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EXHIBIT 10.06
AMENDED AND RESTATED
EASTMAN EXECUTIVE DEFERRED COMPENSATION PLAN
Preamble. The Amended and Restated Eastman Executive Deferred Compensation Plan
is an unfunded, nonqualified deferred compensation arrangement for eligible
employees of Eastman Chemical Company ("the Company") and certain of its
subsidiaries. Under the Plan, each Eligible Employee is annually given an
opportunity to elect to defer payment of part of his or her cash compensation.
This Plan also assumed the liabilities accrued under the Kodak Executive
Deferred Compensation Plan, as of January 1, 1994, in respect of each Eligible
Employee who was actively employed by the Company as of such date and who chose
to transfer his or her deferred compensation account to the Company. This Plan
originally was adopted effective January 1, 1994, was amended effective March 2,
1994, and is further amended and restated effective as of October 10, 1996.
Section 1. Definitions.
Section 1.1. "Account" means the Interest Account or the Stock Account.
Section 1.2. "Board" means the Board of Directors of the Company.
Section 1.3. "Change In Control" means a change in control of the Company
of a nature that would be required to be reported (assuming such event has
not been "previously reported") in response to Item 1 (a) of a Current
Report on Form 8-K, as in effect on August 1, 1993, pursuant to Section 13
or 15(d) of the Exchange Act; provided that, without limitation, a Change
In Control shall be deemed to have occurred at such time as (i) any
"person" within the meaning of Section 14(d) of the Exchange Act, other
than the Company, a subsidiary of the Company, or any employee benefit
plan(s) sponsored by the Company or any subsidiary of the Company, is or
has become the "beneficial owner," as defined in Rule 13d-3 under the
Exchange Act, directly or indirectly, of 25% or more of the combined voting
power of the outstanding securities of the Company ordinarily having the
right to vote at the election of directors; provided, however, that the
following will not constitute a Change In Control: any acquisition by any
corporation if, immediately following such acquisition, more than 75% of
the outstanding securities of the acquiring corporation ordinarily having
the right to vote in the election of directors is beneficially owned by all
or substantially all of those persons who, immediately prior to such
acquisition, were the beneficial owners of the outstanding securities of
the Company ordinarily having the right to vote in the election of
directors, or (ii) individuals who constitute the Board on January 1, 1994
(the "Incumbent Board") have ceased for any reason to constitute at least a
majority thereof, provided that: any person becoming a director subsequent
to January 1, 1994 whose election, or nomination for election by the
Company's stockholders, was approved by a vote of at least three-quarters
(3/4) of the directors comprising the Incumbent Board (either by a specific
vote or by approval of the proxy statement of the Company in which such
person is named as a nominee for director without objection to such
nomination) shall be, for purposes of the Plan, considered as though such
person were a member of the Incumbent Board, (iii) upon approval by the
Company's stockholders of a reorganization, merger or consolidation, other
than one with respect to which all or substantially all of those persons
who were the beneficial owners, immediately prior to such reorganization,
merger or consolidation, of outstanding securities of the Company
ordinarily having the right to vote in the election of directors own,
immediately after such transaction, more than 75 % of the outstanding
securities of the resulting corporation ordinarily having the right to vote
in the election of directors; or (iv) upon approval by the Company's
stockholders of a complete liquidation and dissolution of the Company or
the sale or other disposition of all or substantially all of the assets of
the Company other than to a subsidiary of the Company. Notwithstanding the
occurrence of any of the foregoing, the Compensation Committee may
determine, if it deems it to be in the best interest of the Company, that
an event or events otherwise constituting a Change In Control shall not be
so considered. Such determination shall be effective only if it is made by
the Compensation Committee prior to the occurrence of an event that
otherwise would be or probably will lead to a Change In Control or after
such event if made by the Compensation Committee a majority of which is
composed of directors who were members of the Board immediately prior to
the event that otherwise would be or probably will lead to a Change In
Control.
