EXHIBIT 10.5
AMENDED AND
RESTATED
ASHLAND INC.
SUPPLEMENTAL EARLY RETIREMENT
PLAN
FOR CERTAIN
EMPLOYEES
Generally Effective as of January
1, 2005
ARTICLE I
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PURPOSE AND EFFECTIVE DATE .
The purpose of the Plan is to allow designated
employees to retire prior to their sixty-fifth birthday without an
immediate substantial loss of income. This Plan is a
supplemental retirement arrangement for a select group of
management.
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The Amended and Restated Ashland
Inc. Supplemental Early Retirement Plan for Certain Employees is
effective January 1, 2005, except as otherwise
provided. This amended and restated Plan supersedes all
prior versions of this Plan that were effective before January 1,
2005 with respect to Effective Retirement Dates that occur on or
after such date, except as may otherwise be provided
herein. The rights and obligations of former Employees
receiving Plan benefits before January 1, 2005 shall be governed by
the terms of the Plan in effect at the time of each such former
Employee’s Effective Retirement Date or at the time such an
Employee otherwise ceased to be an
Employee. Notwithstanding anything herein to the
contrary, amendments to the Plan that were executed since July 1,
2003 through the date of the adoption of this amendment and
restatement shall continue to apply hereafter according to their
respective terms; provided, however, that Amendment No. 1 to the
Eleventh restatement of the Plan that was effective December 31,
2004 shall be null and void and treated as though never
adopted.
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The following terms used herein
shall have the following meanings unless the context otherwise
requires:
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“Age”
- means the age of an Employee as of
his or her last birthday, except as may otherwise be provided under
Sections 5.01 and 5.02 in the event of a Change in
Control.
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“Annual Retirement
Income” - means the
lifetime annual income that would be payable to a Participant that
is converted to the equivalent lump sum benefit payable under this
Plan by Ashland commencing on such Participant’s Effective
Retirement Date, subject to the provisions of Section
5.04.
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“Ashland”
- means Ashland Inc. and its present
or future subsidiary corporations.
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“Board”
- means the Board of Directors of
Ashland and its designees.
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“Change in
Control” –shall be deemed to occur (1) upon
approval of the shareholders of Ashland (or if such approval is not
required, upon the approval of the Board) of (A) any consolidation
or merger of the Company (a “Business Combination”),
other than a consolidation or merger of the Company into or with a
direct or indirect wholly-owned subsidiary, in which the
shareholders of the Company own, directly or indirectly, less than
50% of the then outstanding shares of common stock of the Business
Combination that are entitled to vote generally for the election of
directors of the Business Combination or pursuant to which shares
of the Company's Common Stock would be converted into cash,
securities or other property, other than a merger of the Company in
which the holders of the Company's Common Stock immediately prior
to the merger have substantially the same proportionate ownership
of common stock of the surviving corporation immediately after the
merger, (B) any sale, lease, exchange, or other transfer (in one
transaction or a series of related transactions) of all or
substantially all the assets of Ashland, provided, however, that no
sale, lease, exchange or other transfer of all or substantially all
the assets of Ashland shall be deemed to occur unless assets
constituting 80% of the total assets of Ashland are transferred
pursuant to such sale, lease exchange or other transfer, or
(C) adoption of any plan or proposal for the liquidation or
dissolution of Ashland, (2) when any person (as defined in
Section 3(a)(9) or 13(d) of the Exchange Act), other than
Ashland or any subsidiary or employee benefit plan or trust
maintained by Ashland, shall become the beneficial owner (as
defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of more than 25% of Ashland’s Common Stock
outstanding at the time, without the approval of the Board, or
(3) at any time during a period of two consecutive years,
individuals who at the beginning of such period constituted the
Board shall cease for any reason to constitute at least a majority
thereof, unless the election or the nomination for election by
Ashland’s shareholders of each new director during such
two-year period was approved by a vote of at least two-thirds of
the directors then still in office who were directors at the
beginning of such two-year period.
