Exhibit 10.5
 
JEFFERIES GROUP, INC.
1999 Directors’ Stock Compensation Plan
 
As Amended and Restated January 1, 2009
     1. PURPOSE. The purpose of this 1999 Directors’ Stock Compensation Plan
(the “Plan”) is to advance the interests of the Company and its stockholders by
providing a means to attract, retain and compensate non-employee directors and
to enable such persons to increase their proprietary interest in the Company. In
furtherance of this purpose, the Plan provides for periodic grants of options,
Deferred Shares or Restricted Stock (as defined below), the opportunity for a
director to elect deferred and alternative forms of compensation in lieu of cash
fees for service as a director, including Options, Deferred Shares, and deferred
cash, and the opportunity to defer delivery of shares deliverable upon exercise
of options or in settlement of other awards.
     2. DEFINITIONS. In addition to the terms defined in Section 1, the
following terms shall be defined as set forth below:
     2.1 “Administrator” means the administrative committee specified in Section
3(b) to whom the Board has delegated the authority to take action under the
Plan.
     2.2 “Beneficiary” means the person(s) or trust(s) which have been
designated by a Participant in his or her most recent written beneficiary
designation filed with the Administrator to receive the benefits specified under
the Plan upon such Participant’s death. If, upon a Participant’s death, there is
no designated Beneficiary or surviving designated Beneficiary, then the term
Beneficiary means the person(s) or trust(s) entitled by will or the laws of
descent and distribution to receive such benefits.
     2.3 “Board” means the Board of Directors of the Company.
     2.4 “Code” means the Internal Revenue Code of 1986, as amended, including
regulations thereunder and successor provisions and regulations thereto.
     2.5 “Company” means Jefferies Group, Inc., a Delaware corporation, formerly
named JEF Holding Company, Inc., the common stock of which was distributed in
the Spin-off.
     2.6 “DDCP” means Predecessor’s Non-Employee Directors’ Deferred
Compensation Plan.
     2.7 “Deferral Account” means the account established and maintained by the
Company for Deferred Shares credited under Sections 7 and 8 and deferred cash
credited under Section 8. A Deferral Account shall include one or more
subaccounts, including a Deferred Share Account for forfeitable Deferred Shares
under Section 7, a Deferred Share Account for Deferred Shares that have become
nonforfeitable under Section 7 or that are at all times nonforfeitable under
Section 8(c), a Deferred Share Account for Deferred Shares resulting from Option
exercises under Section 9(a), and a Deferred Cash Account described in
Section 8(d). The Deferral Account also includes two subaccounts for purposes of
complying with Code Section 409A: The “Grandfathered Account” is that portion of
the Deferral Account (and subaccouns) resulting from deferrals of compensation
that was vested before 2005, except for any designated deferred compensation
which the Committee has caused to be not grandfathered for purposes of Code
Section 409A. The “2005-and-Later Account” is the remaining portion of the
Deferral Account (and subaccounts) which is not “grandfathered” for purposes of
Code Section 409A. The Deferral Account and subaccounts, and Deferred Shares and
deferred cash credited thereto, will be maintained solely as bookkeeping entries
by the Company to evidence unfunded obligations of the Company.
     2.8 “Deferred Share” means a credit to a Participant’s Deferred Share
Account under Sections 7 or 8 which represents the right to receive one Share
upon settlement of such Account. Deferred Shares granted under Section 7 may be
designated as “Restricted Stock Units.”
     2.9 “Disability” means a Participant’s termination of service as a director
of the Company due to a physical or mental incapacity of long duration which
renders the Participant unable to perform the duties of a director of the

 

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Company.
     2.10 “Eligible Holder” means each person who, at the Spin-off Date, holds
an option or deferred share granted by Predecessor under a plan or program for
Predecessor’s non-employee directors with respect to which the Company has
agreed to grant, or offer to grant, an Option or Deferred Share award in
substitution for such Predecessor award or to offset any lost value due to the
early termination of such option or deferred share.
     2.11 “Exchange Act” means the Securities Exchange Act of 1934, as amended,
including rules thereunder and successor provisions and rules thereto.
     2.12 “Fair Market Value,” means, with respect to Shares, the fair market
value of such Shares determined by such methods or procedures as shall be
established from time to time by the Board. Unless otherwise determined by the
Board, the Fair Market Value of a Share as of any given date means the average
of the closing sales prices of a Share as reported in the table entitled “New
York Stock Exchange Composite Transactions” contained in The Wall Street Journal
(or an equivalent successor table) for the day as of which the valuation is to
be made or, if that day is not a trading day, the nearest preceding trading day,
and the four trading days immediately prior thereto; PROVIDED, HOWEVER, that
Fair Market Value at the date of the Spin-off shall be determined based on the
first five trading days for which a closing price is reported following the
Spin-off.
     2.13 “Option” means the right, granted to a Participant under Section 6 or
8, to purchase a specified number of Shares at the specified exercise price for
a specified period of time under the Plan. All Options will be non-qualified
stock options.
     2.14 “Option Valuation Methodology” means the method for determining the
number of shares to be subject to Options, and the exercise price thereof,
granted in payment of Retainer Fees under Section 8(b).
     2.15 “Other Director Compensation” means fees payable to a director in his
or her capacity as such, other than Retainer Fees, for attending meetings and
other service on the Board and Board committees.
     2.16 “Participant” means any person who has been granted an Option which
remains outstanding, has Deferred Shares or cash credited to his or her Deferral
Account, or has elected to be granted Options in payment of Retainer Fees or to
defer payment of Retainer Fees and Other Director Compensation in the form of
Deferred Shares or cash under the Plan.
     2.17 “Plan Year” means, with respect to a Participant, the period
commencing at the time of election of the director at an annual meeting of
stockholders (or the election of a class of directors if the Company then has a
classified Board of Directors), or the director’s initial appointment to the
Board if not at an annual meeting of stockholders, and continuing until the
close of business of the day preceding the next annual meeting of stockholders;
PROVIDED, HOWEVER, that the initial Plan Year shall be deemed to be a
continuation of the plan year in effect under the DDCP at the Spin-Off Date.
“409A Plan Year” means the calendar year.
     2.18 “Predecessor” means Jefferies Group, Inc., a Delaware corporation, as
it existed immediately prior to the Spin-off.
     2.19 “Restricted Stock” means Shares granted under Section 7, subject to a
risk of forfeiture and restrictions on transfer for a specified period.
     2.20 “Retainer Fees” means annual retainer fees payable to a director in
his or her capacity as such for service on the Board and service as chairman of
any Board committee.
     2.21 “Retirement” means a Participant’s termination of service as a
director of the Company at or after age 65.
     2.22 “Shares” means shares of common stock, par value $.01 per share, of
the Company and such other securities as may be substituted or resubstituted for
Shares pursuant to Section 5.3.