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Section 1.4. "Common Stock" means the $.01 par value common stock of the
Company.
Section 1.5. "Company" means Eastman Chemical Company.
Section 1.6. "Compensation Committee" shall mean the Compensation and
Management Development Committee of the Board.
Section 1.7. "Deferrable Amount" means, for a given fiscal year of the
Company, an amount equal to the sum of the Eligible Employee's (i) annual
base cash compensation; (ii) annual cash payments under the Eastman
Performance Plan and the Annual Performance Plan of the Company; and (iii)
stock and stock-based awards under the Omnibus Plan which, under the terms
of the Omnibus Plan and the award, are payable in cash and required or
allowed to be deferred into this Plan; provided, however, that the
Deferrable Amount shall not include any amount that must be withheld from
the Eligible Employee's wages for income or employment tax purposes. In
addition, each Eligible Employee as of January 1, 1994, who had previously
participated in the Kodak Executive Deferred Compensation Plan could elect
to transfer the amount then in his or her account in the Kodak Executive
Deferred Compensation Plan into the Plan. Furthermore, "Deferred Amount"
included, for 1993, annual cash payments under the Kodak Wage Dividend
policy and Success Sharing program payable in 1994 and attributable to 1993
service.
Section 1.8. "Eligible Employee" means a U.S.-based employee of the Company
or any of its U.S. Subsidiaries who, as of the first day of the applicable
Enrollment Period (i) has a salary grade classification of SG 49 or above;
or (ii) is not covered under clause (i), but who was an Eligible Employee
under the Kodak Executive Deferred Compensation Plan, as in effect on
January 1, 1994. Any employee who becomes eligible to participate in this
Plan and in a future year does not qualify as an Eligible Employee because
of a change in position level shall nevertheless be eligible to participate
in such year.
Section 1.9. "Enrollment Period" means the period designated by the
Compensation Committee each year; provided however, that such period shall
end on or before the last business day before the last Sunday in December
of each year.
Section 1.10. "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
Section 1.11. "Interest Account" means the account established by the
Company for each Participant for compensation deferred pursuant to this
Plan and which shall bear interest as described in Section 4.1 below. The
maintenance of individual Interest Accounts is for bookkeeping purposes
only.
Section 1.12. "Interest Rate" means the monthly average of bank prime
lending rates to most favored customers as published in THE WALL STREET
JOURNAL, such average to be determined as of the last day of each month.
Section 1.13. "Market Value" means the closing price of the shares of
Common Stock on the New York Stock Exchange on the day on which such value
is to be determined or, if no such shares were traded on such day, said
closing price on the next business day on which such shares are traded;
provided, however, that if at any relevant time the shares of Common Stock
are not traded on the New York Stock Exchange, then "Market Value" shall be
determined by reference to the closing price of the shares of Common Stock
on another national securities exchange, if applicable, or if the shares
are not traded on an exchange but are traded in the over-the-counter
market, by reference to the last sale price or the closing "asked" price of
the shares in the over-the-counter market as reported by the National
Association of Securities Dealers Automated Quotation System (NASDAQ) or
other national quotation service.
Section 1.14. "Omnibus Plan" means the Eastman Chemical Company 1994
Omnibus Long-Term Compensation Plan or any successor plan to the Omnibus
Plan providing for awards of stock and stock-based compensation to Company
employees.
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Section 1.15. "Participant" means an Eligible Employee who elects for one
or more years to defer compensation pursuant to this Plan.
Section 1.16. "Plan" means this Amended and Restated Eastman Executive
Deferred Compensation Plan.
Section 1.17. "Section 16 Insider" means a Participant who is, with respect
to the Company, subject to Section 16 of the Exchange Act.
Section 1.18. "Stock Account" means the account established by the Company
for each Participant, the performance of which shall be measured by
reference to the Market Value of Common Stock. The maintenance of
individual Stock Accounts is for bookkeeping purposes only.
Section 1.19. "U.S. Subsidiaries" means the United States subsidiaries of
the Company listed on Schedule A.
