Exhibit 10.28

 

 

HILTON HOTELS
2005 EXECUTIVE DEFERRED COMPENSATION PLAN

 

(As Amended and Restated Effective as of January 1, 2005)

 

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HILTON HOTELS

EXECUTIVE DEFERRED COMPENSATION PLAN

 

TABLE OF CONTENTS

 

 

Page

 

 

ARTICLE I TITLE AND DEFINITIONS

1

 

 

1.1 – Title

1

 

 

1.2 - Definitions

1

 

 

ARTICLE II PARTICIPATION

6

 

 

ARTICLE III DEFERRAL ELECTIONS

7

 

 

3.1 - Elections to Defer Compensation

7

 

 

3.2 – Distribution Elections

9

 

 

3.3 - Investment Elections

12

 

 

3.4 – Subsequent Elections

13

 

 

3.5 – Cancellation of Elections

14

 

 

3.6 – New Payment Elections

14

 

 

ARTICLE IV DISTRIBUTION OPTION ACCOUNTS

15

 

 

4.1 - Compensation Deferrals

15

 

 

4.2 - Company Contribution

15

 

 

4.3 - Investment Return

17

 

 

ARTICLE V VESTING

17

 

 

5.1 - Compensation Deferral

17

 

 

5.2 - Company Contribution

17

 

 

ARTICLE VI DISTRIBUTIONS

18

 

 

6.1 – Form and Timing of Distribution

18

 

 

6.2 – Small Benefit Cashout

19

 

 

6.3 – Payout

20

 

 

6.4 – Distributions to Key Employees

21

 

 

6.5 – Financial Hardship of Participant

21

 

 

6.6 – Permissible Distribution Event

22

 

 

6.7 - Payment by Trust

22

 

 

6.8 - Inability to Locate Participant

23

 

 

ARTICLE VII CHANGE IN CONTROL

23

 

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Page

 

 

ARTICLE VIII DEATH BENEFITS

24

 

 

ARTICLE IX CLAIMS PROCEDURES

24

 

 

9.1 – Claims

24

 

 

9.2 – Appeal

24

 

 

9.3 – Authority

25

 

 

ARTICLE X ADMINISTRATION

26

 

 

10.1 - Committee

26

 

 

10.2 - Committee Action

26

 

 

10.3 - Powers and Duties of the Committee

26

 

 

10.4 - Construction and Interpretation

27

 

 

10.5 - Information

28

 

 

10.6 - Compensation, Expenses and Indemnity

28

 

 

10.7 - Quarterly Statements

29

 

 

ARTICLE XI MISCELLANEOUS

29

 

 

11.1 - Unsecured General Creditor

29

 

 

11.2 - Restriction Against Assignment

29

 

 

11.3 - Withholding

30

 

 

11.4 - Amendment, Modification, Suspension or Termination

30

 

 

11.5 - Governing Law

31

 

 

11.6 - Receipt or Release

31

 

 

11.7 - Payments on Behalf of Persons Under Incapacity

31

 

 

11.8 - Headings

31

 

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HILTON HOTELS

 

2005 EXECUTIVE DEFERRED COMPENSATION PLAN

 

WHEREAS, Hilton Hotels Corporation (the “Company”) hereby establishes a deferred
compensation plan (the “Plan”), effective as of November 12, 2004 for deferrals
with respect to Compensation (as defined below) to be earned or to be otherwise
paid on or after January 1, 2005, to provide supplemental retirement income
benefits for a select group of management and highly compensated employees
through deferrals of base salary and bonus compensation and Company
contributions.

 

NOW, THEREFORE, the Plan is hereby established, on the terms and conditions
hereinafter set forth:

 

ARTICLE I
TITLE AND DEFINITIONS

 

1.1 – Title.

 

This Plan shall be known as the Hilton Hotels 2005 Executive Deferred
Compensation Plan.

 

1.2 - Definitions.

 

Whenever the following words and phrases are used in this Plan, with the first
letter capitalized, they shall have the meanings specified below.

 

“Base Salary Deferral” shall mean that portion of Base Salary as to which an
Eligible Employee has made an irrevocable election to defer receipt of until the
date specified under the In-Service Distribution Option and/or as otherwise
specified under this Plan.

