EXHIBIT 10.3
DOW CORNING CORPORATION
EMPLOYEES' SEVERANCE PAY PLAN
Effective: August 11, 1995
Prepared by:
Kelly M. Hayes
Keywell and Rosenfeld
2301 West Big Beaver Road, Suite 600
Troy, Michigan 48084
(810) 649-3200
TABLE OF CONTENTS
Page
ARTICLE I PURPOSE............................................... 1
ARTICLE II DEFINITIONS........................................... 2
ARTICLE III PARTICIPATION......................................... 5
3.1 Participation................................... 6
3.2 Exclusions...................................... 6
3.3 Good Reason..................................... 7
ARTICLE IV SEVERANCE PAY BENEFITS PROVIDED
UNDER THIS PLAN....................................... 9
4.1 Involuntary Termination......................... 9
4.2 Involuntary Termination following
Change in Control............................... 9
ARTICLE V FUNDING............................................... 10
ARTICLE VI DISTRIBUTION PROCEDURES............................... 11
6.1 Lump-Sum Distributions.......................... 11
6.2 Change in Control Distributions................. 11
ARTICLE VII ADMINISTRATION AND FIDUCIARIES........................ 13
7.1 Plan Administration............................. 13
7.2 Discretionary Authority of Plan
Administrator................................... 13
7.3 Fiduciaries..................................... 14
7.4 Employment of Advisors.......................... 14
7.5 Delegation to Officers or Employees............. 14
ARTICLE VIII CLAIMS AND APPEALS.................................... 15
8.1 Claims and Appeals.............................. 15
8.2 Arbitration..................................... 16
ARTICLE IX AMENDMENT OR TERMINATION.............................. 17
ARTICLE X MISCELLANEOUS PROVISIONS.............................. 18
10.1 Indemnification for Liability................... 18
10.2 Not an Employment Contract...................... 19
10.3 Construction of Plan............................ 19
10.4 Severability.................................... 19
10.5 Fiscal Records and Reports...................... 19
10.6 Headings........................................ 20
10.7 No Vested Interest.............................. 20
10.8 Limit on Liability.............................. 20
10.9 Anti-Alienation................................. 20
DOW CORNING CORPORATION
EMPLOYEES' SEVERANCE PAY PLAN
-----------------------------
ARTICLE I
PURPOSE
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The purpose of this Plan is to provide salary/income continuance
benefits to certain employees of Dow Corning Corporation.
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 pronouns shall
include the feminine and the singular shall include the plural:
2.1 "Board" means the Board of Directors of Dow Corning Corporation.
2.2 "Case" means the Chapter 11 Case commenced by the Employer on May
15, 1995 in the United States Bankruptcy Court for the Eastern District of
Michigan, Northern Division, Case no. 95-20512.
2.3 "Code" means the Internal Revenue Code of 1986, as amended.
2.4 "Change in Control" means an event which results in The Dow
Chemical Company and Corning Incorporated collectively owning less than 51% of
the issued and outstanding voting common stock of Dow Corning Corporation.
2.5 "ECP" means the Executive Compensation Plan, an incentive
deferred compensation plan sponsored by Dow Corning Corporation.
2.6 "Effective Date" means August 11, 1995.
2.7 "Eligible Employee" means any Employee who meets one (1) of the
following requirements:
a. an Employee who is employed by the Employer within the
confines of the United States, and is on the United States payroll of the
Employer; or
2
b. an Employee who is a citizen of the United States, but who
is assigned overseas by the Employer on an expatriate assignment.
2.8 "Employee" means any person engaged by the Employer to perform
personal services in an Employer/Employee relationship who receives compensation
from the Employer other than a retirement benefit, severance pay, retainer or
fee under contract. The term "Employee" shall not include:
a. Any leased employees;
b. Any person represented by a labor organization having a
collective bargaining agreement with the Employer;
c. Any person participating in a student employment program, or
Co-op program, as those terms are defined in the Employer's personnel policies
or any person who is on leave or vacation from another employer; and
d. Any person who is not employed by the Employer, but rather,
is employed by a subsidiary or entity related to the Employer.
2.9 "Employer" means Dow Corning Corporation and any other business
organization which succeeds to its business, but not any subsidiary or affiliate
of Dow Corning Corporation.
