Exhibit 10.157
THE CHARLES SCHWAB CORPORATION
DIRECTORS' DEFERRED COMPENSATION PLAN
THE CHARLES SCHWAB CORPORATION
DIRECTORS' DEFERRED COMPENSATION PLAN
TABLE OF CONTENTS
Section Page
Article I. Purpose
1.1 Establishment of the Plan 2
1.2 Purpose of the Plan 2
Article II. Definitions
2.1 Definitions 3
2.2 Gender and Number 3
Article III. Administration
3.1 Committee and Administrator 4
Article IV. Participants
4.1 Participants 5
Article V. Deferrals
5.1 Deferrals 6
5.2 Deferral Procedures 6
5.3 Election of Time and Manner of Payment 6
5.4 Accounts and Earnings 7
5.5 Maintenance of Accounts 8
5.6 Change in Control 8
5.7 Payment of Deferred Amounts 12
5.8 Acceleration of Payment 12
Section Page
Article VI. General Provisions
6.1 Unfunded Obligation 14
6.2 Informal Funding Vehicles 14
6.3 Beneficiary 15
6.4 Incapacity of Participant or Beneficiary 15
6.5 Nonassignment 16
6.6 No Right to Continued Employment 16
6.7 Tax Withholding 16
6.8 Claims Procedure and Arbitration 16
6.9 Termination and Amendment 17
6.10 Applicable Law 18
THE CHARLES SCHWAB CORPORATION
DIRECTORS' DEFERRED COMPENSATION PLAN
Article I. Purpose
1.1 Establishment of the Plan. Effective as of January 1, 1996,
The Charles Schwab Corporation (hereinafter, the "Company") hereby
establishes The Charles Schwab Corporation Directors' Deferred
Compensation Plan (the "Plan"), as set forth in this document.
1.2 Purpose of the Plan. The Plan permits Directors to defer the
payment of directors' fees that they may earn. The opportunity to elect such
deferrals is provided in order to help the Company attract and retain
outside directors. This Plan is unfunded and is maintained primarily for
the purpose of providing deferred compensation for its outside directors.
It is intended to be exempt from the participation, vesting, funding, and
fiduciary requirements set forth in Title I of the Employee Retirement Income
Security Act of 1974, as amended.
Article II. Definitions
2.1 Definitions. The following definitions are in addition to any
other definitions set forth elsewhere in the Plan. Whenever used in the
Plan, the capitalized terms in this section shall have the meanings set
forth below unless otherwise required by the context in which they are used:
(a) "Administrator" the administrator described in section 3.1 that is
selected by the Committee to assist in the administration of the Plan.
(b) "Beneficiary" means a person entitled to receive any benefit
payments that remain to be paid after a Participant's death, as determined
under section 6.3.
(c) "Board" means the Board of Directors of the Company.
(d) "Company" means The Charles Schwab Corporation, a Delaware
corporation.
(e) "Committee" means the Compensation Committee of the Board.
(f) "Deferral Account" means the account representing deferrals of
cash compensation, plus investment adjustments, as described in sections 5.4
and 5.5.
(g) "Director" means each member of the Board of the Directors who
is not an employee of the Company or any of its subsidiaries.
(h) "Plan" means The Charles Schwab Corporation Directors' Deferred
Compensation Plan, as in effect from time to time.
(i) "Plan Year" means the calendar year.
(j) "Termination" means the date a Participant ceases to be a
Director.
(k) "Valuation Date" means each December 31 and any other date
designated from time to time by the Committee for the purpose of determining
the value of a Participant's Deferral Account balance pursuant to section 5.4.
2.2 Gender and Number. Except when otherwise indicated by the
context, any masculine or feminine terminology shall also include the neuter
and other gender, and the use of any term in the singular or plural shall
also include the opposite number.
Article III. Administration
3.1 Committee and Administrator. The Committee shall administer
the Plan and may select one or more persons to serve as the Administrator.
The Administrator shall perform such administrative functions as the Committee
may delegate to it from time to time. Any person selected to serve as the
Administrator may, but need not, be a Committee member or an officer or
employee of the Company. However, if a person serving as Administrator or a
member of the Committee is a Participant, such person may not vote on a
matter affecting his interest as a Participant.
The Committee shall have discretionary authority to construe and
interpret the Plan provisions and resolve any ambiguities thereunder; to
prescribe, amend, and rescind administrative rules relating to the Plan; to
determine eligibility for benefits under the Plan; and to take all other
actions that are necessary or appropriate for the administration of the
Plan. Such interpretations, rules, and actions of the Committee shall be
final and binding upon all concerned and, in the event of judicial review,
shall be entitled to the maximum deference allowable by law. Where the
Committee has delegated its responsibility for matters of interpretation
and Plan administration to the Administrator, the actions of the
Administrator shall constitute actions of the Committee.
