EXHIBIT 10.1
JEFFERIES GROUP, INC.
STOCK OPTION GAIN AND STOCK AWARD
DEFERRAL PROGRAM
EFFECTIVE DATE: JANUARY 21, 2003
JEFFERIES GROUP, INC. STOCK OPTION GAIN AND STOCK AWARD DEFERRAL PROGRAM
SECTION:
I. Name and Purpose....................................................... 1
II. Effective Date......................................................... 1
III. Definitions............................................................ 1
IV. Eligibility............................................................ 5
V. Administration of the Program.......................................... 5
VI. Deferral of Qualifying Gains and Stock Awards.......................... 5
VII. Election to Participate................................................ 5
VIII. Stock Deferral Account................................................. 6
IX. Method of Distribution................................................. 8
X. Offset for Obligations to Company...................................... 9
XI. Liability of Company................................................... 9
XII. Change in Distribution Schedule........................................ 9
XIII. Benefit Plans.......................................................... 10
XIV. Rights of a Participant................................................ 11
XV. Amendment and Termination.............................................. 11
XVI. Determination of Benefits.............................................. 11
XVII. Notices................................................................ 12
XVIII. General Provisions..................................................... 12
XIX. Unfunded Status of Program............................................. 13
XX. Rights to Benefits..................................................... 13
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JEFFERIES GROUP, INC. STOCK OPTION GAIN AND STOCK AWARD DEFERRAL PROGRAM
I. NAME AND PURPOSE
The name of this program is the Stock Option Gain and Stock Award
Deferral Program (the "Program") of Jefferies Group, Inc. (the
"Company"). Its purpose is to set forth the terms upon which certain
individuals will be given the opportunity to defer receipt of
compensation that otherwise would result from the exercise of certain
stock options or the vesting of restricted stock, thereby implementing
deferrals as contemplated or permitted under the Company's 1999
Incentive Compensation Plan, 1999 Director's Stock Compensation Plan,
Deferred Compensation Plan, and future equity plans. The Company has
adopted this Program in recognition of the valuable service of eligible
individuals, the desire to provide them with additional flexibility in
their personal financial planning, and as a means to encourage
long-term holdings of equity interests in the Company, consistent with
the purposes of those equity plans under which the options and
restricted stock were originally issued. This Program is intended to be
an unfunded plan maintained primarily for the purpose of providing
deferred compensation for a select group of management or highly
compensated employees within the meaning of Title I of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA").
II. EFFECTIVE DATE
The Program shall be effective as of January 21, 2003.
III. DEFINITIONS
(a) ACCOUNT means the total balance credited to a Participant's Stock
Deferral Account.
(b) ADMINISTRATOR means the administrator of the Program, which shall
be the Compensation Committee of the Board of Directors or any
committee of officers appointed by the Compensation Committee.
(c) BENEFICIARY means any person or persons so designated in accordance
with the provisions of Section XII.
(d) BOARD OF DIRECTORS means the board of directors of Jefferies Group,
Inc.
(e) CHANGE IN CONTROL means the first to occur of any of the following
events after the effective date of the Program:
(i) Any "person," as such term is used in Section 13(d)
and 14(d) of the Exchange Act (other than the Company, any trustee
or other fiduciary holding securities under an employee benefit
plan of the Company, or any company owned, directly or indirectly,
by the shareholders of the Company in substantially the same
proportions as their ownership of stock of the Company), acquires
voting securities of the Company and immediately thereafter is a
"50% Beneficial Owner." For purposes of this provision, a "50%
Beneficial Owner" shall mean a person who is the "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 50% or more
of the combined voting power of the Company's then-outstanding
voting securities; provided, however, that the term "50% Beneficial
Owner" shall not include any person who shall become the beneficial
owner of 50% or more of the combined voting power of the Company's
then-outstanding voting securities solely as a result of an
acquisition by the Company of its voting securities, until such
time thereafter as such person shall become the
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beneficial owner (other than by means of a stock dividend or stock
split) of any additional voting securities and becomes a 50%
Beneficial Owner in accordance with this subsection;
(ii) During any period of two consecutive years commencing
on or after the effective date of this Program, individuals who at
the beginning of such period constitute the Board of Directors, and
any new director whose election by the Board or nomination for
election by the Company's shareholders was approved by a vote of at
least two-thirds (2/3) of the directors then still in office who
either were directors at the beginning of the period or whose
election or nomination for election was previously so approved (the
"Continuing Directors"), cease for any reason to constitute at
least a majority thereof;
(iii) The shareholders of the Company have approved a
merger, consolidation, recapitalization, or reorganization of the
Company, or a reverse stock split of any class of voting securities
of the Company, or the consummation of any such transaction if
shareholder approval is not obtained, other than any such
transaction which would result in at least 50% of the combined
voting power of the voting securities of the Company or the
surviving entity outstanding immediately after such transaction
being beneficially owned by persons who together beneficially owned
at least 80% of the combined voting power of the voting securities
of the Company outstanding immediately prior to such transaction,
with the relative voting power of each such continuing holder
compared to the voting power of each other continuing holder not
substantially altered as a result of the transaction; provided
that, for purposes of this subsection, such continuity of ownership
(and preservation of relative voting power) shall be deemed to be
satisfied if the failure to meet such 50% threshold (or to
substantially preserve such relative voting power) is due solely to
the acquisition of voting securities by an employee benefit plan of
the Company or of such surviving entity or a subsidiary thereof;
and provided further, that, if consummation of the corporate
transaction referred to in this subsection is subject, at the time
of such approval by shareholders, to the consent of any government
or governmental agency or approval of the shareholders of another
entity or other material contingency, no Change in Control shall
occur until such time as such consent and approval has been
obtained and any other material contingency has been satisfied;
(iv) The shareholders of the Company have approved a plan
of complete liquidation of the Company or an agreement for the sale
or disposition by the Company of all or substantially all of the
Company's assets (or any transaction having a similar effect);
provided that, if consummation of the transaction referred to in
this subsection is subject, at the time of such approval by
shareholders, to the consent of any government or governmental
agency or approval of the shareholders of another entity or other
material contingency, no Change in Control shall occur until such
time as such consent and approval has been obtained and any other
material contingency has been satisfied; and
(v) any other event which the Board of Directors
determines shall constitute a Change in Control for purposes of
this Program.
