Meridian Automotive key employee, annual incentive, severance plans approved

By Caroline Salls

Pittsburgh, Aug. 24 - Meridian Automotive Systems, Inc. obtained approval of a key employee retention program, annual incentive program and severance plan, according to a Wednesday filing with the U.S. Bankruptcy Court for the District of Delaware.

In its motion, the company said these programs are integral to its continuing operations and reorganization efforts, as each is designed to ensure that critical employees continue to provide essential services during the Chapter 11 bankruptcy process.

The key employee retention plan, with a maximum cost of $4.71 million, has been tailored to ensure the interests of the key employees meet the company's restructuring goals.

Therefore, the plan includes a payment that is primarily "back-end weighted," with 20% of the payments contingent on the company's filing a plan of reorganization and 60% delayed until after emergence from bankruptcy.

The first payment will be made no earlier than Sept. 30.

Two separate retention funds will be created under the plan, one a specific retention incentives fund for 64 key employees and the other a discretionary fund available to address unexpected retention needs throughout the Chapter 11 cases.

The plan consists of three tiers:

*Tier I(a) is for the company's former executive vice president and chief financial officer and includes a payment of 200% of the officer's salary, or $1.1 million;

*Tier II(b), for four of the company's most senior officers and executives, pays 175% of their salary, or $1.62 million;

*Tier II, for five of the company's national executives, pays 40% of their salaries, or $418.000; and

*Tier III, for 54 of the company's executives and other employees who possess knowledge and experience critical to continued operation, is for 20% of their salaries, or $1.32 million.

The discretionary pool will consist of a maximum of $250,000 to be used by the chief executive officer and president to address specific retention issues and may be used for new employees and employees not covered under the retention plan.

No one individual can receive more than $75,000 from the discretionary pool.

The annual incentive program will be tied to the achievement of a financial benchmark for 2005, and eligible employees will be selected at the sole discretion of the chief executive officer and president.

The benchmark for 2005 to be met before any payments will be made is $75 million of consolidated earnings before interest, taxes, depreciation, amortization and restructuring costs.

These payments will be distributed from a pool of $1 million.

Under the severance plan, the tier I(a) employee could receive two times the annual salary, or $1.1 million; tier I(b) 1.5 times their annual salary, or $1.39 million; tier II 1.0 times their annual salary, or $1.04 million and tier III 0.5% of their annual salary, or $1.3 million.

The plan will be offered for payments under involuntary termination without cause.

Meridian believes only a fraction of the maximum $8.1 million cost of this plan would be used.

Meridian is a Dearborn, Mich., supplier of front and rear end modules, lighting, exterior composites, console modules, instrument panels and other interior systems to automobile and truck manufacturers.

Meridian filed for bankruptcy on April 26. Its Chapter 11 case number is 05-11168.

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