Article IV. Participants
4.1 Participants. Each Director shall be eligible to participate
in this Plan.
Article V. Deferrals
5.1 Deferrals. Each Director may elect to defer up to 100 percent
of the fees otherwise receivable from the Company for service as a Director.
Any such election must be made by entering a deferred compensation agreement
with the Company, as evidenced by a form approved by and filed with the
Administrator on or before the deadline specified by the Committee (which
shall be no earlier than one month prior to the beginning of the election
period for which the deferred fees are to be earned; provided that for the
first year in which the Plan is in effect, the deferral election shall be
made within the first thirty days of the election period). For this
purpose, the election period shall be the calendar year; provided, however,
that during periods in which the Plan is not in effect for a full calendar
year or a Director is not a Participant for a full calendar year, the
election period shall be the portion of the calendar year during which the
Plan is in effect and the Director is an eligible Participant. Deferrals
that have been elected shall occur throughout the election period in pro
rata increments.
5.2 Deferral Procedures. Participants shall have an opportunity to
elect deferrals each year. Unless the Committee specifies other rules for the
deferrals that may be elected, deferrals may be made in increments of 10
percent or in a fixed dollar amount. If a deferral is elected, the election
shall be irrevocable. Deferral elections shall be made on a form prescribed
by the Committee or the Administrator. As provided in section 6.7, any
deferral is subject to any applicable tax withholding measures and may be
reduced to satisfy any applicable tax withholding requirements.
5.3 Election of Time and Manner of Payment. At the time a
Participant makes a deferral election under section 5.1, the Participant
shall also designate the manner of payment and the date on which payments
from his or her Deferral Account shall begin, from among the following
options:
(i) a lump sum payable by the end of February in the year
immediately following the Participant's Termination; or
(ii) a series of annual installments, commencing in the year
following the Participant's Termination and payable each year on or before
the end of February, over a period of five, ten, or fifteen years, as
designated by the Participant.
If payment is due in the form of a lump sum, the payment shall equal
the balance of the Deferral Account being paid, determined as of the
Valuation Date coincident with or immediately preceding the payment date.
If payment is due in the form of installments, the amount of each
installment payment shall be equal to the quotient determined by dividing
(A) the value of the portion of the Deferral Account to which the
installment payment election applies (determined as of the Valuation Date
coincident with or immediately preceding the date the payment is to be
made), by (B) the number of years over which the installment payments are
to be made, less the number of years in which prior payments attributable to
such installment payment election have been made.
Notwithstanding the foregoing, however, if earnings or any other
amounts credited to a Participant's Deferral Account do not otherwise meet
any applicable requirements of the Internal Revenue Code allowing the
Company and its Subsidiaries to receive a federal income tax deduction for
such amounts upon paying them at the time provided under the Participant's
election, the payment of such amounts, to the extent in excess of the amount
that would be currently tax deductible, shall automatically be deferred
until the earliest year that the payment can be deducted.
5.4 Accounts and Earnings. The Company shall establish a Deferral
Account for each Participant who has elected a deferral under section 5.1
above, and its accounting records for the Plan with respect to each such
Participant shall include a separate Deferral Account or subaccount for each
deferral election of the Participant that could cause a payment made at a
different time or in a different form from other payments of deferrals
elected by the same Participant. Each Deferral Account balance shall
reflect the Company's obligation to pay a deferred amount to a Participant
or Beneficiary as provided in this Article V. Under procedures approved by
the Committee and communicated to Participants, a Participant's Deferral
Account balance shall be increased periodically (not less frequently than
annually) to reflect an assumed earnings increment, based on the
hypothetical compounded return that would have resulted (including
reinvestment of any cash dividends) had the amounts deferred been invested
in Common Stock of the Company on the date the Deferral occurred. The
crediting of assumed earnings shall not mean that any deferred compensation
promise to a Participant is secured by particular investment assets
or that the Participant is actually earning any form of investment income
under the Plan.
5.5 Maintenance of Accounts. The Accounts of each Participant
shall be entered on the books of the Company and shall represent a
liability, payable when due under this Plan, from the general assets of the
Company. Prior to benefits becoming due hereunder, the Company shall
expense the liability for such accounts in accordance with policies
determined appropriate by the Company's auditors. Except to the extent
provided pursuant to the second paragraph of this section 5.5, the Accounts
created for a Participant by the Company shall not be funded by a trust or
an insurance contract; nor shall any assets of the Company be segregated or
identified to such account; nor shall any property or assets of the Company
be pledged, encumbered, or otherwise subjected to a lien or security
interest for payment of benefits hereunder.
