EXHIBIT 10.1
DOW CORNING CORPORATION
EXECUTIVE COMPENSATION PLAN
Prepared by:
Kelly M. Hayes
Keywell and Rosenfeld
2301 W. Big Beaver Road, Suite 600
Troy, Michigan 48084
(810) 649-3200
TABLE OF CONTENTS
PAGE
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ARTICLE I
PURPOSE............................................................... 1
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ARTICLE II
DEFINITIONS........................................................... 2
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ARTICLE III
ELIGIBILITY AND PARTICIPATION......................................... 4
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3.1 Eligibility............................................... 4
3.2 Commencement of Participation............................. 4
3.3 Termination of Participation.............................. 4
ARTICLE IV
BENEFITS OFFERED UNDER THIS PLAN...................................... 5
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ARTICLE V
FUNDING............................................................... 6
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5.1 Funding from General Assets............................... 6
5.2 Participant Accounts...................................... 6
ARTICLE VI
DISTRIBUTION PROCEDURES............................................... 7
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ARTICLE VII
DEFERRAL ELECTIONS.................................................... 8
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7.1 Election Procedure........................................ 8
7.2 Earnings on Deferred Amounts.............................. 8
ARTICLE VIII
VESTING............................................................... 9
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ARTICLE IX
ADMINISTRATION........................................................ 10
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9.1 Plan Administration........................................ 10
9.2 Discretionary Authority of Plan Administrator.............. 10
9.3 Employment of Advisors..................................... 11
9.4 Delegation to Officers or Employees........................ 11
ARTICLE X
CLAIMS AND APPEALS.................................................... 12
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ARTICLE XI
AMENDMENT............................................................. 14
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ARTICLE XII
MISCELLANEOUS PROVISIONS.............................................. 15
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12.1 Indemnification for Liability............................. 15
12.2 Not an Employment Contract................................ 16
12.3 No liability for Elections................................ 16
12.4 Construction of Plan...................................... 16
12.5 Severability.............................................. 16
12.6 Fiscal Records and Reports................................ 16
12.7 Headings.................................................. 17
12.8 No Vested Interest........................................ 17
12.9 Limit on Liability........................................ 17
12.10 Anti-Alienation........................................... 17
DOW CORNING CORPORATION
EXECUTIVE COMPENSATION PLAN
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ARTICLE I
PURPOSE
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Dow Corning Corporation hereby establishes this Executive Compensation
Plan for the benefit of its Eligible Employees. The purpose of this Plan is to
provide Eligible Employees with an annual variable pay component based on
individual and corporate performance measures which the Participant can
influence.
ARTICLE II
DEFINITIONS
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The following words and phrases as used herein shall have the
following meanings, unless a different meaning is plainly required by the
context. Pronouns shall be interpreted so that the masculine pronoun shall
include in the feminine and the singular shall include the plural:
2.0 "Adjusted Profit After Tax" means the Employer's profit after tax
adjusted for material and publicly disclosed gains or losses as a result of
accounting rule changes, acquisitions and divestitures, and other significant
special charges.
2.1 "Board" means the Board of Directors of Dow Corning Corporation.
2.2 "Corporation" means Dow Corning Corporation and any other
business organization which succeeds to its business and elects to continue this
Plan, or any other related entity which adopts this Plan with the consent of the
Board.
2.3 "Effective Date" means January 1, 1994.
2.4 "Eligible Employee" means any Employee who meets the requirements
of Section 3.1.
2.5 "Employee" means any person engaged by the Corporation to perform
personal services in an Employer/Employee relationship who received compensation
from the Corporation. The term "Employee" shall not include the following:
a. All leased Employees;
2
b. Any person represented by a labor organization having a
Collective Bargaining Agreement with the Employer; and
c. Any person participating in a student employment program, or
coop program, as those terms are defined in the Corporation's personnel policies
or any person who is on leave or vacation from another Employer.
2.6 "ERISA" means the Employee Retirement Income Security Act of 1974
and all amendments thereto.
2.7 "Participant" means any Eligible Employee who has met the
conditions for participation set forth in Article III.
2.8 "Plan" means the Dow Corning Corporation Executive Compensation
Plan as set forth herein, together with any and all amendments and supplements
hereto.
