Short-Term
Incentive Compensation Plan
For Senior Officers
I. Introduction
1.1. Purpose. The purpose of this Plan is to motivate executives to achieve
specific annual goals that are of primary importance to EQ and Equitable Life.
1.2. Definitions. 'Affiliate' means any firm, partnership or corporation
that directly or indirectly through one or more intermediates, controls, is
controlled by, or is under common control with another firm, partnership or
corporation. 'Boards' mean the respective Boards of Directors of Equitable Life
and EQ, each as constituted from time to time. 'Code' means the Internal Revenue
Code of 1986, as amended. 'Committees' mean the respective Organization and
Compensation Committees of the Boards, each as constituted from time to time.
'DLJ' means Donaldson, Lufkin & Jenrette, Inc. and its subsidiaries.
'Earnings Level' means for each performance period (1) with respect to the
EQ Compensation Pool, an amount of Pre-Tax EQ Adjusted Earnings equal to the
pre-tax earnings threshold designated by the Committees and (2) with respect to
the Insurance Compensation Pool, an amount of Pre-Tax Insurance Adjusted
Earnings equal to the pre-tax earnings threshold designated by the Committees.
'EQ' means The Equitable Companies Incorporated, a Delaware corporation,
and any successor thereto.
'EQ Compensation Pool' means the pool to which is credited an amount
determined by the Committees up to a maximum determined by multiplying the
Pre-Tax EQ Adjusted Earnings by 1%.
'Equitable Life' means The Equitable Life Assurance Society of the United
States, a New York stock life insurance company, and any successor thereto.
'Insurance Compensation Pool' means the pool to which is credited an amount
determined by the Committees up to a maximum determined by multiplying the
Pre-Tax Insurance Adjusted Earnings by 6%.
'Participant' means an individual who is or was during the performance
period covered by this Plan a Chairman or Vice Chairman of the Board, President,
Executive Vice President or Senior Vice President of EQ or an officer of
Equitable Life who is or was (i) designated a principal officer, pursuant to the
procedures set forth in Section 4230(a) of the New York Insurance Law, or (ii)
any officer having a title of Senior Vice President or higher.
'Plan' means the Short-Term Incentive Compensation Plan for Senior
Officers, as in effect and as amended from time to time.
'Pools' means both the EQ Compensation Pool and the Insurance Compensation
Pool.
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'Pre-Tax Adjustments' shall mean such adjustments, based on EQ's accounting
records, as are necessary to eliminate from the calculation of Pre-Tax Earnings
and Pre-Tax Insurance Earnings the effect of:
(i) all charges for any incentive compensation programs with respect to
Participants under this Plan;
(ii) all non-DLJ capital gains and losses;
(iii) any incremental change attributable to item (ii) in (a) the
investment results directly passed through to participating contract holders and
(b) the amortization of deferred acquisition costs; and
(iv) restructuring charges.
'Pre-Tax EQ Adjusted Earnings' for any year shall mean an amount equal to
the sum of: (1) the consolidated earnings from continuing operations before
Federal income taxes of EQ for such year determined in conformity with generally
accepted accounting principles (the 'Pre-Tax Earnings'), and (2) the net amount
of the Pre-Tax Adjustments.
'Pre-Tax Insurance Adjusted Earnings' for any year shall mean an amount
equal to: the sum of (1) (a) the Pre-Tax Earnings less (b) the amount of the
earnings from continuing operations before Federal income taxes of the
investment services segment included in the Pre-Tax Earnings, such difference
being referred to as the Pre-Tax Insurance Earnings, and (2) the net amount of
the Pre-Tax Adjustments other than Pre-Tax Adjustments attributable to the
investment services segment.
II. Administration
2.1. For purposes of complying with the requirements of Section 162(m) of
the Code, the Committees, prior to the commencement of a performance period or
such later date as may be permitted under such Section 162(m), will determine
the amount to be paid to each of the 'covered employees' as defined in Section
162(m) of the Code subject to the Committees' right in their sole discretion to
reduce or eliminate the amount to be paid to such individuals.