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2.06
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“Change in Control
Agreements” - means
those contractual agreements, in effect from time to time, which
are approved by the Board and which provide an Employee with
benefits in the event of a change in control as defined in such
agreement or other benefits that may be included in such an
agreement.
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2.07
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“Committee” - means the Personnel and Compensation Committee
of the Board and its designees.
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2.08
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“Continuous
Service” –
means Continuous Service as defined in the Ashland Inc. and
Affiliates Pension Plan, except as the determination of Continuous
Service is modified for purposes of this Plan.
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“Effective Retirement
Date” –
means:
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In General
. The Effective
Retirement Date of an Employee that is a Participant under Section
3.01 is whichever of the following applies, so long as the
Participant has at least five years of Continuous
Service.
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The Effective Retirement Date is the
first day of the month following the date a Participant incurs a
Termination of Employment -
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on or after the date the sum of the
Participant’s Age and Continuous Service is 80; or
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on or after the date the Participant
attains Age 55.
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The Effective Retirement Date of a
Participant that incurs a Termination of Employment before the
dates specified in (1) above is the first day of the month
following the date the Participant attains Age 55.
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Change in Control
. The Effective
Retirement Date in the event of a Change in Control of a
Participant considered to be a Level I or II Participant who has a
Change in Control Agreement shall be the first day of the month
following (i) such Participant’s termination for reasons
other than “Cause” or (ii) such Participant’s
resignation for “Good Reason” (as they are defined in
the applicable Change in Control Agreement). The
Effective Retirement Date in the event of a Change in Control of a
Participant considered to be a Level III, IV or V Participant, or
who is considered to be a Level I or II Participant and who does
not have a Change in Control Agreement, shall be the first day of
the month following such Participant’s termination for
reasons other than “Cause”. For
Participant’s who do not have a Change in Control Agreement
with Ashland, “Cause” shall have the meaning given to
that word in Section 3.02. In the event a Change in
Control, all Participants shall be completely vested in their Plan
benefits, regardless of the number of their years of Continuous
Service
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“Employee”
– means, a common law employee
of Ashland who is paid on the United States payroll of Ashland
Inc.
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“Final Average
Bonus” - means the
Participant’s average bonus paid under the Incentive
Compensation Plan (including amounts that may have been deferred)
during the highest thirty-six (36) months out of the final
eighty-four-month (84) period. The calculation of the
eighty-four month period shall be measured back from the
Participant’s Termination of Employment that is nearest to or
which is coincident with the Participant’s Effective
Retirement Date. If the Participant becomes classified
below a Level V Employee before the Termination of Employment
identified in the preceding sentence, then the date of such change
in classification is substituted for the said Termination
Date. For these purposes, the “bonus paid”
for a particular month within a particular fiscal year under such
plan shall be equal to the amount of such bonus actually
paid
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(regardless of the date paid, but
excluding any adjustment for the deferral of such payment) to such
Participant on account of such fiscal year divided by the number of
months contained in such fiscal year which were used in determining
the amount of such bonus actually paid to such
Participant. The bonus paid that is used to compute the
average described in this Section 2.11 shall only be a bonus that
is paid to the Participant when such Participant is considered a
Level III, IV or V Participant.
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“Final Average
Compensation” -
means the average total compensation paid during the highest
thirty-six months (36) out of the final eighty-four-month (84)
period. The calculation of the eighty-four month period
shall be measured back from the Participant’s Termination of
Employment that is nearest to or which is coincident with the
Participant’s Effective Retirement Date. If the
Participant becomes classified below a Level II Employee before the
Termination of Employment identified in the preceding sentence,
then the date of such change in classification is substituted for
the said Termination Date. For these purposes,
“total compensation paid” is the sum of the
“compensation paid” and the “bonus paid”
during a particular month. “Compensation paid” shall be
the base rate of compensation for such Participant in effect on the
first day of such calendar month. “Bonus
paid” shall have the same meaning as set forth in Section
2.11. In the event a payment is due under the Plan after
a Change in Control because the Participant was terminated other
than for “Cause” or resigned for “Good
Reason,” the calculation of Final Average Compensation shall
include the amount paid under such Participant’s Change in
Control Agreement. The amount so paid shall be divided
by 36 to derive the monthly “total compensation paid”
it represents. The total compensation paid that is used
compute the average described in this Section 2.12 shall only be
total compensation that is paid to the Participant when such
Participant is considered a Level I or II Participant.