2.9 "Plan Administrator" means the Corporation or any individual or
entity designated by the Corporation.
2.10 "Plan Year" means each twelve (12) month period commencing on
January 1st and ending on the following December 31st.
3
ARTICLE III
ELIGIBILITY AND PARTICIPATION
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3.1 Eligibility. Only those Employees who occupy executive level
management positions and are selected annually by approval of the Board (or a
committee designated by the Board) shall be allowed to participate in this Plan.
3.2 Commencement of Participation. Participants are notified by the
Chief Executive Officer of the Corporation in December of the year prior to the
first day of the Plan Year in which they will participate.
3.3 Termination of Participation. A Participant will cease
participation in this Plan as of the earlier of the following dates:
a. The termination of the Plan;
b. The termination of Participant's employment with the
Corporation; or
c. When the Participant is transferred out of a participating
position. If the Participant's termination of participation occurs as a result
of this subparagraph c, the Participant will cease participating in the Plan at
the end of the Plan Year in which the Participant is transferred out of his
participating position.
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ARTICLE IV
BENEFITS OFFERED UNDER THIS PLAN
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The benefits offered under this Plan are those listed on Schedule A
attached hereto and incorporated herein by reference. The Corporation reserves
the right to amend Schedule A at any time.
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ARTICLE V
FUNDING
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5.1 Funding from General Assets. All contributions to this Plan shall
be from the general assets of the Corporation. Funds invested hereunder shall
continue for all purposes to be part of the general funds of the Corporation,
and no person other than the Corporation shall, by virtue of the provisions of
this Plan, have any interest in such funds. To the extent that any person
acquires a right to receive payments from the Corporation under this Plan, such
right shall be no greater than the right of any unsecured general creditor of
the Corporation.
5.2 Participant Accounts. The establishment of Accounts for
Participants are for the recordkeeping convenience of the Corporation. Such
Accounts shall not result in any amounts being made available to the Participant
or otherwise set aside for the Participant in a funded Plan within the meaning
of Part 3 of ERISA. The Corporation, in its sole discretion, may establish a
Grantor Trust or other form of escrow for purposes of setting aside such
amounts. Provided, however, such amounts shall continue to represent the general
assets of the Corporation and shall be subject to the claims of the
Corporation's general creditors.
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ARTICLE VI
DISTRIBUTION PROCEDURES
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The distribution of benefits under this Plan shall be pursuant to the
provisions set forth on Schedule B attached hereto and incorporated herein by
reference. The Corporation reserves the right to amend Schedule B at any time.
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ARTICLE VII
DEFERRAL ELECTIONS
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7.1 Election Procedure. Each Participant shall be entitled to make an
irrevocable election to defer receipt of any whole percentage of the amount that
would otherwise be awarded and payable by the Corporation to the Participant for
any particular Plan Year. Said election must be made prior to January 1st of the
Plan Year in which the services are performed by the Participant which result in
the benefit accruing under this Plan. Said election shall also indicate the
future year in which the deferred amount will be payable to the Participant.
7.2 Earnings on Deferred Amounts. Any amounts deferred pursuant to
Section 7.1 shall be increased quarterly at a rate coinciding with the rate of
three month commercial paper (See Business Week, "Money Market Rates" Section)
effective as of the first week of each calendar quarter. At the end of the
deferral period noted above, the deferred amount and any interest earned thereon
shall be paid to the Participant. In the event of the Participants separation
from service with the Corporation (not including retirement), or the death of
the Participant during the deferral period noted above, the deferred amount and
interest earned thereon shall be paid as soon as administratively feasible to
the Participant or to the Participant's designated beneficiary.
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ARTICLE VIII
VESTING
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There are no vesting provisions under this Plan.
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ARTICLE IX
ADMINISTRATION
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9.1 Plan Administration. The Plan Administrator shall have the
authority to control and manage the operation and administration of the Plan and
to construe and interpret its terms. The Plan Administrator shall decide all
questions of eligibility to participate under the Plan and shall determine the
amount, manner and time of payment of any benefit under the Plan and, in the
exercise of its discretion hereunder, the decisions of the Plan Administrator
shall be final and binding on all parties. The Plan Administrator may delegate
responsibilities for the operation and administration of the Plan. The Plan
Administrator shall have the authority to determine the Plan's policies.