(f) CODE means the Internal Revenue Code of 1986, as amended, and the
regulations and other authority issued thereunder by the
appropriate governmental authority. References to the Code shall
include references to any successor section or provision of the
Code.
(g) COMMITTEE means the Compensation Committee of the Board.
(h) COMPANY means Jefferies Group, Inc. (and its successors and
assigns) unless otherwise provided herein, or any other corporation
or business organization which, with the consent of Jefferies
Group, Inc. (or its successors or assigns), assumes the Company's
obligations hereunder.
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(i) DEFERRAL ELECTION means a Stock Option Gain Deferral Election or a
Stock Award Deferral Election.
(j) DEFERRAL ELECTION FORM means a Participant's written election form
containing his Stock Option Gain Deferral Election or Stock Award
Deferral Election. All Deferral Election Forms must be submitted on
a timely basis to the Administrator, otherwise the Participant
shall be deemed to have not submitted a Deferral Election Form for
the Program Year to which it relates. A Deferral Election Form
shall be deemed timely only if it is submitted prior to both its
effective date and other deadlines imposed by the Administrator, in
its discretion. Unless otherwise determined by the Administrator,
the effective date of a timely filed Stock Option Gain Deferral
Election shall be January 1 of the applicable Program Year and the
effective date of a timely filed Stock Award Deferral Election
shall be promptly upon the filing thereof, provided, however, with
respect to the Program Year in which the Program is first
implemented and/or the employee or member of the Board of Directors
first becomes eligible to participate, the effective date of the
Deferral Election Form shall be no earlier than the date such
Deferral Election Form is submitted to the Company and no later
than thirty (30) days from the date Program implementation or first
eligibility occurs (as applicable).
(k) DISTRIBUTION EVENT means the date or dates designated in advance by
the Participant in his Deferral Election Form or specified under
the terms of the Program, upon which payment of the Participant's
Stock Deferral Account shall be deemed triggered for subsequent
distribution, pursuant to Section IX, in the form of: (i) a lump
sum payment due within thirty (30) days of the occurrence of the
Distribution Event or (ii) annual installments commencing on the
January 1 concurrent with or subsequent to the occurrence of the
Distribution Event.
(l) ELIGIBLE INDIVIDUAL means each employee of a Participating Company
or member of the Board of Directors of the Company selected for
participation in this Program pursuant to Section IV of the
Program.
(m) ELIGIBLE STOCK AWARD means an outstanding award of restricted stock
under the 1999 Incentive Compensation Plan (or any Equity Plan
hereafter adopted providing for restricted stock awards and awards
of forfeitable deferred shares).
(n) ELIGIBLE STOCK OPTION means one or more non-qualified stock
option(s) exercisable under one of the Equity Plans.
(o) EQUITY PLANS means the Company's 1999 Incentive Compensation Plan,
1999 Directors' Stock Compensation Plan, and Deferred Compensation
Plan, and any other plan hereafter adopted which permits the
deferral of gains realized upon exercise of options in the form of
deferred shares or permits the surrender of outstanding restricted
stock in exchange for an award in the form of forfeitable deferred
shares (a contractual obligation of the Company to deliver shares
at a future date) that can be deferred as to delivery beyond the
time any risk of forfeiture lapses.
(p) FORFEITABLE STOCK AWARD AMOUNT means the number of shares credited
to a Participant's Stock Deferral Account as a result of a valid
deferral of an Eligible Stock Award. Such number of shares shall be
subject to a risk of forfeiture and other restrictions in
accordance with Section VI. Other provisions of the Program
notwithstanding, the shares constituting the Forfeitable Stock
Award Amount will not be subject to distribution upon a
Distribution Event or any other circumstance specified in the
Program until vesting of the such shares.
