EXHIBIT 10.2
DEAN WITTER REYNOLDS INC.
FINANCIAL ADVISOR PRODUCTIVITY COMPENSATION PLAN
[Amended as of September 25, 1998]
SECTION I
INTRODUCTION
(a) The name of this plan is the Dean Witter Reynolds Inc. Financial Advisor
Productivity Compensation Plan (the "Plan").
(b) The Plan was initially adopted to be effective for Awards granted for
Fiscal Years commencing with 1984; was amended and restated December 23,
1985 retroactive to the 1984 Fiscal Year; was further amended effective
December 24, 1990 and July 15, 1991; was restated for Fiscal Years
beginning with 1992; was amended and restated effective October 1, 1993;
was amended effective January 1, 1994; amended and restated effective
January 1, 1994; was amended and restated effective October 21, 1994; was
amended June 18, 1997; and was amended effective September 25, 1998.
SECTION II
PURPOSE OF PLAN
(a) The purposes of the Plan are to retain and recruit key Financial Advisors
to Dean Witter Reynolds Inc. by enabling them to accumulate significant net
worth.
SECTION III
DEFINITIONS
(a) "Financial Advisor" means an Employee performing the functions of a retail
Financial Advisor, as defined by DWR.
(b) "Account" means a bookkeeping account maintained in a confidential ledger
by DWR pursuant to Section VI of the Plan for each Participant under the
Plan.
(c) "Disability" means termination of employment from DWR due to a medically
determinable physical or mental incapacity which is reasonably expected to
be of long-term duration or result in death. The determination of DWR shall
be conclusive on all parties as to whether a Participant is Disabled.
(d) "MWD" means Morgan Stanley Dean Witter & Co., a Delaware corporation.
(e) "DWR" means Dean Witter Reynolds Inc., a Delaware corporation.
(f) "Employee" means an employee of DWR.
(g) "Fair Market Value" means:
(1) for purposes of determining the number of shares of Stock to be allocated
pursuant to Section VII(a) to an award made pursuant to Section V, the fair
market value thereof as of the relevant date of determination, as determined in
accordance with a valuation methodology approved by the Board of Directors of
MWD or a committee thereof designated by such Board of Directors (such Board of
Directors or committee is hereinafter referred to as the "MWD Committee"); and
(2) for purposes of crediting a Participant pursuant to Section VII(c) with
shares of Stock based upon cash dividends paid or deemed to be paid on shares of
Stock credited to the Participant as of the record date for such dividends, the
average of the high and low sales prices, regular way, of a share of Stock as
reported on the New York Stock Exchange Composite Tape (the "High/Low Price") on
the relevant dividend payment date, or, if Stock is not traded on public markets
on the relevant dividend payment date, the first preceding date on which Stock
is traded on public markets; provided, however, that in the event a "Fair Market
Value" cannot be determined pursuant to the foregoing, the fair market value
thereof as of the relevant date of determination, as determined in accordance
with a valuation methodology approved by the MWD Committee; and
(3) for purposes of distributing cash in lieu of a fractional share pursuant to
Section VII(a), the High/Low Price on the date of the distribution, or, if Stock
is not traded on public markets on the date of the distribution, the first
preceding date on which Stock is traded on public markets; provided, however,
that in the event a "Fair Market Value" cannot be determined pursuant to the
foregoing, the fair market value thereof as of the relevant date of
determination, as determined in accordance with a valuation methodology approved
by the MWD Committee; and
(4) for such other purposes as may arise in connection with the Plan, the fair
market value of a share of Stock as of the relevant date of determination, as
determined in accordance with a valuation methodology approved by the MWD
Committee.
(h) "Fiscal Year" means the fiscal year of DWR.
(i) "Gross Revenue" means the total gross revenue generated in a Fiscal Year by
a Financial Advisor for any purchase or sale of securities and other
investments to a DWR client, based on criteria established and reported by
DWR in accordance with its standard accounting practices.
(j) "Participant" means an Employee to whom an award has been made pursuant to
Section V.
(k) "Retirement" means termination of employment from DWR: (i) after attaining
age 65; (ii) as defined in the Dean Witter Reynolds Inc. Pension Plan
whether or not the individual is a participant therein; or (iii) as
otherwise specified by written agreement between DWR and a Financial
Advisor.
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(l) "Stock" means the common stock of MWD, par value $.01 per share.
(m) "Valuation Date" means the last day of each Fiscal Year.
SECTION IV
ELIGIBILITY
(a) Financial Advisors who produce Gross Revenue within a Fiscal Year which is
equal to or exceeds criteria established from time to time by the
Compensation Committee of the Board of Directors of DWR, or who equal or
exceed any other performance or production criteria established from time
to time by the Compensation Committee of the Board of Directors of DWR,
shall be eligible to participate in the Plan.
