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EXHIBIT 10.11
SCHWEITZER-MAUDUIT INTERNATIONAL, INC.
EXECUTIVE SEVERANCE PLAN
AS AMENDED AND RESTATED
EFFECTIVE AS OF FEBRUARY 27, 1997
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SCHWEITZER-MAUDUIT INTERNATIONAL, INC.
EXECUTIVE SEVERANCE PLAN FOR KEY EMPLOYEES
ARTICLE 1 - PURPOSE AND ADOPTION OF PLAN
1.1 Adoption of Plan. Schweitzer-Mauduit International, Inc.
("Company") hereby amends and restates the Schweitzer-Mauduit International,
Inc. Executive Severance Plan effective as of February 27, 1997. The Company
intends that this Plan qualify as and come within the various exceptions and
exemptions under the Employee Retirement Income Security Act of 1974 ("ERISA"),
as amended, for an unfunded plan maintained primarily for a select group of
management or highly compensated employees, and any ambiguities in this Plan
shall be construed to effect that intent. The benefits of this Plan for U.S.
Employees (as hereinafter defined) shall be paid solely from the general assets
of the Company. The benefits of this Plan for French Employees (as hereinafter
defined) shall be paid by the French Employer (as hereinafter defined) but, if
as a result of applicable French laws, a French Employer would be prohibited
from paying the benefits of this Plan to a French Employee, any such benefits
shall be paid by the Company to such French Employee.
1.2 Purpose. The Plan is primarily designed to provide benefits to
certain Key Employees (as hereinafter defined) upon termination of employment as
a result of a Change of Control or otherwise.
1.3 Effect on Other Plans Sponsored by the Company or by a French
Employer. The benefits payable under the Plan are in addition to the coverage
and benefits generally afforded by Other Plans (as hereinafter defined) to Key
Employees terminating from the service of the Company or, as the case may be,
from the service of a French Employer and any other programs sponsored by the
Company or provided to Participants who are French Employees including, but not
limited to, vested benefits under any qualified employee benefit plans. However,
nothing herein is intended to or shall be construed to require the Company or a
French Employer to institute or continue in effect any particular plan or
benefit sponsored by the Company or such French Employer, and the Company and
each French Employer hereby reserve the right to amend or terminate any of their
Other Plans or benefit programs at any time in accordance with the procedures
set forth in each such plan or program and any applicable law.
The masculine pronoun shall be construed to include the feminine
pronoun and singular shall include the plural where the context so requires.
ARTICLE 2 - DEFINITIONS
2.1 "Administrator" shall mean the Compensation Committee
of the Board.
2.2 "Agreement" shall mean the participation agreement provided to
a Key Employee by the Administrator as provided in Section 3.2.
2.3 "Annual Compensation" shall mean:
a) For U.S. Employees, a Participant's rate of base
salary paid or payable for a calendar year by the
Company and any incentive award paid or payable to
such Participant pursuant to the Schweitzer-Mauduit
International, Inc. Annual Incentive Plan (the "SMI
Annual Incentive Plan") or any replacement or
successor to such plan for such calendar year. b) For
French Employees, a Participant's rate of base salary
paid or payable for a calendar year by his French
Employer, plus any incentive award paid or payable to
such Participant pursuant to the SMI Annual Incentive
Plan or any replacement or successor to such plan for
such calendar year, plus any profit-sharing paid or
payable by his French Employer attributable to such
calendar year minus the aggregate amount of (i) any
Convention Collective payments, (ii) Assedic
Payments, or (iii) private insurance payments paid or
payable to such Participant as a result of a Change
of Control Termination.
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2.4 "Basic Plan" shall mean the Securite Sociale retirement benefit
plan sponsored by the French Government.
2.5 "Board" shall mean the Board of Directors of
Schweitzer-Mauduit International, Inc.
2.6 "Cause" shall mean the termination of the Participant's
employment by the Company or by
his French Employer, as the case may be on the basis of criminal or civil fraud
on the part of the Participant.
2.7 "Change of Control" shall mean the date as of which:
(a) a third person, including a "group" as defined in Section 13(d)(3) of the
Securities Exchange Act of 1934, acquires actual or beneficial ownership of
shares of the Company having 15% or more of the total number of votes that may
be cast for the election of Directors of the Company; or (b) as the result of
any cash tender or exchange offer, merger or other business combination, sale of
assets or contested election, or any combination of the foregoing transactions
(a "Transaction"), the persons who were directors of the Company before the
Transaction shall cease to constitute a majority of the Board of Directors of
the Company or any successor to the Company.