2.2. The Committees shall determine each year, subject to the terms of the
Plan, whether the Earnings Level under section 4.1 has been achieved, the
aggregate size of the respective Pools and the payments to Participants in each
Pool. To the extent required by Section 162(m) of the Code, the Committees shall
certify that the performance goals and any other material terms of the Plan have
been satisfied prior to any payment to 'covered employees' as defined in Section
162(m) of the Code.
The administration and operation of the Plan shall be supervised by the
Committees. The Committees may delegate responsibility for the day-to-day
administration and operation of the Plan to such employees of Equitable Life as
they shall designate from time to time. The Committees shall interpret and
construe any and all provisions of the Plan and any determination made by the
Committees, under the Plan, shall be final and conclusive. All accounting
determinations shall be made using the accounting principles used by EQ in its
consolidated financial statements and quarterly financial supplements prepared
in accordance with generally accepted accounting principles. Neither the Boards,
nor the Committees, nor any member of the Boards or the Committees, nor any
employee of Equitable Life and EQ shall be liable for any act, omission,
interpretation, construction or determination made in connection with the Plan
(other than acts of willful misconduct) and the members of the Boards and the
Committees and the employees of Equitable Life and EQ shall be entitled to
indemnification and reimbursement by Equitable Life and EQ to the maximum extent
permitted by law in respect of any claim, loss, damage or expense (including
counsel's fees) arising from their acts, omissions and conduct in their official
capacity with respect to the Plan.
III. Eligibility
3.1. (a) Only Participants who are or were officers of Equitable Life shall
be eligible to participate in the Insurance Compensation Pool.
(b) Only Participants who are or were officers of EQ shall be eligible to
participate in the EQ Compensation Pool.
(c) Participants who are or were officers of both EQ and Equitable Life
shall be eligible to participate in both Pools.
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IV. Determination of Compensation Pools
4.1. If the Earnings Level for the EQ Compensation Pool is achieved, the
Committees may direct that an amount be set aside up to 1% of the Pre-Tax EQ
Adjusted Earnings for the EQ Compensation Pool. If the Earnings Level for the
Insurance Compensation Pool is achieved, the Committees may direct that an
amount be set aside up to 6% of the Pre-Tax Insurance Adjusted Earnings for the
Insurance Compensation Pool.
V. Payment
5.1 General Rule. Except as otherwise provided hereunder, payment of
amounts determined under this Plan shall be made to each Participant for any
annual performance period as soon as practicable.
5.2. Maximum Payment. The Committees will determine the amount to be paid
to each of the 'covered employees' as defined in Section 162(m) of the Code
subject to the Committees' right in their sole discretion to reduce or eliminate
the amount to be paid to such Participants; provided that, to extent required by
Section 162(m) of the Code, the exercise of negative discretion by the Committee
with respect to such 'covered employee' shall not increase the amounts payable
from the Compensation Pools with respect to any other Participant.
Notwithstanding the foregoing, in no event shall (i) a Participant who is
described in Section 162(m)(3)(A) of Code with respect to the taxable year in
which the amounts payable in respect of any performance period are deductible
for Federal income tax purposes (the 'Taxable Year') receive payment under this
Plan of an amount in excess of 12% of the maximum amount which could be credited
to the Pools under Section 4.1 and (ii) the Participants described in Section
162(m)(3)(B) of the Code with respect to the Taxable Year receive payment under
this Plan of an amount in excess of 10% in the case of such Participant
receiving the highest amount of salary and bonus for the Taxable Year, 8% in the
case of such Participant receiving the second highest amount of salary and bonus
for the Taxable Year, 7% in the case of such Participant receiving the third
highest amount of salary and bonus for the Taxable Year and 6% in the case of
such Participant receiving the fourth highest amount of salary and bonus for the
Taxable Year, of the maximum amount which could be credited to the Pools under
Section 4.1.