Section 1.20. "Valuation Date" means each business day.
Section 2. Deferral of Compensation. An Eligible Employee may elect to defer
receipt of all or any portion of his or her Deferrable Amount to his or her
Interest Account and/or Stock Account. A Participant in this Plan need not
participate in the Eastman Investment Plan. If an Eligible Employee terminates
employment with the Company or any of its U.S. Subsidiaries, any previous
deferral election with respect to a Wage Dividend, Success Sharing, Eastman
Performance Plan, Annual Performance Plan or Omnibus Plan payment or award shall
remain in effect with respect to such items of compensation payable after
termination of employment.
Section 3. Time of Election of Deferral. An Eligible Employee who wishes to
defer compensation must irrevocably elect to do so during the applicable
Enrollment Period. Except as provided in the next sentence, the Enrollment
Period shall end prior to the first day of the calendar year in which the
applicable Deferrable Amount will first be paid, earned, or awarded. The
Enrollment Period with respect to payouts (if any) in 1997 under the 1994-1996
Long-Term Performance Subplan of the Omnibus Plan shall end prior to October 31,
1996. Elections shall be made annually.
This Plan was first adopted January 1, 1994, and is generally effective with
respect to compensation earned on or after such date. However, (i) if a person
who is eligible to participate in this Plan made an election under the Kodak
Executive Deferred Compensation Plan with respect to a payment under the
Management Annual Performance Plan (MAPP) that would be paid in calendar year
1994, such election remained in force and was effective under this Plan for such
MAPP payment; and (ii) Participants could elect to defer under this Plan a Wage
Dividend or Success Sharing payment payable in calendar year 1994 but
attributable to 1993 service.
Section 4. Hypothetical Investments.
Section 4.1. Interest Account. Amounts in a Participant's Interest Account
are hypothetically invested in an interest bearing account which bears
interest computed at the Interest Rate, compounded monthly.
Section 4.2. Stock Account. Amounts in a Participant's Stock Account are
hypothetically invested in units of Common Stock. Amounts deferred into a
Stock Account are recorded as units of Common Stock, and fractions thereof,
with one unit equating to a single share of Common Stock. Thus, the value
of one unit shall be the Market Value of a single share of Common Stock.
The use of units is merely a bookkeeping convenience; the units are not
actual shares of Common Stock. The Company will not reserve or otherwise
set aside any Common Stock for or to any Stock Account. The maximum number
of Common Stock units that may be hypothetically purchased by deferral of
compensation to Stock Accounts under this Plan is 4,500,000.
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Section 5. Deferrals and Crediting Amounts to Accounts.
Section 5.1. Manner of Electing Deferral. An Eligible Employee may elect to
defer compensation by executing and returning to the Compensation Committee
a deferred compensation form provided by the Company. The form shall
indicate (i) the amount and sources of Deferrable Amount to be deferred;
(ii) whether deferral of annual base cash compensation is to be at the same
rate throughout the year, or at one rate for part of the year and at a
second rate for the remainder of the year; and (iii) the portion of the
deferral to be credited to the Participant's Interest Account and Stock
Account, respectively. An election to defer compensation shall be
irrevocable following the end of the applicable Enrollment Period, but the
portion of the deferral to be credited to the Participant's Interest
Account and Stock Account, respectively, may be reallocated by the
Participant in the manner specified by the Compensation Committee or its
authorized designee through and including the business day immediately
preceding the date on which the deferred amount is credited to the
Participant's Accounts pursuant to Section 5.2.
Section 5.2. Crediting of Amounts to Accounts. Amounts to be deferred shall
be credited to the Participant's Interest Account and/or Stock Account, as
applicable, as of the date such amounts are otherwise payable.