2.8 "Change of Control Termination" shall mean the termination of a
Participant's employment by the Company or his French Employer, as the case may
be, within two years of a Change of Control for any reason other than
Retirement, Disability or the Participant's death.
2.9 "Code" shall mean the Internal Revenue Code of 1986,
as amended.
2.10 "Company" shall mean Schweitzer-Mauduit International,
Inc. and each of its successors and assigns.
2.11 "Complementary Plan" shall mean the national pension plans for
French Employees and workers sponsored by the Association des Regimes de
Retraite Complementaires ("ARRCO") and the Association Generale des Institutions
de Retraite des Cadres ("AGIRC"), respectively.
2.12 "Disability" shall mean Totally and Permanently Disabled,
within the meaning of the Retirement Plan, provided that the Administrator shall
make any such determination with respect to a Participant hereunder.
2.13 "French Employee" shall mean an individual employed by one
of the French Employers.
2.14 "French Employer(s)" mean Schweitzer-Mauduit France,
S.A.R.L. or LTR Industries, S.A.
and their respective subsidiaries.
2.15 "French Supplementary Plans" shall mean the
supplementary pension benefit plans provided, respectively, by Papeteries
de Mauduit, S.A. and LTR Industries, S.A. to their employees.
2.16 "Key Employee" shall mean an individual who is a member of a
select group of management or highly compensated French Employees and/or U.S.
Employees, as determined from time to time by the Administrator.
2.17 "Other Plans" shall mean other plans of the Company
or of the French Employer, including but not limited to the Schweitzer-Mauduit
International, Inc. Annual Incentive Plan, the Schweitzer-Mauduit International,
Inc. Equity Participation Plan, the Schweitzer-Mauduit International, Inc.
Long-Term Incentive Plan, and the Supplemental Plan.
2.18 "Participant" shall mean a Key Employee who has entered into
an Agreement with the Administrator in accordance with Section 3.2.
2.19 "Plan" shall mean this Schweitzer-Mauduit
International, Inc. Executive Severance Plan.
2.20 "Retirement" shall mean
a. For U.S. Employees, the voluntary termination of the
Participant's employment by the Company pursuant to the terms
of the qualified defined benefit pension plan of the Company,
which termination was initiated by such Participant in writing
pursuant to the procedures of such qualified defined benefit
pension plan prior to a Change of Control notwithstanding the
Participant's actual retirement date occurs after a Change of
Control.
b. For French Employees, the voluntary termination of
the Participant's employment by his French Employer as a
result of such Participant's retirement pursuant to the terms
of the Basic Plan, the Complementary Plan and, if applicable,
the French Supplementary Plan, which termination was initiated
by such Participant in writing pursuant to the
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procedures of such Basic Plan, Complementary Plan and, if
applicable, French Supplementary Plan prior to a Change of
Control, notwithstanding that the Participant's actual
retirement date occurs after a Change of Control.
2.21 "Retirement Plan" shall mean the Schweitzer-Mauduit
International, Inc. Retirement Plan.
2.22 "Supplemental Plan" shall mean the Supplemental
Benefit Plan to the Schweitzer-Mauduit International, Inc. Retirement Plan.
2.23 "U.S. Employee" shall mean individuals employed by the
Company.
ARTICLE 3 - ELIGIBILITY
3.1 Eligibility to Participate. The Administrator shall
from time to time determine in writing the Key Employees who are eligible to
participate in this Plan. A list of current Participants shall be set forth on
Appendix A hereto, as updated by the Committee from time to time.
3.2 Agreement. The Administrator shall enter into a participation
agreement with each Key Employee the Administrator determines to be eligible
for participation in this Plan. Such Agreement shall identify the Key Employee
as a Participant in this Plan and shall contain such terms as deemed
appropriate by the Administrator, but shall be consistent with and governed by
the terms of this Plan.