(b) Any Financial Advisor who is eligible to participate in the Plan pursuant
to Section IV(a) shall be eligible to participate in the Plan only with
respect to the Fiscal Year for which he or she meets the criteria specified
pursuant to Section V of the Plan.
(c) Individuals selected to receive awards pursuant to Section V(d) of the Plan
shall be eligible to participate in the Plan in connection with, and
subject to the terms of, their awards.
SECTION V
AWARDS
(a) At the beginning of each Fiscal Year DWR shall establish the Gross Revenue
criteria which will entitle a Financial Advisor to receive an award under
the Plan for that Fiscal Year. Awards shall be expressed as a percentage of
each Financial Advisor's Gross Revenue production for the Fiscal Year for
which such award is being made. A Financial Advisor who achieves the Gross
Revenue criteria for a Fiscal Year shall receive an award for that Fiscal
Year based on such criteria. Awards shall be payable in accordance with
Section VII.
(b) At the beginning of each Fiscal Year, the Compensation Committee of the
Board of Directors of DWR may establish any other criteria which will
entitle a Financial Advisor to receive an award under the Plan for that
Fiscal Year. A Financial Advisor who achieves such other criteria shall
receive an award for that Fiscal Year based on such criteria.
(c) Any Participant who terminates as an Employee during the Fiscal Year, for
whatever reason, shall not be eligible for any award for such Fiscal Year.
(d) The MWD Committee may, in its discretion from time to time, make to an
individual, in consideration of such individual becoming (and remaining for
such
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period of time, if any, as the MWD Committee may determine) a Financial
Advisor and such other consideration, if any, as the MWD Committee
determines, an award of Stock on such terms and conditions as the MWD
Committee may determine, which terms and conditions need not be uniform
with the terms and conditions of Section VI, VII or VIII hereof, but which
shall be set forth in a written award certificate or award agreement
delivered or made available by DWR to the individual as soon as practicable
following the date of the award. Awards of Stock under this Section V(d)
shall be satisfied only out of shares held in treasury and not out of
authorized but unissued shares.
SECTION VI
ACCOUNTS-ESCROW AGENT
(a) A separate Account shall be maintained by DWR in a confidential ledger for
each Participant awarded cash by DWR for each Fiscal Year. Each such
Account shall be credited with the amount of cash awards not paid to the
Participant pursuant to Section VII of the Plan and increased from time to
time by any additional cash awards not paid to each Participant. Each
Account shall be decreased by any cash amounts paid to or on behalf of a
Participant or forfeited pursuant to Section VII of the Plan.
(b) Within a reasonable time after the end of each Fiscal Year, the Controller
of DWR shall give each Participant a written report of the status of such
Participant's Account under the Plan, including the value thereof. For each
Fiscal Year, Accounts shall be valued as of the Valuation Date.
(c) As a condition to participation in this Plan, each eligible Employee shall
be required to hold restricted Stock awarded hereunder in an escrow account
and such Employee's decision to participate in the Plan shall constitute
the appointment of Morgan Stanley Dean Witter Trust FSB, or such other
custodian as DWR shall designate (the "Custodian"), as the custodial agent
for the purpose of holding such Stock. Such escrow account will be governed
by and subject to the terms and conditions of a written agreement with the
Custodian.
SECTION VII
AWARD PAYMENTS
(a) Awards under Section V(a) for the 1994 Fiscal Year will be paid, at the
Participant's election prior to the date the award is made, in the form of
(i) cash, payable four years and six months following the close of the
Fiscal Year for which the award is made, or (ii) shares of Stock valued at
100% of the Fair Market Value of Stock as of the date the award is made,
payable as soon as practicable following
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the close of the Fiscal Year for which the award is made. Awards under
Section V(a) for Fiscal Years commencing with the 1995 Fiscal Year, will be
paid entirely in Stock valued at 100% of the Fair Market Value of Stock as
of the date the award is made, payable as soon as practicable following the
close of the Fiscal Year for which the award is made. Awards under Section
V(b) may be paid in cash or in Stock as determined by the Compensation
Committee of the Board of Directors of DWR. The number of shares of Stock
payable with respect to an award shall be calculated by reference to the
amount of the award determined under Section V, discounted by an
appropriate interest rate factor as DWR shall establish from time to time
so that the value of the award payable under this Section VII is equal to
the present value of the amount determined pursuant to Section V and
payable four years and six months following the close of the Fiscal Year
for which the award is made. Payments to Participants of awards made in the
form of Stock shall be made in the form of a certificate for whole shares
and cash in lieu of any fractional share. A Participant on a leave of
absence approved by DWR or who is absent due to disability on the date an
award payment is made shall not be entitled to payment of such award until
the Participant returns to DWR following completion of such leave of
absence or disability.