Section 6. Deferral Period. Subject to Sections 9, 10, and 19 hereof, the
compensation which a Participant elects to defer under the Plan will be deferred
until the Participant retires or otherwise terminates employment with the
Company or any of its U.S. Subsidiaries. Any such election shall be made during
the applicable Enrollment Period on the deferred compensation form referenced in
Section 5 above. The payment of a Participant's Account shall be governed by
Sections 8, 9, 10, and 19, as applicable.
Notwithstanding the foregoing, any fixed date election made by an Eligible
Employee under the Kodak Executive Deferred Compensation Plan shall remain in
force under this Plan, provided he or she continues as an employee of the
Company or any of its U.S. Subsidiaries during the period of deferral. Payment
of such amount pursuant to a deferral election made under such Kodak Plan shall
be made in cash in a single lump sum on the fifth business day in March in the
year following the termination of such deferral period, and the amount of the
lump-sum due the Participant shall be valued as of the last Valuation Date in
February in the year following the termination of the deferral period. If such
Participant ceases to be an employee of the Company or any of its U.S.
Subsidiaries prior to the end of the fixed period, Section 8 shall govern the
payment of his or her Accounts.
Section 7. Investment in the Stock Account and Transfers Between Accounts.
Section 7.1. Election Into the Stock Account. If a Participant elects to
defer compensation into his or her Stock Account, his or her Stock Account
shall be credited, as of the date described in Section 5.2, with that
number of units of Common Stock, and fractions thereof, obtained by
dividing the dollar amount to be deferred into the Stock Account by the
Market Value of the Common Stock as of such date.
Section 7.2. Transfers Between Accounts. A Participant may direct that all
or any portion, designated as a whole dollar amount, of the existing
balance of one of his or her Accounts be transferred to his or her other
Account, effective as of (i) the date such election is made, if and only if
such election is made prior to the close of trading on the New York Stock
Exchange on a day on which the Common Stock is traded on the New York Stock
Exchange, or (ii) if such election is made after the close of trading on
the New York Stock Exchange on a given day or at any time on a day on which
no sales of Common Stock are made on the New York Stock Exchange, then on
the next business day on which the Common Stock is traded on the New York
Stock Exchange (the date described in (i) or (ii), as applicable, is
referred to hereinafter as the election's "Effective Date"). Such election
shall be made in the manner specified by the Compensation Committee or its
authorized designee during the period that begins on the third business day
following the public release of the Company's quarterly earnings report and
that ends on the last business day of the second calendar month following
the end of each
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fiscal quarter of the Company; provided however, that a Section 16 Insider
may only elect to transfer between his or her Accounts if he or she has
made no election within the previous six months to effect an "opposite way"
fund-switching (i.e., transfer out versus transfer in) transfer into or out
of the Stock Account or the Eastman Stock Funds of the Eastman Investment
Plan or the Savings and Investment Plan Appendix, or any other "opposite
way" intra-plan transfer or plan distribution involving a Company equity
securities fund which constitutes a "Discretionary Transaction" as defined
in Rule 16b-3 under the Exchange Act.
Section 7.3. Transfer Into the Stock Account. If a Participant elects
pursuant to Section 7.2 to transfer an amount from his or her Interest
Account to his or her Stock Account, effective as of the election's
Effective Date, (i) his or her Stock Account shall be credited with that
number of units of Common Stock, and fractions thereof, obtained by
dividing the dollar amount elected to be transferred by the Market Value of
the Common Stock on the Valuation Date immediately preceding the election's
Effective Date; and (ii) his or her Interest Account shall be reduced by
the amount elected to be transferred.
Section 7.4. Transfer Out of the Stock Account. If a Participant elects
pursuant to Section 7.2 to transfer an amount from his or her Stock Account
to his or her Interest Account, effective as of the election's Effective
Date, (i) his or her Interest Account shall be credited with a dollar
amount equal to the amount obtained by multiplying the number of units to
be transferred by the Market Value of the Common Stock on the Valuation
Date immediately preceding the election's Effective Date; and (ii) his or
her Stock Account shall be reduced by the number of units elected to be
transferred.