 

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     2.23 “Spin-off” means the distribution of the Common Stock of the Company
by the Predecessor to the Predecessor’s stockholders, which was approved by the
Predecessor’s stockholders on April 20, 1999.
     2.24 “Spin-off Date” means the record date for Predecessor’s distribution
of Shares in the Spin- off.
     2.25 “Valuation Date” shall mean the close of business on the last business
day of each calendar quarter and, in the case of any final distribution from a
Participant’s Deferred Cash Account, the day preceding such distribution.
     3. ADMINISTRATION.
     3.1 AUTHORITY. Both the Board and the Administrator (subject to the ability
of the Board to restrict the Administrator) shall administer the Plan in
accordance with its terms, and shall have all powers necessary to accomplish
such purpose, including the power and authority to construe and interpret the
Plan, to define the terms used herein, to prescribe, amend and rescind rules and
regulations, agreements, forms, and notices relating to the administration of
the Plan, and to make all other determinations necessary or advisable for the
administration of the Plan. The Administrator may perform any function of the
Board under the Plan, except for grants of awards under Sections 6 and 7,
adoption of material amendments to the Plan under Section 11.5, or other
functions from time to time specifically reserved by the Board to itself. Any
actions of the Board or the Administrator with respect to the Plan shall be
final, conclusive, and binding upon all persons interested in the Plan, except
that any action of the Administrator will not be binding on the Board. The Board
and Administrator may each appoint agents and delegate thereto powers and duties
under the Plan, except as otherwise limited by the Plan.
     3.2 ADMINISTRATOR. The Administrator shall be the Director of Human
Resources and the Secretary or such other committee as may designated by the
Board. In any case in which a director is a member of the Administrator, such
director shall be not act on or decide any matter relating solely to himself or
herself or any of his or her rights or benefits under the Plan. No bond or other
security need be required of the Administrator or any member thereof in any
jurisdiction.
     3.3 LIMITATION OF LIABILITY. Each member of the Board and the Administrator
shall be entitled to, in good faith, rely or act upon any report or other
information furnished to him or her by any officer or other employee of the
Company or any subsidiary, the Company’s independent certified public
accountants, or any executive compensation consultant, legal counsel, or other
professional retained by the Company to assist in the administration of the
Plan. No member of the Board or the Administrator, nor any person to whom
ministerial duties under the Plan have been delegated, shall be personally
liable for any action, determination, or interpretation taken or made in good
faith with respect to the Plan, and any such person shall, to the extent
permitted by law, be fully indemnified and protected by the Company with respect
to any such action, determination, or interpretation.
     4. SHARES AVAILABLE UNDER THE PLAN. The total number of Shares reserved and
available for delivery under the Plan is 2,000,000, subject to adjustment as
provided in Section 11.2 (this reflects stock splits from the effective date of
the Plan through January 1, 2009). Shares that may be delivered under the Plan
may consist, in whole or in part, of authorized and unissued Shares, treasury
Shares or Shares acquired in the market for the account of a Participant. For
purposes of the Plan, shares that may be purchased upon exercise of an Option or
distributed in settlement of Deferred Shares will not be considered to be
available after such Option has been granted or Deferred Share credited, except
for purposes of delivery in connection with such Option or Deferred Share;
provided, however, that, if an Option expires for any reason without having been
exercised in full or Deferred Shares or shares of Restricted Stock are forfeited
or cancelled, the shares subject to the unexercised portion of such Option or to
the forfeited or cancelled Deferred Shares or Restricted Stock will again be
available for delivery under the Plan.
     5. ELIGIBILITY. Each non-employee director of the Company who is paid fees
for service on the Board or a Board committee, and each Eligible Holder, may
participate in the Plan, subject to the terms hereof. No person other than those
specified in this Section 5 will be eligible to participate in the Plan. The
Administrator will notify each person of his or her eligibility to participate
in the Plan on an elective basis not later than 15 days (or such other period as
may be determined by the Administrator) prior to any deadline for filing an
election form.

