EXHIBIT EX-10.18
TRANSAMERICA DEFERRED COMPENSATION POLICY
(January 1, 1994 Restatement)
1. Adoption
Transamerica Corporation, having adopted a Deferred Compensation
Policy for the deferral of compensation earned in 1989 and later years, and
having restated the Policy effective as of January 1, 1990, January 1, 1992,
and July 1, 1992, hereby amends and restates the Policy effective as of
January 1, 1994. The Policy permits the deferral of compensation by the
members of the Board of Directors and eligible employees of Transamerica
Corporation, and permits the deferral of compensation by eligible employees of
subsidiaries that adopted the Policy, and of subsidiaries that adopt the
Policy in the future, in accordance with the terms set forth herein. An
individual's employer becomes obligated to pay deferred compensation to a
particular individual only upon the employer's acceptance of such individual's
executed election to defer compensation.
The Policy as restated herein applies to the deferral of
compensation earned in 1994 and later years. Prior versions of the Policy
continue to be applicable to and to govern deferrals of compensation earned in
the years 1989 through 1993, inclusive. The individual policies of deferred
compensation adopted by Transamerica Corporation and each electing subsidiary
for years prior to 1989 shall continue to be applicable to and govern
deferrals of compensation earned in such prior years.
2. Eligibility and Amount
(a) Employees. Any employee whose total compensation (i.e., base
salary rate plus bonus (if any), before reduction for deferrals under this
Policy and contributions to other employee benefit plans or programs) for a
calendar year meets or exceeds the Eligibility Amount (as defined below), may
elect to defer the receipt of up to 100% of his or her salary and/or bonus
(if any), less required deductions for welfare plans and statutory benefits,
for the following calendar year. The only bonuses which may be deferred under
the Policy are annual management incentive bonuses and production bonuses
(without regard to the frequency with which any such incentive or production
bonuses are paid). An individual employed at an annual base salary rate that
meets or exceeds the Eligibility Amount, shall be eligible to make a deferral
election in his or her year of hire. The "Eligibility Amount" shall be
determined annually by the Chief Executive Officer of Transamerica Corpora-
tion. For example, for 1994, the Eligibility Amount is $150,000. Also, any
employee (a) whose total compensation (i.e., base salary rate plus bonus, if
any, before reduction for deferrals under this Policy and contributions to
other employee benefit plans or programs) for a calendar year is $122,000 or
more, and (b) who prior to 1989, deferred compensation under the Policy or a
prior policy for a term which, when added to the number of years over which
the deferral account was scheduled to be paid, exceeded five years, may elect
to defer the receipt of up to 100% of his or her salary and/or bonus (if any),
less required deductions for welfare plans and statutory benefits, for the
following calendar year.
(b) Directors. Any member of the Board of Directors of
Transamerica Corporation (a "director") may elect to defer the receipt of up
to 100% of his or her annual retainer, up to 100% of his or her retainer for
serving as a committee chairman, and either 0% or 100% of his or her meeting
fees, less any required statutory deductions.
(c) $5,000 Minimum. The minimum amount which an employee or
director may elect to defer is $5,000.
3. Election to Defer
Each individual's deferred compensation election must be executed by
both the individual and the employer on or prior to December 31 of the
preceding year (or such earlier date as may be designated by the Director of
Compensation of Transamerica Corporation) and an executed copy of any such
deferral election must be received by the Director of Compensation at
Transamerica Corporation within such time as he or she may designate.
However, if an individual commences employment or is elected a director after
December 31, his or her deferred compensation election must be executed within
30 days after the date on which his or her employment commences or, in the
case of a director, within 30 days after the date on which he or she is
elected a director (as to either an employee or a director, the "Compensation
Commencement Date"). Any deferral election executed after the Compensation
Commencement Date (i.e., during the 30 day grace period) shall apply only to
compensation attributable to services performed in any pay period commencing
after the date of execution. An executed copy of any such deferral election
must be received by the Director of Compensation of Transamerica Corporation
within such time period after the Compensation Commencement Date as the
Director shall specify from time to time. For example, a copy of the executed
election to defer 1994 compensation of an individual hired after December 31,
1993 must be received by the Director of Compensation at Transamerica
Corporation on or before the fifth business day after the election is executed
(the deadline specified by the Director of Compensation for 1994 deferral
elections).