Notwithstanding that the amounts to be paid hereunder to Participants
constitute an unfunded obligation of the Company, the Company may direct that
an amount equal to any portion of the Accounts shall be invested by the
Company as the Company, in its sole discretion, shall determine. The
Committee may, in its sole discretion, determine that all or any portion of
an amount equal to the Accounts shall be paid into one or more grantor
trusts that may be established by the Company for the purpose of providing a
potential source of funds to pay Plan benefits.
5.6 Change in Control. In the event of a Change in Control (as
defined below), the following rules shall apply:
(a) All Participants shall continue to have a fully vested,
nonforfeitable interest in their Deferral Accounts.
(b) Deferrals of amounts for the year that includes the Change in
Control shall cease beginning with the first payment otherwise due that follows
the Change in Control.
(c) A special allocation of earnings on all Deferral Accounts shall
be made under section 5.4 as of the date of the Change in Control on a basis
no less favorable to Participants than the method being followed prior to
the Change in Control.
(d) All payments of deferred amounts following a Change in Control,
whether or not they have previously begun, shall be made in a cash lump
sum no later than 30 days following the Change in Control and, except as
provided in section 5.3 with respect to installment payments in progress,
shall be in an amount equal to the full Deferral Account balance, as
adjusted pursuant to paragraph (c) above, as of the date of the Change in
Control.
(e) Nothing in this Plan shall prevent a Participant from enforcing
any rules in a contract or another plan of the Company or any Subsidiary
concerning the method of determining the amount of fees or other form of
compensation to which a Participant may become entitled following a change
in control, or the time at which that compensation is to be paid in the
event of a change in control.
For purposes of this Plan, a "Change in Control" means any of the
following:
(1) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20%
or more of either (i) the then outstanding shares of common stock of the
Corporation (the "Outstanding Corporation Common Stock") or (ii) the
combined voting power of the then outstanding voting securities of the
Corporation entitled to vote generally in the election of directors (the
"Outstanding Corporation Voting Securities"); provided, however, that for
purposes of this paragraph (1), the following acquisitions shall not
constitute a Change of Control: (i) any acquisition directly from the
Company, (ii) any acquisition by the Company, (iii) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by the
Company or any corporation controlled by the Company, or (iv) any
acquisition by any corporation pursuant to a transaction which complies
with clauses (i), (ii) and (iii) of paragraph (3) hereof; or
(2) Individuals who, as of January 1, 1996, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority
of the Board; provided, however, that any individual becoming a director
subsequent to January 1, 1996 whose election, or nomination for election by
the Company's shareholders, was approved by a vote of at least a majority of
the directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial assumption of office
occurs as a result of an actual or threatened election contest with respect
to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than
the Board; or
(3) Consummation of a reorganization, merger or consolidation, or sale
or other disposition of all or substantially all of the assets of the
Company (a "Business Combination"), in each case, unless, following such
Business Combination, (i) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Outstanding
Corporation Common Stock and Outstanding Corporation Voting Securities
immediately prior to such Business Combination beneficially own, directly
or indirectly, more than 50% of, respectively, the then outstanding shares
of common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as the
case may be, of the corporation resulting from such Business Combination
(including, without limitation, a corporation which as a result of
such transaction owns the Company or all or substantially all of the
Company's assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately prior to
such Business Combination, of the Outstanding Corporation Common Stock and
Outstanding Corporation Voting Securities, as the case may be, (ii) no
Person (excluding any corporation resulting from such Business Combination
or any employee benefit plan (or related trust) of the Company or such
corporation resulting from such Business Combination) beneficially owns,
directly or indirectly, 20% or more of, respectively, the then outstanding
shares of common stock of the corporation resulting from such Business
Combination or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such ownership
existed prior to the Business Combination and (iii) at least a majority of
the members of the board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board, providing
for such Business Combination; or
(4) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
A Change of Control shall occur on the first day on which any of the
preceding conditions has been satisfied. However, notwithstanding the
foregoing, this section 5.6 shall not apply to any Participant who alone or
together with one or more other persons acting as a partnership, limited
partnership, syndicate, or other group for the purpose of acquiring, holding
or disposing of securities of the Company, triggers a "Change in Control"
within the meaning of paragraphs (1) and (2) above. Moreover, no
acquisition by (i) Charles Schwab and/or his spouse or any of his lineal
descendants or (ii) any trust created by or for the benefit of Charles Schwab
and/or his spouse or any of his lineal descendants or (iii) the Schwab
Family Foundation shall constitute a Change of Control.