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“Incentive Compensation
Plan” - means the
annual bonus paid to Employees in base salary pay band grades 21
and above under the applicable incentive compensation
plan.
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“Level I, II, III, IV or V
Participant or Employee” – means, the following corresponding base
salary pay band grades on the records of the Company or any
succeeding equivalent compensation grade designations:
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Level
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Base Salary Pay Band
Grade
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“Participant”
– means an Employee that meets
the applicable requirements of Article III and who has not incurred
a Termination of Employment for Cause, as defined in Section
3.02. A former Employee that did not incur a Termination
of Employment for Cause and who has a benefit being paid or payable
from the Plan is also a Participant. The term
Participant includes Transition Participants, unless the context
otherwise requires or unless expressly otherwise
provided.
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“Plan”
- means the Amended and Restated
Ashland Inc. Supplemental Early Retirement Plan for Certain
Employees, generally effective as of January 1, 2005, as set forth
herein.
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“Service”
- means the number of years and
fractional years of employment by Ashland of an Employee, measured
from the first day of the month coincident with or next succeeding
his or her initial date of employment up to and including such
Employee’s Effective Retirement Date. For purposes
of this Section 2.17, Service shall include an Employee’s
employment with a subsidiary or an affiliate of Ashland determined
in accordance with rules from time to time adopted or approved by
the Board, or its delegate. Service shall be calculated
based on the rules for calculating Periods of Service under the
Ashland Inc. and Affiliates Pension Plan, except as the
determination of Service is modified for purposes of this Plan or
under any other document that either directly or indirectly
references the calculation of Service for purposes of the
Plan.
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“Specified
Employee” - means,
for a particular calendar year, any Employee who was at anytime
during the 12 months ending on the December 31 preceding the start
of the particular calendar year (the Specified Employee
identification date) classified on the records of Ashland as being
in base salary pay band grade 23 or higher. Such an
Employee shall be classified as a Specified Employee as of January
1 of the particular calendar year (the Specified Employee effective
date) and shall remain classified as such for the entirety of such
calendar year. Notwithstanding anything to the contrary,
no more than 200 Employees may be classified as Specified Employees
for any calendar year. Unless otherwise provided in the
particular document, this definition of Specified Employee shall
apply to all plans, programs, contracts, agreements and other
arrangements maintained by the Company that are subject to Code
section 409A.
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“Termination of
Employment” –
means a termination from employment resulting in a cessation of
performing active service for Ashland (other than by reason of
death or disability). An Employee is considered to incur
a Termination of Employment on the date the Employee terminates
employment with Ashland or when it is reasonably anticipated that
the Employee's services to Ashland will permanently decrease to 20%
or less of the average amount of services performed for Ashland
during the immediately preceding 36 month period (or period of
total employment if less than 36
months). Notwithstanding anything in the foregoing to
the contrary, a Termination of Employment does not occur as a
result of military leave, sick leave or other
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bona fide leave of absence not
exceeding six months or the period during which the Employee
retains a right to reemployment.
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2.20 “Transition
Participant” - means. the Employees on June 30, 2003 that
were in an employment classification that potentially made them
eligible for the Plan and that –
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(a) were at least age
55 on June 30, 2003; or
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(b) the sum of whose
Age and Continuous Service was 80.
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Transition Participants shall remain
subject to the terms of the Plan in effect before July 1, 2003
addressing the calculation and amount of benefits. These
Employees shall, however, be subject to the other changes that
became effective thereafter and that apply to them as provided in
the Plan as amended from time to time, such as those addressing the
vesting of benefits and the change to the Effective Retirement
Date.