2.10 "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
2.11 "MIP" means the Management Incentive Plan, an incentive
compensation plan sponsored by Dow Corning Corporation.
2.12 "Participant" means any Eligible Employee who has met the
conditions for participation set forth in Article III.
3
2.13 "Plan" means the Dow Corning Corporation Employees' Severance Pay
Plan as set forth herein, together with any and all amendments and supplements
hereto.
2.14 "Plan Administrator" means the Employer or any individual or
entity designated by the Employer.
2.15 "Plan Year" means each twelve (12) month period commencing on
January 1st and ending on the following December 31st. The first Plan Year
shall commence on the Effective Date and end on December 31, 1995.
2.16 "VCP" means the Variable Compensation Plan, an incentive
compensation plan sponsored by Dow Corning Corporation.
2.17 "Year of Service" means a Plan Year (or a calendar year, for the
period of time prior to the Effective Date of this Plan) in which an Eligible
Employee works or is deemed to have worked at least 1,950 hours for the
Employer. An Eligible Employee shall be credited during each Plan Year with
one-tenth of a Year of Service for each 195 hours the Eligible Employee works,
or is deemed to have worked for the Employer. In no event shall an Eligible
Employee be credited with more than one Year of Service in any single Plan Year.
Employment with a subsidiary of the Employer, or with The Dow Chemical Company
or Corning, Inc., including employment prior to the Effective Date, shall be
included in the determination of Years of Service under this Plan.
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ARTICLE III
PARTICIPATION
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3.1 Participation. The Eligible Employees who shall be allowed to
participate in this Plan shall be those Eligible Employees:
a. whose employment with the Employer is involuntarily
terminated, as provided in this Article III; and
b. who agree to execute a document in a form substantially
similar to Schedule C (for those Eligible Employees who have attained age 40) or
Schedule D (for all other Eligible Employees) releasing the Employer from any
and all actions, suits, proceedings, claims, and demands related to the
termination of employment.
3.2 Exclusions. Although an Eligible Employee's employment may be
involuntarily terminated, said Eligible Employee shall, nevertheless, not become
a Participant in the Plan if one (1) of the following occurs:
a. the Eligible Employee resigns (except for those Eligible
Employees who resign for "good reason" as that term is defined in Section 3.3,
and they meet the requirements of Section 3.3);
b. the Eligible Employee is terminated "for cause." Cause for
termination includes, but is not limited to, theft, dishonesty, fraudulent,
criminal, or illegal conduct that is material in nature or material violations
of the Dow Corning Corporation Code of Conduct or other personnel policies of
the Employer;
c. the Eligible Employee breaches the terms of any written
employment agreement with the Employer;
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d. the Eligible Employee is involuntarily terminated by the
Employer due to a sale of all or part of the Employer's assets or business, or
the sale of a particular division, but the acquiring or purchasing entity offers
employment to such Eligible Employee at a compensation and benefits level which
is comparable to the compensation and benefits level of such Eligible Employee
immediately prior to such involuntarily termination. The determination of
comparability shall be made by an independent third-party employee benefits
consulting firm selected by the Employer;
e. the Eligible Employee becomes "totally and permanently
disabled" as that term is defined in the Employer's long-term disability plans;
or
f. the Eligible Employee is an inpatriate who is returned to
the non-U.S. affiliate or branch of the Employer in the country from which the
Eligible Employee was originally transferred.
3.3 Good Reason. If an Eligible Employee who is a participant in
either the ECP or the MIP resigns for good reason, said resignation shall be
considered an involuntary termination for purposes of this Article III. Good
Reason shall mean:
(i) If within eighteen months of a Change of Control an Eligible
Employee's base salary is reduced below the higher of (x) the amount in effect
immediately prior to the Change of Control and (y) the highest amount in effect
at any time thereafter, the Eligible Employee may resign his employment within
90 days of the occurrence of such reduction, and such resignation shall be
considered an involuntary termination.
(ii) If within eighteen months of a Change of Control, an
Eligible Employee's duties and responsibilities or the program of benefits
offered to an Eligible Employee are materially and adversely diminished in
comparison to the duties and
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responsibilities or the program of benefits enjoyed by the Eligible Employee
immediately prior to the Change of Control, the Eligible Employee may resign his
employment within 90 days of the occurrence of such reduction and such
resignation shall be considered an involuntary termination.