 

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     6. INITIAL AND ANNUAL GRANTS OF OPTIONS. Options shall be granted to
non-employee directors in accordance with policies established from time to time
by the Board specifying the classes of directors to be granted Options, the
number of Shares to be subject to each Option, and the time or times at which
such Options shall be granted; provided, however, that the maximum number of
Shares that may be subject to Options granted to a director in a given year
under this Section 6 (i.e., without a corresponding reduction in fees) shall be
40,000, subject to adjustment as provided in Section 11.2. Options granted to an
Eligible Holder under Section 9.6 shall not be counted against the limitation
set forth in the preceding sentence.
     6.1 GRANT POLICY — OPTION GRANTS. The policy with respect to grants of
Options under this Section 6 shall be established, modified and/or revoked from
time to time by the Board.
     6.2 TERMS OF OPTIONS GRANTED UNDER SECTION 6. Each Option granted under
this Section 6 shall be subject to the following terms and conditions:
     (a) EXERCISE PRICE. The exercise price per Share purchasable under an
Option will be equal to 100% of the Fair Market Value of a Share on the date of
grant of the Option.
     (b) OPTION TERM. Each Option shall expire at the end of a term fixed by the
Board, not longer than ten years after the date of grant, or at such earlier
date as the Option may no longer be exercised and cannot, by its terms,
thereafter become exercisable. Options granted under the initial policy set out
in Section 6.1 shall expire at the earlier of (i) a fixed term of five years
after the date of grant, (ii) 12 months after the Participant ceases to serve as
a Director of the Company due to death, Disability, or Retirement, or
(iii) 60 days after the Participant ceases to serve as a Director of the Company
for any reason other than death, Disability, or Retirement.
     (c) VESTING AND EXERCISABILITY. The Board may establish terms regarding the
times at which Options shall become vested and exercisable. Options granted
under the initial policy set out in Section 6.1 and not previously forfeited
shall vest and become exercisable by a Participant on the date three months
after the date of grant, and, unless otherwise provided in the Participant’s
Option agreement, any portion of a Participant’s Option that has not vested and
become exercisable at the time of termination of the Participant’s service as a
director shall be forfeited.
     (d) PAYMENT. The exercise price of an Option shall be paid to the Company
either in cash or by the surrender of Shares, or any combination thereof, or in
such other form or manner as may be established by the Administrator; PROVIDED,
HOWEVER, that, unless otherwise determined by the Administrator, shares shall
not be surrendered in payment of the exercise price if such surrender would
result in additional accounting expense to the Company.
     7. GRANTS OF DEFERRED SHARES AND RESTRICTED STOCK. Deferred Shares and/or
Restricted Stock shall be granted to non-employee directors in accordance with
policies established from time to time by the Board specifying the classes of
directors to be granted such awards, the number of Deferred Shares or shares of
Restricted Stock to be granted, and the time or times at which such awards shall
be granted; provided, however, that the maximum number of Deferred Shares and
shares of Restricted Stock that may be granted to a director in a given year
under this Section 7, without a corresponding reduction in fees, shall be 50% of
the number of Deferred Shares that could be granted under Section 8.3 in that
year with such a corresponding reduction in fees. A grant of a specified dollar
amount of Deferred Shares or Restricted Stock shall be deemed a reduction in
fees for purposes of this Section 7. Deferred Shares and Restricted Stock
granted to an Eligible Holder under Section 9.6 shall not be counted against the
limitation set forth in the preceding sentence.
     7.1 GRANT POLICY. The policy with respect to grants of awards under this
Section 7 shall be established, modified and/or revoked from time to time by the
Board.

 

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     7.2 TERMS OF DEFERRED SHARES AND RESTRICTED STOCK GRANTED UNDER SECTION 7.
Deferred Shares granted under this Section 7 shall be subject to the terms and
conditions of Deferred Shares specified in Sections 9.2, 9.3, and 9.4 (including
the requirement that any Deferred Shares granted or vested in 2005 or thereafter
comply with Code Section 409A), unless otherwise determined by the Board.
Deferred Shares and Restricted Stock granted under this Section 7 shall also be
subject to the following additional terms and conditions:
     (a) VESTING AND FORFEITURE. The Board may establish terms regarding the
times at which Deferred Shares and Restricted Stock shall become vested and
non-forfeitable. Unless otherwise determined by the Board, an award granted
under this Section 7 shall be subject to the following terms: Such award, if not
previously forfeited, shall become vested and non-forfeitable as to one-third of
the number of Deferred Shares or shares of Restricted Stock at the close of
business on the day preceding each of the three annual meetings of stockholders
following the date of grant of such award, rounded to the nearest number of
whole shares; provided, however, that if such award was not previously vested or
forfeited, it shall vest and become non-forfeitable on an accelerated basis upon
the termination of the Participant’s service as a director due to death,
Disability or Retirement (settlement shall remain subject to Section 9.4,
however). Unless otherwise determined by the Board, an award of Deferred Shares
or Restricted Stock not previously vested or forfeited will cease to vest and
will be forfeited upon the termination of the Participant’s service as a
director for any reason other than death, Disability or Retirement.
     (b) DEFERRED SHARES CREDITED AS A RESULT OF DIVIDEND EQUIVALENTS. Unless
otherwise determined by the Board, Deferred Shares credited as a result of
dividend equivalents under Section 9.2 shall be subject to the same terms,
including risk of forfeiture, as the Deferred Shares with respect to which the
dividend equivalents were credited.
     (c) DIVIDENDS ON RESTRICTED STOCK. Unless otherwise determined by the
Board, dividends on Restricted Stock declared and paid prior to the lapse of the
risk of forfeiture on such Restricted Stock shall be automatically reinvested in
additional shares of Restricted Stock, which shall be subject to the same terms,
including risk of forfeiture, as the Restricted Stock on which the dividend was
paid.
     (d) AWARDS NONTRANSFERABLE. Deferred Shares and Restricted Stock shall be
nontransferable by the Participant at any time that the award remains subject to
a risk of forfeiture.
     (e) CONSIDERATION FOR RESTRICTED STOCK. If shares to be granted as
Restricted Stock are not treasury shares, the Board or Administrator may impose
additional conditions upon the grant of the Restricted Stock, possibly including
a requirement that cash consideration be paid by the Participant, if and to the
extent necessary to ensure that the Company will receive lawful consideration
equal to the aggregate par value of the Shares being granted as Restricted
Stock.
     8. OPTIONS GRANTED IN PAYMENT OF FEES AND DEFERRAL OF FEES IN DEFERRED
SHARES AND DEFERRED CASH. Each director of the Company who is eligible under
Section 5 may elect, in accordance with Section 8.1, to be paid Retainer Fees in
the form of Options under Section 8.2 or to defer receipt of Retainer Fees and
Other Director Compensation in the form of Deferred Shares under Section 8.3 or
deferred cash under Section 8.4.
     8.1 ELECTIONS. A director shall elect to participate and the terms of such
participation by filing an election with the Company prior to the beginning of a
409A Plan Year or, in the case of a director commencing service with the
Company, prior to his or her commencement of service, or at such other date
compliant with Exhibit A to the 2003 Incentive Compensation Plan and/or
compliant with Section 9.6(a)(ii) of the 2003 Incentive Compensation Plan as may
be specified by the Administrator, provided that any date so specified shall
ensure effective deferral of taxation (including under Code Section 409A) and
otherwise comply with applicable laws.
     (a) EFFECT AND IRREVOCABILITY OF ELECTIONS. Elections shall be deemed
continuing, and therefore applicable to Plan Years or 409A Plan Years after the
initial Plan Year or 409A Plan Year