Each employee shall make a separate deferral election with respect
to the bonus portion (if any) of his or her compensation. All such elections
shall be subject to the general rules for elections that are specified in the
preceding paragraph.
Employees and directors are permitted to defer income for any
number of years, but this choice must be made at the time of the election.
The term of deferral is measured in calendar years only. For example, an
election to defer amounts from 1994 salary for 8 years will result in a term
of deferral that ends on December 31, 2001, and payment will be made or
commenced on the first business day of January 2002. Any individual executing
a deferral election in his or her year of hire shall be deemed to have
completed a one-year term of deferral as of the December 31 of his or her year
of hire. The rate of interest applied to the deferred income will depend on
the length of time chosen for deferral (as described in paragraph 4 below).
Once an election is made, the terms and conditions for that year's deferral
are fixed and may not be changed at a later time.
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Each deferred compensation election will apply only to compensation
earned in a single calendar year. (Such election applies to all compensation
earned in such single calendar year, including compensation, such as certain
bonuses, which ordinarily would not be payable until after the end of the year
in which it was earned.) For example, a deferred compensation election
executed in December of 1993 will apply to only to compensation earned in
1994. Thus, future deferral elections, if any, will be independent of prior
elections and can be for whatever amount or time period seems appropriate to
the individual at that time.
4. Credited Interest Rates
Subject to the special rules in paragraph 5(a) relating to
termination of employment, amounts deferred for 8 years or more will be
credited at the end of each month with interest at a rate (which rate shall be
adjusted annually) equal to the Moody's A Rated Corporate Bond Yield average
for November of the year preceding the year in which such interest is to be
credited plus 3%. Amounts deferred for 5, 6 or 7 years will be credited at
the end of each month with interest at a rate (which rate shall be adjusted
annually) equal to the Moody's A Rated Corporate Bond Yield average for
November of the year preceding the year in which such interest is to be
credited plus 2%. Amounts deferred for less than 5 years will be credited at
the end of each month with interest at a rate equal to the average rate paid
by 10-year U.S. Treasury Notes during that month, provided, that for the month
of deferral which immediately precedes payout of amounts deferred for less
than 5 years (the "Last Month"), interest will be credited at the rate in
effect for the month which immediately precedes the Last Month. The Last
Month rule can be illustrated with the following example: amounts deferred
for two years which are payable on the first business day of 1996 will be
credited in December of 1995 with interest at a rate equivalent to the average
rate paid by 10-year U.S. Treasury Notes during November of 1995. Interest
will be calculated using a 360-day year and will be compounded on a monthly
basis.
Unless otherwise specified in a deferral election, amounts deferred
shall reduce each payment of salary (or fees, in the case of a director) as
ratably as practicable during the year. The amount deferred from each payment
shall be credited to the individual's deferral account as of the last day of
the month of deferral, and interest shall begin to accrue on amounts so
credited as of the beginning of the next month. For example, amounts deferred
by an employee from salary payments to be made on January 15 and 31, 1994,
will be credited to his or her deferral account on January 31, 1994, and will
begin to accrue interest as of February 1, 1994. On February 28, 1994,
(a) the amounts deferred from the employee's February 15 and 28, 1994 salary
payments will be credited, and (b) interest will be credited with respect to
the account balance as of January 31, 1994 (i.e., exclusive of the February
deferrals).
The management of Transamerica Corporation will review these rates
each year, taking into account future tax legislation and other factors.
Upon the recommendation of management, the Management Development and
Compensation Committee of the Board of Directors of Transamerica Corporation
may modify the rates each year with respect to any future deferral elections.