(iii) If within eighteen months of a Change of Control an
Eligible Employee is required to be based at a location more than 50 miles from
the location where the Eligible Employee was based and performed services
immediately prior to the Change of Control, the Eligible Employee may resign his
employment within 90 days of such relocation and such resignation shall be
considered an involuntary termination.
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ARTICLE IV
SEVERANCE PAY BENEFITS PROVIDED UNDER THIS PLAN
-----------------------------------------------
4.1 Involuntary Termination. Those Participants whose employment is
terminated by the Employer shall be entitled to receive the severance pay
benefits set forth on Schedule A, which is attached hereto and incorporated
herein by reference. Provided, however, those Participants who are eligible to
receive severance pay benefits pursuant to Paragraph 4.2 herein shall not also
be eligible to receive the severance pay benefits under this Paragraph 4.1. The
Employer shall have discretion to enhance the Schedule A severance benefits in
its business judgment in order to make the Plan competitive.
4.2 Involuntary Termination following Change in Control. Those
Participants whose employment is involuntarily terminated within twelve months
for VCP participants or eighteen months for MIP or ECP participants after a
Change in Control shall be entitled to receive the severance pay benefits set
forth on Schedule B, which is attached hereto and incorporated herein by
reference. The Employer shall have discretion to provide MIP severance benefits
to VCP participants as set forth in Schedule B when determined in its reasonable
business judgment to be necessary and appropriate.
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ARTICLE V
FUNDING
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Funding from General Assets. All contributions to this Plan shall be
from the general assets of the Employer. Funds invested hereunder shall continue
for all purposes to be part of the general funds of the Employer, and no person
other than the Employer 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 payment from the Employer under paragraph 4.1 of this Plan during the
Case, such rights shall constitute an administrative priority claim in the Case.
To the extent that any person acquires a right to receive payments from the
Employer under this Plan, after consummation of a plan of reorganization in the
Case, such rights shall be no greater than the right of any unsecured general
creditor of the Employer.
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ARTICLE VI
DISTRIBUTION PROCEDURES
-----------------------
6.1 Lump-Sum Distributions. Except as provided in Paragraph 6.2, the
Employer shall distribute applicable severance pay benefits to Participants in a
single lump sum payment, less any withholdings required by law. Severance pay
benefits shall be distributed by the Employer as soon as administratively
feasible, but no later than 60 days after the date of involuntary termination.
6.2 Change in Control Distributions. Those Participants who are
eligible to receive an enhanced severance benefit as a result of their
participation in the ECP shall have the option of either receiving a lump sum
cash payment of the 18 months salary plus target bonus as set forth on Schedule
B or receiving a lump sum cash payment of 50% of the Participant's salary plus
target bonus, for a 21-month period, with the balance of the 21 months salary
plus target bonus being paid in 11 equal monthly installments, commencing 11
months after the date of involuntary termination.
Any lump sum payments made pursuant to this Paragraph 6.2 shall be
made as soon as is administratively feasible, but no later than 60 days after
the date of involuntary termination.
In the event of the death of a Participant prior to the completion of
severance payments hereunder, the balance owed to the Participant shall be paid
to the Participant's estate in a lump sum payment within 60 days of the date of
death of the Participant.
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Any monthly installments payable pursuant to this Paragraph 6.2 shall
be reduced by the amount of any monthly salary or wages actually received by the
Participant through alternative employment during the period of the monthly
severance payments.
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ARTICLE VII
ADMINISTRATION AND FIDUCIARIES
------------------------------
7.1 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, to
appoint and remove fiduciaries, fix their compensation, if any, and exercise
general supervisory authority over them.
7.2 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
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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.
7.3 Fiduciaries. The Employer shall be the named fiduciary of this
Plan, which is an "employee welfare benefit plan," as said term is defined in
ERISA. The Employer shall have only those duties, responsibilities, and
obligations (referred to collectively as "fiduciary duties") as specifically are
given it under this Plan or as otherwise are imposed by applicable law. The
Employer may allocate its fiduciary duties under this Plan to other Plan
fiduciaries by written agreement between the Employer and such other fiduciary.
7.4 Employment of Advisors. The Employer shall have the authority 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 Employer.