(b) Stock awards shall vest and cash awards shall be paid, four years and six
months following the close of the Fiscal Year with respect to which
awarded; provided that the Participant's status as an Employee has not been
terminated prior to such date. Upon the Participant's termination of
employment with DWR, all unvested Stock awards and unpaid cash awards shall
be forfeited. Notwithstanding the foregoing, if a Participant terminated
employment with DWR due to Disability, Retirement or death, all of the
Participant's awards shall become vested and/or payable in accordance with
this Section VII(b) without regard to the Participant's termination of
employment.
(c) A Participant may vote and receive dividends on any Stock awarded to such
Participant under Section VII(a) or credited under this Section VII(c);
provided that all dividends on Stock (other than dividends payable in
Stock) shall be reinvested in shares of Stock at 100% of the Fair Market
Value of Stock which shares shall be credited to the Participant and held
by the Custodian. All shares of Stock received as a distribution with
respect to Stock or purchased with reinvested dividends shall be subject to
the same restrictions as the Stock on which the distribution or dividend is
awarded.
(d) In accordance with the provisions of Appendix A to the Plan, if DWR must
recover a Payment Obligation previously paid to a Participant pursuant to
this Section VII, a Participant shall be required to repay the amount of
cash or the number of shares of Stock received (or an amount in cash equal
to the fair market value of such Stock as of the date of such repayment).
If any such amount is not repaid, DWR reserves the right to withhold from a
Participant's compensation the amount of any Payment Obligation which a
Participant fails to repay as required herein.
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(e) All federal, state, local and other withholding tax requirements, if any,
relating to the Plan shall be met pursuant to procedures determined by DWR
which may include:
1. Withholding from any cash amounts payable to a Participant under the Plan
(including salary, bonus or any other amounts payable from DWR or any
affiliate of DWR).
2. Requiring Participants to remit to DWR an amount in cash prior to the
delivery of any certificate for Stock or other payments under the Plan.
3. At the election of the Participant, tendering to DWR a number of shares of
Stock.
4. At the election of the Participant, withholding by DWR of shares of Stock.
In the event that the Custodian is directed by DWR to withhold shares
pursuant to this Section VII(e)(4), the Custodian shall distribute such
shares from the custodial account to DWR (or, at the direction of DWR, sell
such shares on public markets and distribute the cash proceeds to DWR) and
DWR shall make appropriate withholding tax payments.
5. If a Participant is subject to Section 16(b) of the Securities Exchange Act
of 1934, DWR may prescribe such requirements or limitations on the
Participant's ability to elect the withholding options contained in
Sections VII(e)(3) and (4) of the Plan as may be required by Securities and
Exchange Commission Rule 16b-3 or by any comparable or successor exemption.
(f) Notwithstanding the foregoing provisions of this Section VII, DWR reserves
the right to accelerate the payment of any cash and/or the vesting of any
Stock awarded pursuant to Sections V(a) and V(b) of the Plan, subject to
the provisions of Appendix A hereof. The MWD Committee reserves the right
to accelerate the vesting of any Stock awarded pursuant to Section V(d) of
the Plan; provided that if the award of such Stock was made subject to
Appendix A hereof, then vesting of such Stock shall be subject to Appendix
A hereof.
(g) The commencement of Related Employment by a Participant shall not be
treated for purposes of the Plan and any Award hereunder as a termination
of employment. The Retirement, Disability or death of an individual during
a period of Related Employment shall be treated for purposes of the Plan
and any Award hereunder as if such event had occurred while the individual
was an Employee. For purposes of this Section VII(g), "Related Employment"
shall mean the employment of a Participant by an employer other than DWR,
provided that: (1) such employment is undertaken by the individual at the
request or with the consent of DWR; (2) immediately prior to undertaking
such employment, the individual was an Employee or was engaged in Related
Employment as defined herein; and (3) such employment is recognized by DWR,
in its discretion, as Related Employment.
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SECTION VIII
SUBORDINATION OF AWARDS
(a) All Financial Advisors as a condition of participation, shall execute and
deliver a written agreement (the "Agreement") within forty-five (45) days
after notice of eligibility to Participate, or the announcement after
December 24, 1990 of an award made under Section V(b), that such Financial
Advisor's right to payment hereunder (the "Payment Obligation"), is
subordinate to the prior payment or provision for payment in full of all
claims of all present and future creditors of DWR arising out of any matter
occurring prior to the date on which the related Payment Obligation matures
consistent with all applicable statutes, regulations and rules, except for
claims which are the subject of subordination agreements which rank on the
same priority (which claims shall be paid pari passu) or are junior to the
Payment Obligation under the Agreement. The Agreement shall also provide
that the Participant's right to payment hereunder shall be subordinate to
claims which are now or hereafter expressly stated in the instruments
creating such claims to be senior in right of payment to the claims of the
class of claims created hereunder which arise out of any matter occurring
prior to the maturity date of any payment under the Payment Obligation.