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Eligibility for benefits shall be
determined as follows:
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Participation after June 30,
2003
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All Employees classified on the records of
Ashland as a Level I, II, III, IV or V Employee shall be
Participants in the Plan. After earning five years of
Continuous Service, whenever earned, a Participant shall be
completely vested in the applicable benefit under
Plan. The determination of whether a Level III, IV or V
Employee receives a reduced benefit for commencement before age 62
under Section 5.02(c) is made based on the Employee’s deemed
status on the Effective Retirement Date. Notwithstanding
such vesting, a Participant forfeits the right to receive any
benefit under this Plan if the Participant incurs a Termination of
Employment for Cause, as defined in Section 3.02. A
Participant may also forfeit the right to the Plan benefit and may
have to repay a prior distribution pursuant to the provisions of
Section 4.02. Participation in the Plan is not subject
to an election by an Employee. Participation is
automatic and is based on the Employee’s status on
Ashland’s records at the applicable time.
Ashland reserves the right to terminate any
Participant for “Cause” prior to his or her Effective
Retirement Date, with a resulting forfeiture of the payment of
benefits under the Plan. Ashland also reserves the right
to terminate any Participant’s participation in the Plan for
“Cause” subsequent to his or her Effective Retirement
Date. For purposes of this Section 3.02,
“Cause” shall mean the willful and continuous failure
of a Participant to substantially perform his or her duties to
Ashland (other than any such failure resulting from incapacity due
to physical or mental illness), or the willful engaging by a
Participant in gross misconduct materially and demonstrably
injurious to Ashland, each to be determined by Ashland in its sole
discretion.
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Automatic Vesting for Change
in Control
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Subject to the provisions of Article VI, in the
event of a Change in Control (as defined in Section 2.05), an
Employee who is deemed to be a Level I, II, III, IV or V
Participant shall automatically be completely vested in his or her
benefits, regardless of the number of years of Continuous
Service.
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INTERACTION WITH CHANGE IN
CONTROL AGREEMENTS .
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Notwithstanding any provision of this Plan to
the contrary, an Employee who has entered into an Change in Control
Agreement with Ashland and who is terminated without
“Cause” or resigns for “Good Reason”
following a “change in control of Ashland” (each quoted
term as defined in the applicable Change in Control Agreement)
shall be entitled to receive the benefits as provided pursuant to
this Plan. Benefits payable hereunder in such a
situation shall be calculated in accordance with the payment option
elected by the Employee.
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Subsequent Activity in
Conflict with Ashland
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The provisions of this Section 4.02 shall apply
to Level I, II, III, IV and V Participants, regardless of whether
such a Participant has a Change in Control Agreement; except that
the provisions of this Section 4.02 shall not apply to any
Participant after a Change in Control. If a Participant
accepts, during a period of five (5) years subsequent to his or her
Effective Retirement Date, or Termination of Employment, if
earlier, any consulting or employment activity which is in direct
and substantial conflict with the business of Ashland at such time
(such determination regarding conflicting activity to be made in
the sole discretion of the Board), he or she shall be considered in
breach of the provisions of this Section 4.02; provided, however,
he or she shall not be restricted in any manner with respect to any
other non-conflicting activity in which he or she is
engaged.
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If a Participant wishes to accept
employment or consulting activity which may be prohibited under
this Section 4.02, such Participant may submit to Ashland written
notice (Attention: Vice President Human Resources and
Communications or any successor position thereto) of his or her
wish to accept such employment or consulting
activity. If within ten (10) business days following
receipt of such notice Ashland does not notify the Participant in
writing of Ashland’s objection to his or her accepting such
employment or consulting activity, then such Participant shall be
free to accept such employment or consulting activity for the
period of time and upon the basis set forth in his or her written
request.