(q) PARTICIPANT means an employee and/or member of the Board of
Directors who is both eligible
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to participate in the Program under the terms of Section IV
and has elected to participate in the Program.
(r) PARTICIPATING COMPANY means the Company and each subsidiary of the
Company the employees of which are permitted by the Company to
participate in the Program. With respect to a specific Participant,
the term "Participating Company" shall refer to the Participating
Company that employs such Participant or, in the case of a director
of the Company, the Company.
(s) PROGRAM YEAR means the twelve (12) month period ending on the
December 31st of each year during which the Program is in effect,
provided that the first Program Year shall commence on January 21,
2003 and end on December 31, 2003.
(t) QUALIFYING GAIN shall mean the incremental value inuring to a
Participant upon the exercise of an Eligible Stock Option, using a
stock-for-stock payment method, during any Program Year. Such
incremental value shall be deliverable to the Participant in the
form of additional shares of Stock and shall be computed as
follows: (i) the total fair market value of the shares of Stock
held/acquired as a result of the exercise of an Eligible Stock
Option using a stock-for-stock payment method, minus (ii) the total
exercise price. For example, assume a Participant elects to
exercise an Eligible Stock Option to purchase 1,000 shares of Stock
at an exercise price of $20 per share (i.e., a total exercise price
of $20,000), when the Stock has a current fair market value of $32
per share (i.e., a total current fair market value of $32,000) and
elects to defer one hundred (100) percent of the Qualifying Gain
(i.e., $12,000). Using the stock-for-stock payment method, the
Participant would deliver 625 shares of Stock (worth $20,000 at
exercise) to exercise the Eligible Stock Option and would receive,
in return, 625 shares of Stock (worth $20,000 at exercise) plus a
Qualifying Gain, in the form of an unfunded and unsecured promise
by the Company to deliver 375 additional shares of Stock in the
future (worth $12,000 at exercise). The number of additional shares
of Stock deliverable to the Participant in the future as a result
of the Qualifying Gain shall be fixed and determined as of the date
of the exercise of the Eligible Stock Option, using the fair market
value of the Stock determined in the same manner as the fair market
value of the stock surrendered to pay the option exercise price in
the stock-for-stock exercise (in accordance with the Equity Plan
under which the Eligible Stock Option was granted).
(u) STOCK means Jefferies Group, Inc. common stock (and any securities
which may be substituted or resubstituted for such common stock).
(v) STOCK AWARD DEFERRAL ELECTION means an irrevocable election made by
an Eligible Individual, during an enrollment period specified by
the Administrator, to surrender restricted stock in exchange for an
award of an equivalent number of deferred shares subject to a risk
of forfeiture and other terms substantially the same as the terms
of the surrendered restricted stock, where all or a portion of such
deferred shares, upon vesting, will continue to be reflected as
credits to the Participant's Stock Deferral Account. The Stock
Award Deferral Election shall be documented by the Participant on
the Deferral Election Form provided by the Company.
(w) STOCK DEFERRAL ACCOUNT means the aggregate value, measured on any
given date, of (i) the number of shares of Stock deferred by a
Participant as a result of all Stock Option Gain Deferral Elections
and Stock Award Deferral Elections, less (ii) the number of shares
of Stock previously distributed to the Participant (or his or her
Beneficiary) pursuant to this Program.
(x) STOCK OPTION GAIN AMOUNT means, for any Eligible Stock Option, the
portion of Qualifying Gains deferred in accordance with Section VII
of this Program.
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(y) STOCK OPTION GAIN DEFERRAL ELECTION means an irrevocable election
made by an Eligible Individual, during an enrollment period
specified by the Administrator, to defer the receipt of a Stock
Option Gain Amount for a given Program Year. The Stock Option Gain
Deferral Election shall be documented by the Participant on the
Stock Option Gain Deferral Election Form provided by the Company.
(z) TRUST mean a trust fund which may be established by the Company
pursuant to the Program.
(aa)TRUSTEE means the trustee named in the agreement establishing a
Trust, if any, and such successor and/or additional trustees as may
be named pursuant to the terms of the agreement establishing the
Trust.
IV. ELIGIBILITY
An Eligible Individual shall be eligible to participate in the Program
if he is approved to participate in the Program by the Committee or,
for employees other than executive officers and directors of the
Company, by the Administrator. An employee and/or director shall become
a Participant under the Program upon the timely filing of a Deferral
Election Form, as described in Section VII.
V. ADMINISTRATION OF THE PROGRAM
The Administrator shall have sole discretion to interpret the
provisions of the Program. However, no Participant may partake in or
vote on any decision, as Administrator, which would specifically affect
his or her own Stock Deferral Account. Initially, the Administrator of
the Program shall be the Company's Chief Financial Officer, General
Counsel and Director of Human Resources.