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5. Termination
(a) If, for any reason other than death, permanent and total
disability, or early or normal retirement, employment with the employee's
employer is terminated or a director ceases to be a director prior to the
payment of all deferred amounts, payment (in the form of a lump sum) of the
undistributed amount will be made as soon as practicable after such
termination or cessation. If payment of the deferred amounts has commenced
(in accordance with the individual's original election) prior to the date of
such a termination or cessation, interest on the amount of compensation which
has been deferred shall be computed and credited (in the manner described in
paragraph 4) prior to any such accelerated payment in accordance with the
original election. If (a) payment of the deferred amounts has not commenced
(in accordance with the individual's original election) prior to the date of
such a termination or cessation, and (b) the individual's employment was
terminated by his or her employer for a reason other than "cause", interest on
the amount of compensation which has been deferred shall be computed and
credited (in the manner described in paragraph 4) prior to any such
accelerated payment in accordance with the original election. If (a) payment
of the deferred amounts has not commenced (in accordance with the individual's
original election) prior to the date of such a termination or cessation, and
(b)(i) the individual voluntarily terminated employment or (ii) the
individual's employment was terminated by his or her employer for "cause",
interest on the amount of compensation which has been deferred shall be
recomputed and credited (in the manner described in paragraph 4) prior to any
such accelerated payment based on the average 10-year U.S. Treasury Note rate.
Termination of employment for "cause" shall mean termination on account of
(a) the individual's commission of any criminal act (other than minor traffic
violations), and/or (b) gross negligence or willful misconduct in the
performance of his or her duties of employment.
A transfer of employment between any two corporations within the
group of corporations including Transamerica Corporation and its 50% or more
owned affiliates (the "Transamerica Group") shall not be deemed to be a
termination of employment for purposes of this paragraph 5(a). For this
purpose, a transfer of employment shall include a transfer on account of the
sale of assets by one member of the Transamerica Group to another member of
the Transamerica Group. In the event that an individual's employer ceases to
be a member of the Transamerica Group by reason of the sale (or spin-off) of
the stock of such corporation by Transamerica Corporation, such cessation
shall not in itself be deemed to constitute a termination of employment for
purposes of this paragraph 5(a), since the contract is between the employee
and his or her employer.
(b) In the event of an individual's death or total and permanent
disability, payment shall nevertheless be made at the time and in the form
originally elected by the individual; provided, however, that the contracting
corporation (in its sole discretion) may instead elect to make an accelerated
lump sum payment. Interest shall be credited prior to any such accelerated
payment in accordance with the terms of the individual's original deferral
election.
In the event of an individual's termination on account of early or
normal retirement, interest shall be credited, and payment shall be made, in
accordance with the terms of the individual's original deferral election.
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Each individual may designate, in writing and on such form as each
contracting corporation may prescribe, one or more beneficiaries to receive
any amount that is payable after the individual's death. If an individual is
married at the time of his or her death and has designated a person other than
his or her spouse as a primary beneficiary, the designation shall be
ineffective unless the individual's spouse consents in writing to the
designation. Notwithstanding this consent requirement, if the individual
establishes to the satisfaction of the contracting corporation that such
written consent may not be obtained because there is no spouse or the spouse
cannot be located, his or her designation shall be effective without spousal
consent. Any spousal consent shall be valid only with respect to the spouse
who signs the consent. An individual may designate different beneficiaries at
any time by delivering a new designation in the manner described above. Any
designation shall become effective only upon its receipt by the contracting
corporation, and the last effective designation received by the contracting
corporation shall supersede all prior designations. If an individual dies
without having designated a beneficiary, or his or her beneficiary designation
is ineffective, or if no beneficiary survives the individual, payment shall be
made (a) to his or her surviving spouse, (b) if the individual is not survived
by his or her spouse, to his or her beneficiary under his or her employer's
group-term life insurance program (if any), or (c) if none survives or no such
program exists, to his or her estate.
The amount of any accelerated lump sum payment made in accordance
with this paragraph 5 shall be the aggregate amount of compensation deferred
by the individual, together with interest computed or recomputed in
accordance with this paragraph 5 and credited (in the manner described in
paragraph 4) prior to any such accelerated payment to the end of the month
next preceding the month in which payment is made.