5.7 Payment of Deferred Amounts. A Participant shall have a fully
vested, nonforfeitable interest in his or her Deferral Account balance at all
times. However, vesting does not confer a right to payment other than in
the manner elected by the Participant pursuant to section 5.3 (subject to any
modification that may occur pursuant to section 5.4, 5.6 or 5.8). Upon the
expiration of a deferral period selected by the Participant in one or more
deferral elections, the Company shall pay to such Participant (or to the
Participant's Beneficiary, in the case of the Participant's death), in cash,
an amount equal to the balance of the Participant's Account attributable
to such expiring deferral elections, plus assumed earnings (determined by
the Company pursuant to section 5.4) thereon.
5.8 Acceleration of Payment. The Committee, in its discretion,
upon receipt of a written request from a Participant, may accelerate the
payment of all or any portion of the unpaid balance of a Participant's
Deferral Account in the event of the Participant's death, permanent
disability, or upon its determination that the Participant (or his
Beneficiary in the case of his death) has incurred a severe, unforeseeable
financial hardship creating an immediate and heavy need for cash that cannot
reasonably be satisfied from sources other than an accelerated payment from
this Plan. The Committee in making its determination may consider such
factors and require such information as it deems appropriate.
Article VI. General Provisions
6.1 Unfunded Obligation. The deferred amounts to be paid to
Participants pursuant to this Plan constitute unfunded obligations of the
Company. Except to the extent specifically provided hereunder, the Company
is not required to segregate any monies from its general funds, to create
any trusts, or to make any special deposits with respect to this obligation.
Title to and beneficial ownership of any investments, including any grantor
trust investments which the Company has determined and directed the
Administrator to make to fulfill obligations under this Plan shall at all
times remain in the Company. Any investments and the creation or
maintenance of any trust or Accounts shall not create or constitute a trust
or a fiduciary relationship between the Administrator or the Company and a
Participant, or otherwise create any vested or beneficial interest in any
Participant or his or her Beneficiary or his or her creditors in any assets
of the Company whatsoever. The Participants shall have no claim for any
changes in the value of any assets which may be invested or reinvested by
the Company in an effort to match its liabilities under this Plan.
6.2 Informal Funding Vehicles. Notwithstanding section 6.1, the
Company may, but need not, arrange for the establishment and use of a
grantor trust or other informal funding vehicle to facilitate the payment of
benefits and to discharge the liability of the Company and participating
Affiliates under this Plan to the extent of payments actually made from such
trust or other informal funding vehicle.
Any investments and any creation or maintenance of memorandum accounts
or a trust or other informal funding vehicle shall not create or constitute
a trust or a fiduciary relationship between the Committee or the Company or
an affiliate and a Participant, or otherwise confer on any Participant or
Beneficiary or his or her creditors a vested or beneficial interest in any
assets of the Company or any Affiliate whatsoever. Participants and
Beneficiaries shall have no claim against the Company or any Affiliate for
any changes in the value of any assets which may be invested or reinvested
by the Company or any Affiliate with respect to this Plan.
6.3 Beneficiary. The term "Beneficiary" shall mean the person or
persons to whom payments are to be paid pursuant to the terms of the Plan in
the event of the Participant's death. A Participant may designate a
Beneficiary on a form provided by the Administrator, executed by the
Participant, and delivered to the Administrator. The Administrator may
require the consent of the Participant's spouse to a designation if the
designation specifies a Beneficiary other than the spouse. Subject to the
foregoing, a Participant may change a Beneficiary designation at any time.
Subject to the property rights of any prior spouse, if no Beneficiary is
designated, if the designation is ineffective, or if the Beneficiary dies
before the balance of the Account is paid, the balance shall be paid to the
Participant's surviving spouse, or if there is no surviving spouse, to the
Participant's estate.
6.4 Incapacity of Participant or Beneficiary. Every person
receiving or claiming benefits under the Plan shall be conclusively
presumed to be mentally competent and of age until the date on which the
administrator receives a written notice, in a form and manner acceptable to
the Administrator, that such person is incompetent or a minor, for whom a
guardian or other person legally vested with the care of his person or
estate has been appointed; provided, however, that if the Administrator
finds that any person to whom a benefit is payable under the Plan is unable
to care for his or her affairs because of incompetency, or because he or she is
a minor, any payment due (unless a prior claim therefor shall have been made
by a duly appointed legal representative) may be paid to the spouse, a
child, a parent, a brother or sister, or to any person or institution
considered by the Administrator to have incurred expense for such person
otherwise entitled to payment. To the extent permitted by law, any such
payment so made shall be a complete discharge of liability therefor under
the Plan.