(b) The form of the Agreement shall be determined by DWR. In the event DWR
elects to treat Payment Obligations as subordinated liabilities for
purposes of determining net capital under Rule 15c3-1 promulgated by the
Securities and Exchange Commission under the Securities Exchange Act of
1934 and similar regulations promulgated under the Commodities Exchange
Act, the form of the Agreement shall be subject to approval of the
Examining Authority as defined by the Agreement. A copy of the Agreement is
annexed hereto as Appendix "A", and incorporated by reference as fully as
if set forth herein at length.
(c) Any amount credited to a Participant's Account shall not be segregated but
shall remain a part of the general corporate funds of DWR subject to the
claims of general, unsecured creditors of DWR to which claims the rights of
the Participant to receive payment of the amount credited to the
Participant's Account shall be subordinated pursuant to the terms of an
Agreement.
(d) If a Participant does not execute and deliver an Agreement within the
forty-five (45) day period described in (a) above, such Participant shall
cease to have any rights whatsoever hereunder.
SECTION IX
ADMINISTRATION
(a) DWR shall have full power and authority to construe, interpret and
administer the
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Plan. Its decisions shall be final, conclusive and binding upon all
persons, including employees and officers and the beneficiaries and
personal representatives of such employees and officers.
(b) The Plan shall be effective for all awards accrued for the Fiscal Year
beginning in 1984 and each Fiscal Year thereafter, as amended from time to
time until suspended or discontinued by DWR.
(c) The expenses of administering the Plan shall be borne by DWR.
(d) The interest and property rights of any person in the Plan or in any
distribution to be made under the Plan shall not be subject to option nor
be assignable, either by voluntary or involuntary assignment or by
operation of law, including (without limitation) bankruptcy, garnishment,
attachment or other creditor's process and any act in violation hereof
shall be void.
(e) Nothing herein shall be construed to require DWR or any affiliate to
segregate or set aside any funds or any property for the purpose of making
award payments hereunder.
(f) DWR's determinations under the Plan need not be uniform and may be made by
it selectively among persons who receive, or are eligible to receive,
Awards under the Plan (whether or not such persons are similarly situated).
Without limiting the generality of the foregoing, DWR shall be entitled,
among other things, to make non-uniform and selective determinations and to
enter into non-uniform and selective Award agreements, as to (1) the person
to receive Awards under the Plan, (2) the terms and provisions of Awards
under the Plan and (3) the exercise by DWR of its discretion in respect of
the terms of the Plan.
SECTION X
MISCELLANEOUS
(a) The establishment of the Plan, the granting of benefits or any action by
DWR or any other person shall not be held or construed to confer upon any
person any right to be continued as an employee of DWR nor, upon
termination of employment, to confer any right or interest other than as
provided herein. No provision of the Plan shall restrict the right of DWR
to terminate any employee's employment with or without cause.
(b) If, in the opinion of DWR, any person becomes unable to handle properly any
amount payable to such person under the Plan, DWR may make any reasonable
arrangement for payment on such person's behalf as it deems appropriate.
(c) Where appropriate, the use of masculine terms within the Plan shall mean
the
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feminine, the use of singular terms shall mean the plural, and visa versa.
SECTION XI
AMENDMENT, SUSPENSION AND DISCONTINUANCE
(a) DWR shall have the authority to amend the Plan, in whole or in part, or to
suspend or discontinue the Plan, in whole or in part, at any time.
(b) The Plan shall continue in effect as amended from time to time, until
suspended or discontinued by DWR.
(c) Notwithstanding any amendment, suspension or discontinuance, award payments
previously announced shall be paid pursuant to the appropriate provisions
of the Plan. Notwithstanding the foregoing, in the event of the
discontinuance or termination of the Plan, DWR reserves the right to
accelerate payment of a Participant's entire Account balance to any date
prior to the vesting periods applicable to awards in such Account, subject
to provisions of Appendix A to the Plan.
(d) If any part of this Plan, including Appendix A hereto, fails to receive any
required approval of the appropriate regulatory and governing bodies or is
otherwise declared void and of no effect, the rest of the Plan shall
continue in full force.
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APPENDIX A
DEAN WITTER REYNOLDS INC.
FINANCIAL ADVISOR PRODUCTIVITY COMPENSATION PLAN
For purposes of this Appendix A, a Financial Advisor who is designated in
writing by DWR as a participant under the Plan shall be known as a
"Participant", Dean Witter Reynolds Inc. shall be known as "DWR", and DWR's
"Payment Obligation" shall be as defined below.