 

“Beneficiary” or “Beneficiaries” shall mean the person or persons, including a
trustee, personal representative or other fiduciary, last designated in writing
by a Participant in accordance with procedures established by the Committee to
receive all of the benefits specified

 

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hereunder in the event of the Participant’s death. No Beneficiary designation
shall become effective until it is filed with the Committee. If there is no
Beneficiary designation in effect, or if there is no surviving designated
Beneficiary, then the Participant’s surviving spouse shall be the Beneficiary.
If there is no surviving spouse to receive any benefits payable in accordance
with the preceding sentence, the duly appointed and currently acting personal
representative of the Participant’s estate (which shall include either the
Participant’s probate estate or living trust) shall be the Beneficiary. In any
case where there is no such personal representative of the Participant’s estate
duly appointed and acting in that capacity within 90 days after the
Participant’s death (or such extended period as the Committee determines is
reasonably necessary to allow such personal representative to be appointed, but
not to exceed 180 days after the Participant’s death), then Beneficiary shall
mean the person or persons who can verify by affidavit or court order to the
satisfaction of the Committee that they are legally entitled to receive the
benefits specified hereunder. In the event any amount is payable under the Plan
to a minor, payment shall not be made to the minor, but instead be paid (i) to
that person’s living parent(s) to act as custodian, (ii) if that person’s
parents are then divorced, and one parent is the sole custodial parent, to such
custodial parent, or (iii) if no parent of that person is then living, to a
custodian selected by the Committee to hold the funds for the minor under the
Uniform Transfers or Gifts to Minors Act in effect in the jurisdiction in which
the minor resides. If no parent is living and the Committee decides not to
select another custodian to hold the funds for the minor, then payment shall be
made to the duly appointed and currently acting guardian of the estate for the
minor or, if no guardian of the estate for the minor is duly appointed and
currently acting within 60 days after the date the amount becomes payable,
payment shall be deposited with the court having jurisdiction over the estate of
the minor.

 

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“Board” shall mean the Board of Directors of Hilton Hotels Corporation.

 

“Bonus Compensation Deferral” shall mean that portion of Bonus Compensation as
to which an Eligible Employee has made an irrevocable election to defer receipt
of until the date specified under the In-Service Distribution Option and/or as
otherwise specified under this Plan.

 

“Change in Control” shall have the same meaning ascribed to the term “change in
control” under the Treasury regulations to be issued under section 409A of the
Code.

 

“Code” shall mean the Internal Revenue Code of 1986, as amended.

 

“Committee” shall mean the Committee appointed by the Board to administer the
Plan in accordance with Article X, or its delegate.

 

“Company” shall mean Hilton Hotels Corporation, any successor corporation and
each corporation which is a member of a controlled group of corporations (within
the meaning of section 414(b) of the Code) of which Hilton Hotels Corporation is
a component member.

 

“Company Contribution” shall equal the amount described in Section 4.2.

 

“Compensation” shall mean the total salary paid to the Eligible Employee,
including cash bonuses, in a Plan Year. An Eligible Employee’s “Compensation”
shall consist of the Eligible Employee’s “Base Salary” as in effect from time to
time during a Plan Year and the Eligible Employee’s “Bonus Compensation” which
shall equal the amount of any cash incentive to be paid to an Eligible Employee
under an incentive plan maintained by the Company and, effective January 1,
2006, any other cash bonus of any kind.

 

“Compensation Deferral” means that portion of Compensation as to which a
Participant has made an irrevocable election to defer receipt until the date
specified under the In-Service Distribution Option and/or as otherwise specified
under this Plan.

 

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“Disabled” or “Disability” shall mean that a Participant is disabled due to
sickness or injury which qualifies the Participant for disability payments under
the Company’s long term disability plan. A Participant shall be considered
totally and permanently disabled on the date he qualifies for such long term
disability payments.

 

“Distribution Option” shall mean the two distribution options which are
available under the Plan, consisting of the Separation Distribution Option and
the In-Service Distribution Option.

 

“Distribution Option Account” or “Accounts” shall mean, with respect to a
Participant, the Separation Distribution Account and/or the In-Service
Distribution Account(s) established on the books of account of the Company,
pursuant to Article IV, for each Participant.

 

“Effective Date” shall mean November 12, 2004.

 

“Eligible Employee” shall mean (i) officers of Hilton Hotels Corporation at the
Vice President level or higher, (ii) hotel managers who are employed by the
Company and selected by the Committee to participate in the Plan pursuant to
Article II, or (iii) Highly Compensated Employees who are selected by the
Committee to participate in the Plan pursuant to Article II.

 

“Enrollment Agreement” shall mean the authorization form which an Eligible
Employee files with the Committee to participate in the Plan.

 

“Fund” or “Funds” shall mean one or more of the investments selected by the
Committee pursuant to Section 3.3(a).

 

“Highly Compensated Employee” shall mean an employee of the Company who the
Committee, in its discretion, anticipates will receive Compensation in excess of
the salary limitation contained in section 401(a)(17) of the Code for the
applicable Plan Year or who the Committee otherwise determines to be a highly
compensated employee or member of a select group of management within the
meaning of Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA.

 

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“In-Service Distribution Account or Accounts” shall mean the Account(s)
maintained for a Participant to which Compensation Deferrals and Company
Contributions are credited pursuant to the In-Service Distribution Option.

 

“In-Service Distribution Option” shall mean the Distribution Option pursuant to
which benefits are payable in accordance with Article VI.