Section 7.5. Dividend Equivalents. Effective as of the payment date for
each cash dividend on the Common Stock, the Stock Account of each
Participant who had a balance in his or her Stock Account on the record
date for such dividend shall be credited with a number of units of Common
Stock, and fractions thereof, obtained by dividing (i) the aggregate dollar
amount of such cash dividend payable in respect of such Participant's Stock
Account (determined by multiplying the dollar value of the dividend paid
upon a single share of Common Stock by the number of units of Common Stock
held in the Participant's Stock Account on the record date for such
dividend); by (ii) the Market Value of the Common Stock on the Valuation
Date immediately preceding the payment date for such cash dividend.
Section 7.6. Stock Dividends. Effective as of the payment date for each
stock dividend on the Common Stock, additional units of Common Stock shall
be credited to the Stock Account of each Participant who had a balance in
his or her Stock Account on the record date for such dividend. The number
of units that shall be credited to the Stock Account of such a Participant
shall equal the number of shares of Common Stock, and fractions thereof,
which the Participant would have received as stock dividends had he or she
been the owner on the record date for such stock dividend of the number of
shares of Common Stock equal to the number of units credited to his or her
Stock Account on such record date.
Section 7.7. Recapitalization. If, as a result of a recapitalization of the
Company, the outstanding shares of Common Stock shall be changed into a
greater number or smaller number of shares, the number of units credited to
a Participant's Stock Account shall be appropriately adjusted on the same
basis.
Section 7.8. Distributions. Amounts in respect of units of Common Stock may
only be distributed out of the Stock Account by transfer to the Interest
Account (pursuant to Sections 7.2 and 7.4 or 7.10) or withdrawal from the
Stock Account (pursuant to Section 8, 9, 10, or 19), and shall be
distributed in cash. The number of units to be distributed from a
Participant's Stock Account shall be valued by multiplying the number of
such units by the Market Value of the Common Stock as of the Valuation Date
immediately preceding the date such distribution is to occur. Pending the
complete distribution under Section 8.2 or liquidation under Section 7.10
of the Stock Account of a Participant who has terminated his or her
employment with the Company or any of its U.S. Subsidiaries, the
Participant shall continue to be able to make elections pursuant to
Sections 7.2, 7.3, and 7.4 and his or her Stock Account shall continue to
be credited with additional units of Common Stock pursuant to Sections 7.5,
7.6, and 7.7.
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Section 7.9. Responsibility for Investment Choices. Each Participant is
solely responsible for any decision to defer compensation into his or her
Stock Account and to transfer amounts to and from his or her Stock Account
and accepts all investment risks entailed by such decision, including the
risk of loss and a decrease in the value of the amounts he or she elects to
transfer into his or her Stock Account.
Section 7.10. Liquidation of Stock Account. The provisions of this Section
7.10 shall be applicable if the Vice President, Human Resources, or the
Compensation Committee, as applicable, determines pursuant to Section 8 to
pay a Participant's Accounts in annual installments and, on the second
anniversary of the Participant's retirement or, if earlier, termination of
employment from the Company or any of its U.S. Subsidiaries, the
Participant has a balance remaining in his or her Stock Account. In such
case, effective as of the first day of the first calendar month immediately
following the date of such second anniversary, the entire balance of the
Participant's Stock Account shall automatically be transferred to his or
her Interest Account and he or she shall thereafter be ineligible to
transfer any amounts to his or her Stock Account. For purposes of valuing
the units of Common Stock subject to such a transfer, the approach
described in Section 7.8 shall be used.
Section 8. Payment of Deferred Compensation.
Section 8.1. Background. No withdrawal may be made from a Participant's
Accounts except as provided in this Section 8 and Sections 9, 10, and 19.
Section 8.2. Manner of Payment. Payment of a Participant's Accounts shall
be made in a single lump sum or annual installments, in the sole discretion
of the Company's Vice President, Human Resources, with respect to
Participants other than executive officers of the Company, and by the
Compensation Committee, with respect to Participants who are executive
officers of the Company. The maximum number of annual installments is ten.