ARTICLE 4 - SEVERANCE BENEFITS
4.1 Termination Following Change of Control. (a) If a Participant's
employment with the Company or his French Employer, as the case may be, shall
terminate within two years of a Change of Control for any reason other than
Retirement, Disability or the Participant's death, the Company or, subject to
the provisions of Section 1.1, the French Employer, as the case may be, shall
pay or, with respect to certain benefits hereinafter described, shall cause to
be paid to the Participant the following benefits:
(1) an amount equal to three times the Participant's
highest Annual Compensation for any calendar year
beginning with or within the three-year period
terminating on the date of termination of the
Participant's employment, which amount shall be paid
to the Participant in cash on or before the fifth day
following the date of termination;
(2) for a period of three years following the date of
termination of employment, the Participant and anyone
entitled to claim under or through the Participant
shall be entitled to benefits as follows:
i) for U.S. Employees, all benefits under
the group health care plan, dental care
plan, life or other insurance or death
benefit plan, or other present or future
similar group employee benefit plan or
program of the Company for which key
executives are eligible at the date of a
Change of Control, to the same extent as if
the Participant had continued to be an
employee of the Company during such period
and such benefits shall, to the extent not
fully paid under any such plan or program,
be paid by the Company; and ii) for French
Employees, all medical and dental benefits
provided by "Social Securite", medical,
dental and life insurance or death benefit
plans, or other present or future similar
medical, dental, life or other insurance or
death benefit plans or programs generally
available to French Employees for which such
Participant is eligible at the date of the
Change of Control, to the same extent as if
the Participant had continued to be a French
Employee during such period and such
benefits shall, to the extent not fully paid
under any such plan or program, be paid by
the French Employer.
(3) for U.S. Employees, an amount equal to the Actuarial
Equivalent (as defined in the Retirement Plan) of the
accrued benefit the Participant would have earned
under
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the Retirement Plan and the Supplemental Plan
for the three-year period following the date of the
termination of his employment with the Company based
on the Participant's earnings in effect for purposes
of the Retirement Plan and the Supplemental Plan on
the date of such termination, which amount shall be
paid to the Participant in cash on or before the
fifth day following the date of termination; and
(4) for French Employees; a lump sum equal
to the sum of the following amounts which sum shall
be payable in cash on or before the tenth day
following the date of termination:
(i) the cost of purchasing
any pension credits lost by a Participant
under the Basic Plan as a result of a Change
of Control Termination, but in no event
shall the pension credits so purchased
exceed 12 quarters of pension credits;
(ii) a lump sum equal to
(x) the purchase price of any pension
credits lost by a Participant under the
Complementary Plan plus (y) the present
value of any portion of lost pension credits
which may not be purchased back from the
Complementary Plan, each as a result of a
Change of Control Termination provided,
however, that in no event shall such lost
Complementary Plan benefits exceed the
present worth of three years of such lost
pension benefits; and
(iii) for pension benefits
lost under the French Supplementary Plan as
a result of a Change of Control Termination,
payment of a lump sum calculated as follows:
a) if the Participant is
terminated between ages 62
and 65, a lump sum equal to
the present worth of the
difference between the
pension benefits the
Participant would have
received at age 65 absent
the Change of Control
Termination and the reduced
pension benefit such
Participant will receive at
age 65 as a result of such
termination;
b) if the Participant is
terminated between ages 60
and 62, payment of a lump
sum as calculated in (a)
above multiplied by the
ratio of A to B where A =
three years and B = the
number of years between the
Change of Control
Termination and attainment
of age 65.
c) if the Participant is
terminated before age 60 or
with less than 20 years
service with a French
Employer, a lump sum equal
to the present worth of the
pension benefit the
Participant would have
received at age 65, absent
the Change of Control
Termination multiplied by
the ratio of A to B where A
= three years and B = the
number of years between the
Change of Control
Termination and the date on
which the Participant would
attain age 65 provided,
however, that no such lump
sum shall be payable unless
such Participant could have
earned 20 years service
with a French Employer on
or before attainment of age
65, absent a Change of
Control Termination.
(b) If a Participant is or may be liable for Federal income taxes
in the United States, such Participant's Agreement shall provide that the
parties agree that the payments provided in Section 4.1(a) hereof are reasonable
compensation in light of the Participant's services rendered to the Company or
the French Employer, as the case may be, and that neither party shall contest
the payment of such benefits as constituting an "excess parachute payment"
within the meaning of Section 280G(b)(1) of the Code.