 

“Investment Return” shall mean, for each Fund, an amount equal to the net
investment performance of such Fund on a given day, as determined by the
Committee.

 

“Key Employee” shall mean (i) officers of the Company having annual compensation
greater than $130,000 (adjusted for inflation and limited to 50 employees),
(ii) five percent owners, and (iii) one percent owners having annual
compensation from the employer greater than $150,000, all as determined by the
Committee in a manner consistent with the regulations issues under section 409A
of the Code.

 

“Participant” shall mean any Eligible Employee who elects to defer Compensation
in accordance with Section 3.1.

 

“Plan” shall mean the Hilton Hotels 2005 Executive Deferred Compensation Plan
set forth herein, in effect as of the Effective Date, or as amended from time to
time.

 

“Plan Year” shall mean the 12 consecutive month period beginning on a January 1.

 

“Prior Plan” shall mean the Hilton Hotels Executive Deferred Compensation Plan,
as amended.

 

“Retirement” shall mean a Participant’s Separation from Service (for reasons
other than death) on or after the combination of the Participant’s age and Years
of Vesting Service equals at least 55.

 

“Separation Date” shall mean the date a Participant incurs a Separation from
Service.

 

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“Separation Distribution Account” shall mean the Account maintained for a
Participant to which Compensation Deferrals and Company Contributions are
credited pursuant to the Separation Distribution Option.

 

“Separation Distribution Option” shall mean the Distribution Option pursuant to
which benefits are payable in accordance with Article VI.

 

“Separation from Service” shall mean a Participant’s separation from service
with the Company within the meaning of section 409A of the Code and the
regulations issued thereunder.

 

“Unvested Company Contribution” shall mean that portion of the Company
Contributions (as defined in the Prior Plan) credited to a participant under the
Prior Plan that are not earned and vested for purposes of Section 409A of the
Code as of December 31, 2004.

 

“Year of Vesting Service” shall mean a “Year of Vesting Service” as defined in
the Hilton Hotels 401(k) Savings Plan.

 

ARTICLE II
PARTICIPATION

 

Prior to December 31 of each Plan Year, the Committee shall designate which
hotel managers and which Highly Compensated Employees shall become Eligible
Employees for the following Plan Year. An Eligible Employee designated as a
Participant shall thereafter, unless otherwise determined by the Committee, be
eligible to make a Compensation Deferral for each Plan Year. Participation in
the Plan shall be made conditional upon an Eligible Employee’s acknowledgement,
in writing or by making a deferral election under the Plan, that all decisions
and determinations of the Committee shall be final and binding on the
Participant, his or her beneficiaries and any other person having or claiming an
interest under the Plan.

 

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ARTICLE III
DEFERRAL ELECTIONS

 

3.1 - Elections to Defer Compensation.

 

(a)                                  Each Eligible Employee may elect to make a
Compensation Deferral by filing with the Committee an election that conforms to
the requirements set forth in this Article III, on an Enrollment Agreement
provided by the Committee, no later than December 31 of the Plan Year preceding
the Plan Year for which the Compensation is to be earned and specifying whether
the Participant elects a Base Salary Deferral or a Bonus Compensation Deferral
or a combination, the Distribution Option Accounts to which such amounts will be
credited, the form and timing of distribution and such other information as the
Committee shall require.

 

                (i)                                     Notwithstanding
(a) above, if an Eligible Employee’s Bonus Compensation is “performance-based
compensation” as contemplated by section 409A of the Code and related
regulations, the Committee may allow the Eligible Employee to elect to defer all
or a portion of his Bonus Compensation for a Plan Year at a time determined by
the Committee, which may be no less than six months before the end of the
applicable Plan Year in which such Bonus Compensation is to be earned.

 

                (ii)                                  The Eligible Employee
shall elect to allocate his or her Compensation Deferrals (and any Company
Contributions that may be credited with respect thereto) between the
Distribution Options in whole percentage increments; provided that 100 percent
of such Deferrals (and Company Contributions) may be allocated to one or the
other of the Distribution Options.

 

                (iii)                               The Committee may establish
minimum or maximum amounts that may be deferred under this Section and
may change such standards from time to time. Any such limits shall be
communicated by the Committee to the Plan Administrator and by the Plan

 

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Administrator to the Participants prior to the commencement of a Plan Year. No
Participant may have more than one Separation Distribution Account.

 

(b)                                 Notwithstanding anything herein to the
contrary, no Eligible Employee shall be permitted to defer Compensation which
the Committee reasonably determines is required to pay the Eligible Employee’s
portion of payroll taxes and contributions towards benefits (including, but not
limited to, medical, life, dental and disability) provided to the Eligible
Employee and his or her dependents.