1. Payment Obligation
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(a) Payment Obligations shall consist of any deferred payments of deferred
bonuses owed from time to time to a Participant by DWR pursuant to the Plan.
(b) Payment Obligations, including the dates payments are due, shall be
determined in accordance with the provisions of the Plan as in effect on the
date hereof, or as hereafter amended. As provided in Sections 4 and 5 of this
Appendix A, payment of any amount of a Payment Obligation may be made sooner
than five years following the year for which such Payment Obligation is accrued
by DWR. If any provision of the Plan as now in effect or as hereafter amended
shall be inconsistent with the Appendix A, this Appendix A shall govern.
2. Subordination of Right of Payment
---------------------------------
(a) Payment Obligations are and shall be subordinated in right of payment
and subject to prior payment or provision for payment in full of all claims of
other present and future creditors of DWR whose claims are not similarly
subordinated (claims hereunder shall rank pari passu with claims similarly
subordinated) and to claims which are now or hereafter expressly stated in the
instruments creating such claims to be senior in right of payment to the claims
or the class of claims hereunder which arise out of any matter occurring prior
to the maturity date of any payment under the Payment Obligation.
(b) In the event of the appointment of a receiver or trustee for DWR or in
the event of its insolvency, liquidation pursuant to the Securities Investor
Protection Act of 1970 ("SIPA"), or otherwise, its bankruptcy, assignment for
the benefit of creditors, reorganization, whether or not pursuant to bankruptcy
laws, or any other marshaling of the assets and liabilities of DWR, Participants
shall not be entitled to participate or share, ratably or otherwise, in the
distribution of the assets of DWR until all claims of all other present and
future creditors of DWR whose claims are senior to claims hereunder have been
fully satisfied or provision has been made therefor.
(c) Notwithstanding the maturing of the Payment Obligation under any
provision of the Plan or this Appendix A, the right of a Participant to receive
payment of any Payment Obligation is and shall remain subordinate as provided in
this Section 2.
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3. Suspension of Maturity During Net Capital Stringency
----------------------------------------------------
(a) DWR's Payment Obligations shall be suspended and not mature for any
period of time during which, after giving effect to such Payment Obligations
(together with the payment of any other subordinated obligation of DWR payable
at or prior to such payment of the Payment Obligations),
(i) if DWR is not operating pursuant to the alternative net capital
requirements provided for in paragraph (f) of Rule 15c3-1 (the "Rule") under the
Securities Exchange Act of 1934 (the "Act"), the aggregate indebtedness of DWR
would exceed 1,200 percentum of its net capital, as those terms are defined in
the Rule, as in effect at the time such payment is to be made, or such percentum
as may be made applicable to DWR from time to time by the Examining Authority
(as defined in paragraph 6(f) hereof) plus an amount equal to the guaranty
deposits with clearing organizations other than the Chicago Board of Trade
("CBOT"), which were included in current assets under Section 211 of the CBOT
"Capital Requirements for Member FCM's," to the extent such deposits cannot be
used for margin purposes, or
(ii) if DWR is operating pursuant to the alternative net capital
requirements provided for in paragraph (f) of the Rule, its net capital would be
less than five (5) percentum of aggregate debit items (or such other percentum
as may be made applicable to DWR by the Examining Authority) computed in
accordance with Exhibit A to Rule 15c3-3 under the Act or any successor rule as
in effect at the time such payment is to be made, plus an amount equal to the
guaranty deposits with clearing organizations other than the CBOT, which were
included in current assets under Section 211 of the CBOT "Capital Requirements
for Member FCM's", to the extent such deposits cannot be used for margin
purposes, or
(iii) if DWR is registered as a futures commission merchant under the
Commodity Exchange Act (the "CEA"), the net capital of DWR would be less than
the greatest of (A) six (6) percentum of the funds required to be segregated
pursuant to the CEA and Commodities Futures Trading Commission ("CFTC")
Regulations and the foreign futures or foreign options secured amount exclusive
of the market value of commodity options purchased by option customers of DWR on
or subject to the rules of a contract market or a foreign board of trade,
provided the deduction for each option customer shall be limited to the amount
of customer funds in each option customer's account(s), and foreign futures and
foreign options secured amounts plus an amount equal to the guaranty deposits
with clearing organizations other than the CBOT, which were included in current
assets under Section 211 of the CBOT "Capital Requirements for Member FCM's", to