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In the event the provisions of this
Section 4.02 are breached by a Participant, the Participant shall
not be entitled to any additional payments hereunder (whether
directly from this Plan or from a SERP Account for such Participant
from the Ashland Inc. Deferred Compensation Plan for Employees
(2005)) and shall be liable to repay to Ashland all amounts such
Participant received prior to such breach. If a
Participant who breaches the provisions of this Section 4.02
received a
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lump sum distribution of his or her
benefit prior to such breach, such Participant shall be liable to
repay to Ashland the amount of such distribution. If a
Participant who breaches the provisions of this Section 4.02
deferred all or any part of a lump sum distribution hereunder to
the Ashland Inc. Deferred Compensation Plan for Employees (2005),
the amount so deferred shall be forfeited, and if any amount of the
amount so deferred was distributed from the Ashland Inc. Deferred
Compensation Plan for Employees (2005) before the breach occurred,
the amount so distributed shall be repaid to
Ashland. Any repayment of benefits hereunder shall be
assessed interest at the rate applicable for the calculation of a
lump sum payment under Section 5.04(b) for the month in which the
breach occurs, with such interest compounded monthly from the month
in which the breach occurs to the month in which such repayment is
made to Ashland. Ashland shall have available to it all
other remedies at law and equity to remedy a breach of this Section
4.02.
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RETIREMENT INCOME AND OTHER
BENEFITS .
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The Transition Participants who are
Level I or II Participants are eligible to receive Annual
Retirement Income equal to:
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A Transition Participant who retires
under this Plan, including a Transition Participant to whom the
provisions of paragraph (d) of this Section 5.01 apply, shall
receive an Annual Retirement Income lump sum benefit for the period
from and after the first day of the calendar month next following
his or her Effective Retirement Date until the end of the month in
which he or she attains age 62 equal to the greater of (1) the
amounts provided in the following schedule or (2) 50% of Final
Average Compensation. Notwithstanding the previous sentence, in the
event such Transition Participant retired with less than 20 years
of Service, such Annual Retirement Income lump sum benefit amount
shall be multiplied by a fraction (A) the numerator of which is
such Transition Participant’s years of and fractional years
of Service, and (B) the denominator of which is twenty
(20).
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For purposes of this Section
5.01(a), “% of Compensation” shall mean the annualized
average of the Transition Participant’s base monthly
compensation rates (excluding incentive awards, bonuses, and any
other form of extraordinary compensation) in effect with respect to
Ashland on the first day of the thirty-six (36) consecutive
calendar months which will give the highest average out of the
one-hundred twenty (120) consecutive calendar month period ending
on the Transition Participant’s Effective Retirement
Date.
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Age 62 Benefit and
Thereafter
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From and after the first day of the
calendar month next following his or her Effective Retirement Date,
or the attainment of age 62, whichever is later, the Transition
Participant’s Annual Retirement Income lump sum benefit
amount shall be equal to 50% of Final Average Compensation;
provided, however, that in the event such Transition Participant
retired with less than 20 years of Service, such Annual Retirement
Income shall be 50% of Final Average Compensation multiplied by a
fraction (A) the numerator of which is such Transition
Participant’s years of and fractional years of Service, and
(B) the denominator of which is twenty (20).
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The amount of benefit provided in
paragraphs (a) and (b) of this
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Section 5.01 shall be reduced by the
sum of the following:
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the Transition Participant’s
benefit under the Ashland Inc. and Affiliates Pension Plan (the
“Pension Plan”) (assuming 50% of such Transition
Participant’s account under the Ashland Inc. Leveraged
Employee Stock Ownership Plan were transferred to the Pension Plan,
as allowed under the terms of each of the said plans and
disregarding any benefit assignment under an approved qualified
domestic relations order affecting either the Pension Plan or the
Ashland Inc. Leveraged Employee Stock Ownership Plan), determined
on the basis of a single life annuity form of benefit;
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the Transition Participant’s
benefit under any other defined benefit pension plan qualified
under Section 401(a) of the Internal Revenue Code of 1986, as
amended which is maintained by Ashland, determined by disregarding
any benefit assignment under an approved qualified domestic
relations order and on the basis of a single life annuity form of
benefit (said plans referred to in sub-paragraphs (1)
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and (2) of this paragraph (c) are
hereinafter referred to jointly and severally as the
“Affected Plans”);
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the Transition Participant’s
benefit under the Ashland Inc. Nonqualified Excess Benefit Pension
Plan, determined on the basis of a single life annuity form of
benefit; and
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the Transition Participant’s
benefit under the Ashland Inc. ERISA Forfeiture Plan attributable
to amounts which were forfeited under the Ashland Inc. Leveraged
Employee Stock Ownership Plan, multiplied by 50%, and determined on
the basis of a single life annuity benefit.