 

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covered by the election, until the election is modified or superseded by the
Participant. Elections to participate (including the amount of any deferrals),
other than those elections subject to Section 9.4, shall become irrevocable with
respect to a given Plan Year or 409A Plan Year at the commencement of the Plan
Year/409A Plan Year to which an election relates, unless the Administrator
specifies a different time (which in no event may be later than the permitted
deadline for filing an election to defer). Elections relating to the time of
settlement of a Deferral Account shall become irrevocable at the time specified
in Section 9.4. Elections may be modified or revoked by filing a new election
prior to the time the election to be modified or revoked has become irrevocable.
The latest election filed with the Administrator shall be deemed to revoke all
prior inconsistent elections that remain revocable at the time of filing of the
latest election.
     (b) MATTERS TO BE ELECTED. The Administrator will provide a form of
election which will permit a director to make appropriate elections with respect
to all relevant matters under this Section 8.
     (c) TIME OF FILING ELECTIONS. An election must be received by the
Administrator prior to the applicable deferral election deadline. Under no
circumstances may a Participant defer compensation to which the Participant has
attained, at the time of deferral, a legally enforceable right to current
receipt of such compensation.
     8.2 OPTIONS GRANTED IN PAYMENT OF RETAINER FEES. A Participant who has
validly elected to be paid a specified amount of Retainer Fees in the form of
Options shall be granted, at the close of business on the day the Participant’s
Plan Year commences, an Option to purchase the number of whole Shares determined
in accordance with the Option Valuation Methodology specified by the Board. Each
Option granted under this Section 8.2 shall be subject to the following terms
and conditions:
     (a) OPTION VALUATION METHODOLOGY. The Board shall determine the Option
Valuation Methodology which will be used to determine the number of Options
granted and the Option exercise price. The Option Valuation Methodology may be
based upon a valuation of the Option (for example, using the Black-Scholes
option valuation model), a discounting of the aggregate exercise price of the
Options by the amount of Retainer Fees to be paid in the form of Options, or
such other methodology as may be deemed reasonable for purposes of this
Section 8.2.
     (b) OPTION TERM. Each Option will expire ten years after the date of grant;
PROVIDED, HOWEVER, that, unless otherwise determined by the Board, any portion
of an Option that is not yet exercisable at the date a Participant ceases to
serve as a director for any reason will expire at the date such service ceases;
and, PROVIDED FURTHER, that, unless otherwise determined by the Board, any
portion of an Option that is not yet exercisable at the date a Participant
ceases to serve as chair or a member of a Board committee will, to the extent
specified in Section 8.2(e), expire at the date such service ceases.
     (c) VESTING AND EXERCISABILITY. Each Option will vest and become
exercisable as to 25% of the underlying shares on the June 30, September 30,
December 31, and March 31 following the date of grant; PROVIDED, HOWEVER, that,
in the case of a Plan Year which begins on or after June 30 and before
September 30, the vesting percentage shall be 33%, and in the case of a Plan
Year which begins on or after September 30 and before December 31, the vesting
percentage shall be 50%; and PROVIDED FURTHER, that an Option will become fully
vested and exercisable at the close of business on the last day of the Plan Year
in which it was granted. The number of Shares as to which the Option becomes
vested and exercisable will be rounded to the nearest whole number. The
foregoing notwithstanding, upon termination of the Participant’s service as a
director due to death, Disability, or Retirement, that portion of the Option
which would become vested and exercisable on the last day of the calendar
quarter in which such death, Disability, or Retirement occurred will become
immediately vested and exercisable. Unless otherwise determined by the Board, an
Option will cease to further vest and become exercisable upon the termination of
the Participant’s service as a director for any reason, and the portion that has
not vested and become exercisable at the time of such termination shall be
forfeited.
     (d) EXERCISE PRICE. The exercise price per Share purchasable under an
Option will be

 