VI. DEFERRAL OF QUALIFYING GAINS AND RESTRICTED STOCK
Subject to any terms and conditions imposed by the Administrator, an
Eligible Individual may irrevocably elect to defer all or a portion of
the Qualifying Gains that the Eligible Individual would otherwise
recognize by exercise of Eligible Stock Options during the Program Year
for which a Stock Option Gain Deferral Election is made and all or a
portion of the Eligible Stock Awards that would vest during a specified
Program Year for which a Stock Award Deferral Election is made. Such
Deferral Elections shall be made as described in Section VII. In the
case of an Eligible Stock Award, upon the effectiveness of the Stock
Award Deferral Election the Participant's restricted stock subject to
such Election shall be surrendered and cancelled, and the Participant's
Stock Deferral Account shall be credited with a number of shares equal
to the number of shares of restricted stock surrendered and cancelled,
such share credits to constitute the Participant's Forfeitable Stock
Award Amount. The Forfeitable Stock Award Amount shall remain subject
to the same risk of forfeiture and other restrictions as applied to
such restricted stock until the time as the restricted stock would have
vested by its terms. Thereupon, the portion of the shares of Stock that
had been credited as the Forfeitable Stock Award Amount but not subject
to deferral beyond vesting shall be promptly distributed to the
Participant in a lump sum, and the portion of such shares of Stock
subject to further deferral shall remain credited to the Participant's
Stock Deferral Account in accordance with the applicable Deferral
Election and the terms of the Program.
VII. ELECTION TO PARTICIPATE
(a) For an election to defer the Qualifying Gain upon an Eligible Stock
Option exercise to be valid, the following must occur: (i) a
Deferral Election Form must be completed and signed by the
Participant with respect to the Program Year, specifying the
Eligible Stock Option(s) subject to the election; (ii) the Deferral
Election Form must be delivered on a timely basis to the
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Administrator and accepted by the Administrator; (iii) the Deferral
Election Form must be deemed by the Administrator to have been
submitted sufficiently in advance of the date on which the
Participant elects to exercise the Eligible Stock Option (the
Administrator in its discretion may not enforce any Deferral
Election Form received less than six (6) months prior to the date
of exercise of the applicable Stock Option); (iv) the Eligible
Stock Option must be exercised using a stock-for-stock payment
method; (v) the Eligible Stock Option must be exercised at a time
that the Participant remains an employee of a Participating Company
or a director of the Company; and (vi) the Stock actually or
constructively delivered by the Participant to exercise the
Eligible Stock Option, if acquired from the Company pursuant to a
plan, must qualify as a "mature" share for purposes of APB 25 if
use of non-mature shares would result in accounting expense to the
Company (thus, if such Stock was acquired by exercise of a stock
option, it may be necessary for the Participant to have held the
Stock for at least six months before delivery).
(b) For an election to defer an Eligible Stock Award to be valid, the
following must occur: (i) a Deferral Election Form must be
completed and signed by the Participant with respect to the Program
Year, specifying the Eligible Stock Award subject to the deferral;
(ii) the Deferral Election Form must be delivered on a timely basis
to the Administrator and accepted by the Administrator, (iii) the
Deferral Election Form must be deemed by the Administrator to have
been submitted sufficiently in advance of the vesting date of the
Eligible Stock Award subject to the deferral; and (iv) the Stock
Award Deferral Election must become effective at a time when the
Participant remains an employee of a Participating Company or a
director of the Company.
(c) For each Eligible Stock Option, a Participant may elect to defer a
minimum of ten (10) percent and a maximum of one hundred (100)
percent of the Qualifying Gain related to exercise of the Eligible
Stock Option. For each Eligible Stock Award, a Participant may
elect to defer a minimum of ten (10) percent and a maximum of one
hundred (100) percent of the Stock Award. A Participant's ability
to defer may be further limited by other terms or conditions set
forth in the Equity Plan or agreement under which such Eligible
Stock Option or Eligible Stock Award was granted.
(d) A newly Eligible Individual may make a Deferral Election within
thirty (30) days of the date the Eligible Individual receives
notification of eligibility to participate in the Program in order
to defer Qualifying Gain attributable to an Eligible Stock Option
exercised during the remainder of such current Program Year or to
defer an Eligible Stock Award that will vest during the remainder
of such current Program Year.
VIII. STOCK DEFERRAL ACCOUNT
(a) Stock Option Gain Amount(s) and any Eligible Stock Award deferred
hereunder shall be reflected on the books of the Company as an
unfunded, unsecured promise to deliver to the Participant a
specific number of shares of Stock, upon a Distribution Event in
the future. Such shares of Stock that would otherwise have been
delivered to the Participant pursuant to the Eligible Stock Option
exercise or vesting of an Eligible Stock Award, but for the
Participant's Deferral Election, shall be the shares of Stock
delivered upon distribution of the Stock Deferral Account, and
therefore shall be deemed to have originated from, and shall be
counted against, the shares reserved under the Equity Plan under
which such Eligible Stock Option or Eligible Stock Award was
granted.