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Because a Transition
Participant’s benefit hereunder is payable as a lump sum, the
reduction to such benefit shall be calculated based upon the lump
sum actuarial present value of the benefits referred to in
subparagraphs (1)-(4) of this paragraph (c). Such
calculation shall be conducted on the basis that the benefits
referred to in said subparagraphs (1)-(4) commence at the same time
as of which the benefit in this Plan is paid as a lump sum, using
the Transition Participant’s attained age at the time of such
commencement, unless otherwise required in paragraph (d) of this
Section 5.01.
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(d)
Benefit After a Change in Control
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Participants Having Change in
Control Agreements . A Participant having a Change in
Control Agreement who either is terminated without
“Cause” or resigns for “Good Reason” after
a Change in Control shall have the benefit payable under this
Section 5.01 computed by adding 3 years to the Participant’s
Age and Service at the Participant’s Effective Retirement
Date. These additions to Age and Service shall, except
as otherwise provided, apply for purposes of computing the single
life annuity payment to the Participant that is converted to Annual
Retirement Income lump sum benefit amount, if
applicable. A Participant subject to this paragraph
(d)(1) whose Effective Retirement Date occurs before attaining an
actual age of 55 shall have the 3 year addition to Age apply when
converting the single life annuity amount (if applicable) to the
Annual Retirement Income lump sum benefit amount. If the
Effective Retirement Date of a Participant subject to this
paragraph (d)(1) occurs on or after the Participant attains an
actual age of 55, then the Participant's actual age shall be used
when making such a conversion. Notwithstanding anything
to the contrary contained herein, when converting a Participant's
single life annuity (if applicable) to the lump sum payment, the
Participant's actual age shall be used without reference to the
additional 3 years. If the addition of 3 years to the
Participant’s age results in an Age less
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than 55 and the Participant
commences the benefit, the amount of the benefit shall be adjusted
to account for the fact it is paid before the Participant’s
attainment of Age 55. This adjustment shall be based
upon the early retirement table in Section 6.2 of the Ashland Inc.
and Affiliates Pension Plan as it existed on September 30,
1999. When applying this table under these
circumstances, age 55 shall be substituted for age 62 and
adjustments for ages younger than those on the table shall be
reasonably determined by an actuary or actuarial firm who regularly
performs services in connection with the Plan.
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Participants Without Change in
Control Agreements . A Participant without a Change in
Control Agreement who is terminated without “Cause”
after a Change in Control shall have the benefit payable under this
Section 5.01 computed by adding the applicable amount to the
Participant’s Age and Service at the Participant’s
Effective Retirement Date. For these purposes, the
applicable amount is derived from the following table.
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Length of Participant’s
Service at Separation from Employment
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Number of Years
(the Applicable
Amount)
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More than 5 and up to 10
years
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More than 10 and up to 15
years
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More than 15 and up to 20
years
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These additions to Age and Service shall, except
as otherwise provided, apply for purposes of computing the single
life annuity payment (if applicable) to the Participant that would
be converted to the Annual Retirement Income lump sum benefit
amount. A Participant subject to this paragraph (d)(2)
whose Effective Retirement Date occurs before attaining an actual
age of 55 shall have the applicable amount added to such
Participant’s Age apply when converting the single life
annuity amount (if applicable) to the Annual Retirement Income lump
sum benefit amount. If the Effective Retirement Date of
a Participant subject to this paragraph (d)(2) occurs on or after
the Participant attains an actual age of 55, then the Participant's
actual age shall be used when making such a
conversion. Notwithstanding anything to the contrary
contained herein, when converting a Participant's single life
annuity (if applicable) to a lump sum payment option, the
Participant's actual age shall be
used without reference to the addition of the
applicable amount. If the addition of the applicable
amount to the Participant’s age results in an Age less than
55 and the Participant commences the benefit, the amount of the
benefit shall be adjusted to account for the fact it is paid before
the Participant&r
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