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determined in accordance with the Option Valuation Methodology. The exercise
price of an Option shall be paid to the Company either in cash or by the
surrender of Shares, or any combination thereof, or in such other form or manner
as may be established by the Administrator; PROVIDED, HOWEVER, that, unless
otherwise determined by the Administrator, shares shall not be surrendered in
payment of the exercise price if such surrender would result in additional
accounting expense to the Company.
     (e) CHANGES IN FEES; CHANGES IN SERVICE AS A COMMITTEE CHAIR. If the amount
of Retainer Fees is increased during a Plan Year, or if a Director is appointed
chair of a Board committee such that an additional Retainer Fee is payable
during a Plan Year, such increased or additional fees will not be paid in the
form of Options. Unless otherwise determined by the Board, if a Director has
been granted an Option in respect of a Plan Year in payment of Retainer Fees
which included committee-related fees for service as chair or a member of any
Board committee, and during such Plan Year he or she ceases such service but
remains on the Board, the Option will expire in part at the time such service
ceases, to the extent of that portion of the Option which is not yet exercisable
multiplied by a fraction the numerator of which is the amount of
committee-related fees included in such Retainer Fees and the denominator of
which is the total amount of such Retainer Fees.
     (f) SERVICE DURING PART OF A QUARTER. If a Participant ceases to serve as a
director or on committee at a date other than a vesting date for the Option and
if the Board does not exercise its discretion to permit vesting of the
Participant’s Option in consideration for the Participant’s service in that
final quarterly period, the Participant shall be entitled to payment in cash for
his or her service in that final quarterly period if and to the extent then
provided in the Company’s regular non-employee director compensation policies.
     8.3 DEFERRAL OF RETAINER FEES AND OTHER DIRECTOR COMPENSATION IN THE FORM
OF DEFERRED SHARES. If a Participant has validly elected to defer receipt of a
specified amount of Retainer Fees or Other Director Compensation in the form of
Deferred Shares, a number of Deferred Shares shall be credited to the
Participant’s Deferred Share Account, as of the date such Retainer Fees or Other
Director Compensation otherwise would have been payable to the Participant but
for such election to defer, equal to (i) such amount otherwise payable divided
by (ii) the Fair Market Value of a Share at that date. Deferred Shares credited
under this Section 8.3 shall be subject to the terms and conditions of Deferred
Shares specified in Sections 9.2, 9.3, and 9.4. The right and interest of each
Participant in Deferred Shares credited to the Participant’s Deferred Share
Account under this Section 8.3 at all times will be nonforfeitable.
     8.4 DEFERRAL OF RETAINER FEES AND OTHER DIRECTOR COMPENSATION IN THE FORM
OF DEFERRED CASH. If a Participant has validly elected to defer receipt of a
specified amount of Retainer Fees or Other Director Compensation in the form of
deferred cash, an amount equal to such specified amount shall be credited to the
Participant’s Deferred Cash Account as of the date such Retainer Fees or Other
Director Compensation otherwise would have been payable to the Participant but
for such election to defer. As of the close of business on each Valuation Date,
interest shall be credited to such Deferred Cash Account in an amount equal to
the average daily balance in such Deferred Cash Account since the last Valuation
Date multiplied by the interest rate as specified by the Board and applicable to
the period since the last Valuation Date. The initial policy with respect to the
interest rate under this Section 8.4, effective as of the Spin-off Date and
continuing until modified or revoked by the Board, shall be to credit interest
at the prime interest rate of a single large bank as published in The Wall
Street Journal and effective on the date of the latest annual meeting of
stockholders of the Company or the date on which Predecessor’s stockholders
approved the Plan. The right and interest of each Participant relating to his or
her Deferred Cash Account at all times will be nonforfeitable.
     9. OTHER DEFERRALS AND TERMS OF DEFERRAL ACCOUNTS.
     9.1 [Reserved.]
     9.2 DIVIDEND EQUIVALENTS ON DEFERRED SHARES. Dividend equivalents will be
credited on Deferred Shares credited to a Participant’s Deferred Share Account
as follows, unless the Administrator determines

 

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to credit dividend equivalents in an alternative form deemed to be equitable by
the Administrator
     (a) CASH AND NON-SHARE DIVIDENDS. If the Company declares and pays a
dividend on Shares in the form of cash or property other than Shares, then a
number of additional Deferred Shares shall be credited to a Participant’s
Deferred Share Account as of the payment date for such dividend equal to (i) the
number of Deferred Shares credited to the Account as of the record date for such
dividend, multiplied by (ii) the amount of cash plus the Fair Market Value of
any property other than shares actually paid as a dividend on each share at such
payment date, divided by (iii) the Fair Market Value of a Share at such payment
date.
     (b) SHARE DIVIDENDS AND SPLITS. If the Company declares and pays a dividend
on Shares in the form of additional Shares, or there occurs a forward split of
Share, then a number of additional Deferred Shares shall be credited to the
Participant’s Deferred Share Account as of the payment date for such dividend or
forward Share split equal to (i) the number of Deferred Shares credited to the
Account as of the record date for such dividend or split multiplied by (ii) the
number of additional Shares actually paid as a dividend or issued in such split
in respect of each Share.
     9.3 REALLOCATION OF ACCOUNTS. A Participant shall have no right to have
amounts credited as cash to the Participant’s Deferred Cash Account reallocated
or switched to his or her Deferred Share Account or amounts credited to the
Participant’s Deferred Share Account reallocated or switched to his or her
Deferred Cash Account, unless otherwise determined by the Board.
     9.4 ELECTIONS AS TO SETTLEMENT. Each Participant, while still a director of
the Company, shall file an election with the Administrator specifying the time
or times at which the Participant’s Deferral Account will be settled, following
the Participant’s termination of service as a director of the Company, and
whether distribution will be in a single lump sum or in a number of annual
installments not exceeding ten; PROVIDED, HOWEVER, that, if no valid election
has been filed as to the time of settlement of a Participant’s Deferral Account
or any portion thereof, such Deferral Account or portion thereof shall be
distributed in a single lump sum on the first business day of the year following
the year in which the Participant ceases to serve as a director. If installments
are elected, such installments must be annual installments commencing not later
than the first year following the year in which the Participant ceases to serve
as a director (on such annual installment date as may be specified by the
Administrator) and extending over a period not to exceed ten years.
     (a) MATTERS COVERED BY ELECTION. Subject to the terms of the Plan, the
Administrator shall determine whether all deferrals under the Plan must be
subject to a single election as to the time or times of settlement, or whether
settlement elections may relate to a specified sub-account (I.E., the Deferred
Share Account or the Deferred Cash Account) and/or a specified Plan Year or 409A
Plan Year. If the Administrator permits elections to relate to a specified Plan
Year or 409A Plan Year, such election shall apply to the amounts originally
credited to the specified subaccount in respect of such Plan Year or 409A Plan
Year and to any additional amounts credited as dividend equivalents or interest
in respect of such originally credited amounts and previously credited
additional amounts.
     (b) MODIFYING ELECTIONS. A Participant may modify a prior election as to
the time at which a Participant’s Deferral Account (including a specified
subaccount) will be settled at any time prior to the time the Participant ceases
to serve as a director of the Company, subject to such requirements as may be
specified by the Administrator. Such modification shall be made by filing a new
election with the Administrator. The foregoing notwithstanding, elections under
this Section 9.4 shall not be permitted, including elections which would have
the effect of advancing the time of settlement of any portion of the Deferral
Account, if permitting such an election would result in constructive receipt by
the Participant of compensation in respect of the Participant’s Deferral Account
prior to the actual settlement of such Deferral Account.
     (c) COMPLIANCE RULES FOR CODE SECTION 409A. 2005 and Later Accounts,
including any award granted under Section 7 and credited thereto but only to the
extent that such award constitutes a deferral of compensation under Code
Section 409A, shall be subject to the terms of Section 9.6 of the 2003