the extent such deposits cannot be used for margin purposes, (B) such amount as
may be made applicable to DWR at the time of such payment by an Examining
Authority under Rule 15c3-1(b)(7), or (C) $2,000,000 (or such other amount as
required by the CEA and CFTC Regulations), or
(iv) if DWR's net capital, as defined in the Rule or any successor
rule as in effect at the time such payment is to be made would be less than 120
percentum (or such other percentum as may be made applicable to DWR at the time
of such payment by the Examining Authority) of the minimum dollar amount
required by the Rule as in effect at such time or such dollar amount as may be
made applicable to DWR by the Examining Authority, plus an amount
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equal to the guaranty deposits with clearing organizations other than the CBOT,
which were included in current assets under Section 211 of the CBOT "Capital
Requirements for Member FCM's", to the extent such deposits cannot be used for
margin purposes, or
(v) if DWR is registered as a futures commission merchant under the
CEA and if its net capital, as defined in the CEA or CFTC Regulations as in
effect at the time of such payment, would be less than 120 percentum (or such
other percentum as may be made applicable to DWR by the Examining Authority) of
the minimum dollar amount required by the CEA or the regulations thereunder as
in effect at such time (or such other dollar amount as may be made applicable to
DWR by the Examining Authority at the time of such payment), plus an amount
equal to the guaranty deposits with clearing organizations other than the CBOT,
which were included in current assets under Section 211 of the CBOT "Capital
Requirements for Member FCM's", to the extent such deposits cannot be used for
margin purposes, or
(vi) if DWR is subject to the provisions of paragraph (a)(6)(v) or
(a)(7)(iv) or (c)(2)(x)(B)(1) of the Rule, its net capital would be less than
the amount required to satisfy the 1,000 percentum test (or such other percentum
test as may be made applicable to DWR by the Examining Authority at the time of
such payment) stated in such applicable paragraph, plus an amount equal to the
guaranty deposits with clearing organizations other than the CBOT, which were
included in current assets under Section 211 of the CBOT "Capital Requirements
for Member FCM's", to the extent such deposits cannot be used for margin
purposes.
The net capital required by (i)-(vi) above is hereinafter referred to as
the "Applicable Minimum Capital". During any such suspension, DWR shall, as
promptly as consistent with the protection of its customers, reduce its business
to a condition whereby payment due under Payment Obligations could be made
(together with the payment of any other subordinated obligation of DWR payable
at or prior to such payment) without DWR's net capital being below the
Applicable Minimum Capital, at which time DWR shall make payment due under
Payment Obligations on not less than five (5) days prior written notice to the
Examining Authority.
(b) If immediately after any payment of a Payment Obligation DWR's net
capital is less than the Applicable Minimum Capital, whether or not the
Participant had any knowledge or notice of such fact at the time of any such
payment, a Participant must repay to DWR, its successors or assigns, any sum so
paid, to be held by DWR pursuant to the provisions of the Plan as if such
payment had never been made; provided, however, that any suit for the recovery
of any such payment must be commenced within two years of the date of such
payment. DWR reserves the right to withhold from the Participant's compensation
the amount of any Payment Obligation which a Participant fails to repay as
required herein.
(c) If, pursuant to the terms hereof, payment of DWR's Payment Obligations
are suspended, DWR may be summarily suspended by the Examining Authority.
4. Permissive Prepayment
---------------------
With the prior written permission of the Examining Authority, DWR may, at
its option and to the extent permitted by the Plan, pay all or any portion of
the Payment Obligation to the
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Participant (such payment hereinafter referred to as a "Prepayment") at any time
subsequent to one year from the date subordinated funds became subject to this
Appendix A. No Prepayment shall be made, however, if after giving effect thereto
(and to all other payments of any other subordinated obligation of DWR payable
within six months of such Prepayment) without reference to any projected profit
or loss of DWR,
(i) in the event that DWR is not operating pursuant to the alternative
net capital requirement provided for in paragraph (f) of the Rule, the aggregate
indebtedness of DWR would exceed 1,000 percentum of its net capital as those
terms are defined in the Rule or any successor rule as in effect at the time
such Prepayment is to be made (or such other percentum as may be made applicable
at such time to DWR by the Examining Authority), plus an amount equal to the
guaranty deposits with clearing organizations other than the CBOT, which were