6. Change in Control
In the event of a change in control of Transamerica Corporation
prior to payment of all deferred amounts and interest credited thereon,
payment of the undistributed amount shall be made to the individual as soon as
practicable. Interest shall be credited prior to any such accelerated payment
in accordance with the terms of the individual's original deferral election.
The amount of any accelerated lump sum payment made in accordance with this
paragraph 6 shall be an amount equal to the value of the individual's deferral
account as of the end of the month next preceding the month in which payment
is made plus an amount, if any, equal to the individual's deferral for the
month during which payment is made which has not yet been credited to the
deferral account.
For purposes of this Policy, a "change in control" of Transamerica
Corporation shall be deemed to have occurred if (a) any "person" (as defined
in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) is or becomes "the beneficial owner" as defined in Rule
13d-3 under the Exchange Act, directly or indirectly, of securities of
Transamerica Corporation representing 35%, or more of the combined voting
power of Transamerica Corporation's then outstanding securities; (b) during
the term of any deferral pursuant to an individual deferred compensation
election entered into pursuant to this Policy, individuals who at the
beginning of such term constitute the Board of Directors of Transamerica
Corporation, including for this purpose any new director whose election, or
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nomination for election by Transamerica Corporation's stockholders was
approved by a vote of at least two-thirds of the directors still in office who
were directors at the beginning of such term, cease, for any reason to
constitute a majority thereof; or (c) more than 50% of the assets of
Transamerica Corporation, including the business or businesses for which the
individual's services are principally performed, is disposed of by
Transamerica Corporation pursuant to a partial or complete liquidation of
Transamerica Corporation, the sale of assets (including stock of a subsidiary
or subsidiaries) of Transamerica Corporation or otherwise.
7. Payment Options
In addition to the amount and time period of deferral, the ultimate
mode of payment must be chosen at the time the election is made, in order to
avoid undesirable tax consequences. The following modes of payment are
available:
(a) Lump sum payment; or
(b) Fixed number of annual payments (over a maximum period of 20
years)
If a lump sum is elected, the payment will be made on the first business day
of the calendar year next following the end of the term of deferral. The
amount of the lump sum payment shall be an amount equal to the value of the
individual's deferral account as of the end of the term of deferral. If
installments are elected, the first installment will be paid on the first
business day of the calendar year next following the end of the term of
deferral, and subsequent installments also will be paid on the first business
day of each following calendar year, until the installments are completed.
The amount of each installment shall be an amount equal to the value of the
individual's deferral account as of the December 31 next preceding the date of
payment, divided by the number of installments remaining to be made.
8. Financial Hardship
(a) Suspension of Deferrals After SSP Hardship Withdrawal. An
individual may not receive a hardship withdrawal from his or her pre-tax
account under the Transamerica Corporation Employees Stock Savings Plan (the
"SSP") or any other plan qualified under section 401(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), which contains a qualified cash
or deferred arrangement under section 401(k) of the Code and which is
maintained by one or more members of the Transamerica Group (collectively, the
"Plans"), unless all deferrals under this Policy are suspended during the
12-month period following such withdrawal.
Accordingly, in the event that an individual receives a hardship
withdrawal from his or her pre-tax account under one or more of the Plans, all
of the individual's deferral elections automatically shall be cancelled (as to
amounts not yet deferred), and such individual shall not be permitted to elect
to defer any amount from his or her compensation that would otherwise be paid
during the portion of the 12-month suspension period that falls in the next
calendar year.
