPLOYEE DIRECTORS' COMPENSATION
DEFERRAL PROGRAM
(Amended and Restated Effective as of the Merger Date)
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, as amended and restated as of the Merger Date,
shall be effective for amounts payable after the Merger Date.
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 of Directors of Dow or subcommittee thereof
designated by the Board of Directors of Dow.
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 A "Change in Control" means, with respect to Dow, the
occurrence of the following:
(i) any "person" or "group" within the meaning of Sections 13(d)
and 14(d)(2) of the Exchange 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 Dow;
(ii) any "person" or "group" within the meaning of Sections 13(d) and
14(d)(2) of the Exchange Act acquires by proxy or otherwise the
right to vote for the election of directors, for any merger or
consolidation of Dow or for any other matter or question with
respect to more than 20% of the then outstanding voting
securities of Dow;
(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 Dow'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 Dow approve a plan of complete liquidation or
dissolution of Dow; or
(v) there shall be consummated (x) a reorganization, merger or
consolidation of all or substantially all of the assets of Dow (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 Dow and outstanding voting securities
of Dow 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 Dow or all or substantially
all of Dow'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 Dow and outstanding voting securities
of Dow, 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 Dow 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 Dow, provided, that the divestiture of less than
substantially all of the assets of Dow 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: (A) pursuant to Subparagraphs (i) and (ii) above, solely because
twenty percent (20%) or more of the combined voting power of Dow's then
outstanding securities is acquired by one or more employee benefit plans
maintained by Dow; or (B) pursuant to Subparagraph (v)(y) above, if the Board
determines that any sale, lease, exchange or transfer does not involve
substantially all of the assets of Dow.
For the purpose of this Section 2.5, "Board" shall mean Board of
Directors of Dow.
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 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 "Dow" means The Dow Chemical Company, a Delaware corporation,
any predecessor thereof, and any successor thereof by merger, consolidation
or otherwise.
2.13 "Dow Stock Value Rate" means the difference between the value
of Dow's common stock as of (i) 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 Dow Stock Value Rate and (ii) the relevant
date of determination of the amount of earnings in accordance with Section
8.2 of this Program. Such value shall include the value of any hypothetical
dividends paid on the common stock during the period for which the Dow Stock
Value Rate is being determined, as if such hypothetical dividends were
reinvested when payable (with no discount). The value of Dow's common stock
for purposes of this Section 2.13 with respect to any relevant date of
determination shall be determined in the same manner for the valuation of
stock as is provided in the Savings Program.
2.14 "Eligible Director" means a non-employee director who receives
Compensation from the Corporation.
2.15 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
2.16 "Fixed Income Rate" means the rate of interest for the Fixed
Income Fund under the Savings Program, in effect from time to time.
2.17 "Merger Date" shall mean the date that a subsidiary of Dow is
merged into the Corporation.
2.18 "Non-Employee Directors' Plan" means the Union Carbide
Corporation Non-Employee Directors' Retirement Plan.
2.19 "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.
2.20 "Program" means this Union Carbide Non-Employee Directors'
Compensation Deferral Program.
2.21 "Savings Program" means the Savings and Investment Program for
Employees of Union Carbide Corporation and Participating Subsidiary
Companies.
2.22 "Service Year" means one of the calendar years on and after
2001, as to which an election may be made in accordance with Article V.
2.23 "UCC Discounted Stock Value Rate" means the UCC Stock Value
Rate, except that the value of Union Carbide 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. Notwithstanding the foregoing, effective as of the Merger Date,
the UCC Discounted Stock Value Rate will no longer apply to deferrals made
after the Merger Date and any election by a Participant to accrue earnings at
the UCC Discounted
Stock Value Rate shall be deemed to be an election, effective as of the
Merger Date, to accrue earnings at the Dow Stock Value Rate.
2.24 "UCC Stock Value Rate" means the difference between the value
of Union Carbide Corporation's common stock as of (i) 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
and (ii) the relevant date of determination of the amount of earnings in
accordance with Section 8.2 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. The value
of the Corporation's common stock for purposes of this Section 2.24 with
respect to any relevant date of determination shall be determined in the same
manner as provided in the Savings Program. Notwithstanding the foregoing,
effective on the Merger Date, the UCC Stock Value Rate will no longer apply
and any election by a Participant to accrue earnings at the UCC Stock Value
Rate shall be deemed to be an election, effective as of the Merger Date, to
accrue earnings at the Dow Stock Value Rate.
2.25 "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 Retirement Board of Dow 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 No additional deferrals shall be made under this Plan following
the Merger Date except for dividend reinvestment of hypothetical dividends as
set forth in Section 2.13.
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) 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 of Directors of Dow 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) (i) 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:
(1) ten annual installments or a shorter schedule, if so
elected by the surviving spouse, or
(2) 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.
(ii) 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 shall be made
in U.S. dollars.
6.4 Reduction of Payments. All payments under this Program shall be
reduced by any and all tax payments that the Corporation is required to
withhold pursuant to applicable law.
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 Dow Stock Value Rate, (iii) the
Applicable Equity Investment Fund Rate or (iv) a combination of the three
rates. Prior to the Merger Date, two additional earnings accrual rates
existed: the UCC Discounted Stock Value Rate and the UCC Stock Value Rate.
Effective as of the Merger Date, all funds currently accruing earnings at the
UCC Discounted Stock Value Rate and/or the UCC Stock Value Rate shall be
deemed an election to accrue earnings at the Dow Stock Value Rate.
(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.
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 and Dow are not
required, for the purpose of funding this Program, to segregate any monies
from their 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 or Dow 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 of Directors of Dow 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
By: /s/ M.A. Kessinger