included in current assets under Section 211 of the CBOT "Capital Requirements
for Member FCM's", to the extent such deposits cannot be used for margin
purposes, or
(ii) in the event that DWR is operating pursuant to such alternative
net capital requirement, the net capital of DWR would be less than 5 percentum
(or such other percentum as may be made applicable to DWR at the time of such
Prepayment by the Examining Authority) of aggregate debit items computed in
accordance with Exhibit A to Rule 15c3-3 under the Act or any successor rule as
in effect at such time, plus an amount equal to the guaranty deposits with
clearing organizations other than the CBOT, which were included in current
assets under Section 211 of the CBOT "Capital Requirements for Member FCM's", to
the extent such deposits cannot be used for margin purposes, or
(iii) in the event that DWR is registered as a futures commission
merchant under the CEA, the net capital of DWR (as defined in the CEA or CFTC
Regulations as in effect at the time of such Prepayment) would be less than the
greatest of (A) 7 percentum (or such other percentum as may be made applicable
to DWR at the time of such Prepayment by the Examining Authority) of the funds
required to be segregated pursuant to the CEA and CFTC Regulations and the
foreign futures or foreign options secured amount, exclusive of the market value
of commodity options purchased by option customers on or subject to the rules of
a contract market or a foreign board of trade (provided the deduction for each
option customer shall be limited to the amount of customer funds in each option
customer's account(s) and foreign futures and foreign options secured amounts),
plus an amount equal to the guaranty deposits with clearing organizations other
than the CBOT, which were included in current assets under Section 211 of the
CBOT "Capital Requirements for Member FCM's", to the extent such deposits cannot
be used for margin purposes, (B) such amount as may be made applicable to DWR by
an Examining Authority under Rule 15c3-1(b)(7), or (C) $2,000,000 (or such other
amount as required by the CEA or CFTC Regulations), or
(iv) DWR's net capital, as defined in the Rule or any successor rule
as in effect at the time of such Prepayment, would be less than 120 percentum
(or such other percentum as may be made applicable to DWR at the time of such
Prepayment by the Examining Authority) of the minimum dollar amount required by
the Rule as in effect at such time (or such other dollar amount as may be made
applicable to DWR at the time of such Prepayment by the Examining Authority),
plus an amount equal to the guaranty deposits with clearing organizations other
than
13
the CBOT, which were included in current assets under Section 211 of the CBOT
"Capital Requirements for Member FCM's", to the extent such deposits cannot be
used for margin purposes, or
(v) in the event that DWR is registered as a futures commission
merchant under the CEA, its net capital, as defined in the CEA or the
regulations thereunder, as in effect at the time of such Prepayment would be
less than 120 percentum (or such other percentum as may be made applicable to
DWR at the time of such Prepayment by the Examining Authority) of the minimum
dollar amount required by the CEA or the regulations thereunder as in effect as
such time or such other dollar amount as may be made applicable to DWR at the
time of such Prepayment by the Examining Authority, plus an amount equal to the
guaranty deposits with clearing organizations other than the CBOT, which were
included in current assets under Section 211 of the CBOT "Capital Requirements
for Member FCM's", to the extent such deposits cannot be used for margin
purposes, or
(vi) in the event that DWR is subject to the provisions of paragraph
(a)(6)(v) or (a)(7)(iv) or (c)(2)(x)(B)(1) of the Rule, the net capital of DWR
would be less than the amount required to satisfy the 1000 percentum test (or
such other percentum test as may be made applicable to DWR at the time of such
Prepayment by the Examining Authority) stated in such applicable paragraph, plus
an amount equal to the guaranty deposits with clearing organizations other than
the CBOT, which were included in current assets under Section 211 of the CBOT
"Capital Requirements for Member FCM's", to the extent such deposits cannot be
used for margin purposes.
If Prepayment is made of all or any part of the Payment Obligation before
the date payment is due and if DWR's net capital is less than the amount
required to permit such Prepayment pursuant to the foregoing provisions of this
paragraph, the Participant agrees irrevocably (whether or not such Participant
had any knowledge or notice of such fact at the time of such Prepayment) to
repay DWR, its successors or assigns, the sum so paid to be held by DWR pursuant
to the provisions hereof as if such Prepayment had never been made; provided,
however, that any suit for the recovery of any such Prepayment must be commenced
within two years of the date of such Prepayment. DWR reserves the right to
withhold from the Participant's compensation the amount of any Payment
Obligation which a Participant fails to repay as required herein.