7.5 Delegation to Officers or Employees. The Employer shall have the
power to delegate its fiduciary duties under this Plan to officers or employees
of the Employer and to other persons, all of whom, if employees of the Employer,
shall serve without compensation other than their regular remuneration from the
Employer.
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ARTICLE VIII
CLAIMS AND APPEALS
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8.1 Claims and Appeals. If any Participant shall dispute the
correctness or applicability to such Participant of a benefit elected or deemed
to be elected by the Participant pursuant to the 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
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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 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.
8.2 Arbitration. Unless an arbitration proceeding is unenforceable
due to federal or state law, any controversy arising out of or relating to this
Plan shall be settled by arbitration in accordance with the rules and
regulations then applicable under the American Arbitration Association in the
State of Michigan, and the judgment upon the award rendered may be entered in
any court having jurisdiction thereof and shall be binding and conclusive.
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ARTICLE IX
AMENDMENT OR TERMINATION
------------------------
This Plan may only be amended, modified, or terminated by resolution
of the Employer's Board. Provided, however, this Plan may not be terminated
until two years after the consummation of a plan of reorganization in the Case.
The Employer makes no promise to continue the Plan in the future other
than the statement made in the preceding paragraph.
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ARTICLE X
MISCELLANEOUS PROVISIONS
------------------------
10.1 Indemnification for Liability. The Employer shall, to the full
extent permitted by applicable state and federal law, or a court of competent
jurisdiction, indemnify any board member, officer or employee of the Employer
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) and who is (or who is alleged to be) a
fiduciary with respect to the Plan 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 Employer;
(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 Employer may retain such accountants, counsel or other
specialists as it deems necessary or desirable in connection with the
administration of the
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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 opinions or reports furnished to it in
writing by such accountants, counsel or other specialists.
10.2 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
Employer nor does it alter any of the Employer's existing personnel policies.
10.3 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.
10.4 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.
10.5 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. The Plan Administrator shall be responsible for
complying with all reporting, filing and disclosure requirements established by
the Internal Revenue Service.
10.6 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.
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10.7 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 of the Employer because of the Plan.
10.8 Limit on Liability. Except as provided herein, nothing contained
in the Plan shall impose on the Employer, or any board members, officers or
employees of the Employer any liability for the payment of benefits under this
Plan other than liabilities resulting from willful neglect or fraud. The
liability of the Employer for benefits shall be limited to the benefits provided
under the Plan.
10.9 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 Employer has caused this Plan to be executed
in its name and behalf effective August 11, 1995.
DOW CORNING CORPORATION
_________________________________________
By: Richard A. Hazleton
Its: Chairman of the Board and
Chief Executive Officer
Dow Corning Corporation
Employees' Severance Pay Plan
Schedule A
Severance Pay Benefits Provided Upon Involuntary Termination
------------------------------------------------------------
YEARS OF SERVICE SEVERANCE BENEFIT
- ---------------- -----------------
Up to 2 years 1 Months Salary
2-5 years 2 Months Salary
5-10 years 3 Months Salary
10-15 years 4 Months Salary
15-20 years 5 Months Salary
20 years and over 6 Months Salary
Dow Corning Corporation
Employees' Severance Pay Plan
Schedule B
Severance Pay Benefits Provided Upon Involuntary Termination When
-----------------------------------------------------------------
Such Involuntary Termination Occurs After A Change In Control
- -------------------------------------------------------------
I. Participants in the Dow Corning Corporation Variable Compensation Plan will
receive the following severance pay benefits if they are involuntarily
terminated within 12 months after a Change in Control:
YEARS OF SERVICE SEVERANCE BENEFIT
- ---------------- -----------------
Up to 2 years 3 Months Salary
2-5 years 6 Months Salary
5-10 years 9 Months Salary
10-15 years 12 Months Salary
15-20 years 15 Months Salary
20 years and over 18 Months Salary
II. Participants in the Dow Corning Corporation Management Incentive Plan will
receive the following severance pay benefits if they are involuntary
terminated within 18 months after a Change in Control:
Eighteen (18) months salary plus annual target bonus
III. Participants in the Dow Corning Corporation Executive Compensation Plan
will receive the following severance pay benefits if they are involuntarily
terminated within 18 months after a Change in Control:
Eighteen (18) months salary plus annual target bonus, except those ECP
Participants who elect the alternate distribution option contained in
Paragraph 6.2.