 

(c)                                  Any Compensation Deferral made under
Section 3.1(a) above shall remain in effect and be irrevocable, notwithstanding
any change in a Participant’s Compensation, for the entire Plan Year for which
it is effective and for all subsequent Plan Years unless the Participant files a
new Enrollment Agreement changing his or her Compensation Deferral election for
a subsequent Plan Year in accordance with Section 3.1(a) above. If a Participant
elects to allocate all or a portion of his Compensation Deferrals to an
In-Service Distribution Account, that election will remain effective only for
the Plan Year to which the Enrollment Agreement relates. If the Participant does
not elect an in-service distribution date for deferrals to the In-Service
Distribution Account in a subsequent Plan Year, such deferrals shall
automatically be allocated to the Participant’s Separation Distribution Account.
Compensation Deferral elections shall be made on an Enrollment Agreement filed
with the Committee by December 31 of a Plan Year (or such earlier date as may be
designated by the Committee) to make a Compensation Deferral for Compensation to
be earned on or after January 1 of the immediately following Plan Year.

 

(d)                                 The Committee may, in its discretion, permit
Employees who first become Eligible Employees after the beginning of a Plan
Year, including Employees who become Eligible Employees because they are
promoted or hired by the Company on or after January 1 of

 

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a Plan Year to a position of Vice President or as a hotel manager designated by
the Committee as an Eligible Employee, to enroll in the Plan for that Plan Year
by filing a completed and fully executed Enrollment Agreement as soon as
practicable following the date the Employee becomes an Eligible Employee but, in
any event, within 30 days after such date. Notwithstanding the foregoing,
however, any Enrollment Agreement executed by an Eligible Employee, pursuant to
this Section, to make a Compensation Deferral shall apply only to Compensation
earned by the Eligible Employee after the date on which such Enrollment
Agreement is filed.

 

(e)                                  All deferral elections under the Plan shall
be made in accordance with section 409A of the Code, and the regulations
thereunder.

 

3.2 – Distribution Elections.

 

Subject to Section 3.4, in the Enrollment Agreement, each Eligible Employee
shall select the form and the timing of payment with respect to the Eligible
Employee’s Compensation Deferral. An Eligible Employee’s deferral election under
this Article III shall not be effective unless and until the Eligible Employee
makes the required distribution elections under this Section 3.2. Each Eligible
Employee shall make the following form and timing of payment elections:

 

(a)                                  Retirement. An Eligible Employee shall
elect the form of payment in which amounts credited to the Eligible Employee’s
Distribution Option Accounts shall be paid where (i) the Eligible Employee’s
Separation Date occurs on or after eligibility for Retirement and (ii) the
amount to be distributed from all of the Eligible Employee’s Distribution Option
Accounts exceeds $100,000 (taking into account all deferrals made to all of the
Eligible Employee’s Distribution Option Accounts). The Eligible Employee
may elect a lump sum, or quarterly, semi-annual or annual installments payable
over 5, 10, 15 or 20 years. This form of payment

 

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election shall apply to all Compensation Deferrals credited on behalf of the
Eligible Employee to his Separation Distribution Account in any Plan Year in
which the Eligible Employee makes Compensation Deferrals under this Plan,
subject to change only in accordance with Section 3.4 below. In the event the
amount to be distributed from a Participant’s Distribution Option Accounts upon
a Separation from Service after eligibility for Retirement does not exceed
$100,000 (taking into account all deferrals made to all of the Eligible
Employee’s Distribution Option Accounts) as determined under Section 6.2, the
Participant’s Distribution Option Accounts shall be paid in a lump sum in
accordance with Section 6.2 without regard to the Participant’s actual form of
payment election.

 

(b)                                 In-Service Distribution. An Eligible
Employee shall elect (i) the form of payment in which amounts credited to the
Eligible Employee’s In-Service Distribution Account, if applicable, shall be
paid where the amount to be distributed exceeds $25,000 and (ii) the Plan Year
in which such payment shall commence; provided that the Plan Year selected in
(ii) may not be prior to the third Plan Year following the Plan Year in which
the Compensation Deferral is made, except as permitted under Section 3.6. The
Eligible Employee may elect a lump sum, or quarterly, semi-annual or annual
installments payable over 2, 3, 4 or 5 years. This election shall apply only to
the Compensation Deferrals credited on behalf of the Eligible Employee to the
In-Service Distribution Account created pursuant to the Enrollment Form to which
such Compensation Deferrals relate, except to the extent changed pursuant to a
subsequent election in accordance with Section 3.4 below. In the event the
amount to be distributed from a Participant’s In-Service Distribution Account
does not exceed $25,000 as of the applicable distribution date, the
Participant’s In-Service Distribution Account shall be paid in a lump sum in
accordance with Section 6.2 without regard to the Participant’s actual form of
payment

 

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election(s). If a Participant incurs a Separation from Service prior to the
in-service distribution date elected by the Participant with respect to the
Participant’s In-Service Distribution Account, the Participant’s distribution
election with respect to such In-Service Distribution Account shall become
invalid and distribution shall instead be made in accordance with the
Participant’s elections under Sections 3.2(a), 3.2(c) or 3.4, as applicable.