 

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Incentive Compensation Plan (treating such a 2005-and-Later Account as a “409A
Award”), including the following:

  •   If any distribution is triggered by a termination of service as a
director, only a separation from service within the meaning of Treasury
Regulation § 1.409A-1(h) shall qualify. For this purpose, continued service as
an employee as described in Section 11.8 shall be taken into account in
determining whether the Participant has had a separation from service.     •  
Settlement may only occur in accordance with Section 9.6(a)(iii) of the 2003
Incentive Compensation Plan, and the six-month delay rule of
Section 9.6(a)(iii)(B) will apply in accordance with its terms;     •  
Acceleration of settlement will be limited as specified in Section 9.6(a)(iv) of
the 2003 Incentive Compensation Plan;     •   Each vesting tranche of Deferred
Shares subject to a substantial risk of forfeiture (and any pro rata portion
that would vest upon a termination or other event as of December 31 of a given
year, and the remaining portion that would not so vest) will be deemed a
separate payment for purposes of Code Section 409A.     •   The provisions of
Section 9.6 of the 2003 Incentive Compensation Plan shall be further
restrictions under this Plan applicable to any right hereunder which constitutes
a deferral of compensation under Code Section 409A (excluding a grandfathered
deferral).     •   Any restriction imposed on Deferred Shares solely to ensure
compliance with Section 409A shall not be applied to a Deferred Share that is
not a deferral of compensation under Code Section 409A except to the extent
necessary to preserve the status of such Deferred Share as not a deferral under
Code Section 409A.     •   If any mandatory term required for a 2005-and-Later
Account to avoid tax penalties under Section 409A is not otherwise explicitly
provided under this Plan or other applicable documents, such term is hereby
incorporated by reference and fully applicable as though set forth at length
herein.

     9.5 ELECTION FORMS. Elections under the Plan shall be made in writing on
such form or forms as may be specified from time to time by the Administrator.
     9.6 TREATMENT OF PREDECESSOR AWARDS AND DEFERRALS. Options may be granted
under the Plan to Eligible Holders in substitution for options granted by
Predecessor, including under the DDCP. The terms of such substitute Options
shall be adjusted to the extent authorized under the applicable Predecessor plan
or agreement, and otherwise as determined to be equitable by the Board. In
addition, the Board may grant Options to Eligible Holders intended to offset any
value lost by the Eligible Holder due to the early termination of a Predecessor
option in connection with the Spin-off. In such case, the Board will determine
such value lost and the replacement value of the Options granted under the Plan
in accordance with Section 8.2(a). Deferred Shares and Deferred Cash shall be
credited to an Eligible Holder in place of like credits under the DDCP, subject
to adjustment to the terms of the Deferred Shares to the extent authorized under
the DDCP and otherwise as determined to be equitable by the Board. The interest
rate applicable to amounts of Deferred Cash so credited and deferrals of cash
under Section 8.4 prior to the Company’s first annual meeting of stockholders
shall be based on the applicable interest rate that would apply under the DDCP
assuming the meeting of Predecessor’s stockholders at which the Plan was
approved had been an annual meeting.
     9.7 STATEMENTS. The Administrator will furnish statements to each
Participant reflecting the amount credited to a Participant’s Deferral Account,
transactions therein, and other related information no less frequently than once
each calendar year.
     9.8 FRACTIONAL SHARES. The amount of Deferred Shares credited to a Deferred
Share Account shall include fractional shares calculated to at least three
decimal places.
     10. SETTLEMENT OF DEFERRAL ACCOUNTS. The Company will settle a
Participant’s Deferral Account by making one or more distributions to the
Participant (or his or her Beneficiary, following Participant’s death) at the
time or times, in a lump sum or installments, as specified in the Participant’s
election(s) filed in accordance with Section 9.4; PROVIDED, HOWEVER, that a
Deferral Account will be settled at times earlier than

 