All payments from the Plan shall be made in cash.
Section 8.3. Timing of Payments. Payments shall be made by the fifth
business day in March and shall commence in any year designated in the sole
discretion of the Company's Vice President, Human Resources, with respect
to Participants other than executive officers of the Company, and by the
Compensation Committee, with respect to Participants who are executive
officers of the Company, up through the tenth year following the year in
which the Participant retires, becomes disabled, or for any other reason,
ceases to be an employee of the Company or any of its U.S. Subsidiaries,
but in no event shall payment commence later than the year the Participant
reaches age 71.
Section 8.4. Valuation. The amount of each payment shall be equal to the
value, as of the preceding Valuation Date, of the Participant's Accounts,
divided by the number of installments remaining to be paid. If payment of a
Participant's Accounts is to be paid in installments and the Participant
has a balance in his or her Stock Account at the time of the payment of an
installment, the amount that shall be distributed from his or her Stock
Account shall be the amount obtained by multiplying the total amount of the
installment determined in accordance with the immediately preceding
sentence by the percentage obtained by dividing the balance in the Stock
Account as of the immediately preceding Valuation Date by the total value
of the Participant's Accounts as of such date. Similarly, in such case, the
amount that shall be distributed from the Participant's Interest Account
shall be the amount obtained by multiplying the total amount of the
installment determined in accordance with the first sentence of this
Section 8.4 by the percentage obtained by dividing the balance in the
Interest Account as of the immediately preceding Valuation Date by the
total value of the Participant's Accounts as of such date.
Section 9. Payment of Deferred Compensation After Death. If a Participant dies
prior to complete payment of his or her Accounts, the balance of such Accounts,
valued as of the Valuation Date immediately preceding the date payment is made,
shall be paid in a single, lump-sum payment to: (i) the beneficiary or
contingent beneficiary designated by the Participant on forms supplied by the
Compensation Committee; or, in the absence of a valid designation of a
beneficiary or contingent beneficiary, (ii) the Participant's estate within 30
days after appointment of a legal representative of the deceased Participant.
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Section 10. Withdrawals.
Section 10.1. Acceleration of Payment for Hardship. Upon written approval
from the Company's Vice President, Human Resources, with respect to
Participants other than executive officers of the Company, and by the
Compensation Committee, with respect to Participants who are executive
officers of the Company, and subject to the restrictions in the next two
sentences, a Participant, whether or not he or she is still employed by the
Company or any of its U.S. Subsidiaries, may be permitted to receive all or
part of his or her Accounts if the Company's Vice President, Human
Resources, or the Compensation Committee, as applicable, determines that an
emergency event beyond the Participant's control exists which would cause
such Participant severe financial hardship if the payment of his or her
Accounts were not approved. Any such distribution for hardship shall be
limited to the amount needed to meet such emergency.
Section 10.2. Payment to Individuals. Any participant in the Eastman
Executive Deferred Compensation Plan may at his or her discretion withdraw
at any time all or part of that person's account balance under the Plan;
provided, if this option is exercised the individual will forfeit to the
Corporation 10% of his or her account balance or $50,000, whichever is
less, and will not be permitted to participate in this plan for a period of
36 months from date any payment to a participant is made under this
section.
Section 10.3. Accelerated Payment. If under Eastman Executive Deferred
Compensation Plan one-half or more of the Participants or one-fifth or more
of the Participants with one-half or more of the value of all benefits owed
exercise their option for immediate distribution in any consecutive
six-month period this will trigger immediate payment to all Participants of
all benefits owed under the terms of the plan. Immediate payout under this
section will not involve reduction of the amounts paid to Participants as
set forth in section 10.2. Any individual that has been penalized in this
six-month period for electing immediate withdrawal will be paid that
penalty, and continuing participation will be allowed, if payout to all
Participants under this section occurs.