 

(c)                                  Separation from Service.

 

An Eligible Employee shall elect the form of payment in which amounts credited
to the Eligible Employee’s Separation Distribution Account, if applicable, shall
be paid where (i) the Eligible Employee’s Separation Date occurs prior to
eligibility for Retirement, and (ii) the amount to be distributed from all of
the Eligible Employee’s Distribution Option Accounts exceeds $100,000 (taking
into account all deferrals made to all of the Eligible Employee’s Distribution
Option Accounts). The Eligible Employee may elect a lump sum, or annual
installments payable over 5 years. This election shall apply to all Compensation
Deferrals credited on behalf of the Eligible Employee to his Separation
Distribution Account in any Plan Year in which Compensation Deferrals are made
under this Plan., subject to change only in accordance with Section 3.4 below.
In the event the amount to be distributed from a Participant’s Distribution
Option Accounts upon a Separation from Service before eligibility for Retirement
does not exceed $100,000 (taking into account all deferrals made to all of the
Eligible Employee’s Distribution Option Accounts) as determined under
Section 6.2, the Participant’s Distribution Option Accounts shall be paid in a
lump sum in accordance with Section 6.2 without regard to the Participant’s
actual form of payment election.

 

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3.3 - Investment Elections.

 

(a)                                  At the time of making the deferral
elections described in Section 3.1 and the distribution elections described in
Section 3.2, the Participant shall designate, in a manner prescribed by the
Committee, which Funds the Participant’s Accounts will be deemed to be invested
in for purposes of determining the Investment Return to be credited to those
Accounts. The Funds shall be as selected by the Committee from time to time and
the Committee may add, change, or delete Funds at any time. In making the
designation pursuant to this Section 3.3, the Participant may specify that all
or any whole percentage of his Accounts be deemed to be invested in one or more
of the Funds. A Participant may change the designation made under this
Section 3.3, in a manner prescribed by the Committee, on any business day. Such
change shall be effective as soon as administratively feasible after it is
received.

 

(b)                                 If a Participant fails to elect a type of
Fund under this Section 3.3, he or she shall be deemed to have elected an S & P
500 Index Fund (or, if no such Fund exists, the Fund designated by the
Committee).

 

(c)                                  Although the Participant may designate the
Funds according to Section 3.3(a) above, the Committee shall select from time to
time, in its sole discretion, for each of the Funds described in
Section 3.3(a) above, a commercially available mutual fund or contract or an
investment fund established with and administered by an investment manager
selected by the Committee. The Investment Return of each such commercially
available mutual fund, contract or investment fund shall be used to determine
the amount of earnings to be credited to Participants’ Accounts under Article IV
although nothing set forth in this Plan shall require an actual investment of
monies in any such mutual fund or in any other Fund designated as a deemed
investment vehicle for Compensation Deferrals.

 

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3.4 – Subsequent Elections.

 

The Committee may establish rules allowing a Participant to make a subsequent
election to postpone payment of Compensation Deferrals under his In-Service
Distribution Account(s) and/or his Separation Distribution Account, in
accordance with the rules in this Section 3.4; provided that any such subsequent
election shall be made in accordance with the requirements of section 409A of
the Code and the regulations thereunder and that no subsequent election
may result in an impermissible acceleration of payment as described in
section 409A of the Code and the regulations thereunder. The following
rules shall apply to subsequent elections under the Plan:

 

(a)                                  With respect to Compensation Deferrals
under an In-Service Distribution Account, a Participant may make a subsequent
election to defer the payment to a later Plan Year or to change the form of
payment applicable to such In-Service Distribution Account; provided that
(i) the subsequent election must be made at least 12 months prior to the
January in which the first scheduled payment was to occur, (ii) the subsequent
election may not take effect until at least 12 months after the date on which
the election is made, and (iii) except with respect to an election related to
payment upon an unforeseeable emergency, the first payment with respect to which
such election is made must be deferred for a period of not less than five years
from the date such payment would otherwise have been made.

 

(b)                                 A Participant may make a subsequent election
to change the form or time at which Compensation Deferrals credited to a
Participant’s Separation Distribution Account will be paid, provided that
(i) the subsequent election may not take effect until at least 12 months after
the date on which the election is made, and (ii) except with respect to an
election related to payment upon an unforeseeable emergency or death, the first
payment with respect to which

 

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such election is made must be deferred for a period of five years from the date
such payment would have otherwise have been made. Participants shall be
permitted to make only one subsequent election to change the form or time of
payment of their Separation Distribution Account, excluding any changes made
pursuant to Section 3.6. .

 

3.5 - Cancellation of Elections.