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those specified in such election in accordance with Sections 10.2 and 10.3.
     10.1 FORM OF DISTRIBUTION. Distributions in respect of a Participant’s
Deferred Share Account shall be made only in Shares, together with cash in lieu
of any fractional share remaining at a time that less than one whole Deferred
Share is credited to such Deferred Share Account. Shares may be delivered in
certificate form to a Participant (or his or her Beneficiary) or to a nominee
for the account of the Participant (or his or her Beneficiary), or in such other
manner as the Administrator may determine. Distributions in respect of a
Participant’s Deferred Cash Account shall be made only in cash.
     10.2 DEATH. If a Participant ceases to serve as a director due to death or
dies prior to distribution of all amounts from his or her Deferral Account, the
Company shall make a single lump-sum distribution to the Participant’s
Beneficiary. Any such distribution shall be made as soon as practicable
following notification to the Company of the Participant’s death, provided that,
in the case of a 2005-and-Later Account, such distribution shall be made on the
30th day after death.
     10.3 FINANCIAL EMERGENCY AND OTHER PAYMENTS. Other provisions of the Plan
notwithstanding, if, upon the written application of a Participant, the Board
determines that the Participant has a financial emergency of such a substantial
nature and beyond the Participant’s control that payment of amounts previously
deferred under the Plan is warranted, the Board may direct the payment to the
Participant of all or a portion of the balance of a Deferral Account and the
time and manner of such payment; provided, however, that payments from the
2005-and-Later Account shall be made only in compliance with
Section 9.6(a)(iv)(A) and (v)(D) of the 2003 Incentive Compensation Plan.
     11. GENERAL PROVISIONS.
     11.1 LIMITS ON TRANSFERABILITY. Options, Deferred Shares, Restricted Stock
and all other rights under the Plan will not be transferable by a Participant
except by will or the laws of descent and distribution, or to a Beneficiary in
the event of a Participant’s death, and will not otherwise be subject to
alienation, anticipation, encumbrance, garnishment, attachment, levy, execution
or other legal or equitable process, nor subject to the debts, contracts,
liabilities or engagements, or torts of any Participant or his or her
Beneficiary. Any attempt to alienate, sell, transfer, assign, pledge, garnish,
attach or take any other action subject to legal or equitable process or
encumber or dispose of any interest in the Plan shall be void. The foregoing
notwithstanding:

  (i)   the Administrator may permit a Participant to transfer Options, Deferred
Shares, and related rights to one or more trusts, partnerships, or family
members during the lifetime of the Participant solely for estate planning
purposes, but only if and to the extent then consistent with the registration of
any offer and sale of shares related thereto on Form S-8, Form S-3, or such
other registration form of the Securities and Exchange Commission as may then be
permitted to be filed with respect to the Plan, and subject to clause
(ii) below; and     (ii)   Any amount credited to the Participant’s
2005-and-Later Account(including any award) shall be subject to the limitation
on transferability specified in Section 9.6(a)(vii) of the 2003 Incentive
Compensation Plan.

The Company may rely upon the beneficiary designation last filed in accordance
with this Section 11.1.
     11.2 ADJUSTMENTS. In the event that any large, special and non-recurring
dividend or other distribution (whether in the form of cash, Shares, or other
property), recapitalization, forward or reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase, share exchange, liquidation,
dissolution or other similar corporate transaction or event affects the Shares
such that an adjustment is determined by the Board to be appropriate in order to
prevent dilution or enlargement of a Participant’s rights under the Plan, then
the Board shall, in such manner as it may deem equitable, adjust any or all of
(i) the number and kind of Shares reserved and available for delivery under the
Plan and to be subject to Options, Deferred Shares, and Restricted Stock
thereafter granted or credited, (ii) the number of Shares subject to Options
automatically granted under any policy under Section 6.1, the number of Deferred
Shares and/or Shares of Restricted Stock automatically granted under any policy

 