(b) The Participant's unfunded, unsecured right to receive a number of
shares of Stock shall be reflected, in his or her Stock Deferral
Account, on the books of the Company. In addition,
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actual shares of Stock may be acquired by/issued to the Trust
established by the Company, if any, at any time after the total of
such Stock Option Gain Amount has been determined. The Participant
shall not have a right to diversify the balance of his Stock
Deferral Account nor to receive cash equal to the value of the
Stock reflected in such Stock Deferral Account.
(c) Unless otherwise determined by the Administrator, dividend
equivalents will be credited with respect to shares credited to the
Participant's Stock Deferral in the following manner:
(i) Cash Dividends. If the Company declares and pays a dividend
or distribution on Stock in the form of cash, no amount will
be credited to the Participant's Stock Deferral Account at
the dividend payment date, but instead, at the time of any
distribution of shares from his Stock Deferral Account, the
Administrator will calculate the aggregate amount of cash
dividends that would have been paid on the shares then being
distributed had receipt of such shares not been deferred,
together with an amount reflecting the interest that would
have accrued had cash been credited to the Account at the
relevant dividend payment dates and had been thereafter
credited interest based on rates applicable to cash balances
in brokerage accounts, and the Company shall pay such cash
amount to the Participant;
(ii) Non-Cash/Non-Stock Dividends. If the Company declares and
pays a dividend or distribution on Stock in the form of
property other than shares of Stock, then a number of
additional shares shall be credited to each Participant's
Stock Deferral Account as of the payment date for such
dividend or distribution equal to the number of shares
credited to the Stock Deferral Account as of the record date
for such dividend or distribution multiplied by the fair
market value of such property actually paid as a dividend or
distribution on each outstanding share of Stock at such
payment date, divided by the fair market value of a share of
Stock at such payment date; provided, however, that, in lieu
of crediting of additional shares, the Administrator may
provide an alternative means of dealing with such dividend
or distribution that provides the Participant with
substantially equivalent value to that which would have
otherwise been received under this subsection (ii), in such
manner and on such terms as the Administrator may specify.
(iii) Stock Dividends and Splits. If the Company declares and pays
a dividend or distribution on Stock in the form of
additional shares of Stock, or there occurs a forward split
of Stock, then a number of additional shares shall be
credited to each Participant's Stock Deferral Account as of
the payment date for such dividend or distribution or
forward split equal to the number of shares credited to the
Stock Deferral Account as of the record date for such
dividend or distribution or split multiplied by the number
of additional shares of Stock actually paid as a dividend or
distribution or issued in such split in respect of each
outstanding share of Stock.
Shares (or any other cash or non-cash amounts) that become credited
to the Participant's Stock Deferral Account directly or indirectly
under this Section VIII(c) in respect of shares previously credited
to the Account (the "underlying credited shares") shall be subject
to the same terms and conditions, including a risk of forfeiture
and other restrictions in the case of a Forfeitable Stock Award
Amount and including Distribution Events in the case of other
shares, as apply to the underlying credited shares.
(d) The risk of forfeiture and other restrictions shall apply to the
Forfeitable Stock Award Amount, as specified in Section VI. A
Participant shall at all times be one hundred percent (100%) vested
in the shares credited to his Stock Deferral Account other than the
Forfeitable Stock Award Amount (but the forfeiture provisions of
Section XII(e) will apply to any withdrawal pursuant to that
provision).
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(e) The number of shares credited to a Participant's Stock Deferral
Account, the kind of securities to which each credited share
relates, and other terms relating to the Stock Deferral Account may
be appropriately adjusted by the Administrator in order to prevent
dilution or enlargement of the Participant's rights hereunder, in
the event of a stock split, stock dividend, reorganization, merger,
or other unusual corporate transaction or event which affects the
Stock, provided that any such adjustment to a Stock Deferral
Account shall be made taking into account any crediting of shares
or other amounts to the Participant's Account under other
provisions of this Section VIII in connection with such transaction
or event.
IX. METHOD OF DISTRIBUTION
(a) Distribution of a Participant's Stock Deferral Account will
commence upon the Participant reaching a Distribution Event
selected by the Participant on his Deferral Election Form. The
Participant's Stock Deferral Account balance shall be payable only
in the form of Stock (except for cash payable under Section VIII(c)
and as provided for fractional shares) and shall be distributed in
either a lump sum or in equal annual installments of Stock over a
predetermined number of years selected by the Participant on his
Deferral Election Form. If the annual distribution method is
elected, the number of shares of Stock distributed as an annual
installment will be equal to the number of whole shares in the
Participant's Stock Deferral Account on each distribution date
divided by the number of remaining installments. Any fractional
shares in the Participant's Stock Deferral Account will be
liquidated on the date of any lump-sum distribution or the final
installment payment and paid in cash to the Participant, unless the
Administrator implements an alternative means of settling such
fractional share.
(b) Distributions will be subject to tax withholding in accordance with
Section XVIII(d).
(c) Annual installments will commence on the business day coinciding
with or next following the January 1 subsequent to the
Participant's applicable Distribution Event and continuing on each
January 1 until all annual installments have been distributed. Lump
sum distributions shall be paid by the Company no later than thirty
(30) days following the applicable Distribution Event.