9.2 Discretionary Authority of Plan Administrator. The Plan
Administrator shall have any and all power and authority (including discretion
with respect to the exercise of that power and authority) which shall be
necessary, properly advisable, desirable or convenient to enable it to carry out
its duties under the Plan. By way of illustration and not limitation, the Plan
Administrator is empowered and authorized to make rules and regulations in
respect of the Plan not inconsistent with the Plan, the Code or ERISA; to
determine, consistently therewith, all questions that may arise as to the
eligibility, benefits, status and right of any person claiming benefits under
the Plan, including (without limitation) Participants, former Participants,
surviving spouses of Participants and beneficiaries; and subject to and
consistent with ERISA, to construe and interpret the Plan and correct any
defect, supply any omissions or reconcile any inconsistencies in the Plan, such
action to be final and conclusive on all persons claiming benefits under the
Plan.
9.3 Employment of Advisors. The Corporation shall have the authority
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to employ such legal, accounting, and financial counsel and advisers, as it
shall deem necessary in connection with the performance of its duties under the
Plan, and to act in accordance with the advice of such counsel and advisers.
Except as otherwise provided in the Plan, the fees and expenses of such counsel
and advisers shall be paid by the Corporation.
9.4 Delegation to Officers or Employees. The Corporation shall have
the power to delegate its duties under this Plan to officers or employees of the
Corporation and to other persons, all of whom, if employees of the Corporation,
shall serve without compensation other than their regular renumeration from the
Corporation.
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ARTICLE X
CLAIMS AND APPEALS
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If any Participant shall dispute the correctness or applicability to
such Participant of a calculation of the Participants benefits under this Plan
or the applicability of any rule, procedure or regulation as applied to such
Participant, or if any Employee shall dispute or question a determination
concerning such Employee's right to participate under the Plan, such person
shall be entitled to make a written claim for review and determination of such
questions to the Plan Administrator. If a claim is wholly or partially denied,
the Plan Administrator shall, within a reasonable period of time, but not later
than ninety (90) days after receipt of the claim, provide to the claimant
written notice setting forth in a manner calculated to be understood by the
claimant:
(a) The specific reason or reasons for denial;
(b) Specific reference to the pertinent Plan provisions on which
the denial is based;
(c) A description of any additional material or information
necessary for the claimant to perfect the claim and an explanation of why such
material or information is necessary; and
(d) An explanation of the Plan's claim review procedure.
A Participant whose claim for benefits under the Plan has been denied,
or his duly authorized representative, may request a review upon written
application to the Plan Administrator, may review pertinent documents, and may
submit issues and comments in writing. The claimant's written request for review
must be submitted to the Plan Administrator within sixty (60) days after receipt
by the claimant of written notification of the
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denial of a claim. A decision by the Plan Administrator shall be made promptly,
and not later than sixty (60) days after the Plan Administrator's receipt of a
request for review, unless special circumstances require an extension of time
for proceeding, in which case a decision shall be rendered as soon as possible,
but not later than one hundred twenty (120) days after receipt of the request
for review. The decision on review shall be in writing and shall include
specific reasons for the decision, specific reference to the pertinent Plan
provision on which the decision is based, and be written in a manner calculated
to be understood by the claimant.
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ARTICLE XI
AMENDMENT
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The Corporation reserves the right to amend, modify or terminate this
Plan. This Plan may also be amended by an individual or individuals designated
by the Board as having authority to amend this Plan. This Plan may be terminated
at any time by the Corporation. The Corporation makes no promise to continue
this Plan in the future.