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under Section 7.1, and the maximum number of Shares that may be subject to
Options granted to a director in a single year under Section 6, (iii) the number
and kind of Shares deliverable upon exercise of outstanding Options, and the
exercise price per share thereof (provided that no fractional shares will be
delivered upon exercise of any Option), (iv) the number and kind of Shares to be
delivered upon settlement of outstanding Deferred Shares (taking into account
any Deferred Shares credited as dividend equivalents under Section 9.2), and
(v) the number and kind of shares outstanding as Restricted Stock. Upon the
occurrence of an event constituting an “equity restructuring” as defined under
Statement of Financial Accounting Standards No. 123R with respect to Shares,
each Participant shall have a legal right to the equitable adjustment to
Options, Deferred Shares and Restricted Stock (including Deferred Shares
credited to his or her Deferral Account), with the manner of such adjustment to
be determined by the Board.
     11.3 RECEIPT AND RELEASE. Payments (in any form) to any Participant or
Beneficiary in accordance with the provisions of the Plan shall, to the extent
thereof, be in full satisfaction of all claims for the compensation deferred and
relating to the Deferral Account to which the payments relate against the
Company, the Board, or the Administrator, and the Administrator may require such
Participant or Beneficiary, as a condition to such payments, to execute a
receipt and release to such effect. In the case of any payment under the Plan of
less than all amounts then credited to a Deferral Account in the form of
Deferred Shares, the amounts paid shall be deemed to relate to the Deferred
Shares credited to the Account at the earliest time.
     11.4 COMPLIANCE. The Company shall have no obligation to settle any
Deferral Account of a Participant (in any form) until all legal and contractual
obligations of the Company relating to establishment of the Plan and such
settlement shall have been complied with in full. In addition, the Company shall
impose such restrictions on Shares delivered to a Participant hereunder and any
other interest constituting a security as it may deem advisable in order to
comply with the Securities Act of 1933, as amended, the requirements of the New
York Stock Exchange or any other stock exchange or automated quotation system
upon which the Shares are then listed or quoted, any state securities laws
applicable to such a transfer, any provision of the Company’s Certificate of
Incorporation or By-laws, or any other law, regulation, or binding contract to
which the Company is a party.
     11.5 CHANGES TO THE PLAN AND AWARDS. The Board may amend, suspend,
discontinue, or terminate the Plan or the authority to grant awards under the
Plan without the consent of stockholders or Participants, except that any
amendment shall be subject to the approval of the Company’s stockholders at or
before the next annual meeting of stockholders for which the record date is
after the date of such Board action if such stockholder approval is required by
any federal or state law or regulation or the rules of any stock exchange or
automated quotation system on which the Shares may then be listed or quoted, and
the Board may otherwise, in its discretion, determine to submit other such
amendments to stockholders for approval; PROVIDED, HOWEVER, that, without the
consent of an affected Participant, no such action may materially impair the
rights of such Participant under any award theretofore granted. The Committee
may amend, suspend, discontinue, or terminate any award theretofore granted and
any award agreement relating thereto; PROVIDED, HOWEVER, that no such amendment
may reduce the exercise price of an outstanding Option (except as authorized
under Section 11.2) or provide for award terms that the Plan would not then
permit for a newly granted award; and PROVIDED FURTHER, that, without the
consent of an affected Participant, no such action may materially impair the
rights of such Participant under such award. The foregoing notwithstanding, the
Board may, in its sole discretion, terminate the Plan (in whole or in part) and,
and may distribute to any Participant (in whole or in part, and whether or not
in connection with a termination of the Plan) the amounts credited to the
Participant’s Deferral Account.
     11.6 UNFUNDED STATUS OF PLAN; CREATION OF TRUSTS. The Plan is intended to
constitute an “unfunded” plan for deferred compensation and Participants shall
rely solely on the unsecured promise of the Company for payment hereunder. With
respect to any payment not yet made to a Participant under the Plan, nothing
contained in the Plan shall give a Participant any rights that are greater than
those of a general unsecured creditor of the Company; PROVIDED, HOWEVER, that
the Board may authorize the creation of trusts or make other arrangements to
meet the Company’s obligations under the Plan, which trusts or other
arrangements shall be consistent with the “unfunded” status of the Plan unless
the Board otherwise determines with the consent of each affected Participant.
The establishment and maintenance of, or allocations and credits to, the
Deferral Account of any Participant shall not vest in any Participant any right,
title or interest in and to any Plan assets or benefits except at the time or
times and upon the terms and conditions and to the extent expressly set forth in
the Plan and in accordance with the terms of any trust.

 

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     11.7 OTHER PARTICIPANT RIGHTS. No Participant shall have any of the rights
or privileges of a stockholder of the Company under the Plan, including as a
result of the grant of an Option or crediting of Deferred Shares or other
amounts to a Deferral Account, or the creation of any Trust and deposit of
Shares therein, except at such time as such Option may have been duly exercised
or Shares may be actually delivered in settlement of a Deferral Account, except
that a Participant granted Restricted Stock shall have rights of a stockholder
except to the extent that those rights are limited by the terms of the Plan and
the agreement relating to the Restricted Stock. No provision of the Plan,
document relating to the Plan, or transaction hereunder shall confer upon any
Participant any right to continue to serve as a director of the Company or in
any other capacity with the Company or a subsidiary or to be nominated for
reelection as a director, or interfere in any way with the right of the Company
to increase or decrease the amount of any compensation payable to such
Participant. Subject to the limitations set forth in Section 11.1, the Plan
shall inure to the benefit of, and be binding upon, the parties hereto and their
successors and assigns.
     11.8 CONTINUED SERVICE AS AN EMPLOYEE. If a Participant ceases to serve as
a director and, immediately thereafter, is employed by the Company or any
subsidiary, then such Participant will not be deemed to have ceased to serve as
a director or as chair or as a member of a Board committee at that time, and his
or her continued employment by the Company or any subsidiary will be deemed to
be continued service as a director or chair or a member of a Board committee;
PROVIDED, HOWEVER, that, for purposes of Section 5, such former director will
not be deemed to be a non-employee director eligible for further grants of
awards.
     11.9 GOVERNING LAW. The validity, construction, and effect of the Plan, any
rules and regulations under the Plan, and any agreement under the Plan will be
determined in accordance with the Delaware General Corporation Law and other
laws (including those governing contracts) of the State of Delaware, without
giving effect to principles of conflicts of laws, and applicable federal law.
     11.10 LIMITATION. A Participant and his or her Beneficiary shall assume all
risk in connection with any decrease in value of Options or a Deferral Account
and neither the Company, the Board nor the Administrator shall be liable or
responsible therefor.
     11.11 CONSTRUCTION. The captions and numbers preceding the sections of the
Plan are included solely as a matter of convenience of reference and are not to
be taken as limiting or extending the meaning of any of the terms and provisions
of the Plan. Whenever appropriate, words used in the singular shall include the
plural or the plural may be read as the singular.
     11.12 SEVERABILITY. In the event that any provision of the Plan shall be
declared illegal or invalid for any reason, said illegality or invalidity shall
not affect the remaining provisions of the Plan but shall be fully severable,
and the Plan shall be construed and enforced as if said illegal or invalid
provision had never been inserted herein.
     11.13 NONEXCLUSIVITY OF THE PLAN. The adoption of the Plan by the Board
shall not be construed as creating any limitation on the power of the Board to
adopt such other compensatory arrangements for directors as it may deem
desirable.
     11.14 EFFECTIVE DATE, STOCKHOLDER APPROVAL, AND PLAN TERMINATION. The Plan
shall become effective on April 20, 1999. Unless earlier terminated by action of
the Board, the Plan will remain in effect until such time as no Shares remain
available for delivery under the Plan and the Company has no further rights or
obligations under the Plan with respect to outstanding Options or other awards
under the Plan.