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EXHIBIT 10.12
SCHWEITZER-MAUDUIT INTERNATIONAL, INC.
EXECUTIVE SEVERANCE PLAN
Amended and Restated -
As of February 25, 1999
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SCHWEITZER-MAUDUIT INTERNATIONAL, INC.
EXECUTIVE SEVERANCE PLAN FOR KEY EMPLOYEES
AMENDED AND RESTATED AS OF FEBRUARY 25, 1999
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 as of February 25, 1999. 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
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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
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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.
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.
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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.
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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 procedures of such
Basic Plan, Complementary Plan and, if applicable, French
Supplementary Plan prior Change of Control, notwithstanding
that the Participant's actual retirement date occurs after a
Change of Control.
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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.
2.24 "Voluntary Resignation" shall mean termination of a
Participant's employment with the Company or the French Employer(s) as a result
of a resignation initiated by the Participant which is unrelated to any act or
omission of the Company or the French Employer, as the case may be, which could
reasonably be construed to be a constructive discharge of such Participant.
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.
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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
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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 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
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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
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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
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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.
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(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 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.l(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 death, Retirement, Voluntary Resignation or
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
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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.
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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 of its general assets,
which assets are subject to the claims of the Company's or the French Employer's
creditors.
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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.
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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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APPENDIX A
Participants in the
Schweitzer-Mauduit International, Inc.
Executive Severance Plan and Number of
Months of Base Salary Pursuant to
Section 4.2 of the Plan
Number of Months of
Participant's Base Salary in the
Event of Termination, Pursuant to
Name Section 4.2 of the Plan
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Wayne H. Deitrich 24
Paul C. Roberts 12
William J. Sharkey 12
William R. Foust 12
Wayne L. Grunewald 6
Jean-Pierre Le Hetet 12
Raymond Nedellec 6
Alain Charet 6
John W. Rumely, Jr. 6
Peter J. Thompson 12
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