5. Special Prepayment
------------------
DWR, at its option and as permitted by the Plan, but not at the option of
the Participant, may make a payment of all or any portion of the Payment
Obligation hereunder sooner than one year from the date on which such amount
became subject to this agreement (a "Special Prepayment"), if the written
consent of the appropriate regulatory authority is first obtained. If DWR shall
be a futures commission merchant, as that term is defined in the CEA and CFTC
Regulations, no such prepayment shall be made if:
(i) after giving effect thereto (and to all payments of payment
obligations under any other Subordination Agreements then outstanding, the
maturities or accelerated
14
maturities of which are scheduled to fall due within six months after the date
such Special Prepayment is to occur pursuant to this provision or on or prior to
the date on which the Payment Obligation in respect to such Special Prepayment
is scheduled to mature disregarding this provision, whichever date is earlier)
without reference to any projected profit or loss of DWR, the net capital of DWR
is less than the greatest of (A) 10 percentum of the funds required to be
segregated pursuant to the CEA and CFTC Regulations and the foreign futures or
foreign options secured amount, exclusive of the market value of commodity
options purchased by option customers of DWR on or subject to the rules of a
contract market or a foreign board of trade (provided the deduction for each
option customer shall be limited to the amount of customer funds in such option
customer's account(s) and foreign futures and foreign options secured amount),
plus an amount equal to the guaranty deposits with clearing organizations, other
than the CBOT, which were included in current assets under Section 211 of the
CBOT "Capital Requirement for Member FCM's", to the extent such deposits cannot
be used for margin purposes, (B) if DWR is a securities broker or dealer, the
amount of net capital specified in Rule 15c3-1(c)(5)(ii) of the regulations of
the Securities and Exchange Commission (17 CFR 240.l5c3-1d(c)5(ii), or (C)
$2,000,000 (or such other amount as required by the CEA or CFTC Regulations), or
(ii) Pretax losses during the latest three month period were greater
than 15% of current excess adjusted net capital.
6. Maturity Upon Certain Events
----------------------------
Notwithstanding the provisions of Section 3 hereof, the Payment Obligation
shall (to the extent not already matured) forthwith mature, together with all
other Subordination Agreements then outstanding in the event of any
receivership, insolvency, liquidation pursuant to SIPA or otherwise, bankruptcy,
assignment for the benefit of creditors, reorganization whether or not pursuant
to bankruptcy laws, or any other marshaling of the assets and liabilities of
DWR.
7. Miscellaneous Provisions
------------------------
(a) Participants may not rely upon any commodity exchange or securities
exchange to provide any information concerning or relating to DWR. Such
exchanges have no responsibility to disclose to the Participant any information
concerning or relating to DWR which they may have now or at any future time. The
Participant agrees that the New York Stock Exchange (the "NYSE"), its Special
Trust Fund or any director, officer, trustee or employee of the NYSE or said
Trust Fund or any other exchange or director, officer, trustee or employee
thereof shall not be liable to the Participant with respect to the Plan or any
distribution pursuant thereto.
(b) The funds represented by the Payment Obligation shall be dealt with in
all respects as capital of DWR, shall be subject to the risks of the business
and may be deposited in an account or accounts in DWR's name in any bank or
trust company.
(c) Payment Obligations under the Plan may not be transferred, sold,
assigned, pledged or otherwise encumbered or disposed of and no lien, charge or
other encumbrance may
15
be created or permitted to be created hereon, without the prior written consent
of the Examining Authority.
(d) If DWR is a futures commission merchant as that term is defined in the
CEA, DWR agrees, consistent with the requirements of Section l.17(h) of CFTC
Regulations that whenever prior written notice by DWR to the Examining Authority
is required pursuant to the provisions of this agreement the same prior written
notice shall be given by DWR to (1) the CFTC at its principal office in
Washington, D.C., Attention: Chief Accountant of Division of Trading and
Markets, and/or (2) the commodity exchanges of which DWR is a member and which
are then designated by the CFTC as DWR's designated self-regulatory
organizations as defined in Section 1.3(ff) of the CFTC Regulations (the
"DSROs").
(e) "Subordination Agreement" as used herein shall include any subordinated
loan agreement and any secured demand note agreement constituting a satisfactory
subordination agreement under the Rule under which DWR is the borrower or the
pledgee of collateral, and reference herein to the payment of a subordinated
obligation of DWR shall be deemed to include the return to the maker-pledgor of
any secured demand note and the collateral therefore held by DWR.
(f) The term "Examining Authority" shall refer to the regulatory body,
specified in paragraph (c)(12) of the Rule, responsible for inspecting or
examining DWR for compliance with financial responsibility requirements. If DWR
is and continues to be a member of the NYSE, the references herein to the
Examining Authority shall be deemed to refer to the NYSE. If DWR is and
continues to be a futures commission merchant as that term is defined in the CEA
and regulations thereunder, references to the Examining Authority shall also be
deemed to refer to the CFTC and DWR's DSROs.
(g) The provisions of this Appendix A shall be binding upon and inure to
the benefit of DWR, its successors and assigns, and the Participant and the
Participant's heirs, executors and administrators.
(h) Any controversy arising out of or relating to this Plan shall be
submitted to and settled by arbitration pursuant to the Constitution and Rules
of the NYSE. DWR and Participant shall be conclusively bound by such
arbitration.
(i) DWR shall not modify, amend or cancel this Appendix or any provision of
the Plan governing the Payment Obligations that are the subject of this Appendix
without the prior approval of the Examining Authority.
(j) This agreement shall be deemed to have been made under and shall be
governed by the laws of the State of New York.
16