If a guardian of the estate of any person receiving or claiming
benefits under the Plan is appointed by a court of competent jurisdiction,
benefit payments may be made to such guardian provided that proper proof of
appointment and continuing qualification is furnished in a form and manner
acceptable to the Administrator. In the event a person claiming or receiving
benefits under the Plan is a minor, payment may be made to the custodian of an
account for such person under the Uniform Gifts to Minors Act. To the
extent permitted by law, any such payment so made shall be a complete
discharge of any liability therefor under the Plan.
6.5 Nonassignment. The right of a Participant or Beneficiary to
the payment of any amounts under the Plan may not be assigned, transferred,
pledged or encumbered nor shall such right or other interests be subject to
attachment, garnishment, execution, or other legal process.
6.6 No Right to Continued Service. Nothing in the Plan shall be
construed to confer upon any Participant any right to continue as a Director of
the Company.
6.7 Tax Withholding. Any appropriate taxes shall be withheld from
cash payments made to Participants pursuant to the Plan. To the extent tax
withholding is payable in connection with the Participant's deferral of income
rather than in connection with the payment of deferred amounts, such
withholding may be made from amounts currently payable to the Participant,
or, as determined by the Administrator, the amount of the deferral elected by
the Participant may be reduced in order to satisfy required tax withholding
for any applicable taxes.
6.8 Claims Procedure and Arbitration. The Company shall establish
a reasonable claims procedure consistent with the requirements of the
Employee Retirement Income Security Act of 1974, as amended. Following a
Change in Control of the Company (as determined under section 5.6) the
claims procedure shall include the following arbitration procedure.
Since time will be of the essence in determining whether any payments
are due to the Participant under this Plan following a Change in Control, a
Participant may submit any claim for payment to arbitration as follows: On
or after the second day following the Termination or other event triggering a
right to payment, the claim may be filed with an arbitrator of the
Participant's choice by submitting the claim in writing and providing a
copy to the Company. The arbitrator must be:
(a) a member of the National Academy of Arbitrators or one who
currently appears on arbitration panels issued by the Federal Mediation and
Conciliation Service or the American Arbitration Association; or
(b) a retired judge of the State in which the claimant is a
resident who served at the appellate level or higher. The arbitration
hearing shall be held within 72 hours (or as soon thereafter as possible)
after filing of the claim unless the Participant and the Company agree to a
later date. No continuance of said hearing shall be allowed without
the mutual consent of the Participant and the Company. Absence from or
nonparticipation at the hearing by either party shall not prevent the
issuance of an award. Hearing procedures which will expedite the hearing
may be ordered at the arbitrator's discretion, and the arbitrator may close
the hearing in his or her sole discretion upon deciding he or she has heard
sufficient evidence to satisfy issuance of an award. In reaching a decision,
the arbitrator shall have no authority to ignore, change, modify, add to or
delete from any provision of this Plan, but instead is limited to
interpreting this Plan. The arbitrator's award shall be rendered as
expeditiously as possible, and unless the arbitrator rules within seven
days after the close of the hearing, he will be deemed to have ruled in
favor of the Participant. If the arbitrator finds that any payment is due
to the Participant from the Company, the arbitrator shall order the Company
to pay that amount to the Participant within 48 hours after the decision is
rendered. The award of the arbitrator shall be final and binding upon the
Participant and the Company. Judgment upon the award rendered by the
arbitrator may be entered in any court in any State of the United States.
In the case of any arbitration regarding this Agreement, the Participant
shall be awarded the Participant's costs, including attorney's fees. Such
fee award may not be offset against the deferred compensation due hereunder.
The Company shall pay the arbitrator's fee and all necessary expenses of the
hearing, including stenographic reporter if employed.
6.9 Termination and Amendment. The Committee may from time to time
amend, suspend or terminate the Plan, in whole or in part, and if the Plan is
suspended or terminated, the Committee may reinstate any or all of its
provisions. Except as otherwise required by law, the Committee may delegate
to the Administrator all or any of its foregoing powers to amend, suspend,
or terminate the Plan. Any such amendment, suspension, or termination may
affect future deferrals without the consent of any Participant or
Beneficiary. However, with respect to deferrals that have already occurred,
no amendment, suspension or termination may impair the right of a
Participant or a designated Beneficiary to receive payment of the related
deferred compensation in accordance with the terms of the Plan prior to the
effective date of such amendment, suspension or termination, unless the
affected Participant or Beneficiary gives his express written consent to the
change.
6.10 Applicable Law. The Plan shall be construed and governed in
accordance with applicable federal law and, to the extent not preempted by
such federal law, the laws of the State of California.