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ARTICLE XII
MISCELLANEOUS PROVISIONS
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12.1 Indemnification for Liability. The Corporation shall, to the
full extent permitted by applicable state and federal law, indemnify any board
member, officer or employee of the Corporation who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding (whether civil, criminal, administrative or investigative)
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner which he
reasonably believed to be solely in the interest of the Participants and
beneficiaries of the Plan, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful;
provided further that:
(a) A person who discharges his duties with respect to the
Plan in a manner which he believes to be solely in the interest of its
Participants and beneficiaries shall be deemed to have acted in a manner which
he reasonably believes to be in (or not opposed to) the best interest of the
Corporation;
(b) This indemnification shall continue as to a person who has
ceased to be a director, officer, or employee and shall inure to the benefit of
the heirs, executors and administrators of such person;
(c) The Corp oration may retain such accountants, counsel or
other specialists as it deems necessary or desirable in connection with the
administration of the Plan and any beneficiary of this indemnity shall be
entitled to rely conclusively upon, and shall be fully protected and indemnified
in any action taken in good faith reliance upon any
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opinions or reports furnished to it in writing by such accountants, counsel or
other specialists.
12.2 Not an Employment Contract. The establishment of the Plan, the
creation of any account, or the payment of any benefit does not create in any
Employee, Participant or other party a right to continuing employment with the
Corporation.
12.3 No liability for Elections. The Corporation shall not be liable
for any Participant's election under the Plan, nor shall the Corporation be
deemed to have made any representations as to the value with respect to any
Participant of any benefit offered under the Plan.
12.4 Construction of Plan. This Plan shall be construed,
administered and governed in all respects under applicable federal law, and to
the extent that federal law is inapplicable, under the laws of the State of
Michigan.
12.5 Severability. Should any part of the Plan subsequently be
invalidated by a court of competent jurisdiction, the remainder thereof shall be
given effect to the maximum extent possible.
12.6 Fiscal Records and Reports. The fiscal records of the Plan are
to be maintained on the basis of the Plan Year. The Plan Administrator shall
exercise such authority and responsibility as it deems appropriate in order to
comply with the terms of the Plan relating to Participant records which are
maintained under this Plan.
12.7 Headings. The headings contained in the Plan are for reference
only, and they do not in any manner limit or expand the terms and provisions of
the Plan.
12.8 No Vested Interest. Except for the right to receive any benefit
payable under the Plan, no person shall have any right, title or interest in or
to the assets
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of the Corporation because of the Plan.
12.9 Limit on Liability. Nothing contained in the Plan shall impose
on the Corporation, or any board members, officers or employees of the
Corporation any liability for the payment of benefits under this Plan other than
liabilities resulting from willful neglect or fraud. The liability of the
Corporation for benefits shall be limited to the benefits provided under the
Plan. Persons entitled to benefits under the Plan shall look only to the
Corporation for payment.
12.10 Anti-Alienation. To the extent permitted by law, the right of
any Participant or any beneficiary to any benefit or to any payment hereunder
shall not be subject in any manner to attachment or other legal process for the
debts of such Participant or beneficiary; and any such benefit or payment shall
not be subject to anticipation, alienation, sale, transfer, assignment, or
encumbrance.
IN WITNESS WHEREOF, the Corporation has caused this Plan to be
executed in its name and behalf effective January 1, 1994.
DOW CORNING CORPORATION
______________________________
By: Richard A. Hazleton
Its: Chairman of the Board and
Chief Executive Officer
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DOW CORNING CORPORATION
EXECUTIVE COMPENSATION PLAN
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SCHEDULE A (1994)
PROGRAM DESIGN
Target award levels are established as a percent of base salary to provide
competitive pay opportunities based on the Employer's performance. The 1994 ECP
is structured with two components:
Corporate Component (A)
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A corporate component which rewards for profit growth. For each 1 percent
of growth over 1993 Adjusted Profit After Tax, the Participant will receive
4 percent of the target award level.
Individual Component (B)
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An individual component which rewards for achievement of established goals.
The actual payout is determined by the Participant's manager and can be up
to an additional 25% of the target award level.
The total earned under this Plan for the 1994 Plan Year is the sum of A + B.
DEFERRAL OPTION
A Participant may elect to defer all or a portion of the ECP payout. The
election to defer must be made by December 31, 1993 and is irrevocable. The
deferred compensation will be a general liability of the Employer and will earn
interest quarterly at money market rates as of the first week of each calendar
quarter.