Section 10.4. Section 16. A Section 16 Insider may only receive a
withdrawal from his or her Stock Account pursuant to this Section 10 if he
or she has made no election within the previous six months to effect a
fund-switching transfer into the Stock Account or the Eastman Stock Fund of
the Eastman Investment Plan or the Savings and Investment Plan Appendix, or
any other "opposite way" intra-plan transfer into a Company equity
securities fund which constitutes a "Discretionary Transaction" as defined
in Rule 16b-3 under the Exchange Act. If such a distribution occurs while
the Participant is employed by the Company or any of its U.S. Subsidiaries,
any election to defer compensation for the year in which the Participant
receives a withdrawal shall be ineffective as to compensation earned for
the pay period following the pay period during which the withdrawal is made
and thereafter for the remainder of such year and shall be ineffective as
to any other compensation elected to be deferred for such year.
Section 11. Non-Competition and Non-Disclosure Provision. Participant will not,
without the written consent of the Company, either during his or her employment
by Company or any of its U.S. Subsidiaries or thereafter, disclose to anyone or
make use of any confidential information which he or she has acquired during his
or her employment relating to any of the business of the Company or any of its
subsidiaries, except as such disclosure or use may be required in connection
with his or her work as an employee of Company or any of its U.S. Subsidiaries.
During Participant's employment by the Company or any of its U.S. Subsidiaries,
and for a period of two years after the termination of such employment, he or
she will not, without the written consent of the Company, either as principal,
agent, consultant, employee or otherwise, engage in any work or other activity
in competition with the Company in the field or fields in which he or she has
worked for the Company or any of its U.S. Subsidiaries. The agreement in this
Section 11 applies separately in the United States and in other countries but
only to the extent that its application shall be reasonably necessary for the
protection of the Company. If the Participant does not comply with the terms of
this Section 11, the Company's Vice President, Human Resources, with respect to
Participants other than executive officers of the Company, or the Compensation
Committee, with respect to executive officers of the Company may, in his or its
sole discretion, direct the Company to pay to the Participant the balance
credited to his or her Interest Account and/or Stock Account.
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Section 12. Participant's Rights Unsecured. The benefits payable under this Plan
shall be paid by the Company each year out of its general assets. To the extent
a Participant acquires the right to receive a payment under this Plan, such
right shall be no greater than that of an unsecured general creditor of the
Company. No amount payable under this Plan may be assigned, transferred,
encumbered or subject to any legal process for the payment of any claim against
a Participant. No Participant shall have the right to exercise any of the rights
or privileges of a shareowner with respect to the units credited to his or her
Stock Account.
Section 13. No Right to Continued Employment. Participation in the Plan shall
not give any employee any right to remain in the employ of the Company or any of
its U.S. Subsidiaries. The Company and each employer U.S. Subsidiary reserve the
right to terminate any Participant at any time.
Section 14. Statement of Account. Statements will be sent no less frequently
than annually to each Participant or his or her estate showing the value of the
Participant's Accounts.
Section 15. Deductions. The Company will withhold to the extent required by law
all applicable income and other taxes from amounts deferred or paid under the
Plan.
Section 16. Administration.
Section 16.1. Responsibility. Except as expressly provided otherwise
herein, the Compensation Committee shall have total and exclusive
responsibility to control, operate, manage and administer the Plan in
accordance with its terms.
Section 16.2. Authority of the Compensation Committee. The Compensation
Committee shall have all the authority that may be necessary or helpful to
enable it to discharge its responsibilities with respect to the Plan.
Without limiting the generality of the preceding sentence, the Compensation
Committee shall have the exclusive right: to interpret the Plan, to
determine eligibility for participation in the Plan, to decide all
questions concerning eligibility for and the amount of benefits payable
under the Plan, to construe any ambiguous provision of the Plan, to correct
any default, to supply any omission, to reconcile any inconsistency, and to
decide any and all questions arising in the administration, interpretation,
and application of the Plan.