 

To the extent permitted under Section 409A of the Code and the regulations
issued thereunder, the Committee may permit Participants during all or part of
calendar year 2005 to cancel their deferral elections, in whole or in part, with
respect to any amounts deferred under this Plan on or after January 1, 2005, on
such terms as shall be determined by the Committee. If a deferral election is
cancelled, the full amount of the distribution shall be included in the
Participant’s income in calendar year 2005, or if later, the Participant’s
taxable year in which the amount is earned and vested.

 

3.6 - New Payment Elections.

 

To the extent permitted under Section 409A of the Code and the regulations
issued thereunder, the Committee may permit Participants to make new payment
elections on or before December 31, 2006 with respect to the time and/or form of
payment of amounts deferred hereunder on or after January 1, 2005, on such terms
as shall be determined by the Committee, provided that a Participant shall not
be permitted in calendar year 2006 (i) to change payment elections with respect
to amounts that the Participant would otherwise receive in 2006 or (ii) to cause
payments to be made in 2006.

 

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ARTICLE IV
DISTRIBUTION OPTION ACCOUNTS

 

4.1 - Compensation Deferrals.

 

The Committee shall establish and maintain separate Distribution Option Accounts
with respect to a Participant. A Participant’s Distribution Option Accounts
may consist of a Separation Distribution Account and/or one or more In-Service
Distribution Account(s), as elected by the Participant. Each Participant’s
Distribution Option Accounts shall be further divided into separate subaccounts
(“subaccounts”), each of which corresponds to a Fund elected by the Participant
pursuant to Section 3.3(a). A Participant’s Distribution Option Account shall be
credited as follows:

 

As soon as practicable after the end of each calendar month, the Committee shall
credit the subaccounts of the Participant’s Distribution Option Account with an
amount equal to the Base Salary and/or Bonus Compensation that would otherwise
have been earned for such calendar month in accordance with the Distribution
Option irrevocably elected by the Participant in the Enrollment Agreement and in
accordance with the Participant’s investment elections under Section 3.3(a). Any
amount once taken into account as Base Salary and/or Bonus Compensation for
purposes of this Plan shall not be taken into account thereafter. The
Participant’s Distribution Option Accounts shall be reduced by the amount of
payments made by the Company to the Participant or the Participant’s Beneficiary
pursuant to this Plan.

 

4.2 - Company Contribution.

 

A Participant’s Distribution Option Account shall be further credited with the
Company Contribution for that Participant as follows:

 

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(a)                                  As soon as practicable after the end of
each calendar month, the Committee shall credit the subaccounts of the
Participant’s Distribution Option Account with an amount equal to the portion of
the Company Contribution, if any, which the Participant elected to be deemed to
be invested in a certain type of Fund. A Participant’s Company Contribution for
any payroll period shall be equal to 50% of the Compensation Deferral by the
Participant during such payroll period in accordance with the Participant’s
election under Section 3.1(a), disregarding any such deferral in excess of 10%
of the Participant’s Compensation for such payroll period. Company
Contributions, when credited, are credited to the Distribution Option Accounts
in the same proportion as the Base Salary and/or Bonus Compensation they match;

 

(b)                                 As of the last day of each month,
forfeitures that occur under Section 5.2 during such month shall be returned to
the Company for its unrestricted use; and

 

(c)                                  Notwithstanding Sections 4.2(a) and
(b) above, from time-to-time and in its sole discretion, the Board may provide
that additional Company Contributions be credited to some or all Participants,
according to the terms and conditions determined by the Board.

 

(d)                                 Effective as of January 1, 2005, all
Unvested Company Contributions under the Prior Plan shall be credited to this
Plan and shall be governed by the terms and provisions of this Plan in all
respects. Whether or not an employee is a Participant in this Plan, the value of
the employee’s Unvested Company Contributions, as of December 31, 2004, shall be
credited to a Separation Distribution Account under this Plan, effective as of
January 1, 2005. If the employee is not a Participant in this Plan, the employee
shall be required to make the distribution elections required under Sections
3.2(a) and 3.2(c) with respect to such amount no later than December 31, 2005.
If the employee is a Participant in this Plan, such amount shall

 

16

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automatically become subject to the Participant’s distribution elections under
Sections 3.2 and 3.4 for the Participant’s Separation Distribution Account.

 

4.3 - Investment Return.

 

Each subaccount of a Participant’s Distribution Option Account shall, as of each
business day, be credited with earnings and debited with losses in an amount
equal to that determined by multiplying the balance credited to such subaccount
as of the previous day by the Investment Return for the corresponding Fund
pursuant to Section 3.3(a).

 

ARTICLE V
VESTING

 

5.1 - Compensation Deferral.

 

A Participant’s Compensation Deferral credited to his or her Distribution Option
Account shall be 100% vested at all times.

 

5.2 - Company Contribution.