(d) The Participant shall make an election upon entering the Program to
elect a form and timing of payment of distributions from the Stock
Deferral Account for the first Program Year which is allowed under
Section IX(a). This election will continue in effect for future
Program Years unless the Participant submits a written request
revising his or her elections on a Deferral Election Form. Such
revised elections shall be made on forms provided by the Company
not later than one (1) year prior to the date the Participant would
otherwise begin receiving a distribution in accordance with the
most recently executed Deferral Election. No election to change the
form or timing of payment shall be allowed within one (1) year
prior to the date the Participant would otherwise begin receiving a
distribution in accordance with the most recently executed Deferral
Election.
(e) The Administrator may determine that, if a Participant's Stock
Deferral Account balance is below a minimum level specified by the
Administrator at the time of a Distribution Event or termination of
Participant's employment or service, the Account will be
distributed in a lump sum rather than installments.
(f) A Participant may elect on his Deferral Election (as initially
filed) to receive an immediate distribution of his Stock Deferral
Account balances upon a Change in Control. The Participant may
modify this election by submitting a revised Deferral Election Form
at least one (1) year prior to the Change in Control (or by such
other deadline as may be specified by the
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Administrator). If the Participant does not elect to receive an
immediate distribution of his Stock Deferral Account, the shares of
Stock held in his Stock Deferral Account will be subject to Section
XVIII(h).
X. OFFSET FOR OBLIGATIONS TO COMPANY
If, at such time as the Participant becomes entitled to payments in
distribution hereunder, the Participant has any debt, obligation or
other liability representing an amount owing to the a Participating
Company or any affiliate of a Participating Company, and if such debt,
obligation, or other liability is due and owing at the time
distributions are payable hereunder, the Participating Company may
offset the amount owing as such liability against the amounts otherwise
distributable hereunder, but only if and to the extent that such offset
is permitted under applicable law.
XI. LIABILITY OF COMPANY
Except as provided below, all contributions to be made as required by
this Program by a Participating Company shall be determined separately,
subject to all the terms and conditions of this Program. No
Participating Company shall be held liable for any contributions to be
made by any other party. The Administrator, shall keep separate books
and records concerning the affairs of the each Participating Company
hereunder and as to the accounts and credits of the Participants
employed thereby.
XII. CHANGE IN DISTRIBUTION SCHEDULE
(a) DEATH OF PARTICIPANT. In the event of the death of a Participant
before distribution of the Participant's Stock Deferral Account
balance has commenced or been completed, the Administrator shall
pay the remaining balance of the Stock Deferral Account (exclusive
of any Forfeitable Stock Award Amount that remains unvested) in one
lump sum, to the individual designated as Primary Beneficiary on
the latest properly completed and executed "Notice of Change of
Beneficiary" form on file, within a reasonable time period but not
later than one hundred (180) days after the date of the
Participant's death. If the Primary Beneficiary designated on the
latest such "Notice of Change of Beneficiary" form is no longer
living at the time of the Participant's death, the Administrator
shall pay such remaining balance of the Stock Deferral Account in
one lump sum to the individual designated as Secondary Beneficiary
on the latest properly completed and executed "Notice of Change of
Beneficiary" form on file. If the Secondary Beneficiary designated
on the latest such "Notice of Change of Beneficiary" form is no
longer living at the time of the Participant's death, the
Administrator shall pay such remaining balance of the Stock
Deferral Account in one lump sum to the Participant's estate.
If a Participant wishes to change the beneficiary he or she has
previously designated, he or she may do so at any time by
submitting a new "Notice of Change of Beneficiary" form to the
Administrator, which form, if properly completed and executed,
shall become effective upon receipt by the Administrator.
(b) PERMANENT DISABILITY OF THE PARTICIPANT. In the event of permanent
disability (as defined below) before distribution of a
Participant's Stock Deferral Account balance has commenced or been
completed, the Administrator shall be permitted to pay the balance
of the Participant's Account (exclusive of any Forfeitable Stock
Award Amount that remains unvested) in one lump sum. Such payouts
shall be made to the Participant or the legal representative of
such Participant pursuant to paragraph (c) of Section XVIII.
"Disability" shall mean, for purposes of the Program, a physical or
mental impairment that
9
would entitle the Participant to receive benefits under the
Company's long term disability program, as determined by the
Committee in its sole discretion. The Administrator may, in its
discretion, require a medical examination performed by a physician
at the expense of the Company, as a condition to any determination
of disability.