Section 16.3. Discretionary Authority. The Compensation Committee shall
have full discretionary authority in all matters related to the discharge
of its responsibilities and the exercise of its authority under the Plan
including, without limitation, its construction of the terms of the Plan
and its determination of eligibility for participation and benefits under
the Plan. It is the intent that the decisions of the Compensation Committee
and its action with respect to the Plan shall be final and binding upon all
persons having or claiming to have any right or interest in or under the
Plan and that no such decision or action shall be modified upon judicial
review unless such decision or action is proven to be arbitrary or
capricious.
Section 16.4. Authority of Vice President, Human Resources. Where expressly
provided for under Sections 8, 10 and 11, the authority of the Compensation
Committee is delegated to the Company's Vice President, Human Resources,
and to that extent the provisions of Section 16.1 through 16.3 above shall
be deemed to apply to such Vice President.
Section 16.5. Delegation of Authority. The Compensation Committee may
provide for an additional delegation of some or all of its authority under
the Plan to any person or persons provided that any such delegation be in
writing.
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Section 17. Amendment. The Board may suspend or terminate the Plan at anytime.
In addition, the Board may, from time to time, amend the Plan in any manner
without shareowner approval; provided however, that the Board may condition any
amendment on the approval of shareowners if such approval is necessary or
advisable with respect to tax, securities, or other applicable laws. However, no
amendment, modification, or termination shall, without the consent of a
Participant, adversely affect such Participant's accruals in his or her Accounts
as of the date of such amendment, modification, or termination.
Section 18. Governing Law. The Plan shall be construed, governed and enforced in
accordance with the law of Tennessee, except as such laws are preempted by
applicable federal law.
Section 19. Change in Control.
Section 19.1. Background. The terms of this Section 19 shall immediately
become operative, without further action or consent by any person or
entity, upon a Change in Control, and once operative shall supersede and
control over any other provisions of this Plan.
Section 19.2. Acceleration of Payment Upon Change In Control. Upon the
occurrence of a Change in Control, each Participant, whether or not he or
she is still employed by the Company or any of its U.S. Subsidiaries, shall
be paid in a single, lump-sum cash payment the balance of his or her
Accounts as of the Valuation Date immediately preceding the date payment is
made. Such payment shall be made as soon as practicable, but in no event
later than 90 days after the date of the Change in Control.
Section 19.3. Amendment On or After Change in Control. On or after a Change
in Control, no action, including, but not by way of limitation, the
amendment, suspension or termination of the Plan, shall be taken which
would affect the rights of any Participant or the operation of this Plan
with respect to the balance in the Participant's Accounts.
Section 19.4. Attorney Fees. The Corporation shall pay all reasonable legal
fees and related expenses incurred by a participant in seeking to obtain or
enforce any payment, benefit or right such participant may be entitled to
under the plan after a Change in Control; provided, however, the
participant shall be required to repay any such amounts to the Corporation
to the extent a court of competent jurisdiction issues a final and
non-appealable order setting forth the determination that the position
taken by the participant was frivolous or advanced in bad faith.
Section 20. Compliance with SEC Regulations. It is the Company's intent that the
Plan comply in all respects with Rule 16b-3 of the Exchange Act, and any
regulations promulgated thereunder. If any provision of the Plan is found not to
be in compliance with such rule, the provision shall be deemed null and void.
All transactions under the plan, including, but not by way of limitation, a
Participant's election to defer compensation or transfer Account balances under
Section 7 and hardship withdrawals under Section 10, shall be executed in
accordance with the requirements of Section 16 of the Exchange Act, as amended
and any regulations promulgated thereunder. To the extent that any of the
provisions contained herein do not conform with Rule 16b-3 of the Exchange Act
or any amendments thereto or any successor regulation, then the Committee may
make such modifications so as to conform the Plan to the Rule's requirements.
Section 21. Successors and Assigns. This Plan shall be binding upon the
successors and assigns of the parties hereto.
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SCHEDULE A
Holston Defense Corporation
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