 

(a)                                  All Company Contributions credited to a
Participant’s Distribution Option Account shall become nonforfeitable in the
following increments:  (i) 25% upon the Participant’s completion of two Years of
Vesting Service, (ii) an additional 25% (50% total) upon completion of three
Years of Vesting Service, (iii) an additional 25% (75% total) upon completion of
four Years of Vesting Service, and (iv) the Distribution Option Account balance
shall be fully nonforfeitable in its entirety on and after the Participant’s
completion of five Years of Vesting Service.

 

(b)                                 Notwithstanding Section 5.2(a) above, a
Participant’s Distribution Option Account balance shall be fully nonforfeitable
in its entirety should:  (i) the Participant die while providing service to the
Company, (ii) the Participant become Disabled while providing service to the
Company, or (iii) there occur a Change in Control.

 

17

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(c)                                  When a Participant incurs a Separation
Date, the portion of the Company Contribution credited to his or her
Distribution Option Account which is not vested shall immediately be forever
forfeited to the Company, and the Company shall have no obligation to the
Participant (or Beneficiary) with respect to such forfeited amount.

 

ARTICLE VI
DISTRIBUTIONS

 

6.1 – Form and Timing of Distribution.

 

(a)                                  Subject to Section 6.2, in the case of a
Participant whose Separation Date occurs on or after eligibility for Retirement
and the vested portion of the Participant’s Separation Distribution Account
exceeds $100,000 (taking into account all deferrals made to the Participant’s
Separation Distribution Account), the Participant’s Separation Distribution
Account shall be distributed in the form elected by the Participant pursuant to
Sections 3.2 and 3.4, as applicable, and shall be paid, or commence to be paid,
as soon as reasonably practicable following the end of the twelfth full calendar
month after the Participant has a Separation from Service, unless payment is
deferred pursuant to Section 3.4.

 

(b)                                 Subject to Section 6.2 and to (i) and
(ii) below, in the case of a Participant who continues to provide service to the
Company and the vested portion of a Participant’s In-Service Distribution
Account exceeds $25,000 (applied on an Account by Account basis), the vested
portion of the Participant’s In-Service Distribution Account shall be paid to
the Participant as soon as reasonable practicable following the date elected by
the Participant pursuant to Sections 3.2 and 3.4, as applicable; provided that
if the amount to be distributed does not exceed $25,000, distribution shall be
made in a lump sum in accordance with Section 6.2.

 

18

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(i)                                     If the Participant is not fully vested
when the In-Service Distribution Account is to be paid, the non-vested portion
at the date of first payment will automatically be transferred to the
Participant’s Separation Distribution Account.

 

(ii)                                  If the Participant incurs a Separation
from Service after distribution has commenced in accordance with this
Section 6.1(b) but prior to the date on which the Participant’s In-Service
Distribution Account(s) is fully distributed, distribution of the remaining
amounts shall be governed by the Participant’s distribution elections under
Section 3.2(a) or 3.2(c), as applicable, and shall be distributed in accordance
with Section 6.1(a) or 6.1(c), as applicable.

 

(c)                                  In the case of a Participant whose
Separation Date occurs prior to the earliest date on which the Participant is
eligible for Retirement, other than by reason of death, and the vested portion
of the Participant’s Distribution Option Accounts exceeds $100,000 (taking into
account all deferrals made to the Participant’s Distribution Option Accounts),
the vested portion of a Participant’s Distribution Option Accounts shall be
distributed in the form elected by the Participant pursuant to Sections 3.2 and
3.4, as applicable, and shall be paid or commence to be paid as soon as
reasonably practicable following the end of the twelfth full calendar month
after the Participant has a Separation from Service, unless payment is deferred
pursuant to Section 3.4. The unvested portion of any Distribution Option Account
shall be forfeited in accordance with Section 5.2.

 

6.2 – Small Benefit Cashout.

 

(a)                                  Notwithstanding any provision of the Plan
or election by a Participant to the contrary, in the event the value of the
vested portion of a Participant’s Separation Distribution Account does not
exceed $100,000 (taking into account all deferrals made to the Eligible

 

19

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Employee’s Separation Distribution Account) as of the date the Participant’s
Account becomes distributable, then the vested portion of the Participant’s
Account shall be paid in a lump sum as soon as reasonably practicable following
the date the Participant’s Account becomes distributable. For purposes of the
foregoing, the Participant’s Account shall be valued as of the last business day
of the month following the month in which the Participant’s Separation Date
occurs. If the value at such time does not exceed $100,000, the Participant’s
Account shall be distributed in a lump sum as soon as reasonably practicable
thereafter.

 

(b)                                 Notwithstanding any provision of the Plan or
election by a Participant to the contrary, in the event the value of the vested
portion of a Participant’s In-Service Distribution Account does not exceed
$25,000 (applied on an Account by Account basis) as of the date the
Participant’s Account becomes distributable, then the vested portion of the
Participant’s Account shall be paid in a lump sum as soon as reasonably
practicable following the date the Participant’s Account becomes distributable.