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(c) In the event that (i) the Participant becomes entitled to the
compensation and benefits described in Section 4.1(a) hereof ("Compensation
Payments"), (ii) the Company determines, based upon the advice of tax counsel
selected by the Company's independent auditors and acceptable to the
Participant, that, as a result of such Compensation Payments and any other
benefits or payments required to be taken into account under Code Section
280G(b)(2) ("Parachute Payments"), any of such Parachute Payments must be
reported by the Company as "excess parachute payments", and (iii) such Parachute
Payments are 3.5 or more times the "base amount" as defined in Code Section
280G(b)(3) with respect to such Participant ("Base Amount"), the Company shall
pay to the Participant at the time specified in Section 4.1(a) above an
additional amount ("Gross-Up Payment") such that the net amount retained by the
Participant, after deduction of any of the tax imposed on the Participant by
Section 4999 of the Code ("Excise Tax") and any Federal, state and local income
tax and Excise Tax upon the Gross-Up Payment, shall be equal to the Parachute
Payments determined prior to the application of this paragraph. The value of any
non-cash benefits or any deferred payment or benefit shall be determined by the
Company's independent auditors. For purposes of determining the amount of the
Gross-Up Payment, the Participant shall be deemed to pay Federal income taxes at
the highest marginal rate of Federal income taxation in the calendar year in
which the Gross-Up Payment is to be made and state and local income taxes at the
highest marginal rates of taxation in the state and locality of the
Participant's residence on the date of termination of his employment, net of the
maximum reduction in Federal income taxes which could be obtained from deduction
of such state and local taxes. In the event that the Excise Tax payable by the
Participant is subsequently determined to be less than the amount, if any, taken
into account hereunder at the time of termination of the Participant's
employment, the Participant shall repay to the Company at the time that the
amount of such reduction in Excise Tax is finally determined the portion of the
Gross-Up Payment attributable to such reduction plus interest on the amount of
such repayment at the rate provided for in Section 1274(b)(2)(B) of the Code
("Repayment Amount"). In the event that the Excise Tax payable by the
Participant is determined to exceed the amount, if any, taken into account
hereunder at the time of the termination of the Participant's employment
(including by reason of any payment the existence or amount of which cannot be
determined at the time of the Gross-Up Payment), the Company shall make an
additional Gross-Up Payment in respect of such excess (plus any interest and
penalty payable with respect to such excess) immediately prior to the time that
the amount of such excess is required to be paid by Participant (regardless of
any contest of such payment pursuant to Section 4.1(e)) ("Additional Gross-up
Payment"), such that the net amount retained by the Participant, after deduction
of any Excise Tax on the Parachute Payments and any Federal, state and local
income tax and Excise Tax upon the Additional Gross-Up Payment, shall be equal
to the Parachute Payments determined prior to the application of this paragraph.
In the event that the Excise Tax payable by the Participant is subsequently
determined to be less than the amount of the Additional Gross-up Payment paid to
the participant, the Participant shall repay to the Company at the time that the
amount of such reduction in the Additional Gross-up Payment is determined the
portion of the Additional Gross-up Payment attributable to such reduction plus
interest on the amount of such repayment at the rate provided for in Section
1274(h)(2)(B) of the Code ("Additional Repayment Amount"). The obligation to pay
any Repayment Amount, Additional Gross-up or Additional Repayment Amount shall
remain in effect under this Agreement for the entire period during which the
Participant remains liable for the Excise Tax, including the period during which
any applicable statute of limitation remains open.
(d) In the event the Participant's Parachute Payments are less than
3.5 times the Base Amount, the Company shall limit the Compensation Payments
provided hereunder to the extent necessary so that the Participant's Parachute
Payments do not exceed 2.99 times the Base Amount.
(e) Unless the Company determines that any Parachute Payments made
hereunder must be reported as "excess parachute payments" in accordance with
Section 4.1(c) above, neither party shall file any return taking the position
that the payment of such benefits constitutes an "excess parachute payment"
within the meaning of Section 280G(b)(1) of the Code. If the Internal Revenue
Service proposes an assessment of Excise Tax against the Participant in excess
of the amount, if any, taken into account at the time specified in Section
4.1(c) and the Company notifies the Participant in writing that the Company
elects to contest such assessment at its own expense, the Participant shall
cooperate in good faith with the Company in contesting such proposed assessment
and agrees not to settle such contest without the written consent of the
Company. Any such contest shall be controlled by the Company, provided, however,
that the
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Participant shall have the right to participate in such contest. Notwithstanding
the Company's election to contest the assessment of an Excise Tax, the
Participant shall be entitled to an Additional Gross-Up Payment under Section
4.1(c) at the time set forth therein.
4.2 Termination of Employment. If a Participant's employment
with the Company or his French Employer shall terminate during the term of his
Agreement for any reason other than Cause, the Company or (if such payment is
not inconsistent with any relevant French law) his French Employer, shall pay
the Participant or the Participant's beneficiary, as the case may be, in cash a
lump sum payment in the amount set forth in the Agreement with such Participant
under this Plan within 30 days of his termination of employment. Such amount
shall be set forth on Appendix A hereto and shall not be more than the
Participant's monthly base salary multiplied by 24. No benefits shall be payable
pursuant to this Section 4.2 in the event a Participant is entitled to severance
payments under Section 4.1 hereof.