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(b) Hardship Suspensions and Withdrawals Under this Policy. In the
event that an individual incurs a "financial hardship" as defined below,
the contracting corporation, in its sole discretion, may discontinue the
deferrals under any deferral election then in effect and/or may distribute all
or part of the individual's deferred compensation account; provided, however,
that a discontinuance of deferrals or a distribution under this paragraph 8(b)
may not be effected by any contracting corporation without the prior approval
of the Management Development and Compensation Committee of the Board of
Directors of Transamerica Corporation. The amount of any distribution under
this paragraph 8(b) shall be limited to the amount necessary to alleviate the
financial hardship. A suspension of deferrals or payment made due to
financial hardship shall not affect the rate at which interest is credited on
the deferred amount, and interest shall be credited in accordance with the
terms of the individual's original deferral election. A "financial hardship"
for purposes of this Policy shall mean a financial emergency which is caused
by accident, illness or other event beyond the control of the individual which
would, if no suspension of deferrals or accelerated distribution were made,
result in severe financial hardship to the individual or a member of his or
her immediate family.
9. Impact on Pension, Stock Savings and SSP+ Plans
Compensation deferred under this Policy will not be considered for
purposes of benefits under the Retirement Plan for Salaried U.S. Employees of
Transamerica Corporation and Affiliates, nor for purposes of determining an
individual's maximum permissible salary deferral contributions under the SSP
and the Stock Savings Plan Plus ("SSP+"). However, compensation deferred
under this Policy will be considered for purposes of determining an
individual's benefit under the Transamerica Corporation Supplemental Pension
Plan. Also, as provided in the SSP+, compensation deferred under this Policy
will be credited with SSP+ employer matching contributions at the rate then in
effect under the SSP+, to the extent of the individual's elected matched
contribution percentage under the SSP/SSP+. For example, suppose an eligible
employee has elected to defer $20,000 under this Policy, and 6% of eligible
compensation under the SSP/SSP+. In this example, the individual would
receive SSP+ employer matching contributions (at the then applicable rate,
currently 75%) on $1,200 (6% of $20,000). Thus, the individual's SSP+
employer matching contribution on the compensation deferred under this Policy
would be $900 (75% of $1,200). Notwithstanding the preceding, an individual's
bonus deferral (if any) will be credited with additional SSP+ matching
contributions only if he or she elected under the SSP/SSP+ to have his or her
bonus included in eligible SSP/SSP+ compensation.
10. Miscellaneous Provisions
(a) All amounts credited to individuals' deferral accounts pursuant
to this Policy shall continue for all purposes to be a part of the general
assets of the contracting corporation, and the individual's interest in his or
her deferral account, including his or her right to payment thereof, shall be
an unsecured claim against the general assets of the contracting corporation.
(b) The contracting corporation shall have the right to terminate
the employment of any employee at any time, with or without cause, and to
enter into any other agreement with any employee as to the terms of his or her
employment, and nothing in this Policy or any deferral election hereunder
shall qualify or otherwise affect such rights.
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(c) An individual's interest in his or her deferral account shall
not be assignable, either by voluntary or involuntary assignment or by
operation of law, including (without limitation) bankruptcy, garnishment,
attachment or other creditor's process, except by will or the laws of descent
and distribution.
(d) The Management Development and Compensation Committee of the
Board of Directors of Transamerica Corporation has the authority to interpret,
construe and administer this Policy in its sole discretion, and its
interpretations and constructions, and actions thereunder, shall be binding
and conclusive on all persons for all purposes.
(e) Any deferral elections agreed to under this Policy shall be
binding upon and inure to the benefit of the contracting corporation, its
successors and assigns, as well as the individual's heirs, executors,
administrators and legal representatives.
(f) Amounts deferred under this Policy shall be taken into account
for purposes of the withholding and contribution requirements of FICA, FUTA
and SECA (as applicable) in the year of initial deferral rather than in the
year of payment.
11. Future of Policy
It is currently intended that this deferred compensation policy will
remain in effect for future years, but Transamerica Corporation retains the
right to amend or terminate the Policy at any time; provided, however, that
any electing subsidiary may terminate its participation in this Policy at any
time by resolution of its board of directors. Moreover, the participation of
an electing subsidiary will be deemed terminated if it ceases to be a member
of the Transamerica Group. However, the cessation of participation by an
electing subsidiary shall not have any effect on compensation previously
deferred under the Policy. Such deferrals shall continue to be governed by
the provisions of the Policy and of the individual's election or elections to
defer compensation.
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