DOW CORNING CORPORATION
EXECUTIVE COMPENSATION PLAN
---------------------------
SCHEDULE A (1995)
PROGRAM DESIGN
Target award levels are established as a percent of base salary to provide
competitive pay opportunities based on the Employer's performance. The 1995 ECP
is structured with two components:
Corporate Component (A)
-----------------------
A corporate component which rewards for profit growth. For each 1 percent
of growth over 1994 Adjusted Profit After Tax, the Participant will receive
5.5 percent of the target award level.
Individual Component (B)
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An individual component which rewards for achievement of established goals.
The actual payout is determined by the Participant's manager and can be up
to an additional 25% of the target award level.
The total earned under this Plan for the 1995 Plan Year is the sum of A + B.
DEFERRAL OPTION
A Participant may elect to defer all or a portion of the ECP payout. The
election to defer must be made by December 31, 1994 and is irrevocable. The
deferred compensation will be a general liability of the Employer and will earn
interest quarterly at money market rates as of the first week of each calendar
quarter.
DOW CORNING CORPORATION
EXECUTIVE COMPENSATION PLAN
---------------------------
SCHEDULE B
All distributions under this Plan shall be in cash and shall occur by the end of
the first quarter of the following Plan Year. Said distributions shall be based
on the Participant's earnings under this Plan for the prior Plan Year, plus any
deferred amounts that become due and payable, less any amounts from the prior
Plan Year that the Participant has elected to defer until future years.
EXHIBIT A
1998 Executive Compensation Plan (ECP)
PURPOSE
The purpose of the Executive Compensation Plan (ECP) is to provide an annual
variable pay component based on individual, team, and corporate performance
measures which the executive can influence.
PARTICIPANTS
Participation is limited to a select group of executives who have significant
impact on corporate performance. Participants are selected annually by the
Chairman and Chief Executive Officer and approved by the Executive Committee of
the Board of Directors.
PLAN DESIGN
Target award levels are established as a percent of base salary to provide
competitive pay opportunities based on company performance. The 1998 ECP is
structured not only to reward for Adjusted PAT growth and individual
performance, but also for a successful SAP implementation.
. If SAP software implementation is successful:
- For each 1% growth in Adjusted PAT for the first 6% of growth, the
participant will earn 13% of the Corporate Performance Target Award.
- For each 1% growth in Adjusted PAT over 6%, the participant will earn an
additional 10% of the Corporate Performance Target Award.
. If SAP software implementation is NOT successful:
- For each 1% growth in Adjusted PAT, the participant will earn 10% of the
Corporate Performance Target Award.
. The individual performance component rewards for achievement of established
goals.
The actual payout is determined by the participant's manager.
INDIVIDUAL GOAL SETTING PROCESS
. Goals should be set according to principles of the performance improvement
process (PIP) and be aligned with team and corporate goals.
. Goals will be mutually agreed to by the participant and manager. The next
level manager will review goals and results for alignment and consistency.
. Goals should be accomplished by the participant within a specified time
period.
. Goals should impact area and global operating results.
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EXHIBIT A
DEFERRAL OPTION
A USD-paid participant may elect to defer all or a portion of the ECP payout.
The election to defer must be made by December 31, 1997 and is irrevocable. The
deferred compensation will be a general liability of the corporation and will
earn interest quarterly at money market rates as of the first week of each
calendar quarter.
GSP Participants: Please reference GSP pamphlet regarding the Annual Bonus
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Deferral.
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EXHIBIT A
1998 ECP Corporate Performance Structure
If SAP Software Implementation is successful:
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For the first 6% of Adjusted PAT growth:
. For each 1% growth in Adjusted PAT, the participant will earn 13% of the
Corporate Performance Target Award.
If the Adjusted PAT growth exceeds 6%:
. For each 1% growth in Adjusted PAT over 6%, the participant will earn an
additional 10% of the Corporate performance Target Award.
If SAP Software Implementation is NOT successful
. For each 1% growth in Adjusted PAT, the participant will earn 10% of the
Corporate Performance Target Award.
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EXHIBIT A
ECP Payout Calculation
The formula for calculating the ECP payout is:
CORPORATE SPECIFIED
PAT X PROFIT GROWTH = A
GROWTH FACTOR(s)
CORPORATE
A X PERFORMANCE = B
B + INDIVIDUAL PERFORMANCE = C
ACTUAL
C X BASE = ECP PAYOUT
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EARNINGS
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