(c) DISTRIBUTION DUE TO FINANCIAL HARDSHIP. Other provisions of the
Program notwithstanding, if the Administrator determines, after
consideration of a Participant's application, that the Participant
has sustained a severe financial hardship resulting from a sudden
and unexpected illness or accident of the Participant or the
Participant's dependent (as defined in Section 152(a) of the Code),
loss of the Participant's property due to casualty, or other
similar extraordinary and unforeseeable circumstances resulting
from events beyond the Participant's control, the Administrator
may, in its sole discretion, direct that all or a portion of the
balance of the Participant's Stock Deferral Account (exclusive of
any Forfeitable Stock Award Amount) be distributed to the
Participant. The distribution will be made in the manner and at the
time specified by the Administrator. No Participant who is also a
member of the Administrator may in any way take part in any
decision pertaining to a request for payment made by that
Participant hereunder. The need to pay for educational expenses or
to purchase a home are not considered to be financial hardships.
(d) CHANGE IN DISTRIBUTION DATE. If a Participant wishes to modify the
distribution schedule established in accordance with Section IX, he
must submit a written petition to the Administrator for such
change. The Administrator shall determine whether to permit the
requested change in its discretion. The written petition must be
submitted to the Administrator at least one (1) year prior to the
date the Participant would otherwise be receiving a distribution in
accordance with the most recent Deferral Election.
(e) EARLY LUMP SUM DISTRIBUTION. Prior to a Distribution Event, a
Participant may withdraw all or a portion of the balance of his
Stock Deferral Account, other than a Forfeitable Stock Award
Amount. If any such withdrawal is made, the Participant shall
receive from his Stock Deferral Account a lump-sum distribution as
follows:
(i) if the withdrawal is made before a Change in Control or
more than twenty-four months following a Change in
Control, the amount distributable shall equal 90% of the
amount requested, and the remaining 10% of the amount
requested shall be forfeited; or
(ii) if the withdrawal is made within the twenty-four month
period beginning on the date of a Change in Control, the
amount distributable shall equal 95% of the amount
requested, and the remaining 5% of the amount requested
shall be forfeited.
No request to withdraw less than 10% of the balance of any Stock
Deferral Account shall be permitted. Any request to withdraw 75% or
more of the balance of a Stock Deferral Account shall result in the
withdrawal and forfeiture of the entire balance of such Account.
XIII. BENEFIT PLANS
The amount of a Participant's Qualifying Gain or Eligible Stock Award
which he elects to defer under the Program shall not be deemed to be
compensation for the purpose of calculating the amount of Participant's
benefits or contributions under a pension plan or retirement plan
(qualified under Section 401(a) of the Internal Revenue Code) or any
non-qualified supplemental retirement plan, the amount of life
insurance payable under any life insurance plan, or the amount of any
disability benefit payments payable under any disability plan
established or maintained by a Participating Company, except to the
extent specifically provided in any such plan.
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XIV. RIGHTS OF A PARTICIPANT
Establishment of the Program shall not be construed as giving any
Participant the right to be retained in the Company's service or employ
or the right to receive any benefits not specifically provided by the
Program.
Qualifying Gain and Eligible Stock Awards deferred under this Program
will not be segregated from the general funds of the Company and no
Participant will have any claim on any specific assets of the Company.
To the extent that any Participant acquires a right to receive benefits
under this Program, his or her right will be no greater than the right
of any unsecured general creditor of the Company and is not assignable
or transferable except to his or her estate as defined in Section XII.
XV. AMENDMENT AND TERMINATION
The Program may be amended from time to time at the discretion of the
Committee. The amendment of any one or more provisions of the Program
shall not affect the remaining provisions of the Program. No amendment
shall reduce any benefits accrued by any Participant prior to the
amendment, except with the written consent of the Participant.
The Committee has the right to terminate the Program at any time. Any
amount accumulated prior to the Program's termination will continue to
be subject to the provisions of the Program.
XVI. DETERMINATION OF BENEFITS
(a) CLAIM - A person who believes that he is being denied a benefit to
which he is entitled under the Program (hereinafter referred to as
a "Claimant") may file a written request for such benefit with the
Company, setting forth his claim. The request must be addressed to
the Administrator at the Company's principal place of business.
(b) CLAIM DECISION - Upon receipt of a claim, the Company shall advise
the Claimant that a reply will be forthcoming within ninety (90)
days and shall, in fact, deliver such reply within such period. The
Company may, however, extend the reply period for an additional
ninety (90) days for reasonable cause. If the claim is denied in
whole or in part, the Company shall adopt a written report, using
language calculated to be understood by the Claimant, setting
forth:
(1) The specific reason or reasons for such denial;
(2) The specific reference to pertinent provisions of this
Program upon which such denial is based;
(3) A description of any additional material or
information necessary for the Claimant to clarify his
claim and an explanation why such material or such
information is necessary;
(4) Appropriate information as to the steps to be taken if
the Claimant wishes to submit the claim for review;
and
(5) The time limits for requesting a review.
(c) REQUEST FOR REVIEW - Within sixty (60) days after the receipt by
the Claimant of the written report described above, the Claimant
may request in writing that the Committee review the determination
of the Company. Such request must be addressed to the Compensation
11
Committee of the Board of Directors at the Company's principal
place of business. The Claimant or his duly authorized
representative may, but need not, review the pertinent documents
and submit issues and comments in writing for consideration by the
Company. If the Claimant does not request a review of the Company's
determination by the Committee within such sixty (60) day period,
he shall be barred and stopped from challenging the Company's
determination.