ARTICLE 5 - ADMINISTRATION
5.1 Administrator. The Administrator is responsible
for the general administration of the Plan.
5.2 Duties of the Administrator. The Administrator shall be
responsible for the daily administration of the Plan and may appoint other
persons or entities to perform or assist in the performance of any of its
duties, subject to its review and approval. The Administrator shall have the
right to remove any such appointee from his position without cause upon notice.
5.3 Powers. The Administrator shall administer the Plan in
accordance with its terms and shall have all powers necessary to carry out the
provisions of the Plan as more particularly set forth herein. The Administrator
shall have discretionary authority to interpret the Plan, and to determine all
questions arising in the administration, interpretation, and application of the
Plan; provided, however, that such discretionary authority shall be exercised in
good faith in order to achieve the principal purposes of the Plan to provide
severance benefits, including enhanced severance benefits upon a Change of
Control, as described in Article 4. All such determinations shall be conclusive
and binding on all interested persons. The Administrator shall adopt such
procedures and regulations necessary and/or desirable for the discharge of its
duties hereunder and may appoint such accountants, counsel, actuaries,
specialists, and other agents as it deems necessary and/or desirable in
connection with the administration of this Plan.
5.4 Compensation of the Administrator. The Administrator
shall not receive any compensation from the Plan for its services.
5.5 Indemnification. The Company shall indemnify the
Administrator against any and all claims, losses, damages, expenses, and
liability arising from its actions or omissions, except when the same is
finally adjudicated to be due to the Administrator's gross negligence or
willful misconduct. The Company may purchase at its own expense sufficient
liability insurance for the Administrator to cover any and all claims, losses,
damages, and expenses arising from any action or omission in connection with
the execution of the duties as the Administrator.
ARTICLE 6 - SUCCESSOR TO THE COMPANY
6.1 The Company will require any successor or assign
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the Company,
expressly, absolutely and unconditionally to assume this Plan and agree to
perform the obligations of the Company under this Plan and each Participant's
Agreement in the same manner and to the same extent that the Company would be
required to perform such obligations if no such succession or assignment had
taken place.
ARTICLE 7 - MISCELLANEOUS
7.1 Funding of Benefits. The benefits payable to a
Participant under the Plan shall not be funded in any manner and shall be paid
by the Company or the French employer, as the case may be, out
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of its general assets, which assets are subject to the claims of the Company's
or the French Employer's creditors.
7.2 Settlement of Accounts. Except as prohibited by
applicable law, there shall be deducted from the payment of any benefit due
under the Plan the amount of any uncontested indebtedness, obligation, or
liability which the Participant has acknowledged in writing as owing to the
Company or the French Employer as the case may be, or any of their respective
subsidiaries and the amount of which has been agreed to by the Participant.
7.3 Withholding. There shall be deducted from the payment
of any benefit due under the Plan the amount of any tax required by any
governmental authority to be withheld and paid over by the Company or the
French Employer, as the case may be, to such governmental authority for the
account of the Participant entitled to such payment.
7.4 Assignment by the Participant. Unless required by court
order, no Participant or beneficiary shall have any rights to sell, assign,
transfer, encumber, or otherwise convey the right to receive the payment of any
benefit due hereunder, which payment and the rights thereto are expressly
declared to be nonassignable and nontransferable. Any attempt to do so shall be
null and void and of no effect.
7.5 Amendment and Termination. The Plan may be amended or
terminated at any time by the Company, by resolution of the Board; provided
that no termination or amendment reducing the severance benefits provided
hereunder shall be effective until the expiration of the two-year period
following the date of the Board resolution providing for such termination.
Further, no amendment or termination shall be effective during the two-year
period following the date of a Change of Control of the Company without the
consent of all the Participants. Any termination of this Plan shall cause the
immediate termination of all outstanding Agreements hereunder. No amendment or
termination shall affect the rights of any Participant who is entitled to
severance benefits pursuant to Article 4 at the time of such amendment or
termination.
7.6 No Guarantee of Employment. Participation hereunder
shall not be construed as creating any contract of employment between the
Company or a French Employer and any Key Employee, nor shall it limit the right
of the Company or such French Employer to terminate a Key Employee's employment
at any time for any reason whatsoever.
7.7 Construction. This Plan shall be construed
in accordance with and governed by the laws of the State of Georgia, to the
extent such laws are not otherwise superseded by the laws of the United States.
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