5.3. Involuntary Termination, Death, Disability or Retirement. If a
Participant's employment is terminated by Equitable Life or EQ or terminates by
reason of his death, disability (as defined in Section 22(e)(3) of the Code, or
any successor provision thereto) or retirement, the Committees, in their sole
discretion, may authorize a payment, subject to the achievement of the Earnings
Levels, at the time and subject to the maximum payment limits established under
Article V.
VI. General Provisions
6.1 Amendment and Termination. The Plan may at any time be amended,
suspended, discontinued or terminated by action taken by the Boards and
Committees without approval or consent by shareholders; provided, however, that
no such amendment, suspension, discontinuance or termination shall adversely
affect the rights of any Participant with respect to any payments which the
Committees have determined shall be made prior to the effective date of such
amendment, suspension, discontinuance or termination.
6.2. Designation of Beneficiary. Each Participant may designate a
beneficiary or beneficiaries (which beneficiary may be an entity other than a
natural person) to receive any payments which may be made following the
Participant's death. Such designation may be changed or canceled at any time
without the consent of any such beneficiary. Any such designation, change or
cancellation must be made in a form approved by the Committees and shall not be
effective until received by the Committees. If no beneficiary has been named, or
the designated beneficiary or beneficiaries shall have predeceased the
Participant, the beneficiary shall be the Participant's spouse or, if no spouse
survives the Participant, the Participant's estate. If a Participant designates
more than one beneficiary, the interests of such beneficiaries shall be paid in
equal shares, unless the Participant has designated otherwise.
6.3 Miscellaneous. (a) No Right of Payment or Continued Employment. Nothing
in this Plan shall be construed as conferring upon any Participant any right to
payments under this Plan, or to continue in the employment of Equitable Life or
any of its Affiliates.
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(b) No Limitation on Corporation Actions. Nothing contained in the Plan
shall be construed to prevent Equitable Life or EQ from taking any corporate
action which is deemed by either Equitable Life or EQ or any of their Affiliates
to be appropriate or in their best interest, whether or not such action would
have an adverse effect on the Plan or any awards made under the Plan. No
employee, beneficiary or other person shall have any claim against Equitable
Life or EQ or any of their Affiliates as a result of any such action.
(c) Nonalienation of Benefits. Except as expressly provided herein, no
Participant or beneficiary shall have the power or right to transfer (otherwise
than by will or the laws of descent and distribution), alienate, or otherwise
encumber the Participant's interest under the Plan. Equitable Life's or EQ's
obligations under this Plan are not assignable or transferable except to (i) a
corporation which acquires all or substantially all of Equitable Life's or EQ's
assets or (ii) any corporation into which Equitable Life or EQ may be merged or
consolidated. The provisions of the Plan shall inure to the benefit of each
Participant and the Participant's beneficiaries, heirs, executors,
administrators or successors in interest.
(d) Withholding Taxes. Equitable Life and EQ may make such provisions and
take such action as they may deem necessary or appropriate for the withholding
of any taxes which Equitable Life or EQ are required by any law or regulation of
any governmental authority, whether Federal, state or local, to withhold in
connection with any awards under the Plan, including, but not limited to, the
withholding of appropriate sums from any amount otherwise payable to the
Participant (or his Beneficiary). Each Participant, however, shall be
responsible for the payment of all individual tax liabilities relating to any
such award.
(e) Unfunded Status of Plan. The Plan is intended to constitute an
'unfunded' plan for incentive compensation for Participants. With respect to any
payments not yet made to a Participant, nothing contained herein shall give any
such Participant any rights that are greater than those of a general creditor of
Equitable Life or EQ.
(f) Severability. If any provision of this Plan is held unenforceable, the
remainder of the Plan shall continue in full force and effect without regard to
such unenforceable provision and shall be applied as though the unenforceable
provision were not contained in the Plan.
(g) Governing Law. The Plan shall be construed in accordance with and
governed by the laws of the State of New York, without reference to the
principles of conflict of law.
(h) Headings. Headings are inserted in this Plan for convenience of
reference only and are to be ignored in the construction of the provisions of
the Plan.
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