(d) REVIEW OF DECISION - Within sixty (60) days after the Committee's
receipt of a request for review, the Committee will review the
Company's determinations. After considering all materials presented
by the Claimant, the Committee will render a written report,
written in a manner calculated to be understood by the Claimant,
setting forth the specific reasons for the decision and containing
specific references to the pertinent provisions of this Program on
which the decision is based. If special circumstances require that
the sixty (60)-day time period be extended, the Committee will so
notify the Claimant and will render the decision as soon as
possible, but no later than one hundred twenty (120) days after
receipt of the request for review.
XVII. NOTICES
Notices and elections under this Program must be in writing. A notice
or election is deemed delivered if it is delivered personally or mailed
by registered or certified mail to the person at his or her last known
business address.
XVIII. GENERAL PROVISIONS
(a) Controlling Law. The Program and the rights of all persons claiming
hereunder shall be construed and determined in accordance with the
laws of the State of New York without giving effect to the choice
of law principles thereof, except to the extent that such law is
preempted by federal law.
(b) Captions. The captions of sections and paragraphs of this Program
are for the convenience of reference only and shall not control or
affect the meaning or construction of any of its provisions.
(c) Facility of Payment. Any amounts payable hereunder to any
Participant who is under legal disability or who, in the judgment
of the Administrator, is unable to properly manage his or her
financial affairs may be paid to the legal representative of such
Participant or may be applied for the benefit of such Participant
in any manner which the Administrator may select, and any such
payment shall be deemed to be payment for such Participant's
account and shall be a complete discharge of all liability of the
Company with respect to the amount so paid.
(d) Withholding of Taxes. To the extent required by the laws in effect
at the time compensation is deferred hereunder or at the time
deferred compensation payments are made, the Participating Company
shall withhold any taxes required to be withheld for federal, state
or local government purposes. Participation in the Program
constitutes a Participant's agreement that a Participating Company
may withhold from payroll or other payments owing to the
Participant cash amounts to satisfy withholding obligations arising
under the Program (for example, FICA withholding can arise in
connection with deferrals upon exercise of Eligible Stock Options
or deferrals of Stock Awards at the time of vesting). Unless other
arrangements satisfactory to the Administrator have been made by
the Participant to provide for payment of withholding amounts in
connection with a distribution of the Participant's Stock Deferral
Account, shares of Stock being distributed will be withheld from
any distribution to satisfy mandatory withholding
12
taxes, if permitted under the Equity Plan under which the shares
originated.
(e) Administrative Expenses. All expenses of administering the Program
shall be borne by the Company. No part thereof shall be charged
against any Participant's account or any amounts distributable
hereunder. Sales of shares of Stock distributed to Participants are
the sole responsibility of the Participant, however.
(f) Severability. Any Provision of this Program prohibited by the law
of any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition without invalidating the
remaining provisions hereof.
(g) No Liabilities. Except as otherwise expressly provided herein, no
member of the Board of Directors of the Company, or the
Compensation Committee thereof or any other person or group acting
as Administrator, and no officer, employee, or agent of a
Participating Company, shall have any liability to any person,
firm, or corporation based on or arising out of the Program, except
in the case of gross negligence or fraud.
(h) Binding on all Successors. In the event of a Change in Control,
any surviving or acquiring corporation shall (i) assume the Program
and (ii) agree to substitute for each share of Stock then credited
to each Stock Deferral Account the amount and type of consideration
payable to a holder of one share of Stock (including if applicable
shares of common stock of such surviving or acquiring corporation).
In the event any surviving or acquiring corporation refuses to
assume the terms set out in this Section, then each Participant
will receive the balance in his or her Stock Deferral Account in a
single lump-sum of Stock (together with any cash payable under
Section VIII(c)).
XIX. UNFUNDED STATUS OF PROGRAM
It is the intention of the parties that the arrangements herein
described be unfunded for tax purposes and for purposes of Title I of
ERISA. Program Participants have the status of general unsecured
creditors of the Company and any other Participating Company. The
Program constitutes a mere promise by the Company to make payments in
the future.
The Company may establish a Trust(s) with the Trustee(s), pursuant to
such terms and conditions as are set forth in the applicable trust
agreement(s) entered into between the Company and the Trustee(s).
Certain of the obligations of the Administrator pursuant to the terms
of the Program may be delegated to a trustee pursuant to the terms of a
trust agreement. Any Trust, if established, is intended to be treated
as a "grantor" trust under the Internal Revenue Code of 1986 and the
Regulations thereunder, as amended from time to time, and the
establishment is not intended to cause Participants to realize current
income on amounts contributed thereto, and the Trust shall be so
interpreted.
XX. RIGHTS TO BENEFITS
A Participant's rights' to benefit payments under the Program are not
subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, attachment, or garnishment by
creditors of the Participant or the Participant's beneficiaries.
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