 

6.3 – Payout.

 

(a)                                  Any lump sum benefit payable under this
Article VI shall be paid in January of the Plan Year elected by the Participant
pursuant to Sections 3.2(b) and 3.4as applicable, or otherwise at the time
specified for payment under Sections 6.1(a) or 6.1(c), as applicable, in an
amount equal to the vested value of the portion of such Distribution Option
Account being distributed as of the business day the Funds are deemed to be
liquidated to make the payment.

 

(b)                                 Installment payments, if any, payable under
this Article VI shall commence in January of the Plan Year elected by the
Participant pursuant to Sections 3.2(b) and 3.4, as applicable, or otherwise at
the time specified for payment under Sections 6.1(a) or 6.1(c), as applicable,
in an amount equal to (i) the vested value of such portion of such Distribution
Option

 

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Account being distributed as of the business day the Funds are deemed to be
liquidated to make the payment, divided by (ii) the number of installment
payments elected by the Participant in the applicable Enrollment Agreement with
respect to an In-Service Distribution Account or in the distribution election
form filed pursuant to Section 3.2 or 4.2(d) with respect to the Separation
Distribution Account.. The remaining installments shall be paid in an amount
equal to (i) the vested value of such portion of the Distribution Option Account
being distributed as of the business day the Funds are deemed to be liquidated
to make the payment divided by (ii) the number of installments remaining.

 

6.4 – Distributions to Key Employees.

 

Notwithstanding any provision of the Plan to the contrary, distributions under
Sections 6.1(a) and 6.1(c) to Participants who are Key Employees shall be
postponed to a date that is not less than 6 months following the Participant’s
Separation Date.

 

6.5 – Financial Hardship of Participant.

 

(a)                                  At any time prior to commencement of
payment pursuant to this Article VI, a Participant may request payment to him or
her of all or a portion of the amounts that the Participant has deferred under
the Plan. The decision to approve or deny such a request shall be in the
absolute discretion of the Committee. However, such a request shall be approved
only upon a finding that the Participant has suffered a severe financial
hardship which has resulted from an illness or accident of the Participant, the
Participant’s spouse, or a dependent (as defined in section 152(a) of the Code)
of the Participant, loss of the Participant’s property due to casualty, or other
similar extraordinary and unforeseeable circumstances arising as a result of
events beyond the Participant’s control, and then only in an amount necessary to
eliminate such hardship plus amounts necessary to pay taxes reasonably
anticipated as a result of the

 

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distribution, after taking into account the extent to which such hardship is or
may be relieved through reimbursement or compensation by insurance or by
liquidation of the Participant’s assets (to the extent the liquidation of such
assets would not itself cause severe financial hardship). In the event such a
request is approved, payment of all or a portion of the amounts previously
deferred by the Participant, with credited interest, to the extent approved by
the Committee, shall be made as soon as practicable to the Participant. Amounts
otherwise payable to a Participant hereunder shall be adjusted (as determined by
the Committee in its absolute discretion) to take into account such financial
hardship payment. The Committee shall administer hardship distribution requests
consistently with section 409A of the Code and the regulations thereunder.

 

(b)                                 If a Participant elects to take a hardship
distribution prior to June 30 of any Plan Year, the Participant’s deferral
election shall be cancelled for the Plan Year in which the distribution occurs
with respect to all salary and bonuses not yet earned.. If a Participant elects
to take a hardship distribution on or after June 30 of any Plan Year, the
Participant’s deferral election shall be cancelled for the Plan Year in which
the hardship distribution occurs with respect to all salary and bonuses not yet
earned, and the Participant shall be suspended from participation in the Plan
for the following Plan Year.

 

6.6 – Permissible Distribution Event.

 

Notwithstanding any provision of the Plan to the contrary, no distributions
shall be made except upon a specified date or event as permitted pursuant to
section 409A of the Code and the regulations thereunder.

 

6.7 - Payment by Trust.

 

The Company may cause the payment of benefits under this Plan to be made in
whole or in part by the trustee of a trust designated by the Committee (the
“Trust”). The Committee may

 

22

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direct the Trustee to pay the Participant’s or Beneficiary’s benefit at the time
and in the amount described herein. In the event the amounts allocated to the
Participant under the Trust are not sufficient to provide the full amount of
benefit payable to the Participant, the Company shall pay the remainder of such
benefit.

 

6.8 - Inability to Locate Participant.

 

In the event that the Committee is unable to locate a Participant or Beneficiary
within two years following the date the Participant was to commence receiving
payment, the entire amount allocated to the Participant’s Deferral Account and
Company Contribution Account shall be forfeited. If, after such forfeiture, the
Participant or Beneficiary later claims such benefit, such benefit shall be
reinstated without interest or earnings from the date payment was to commence
pursuant to the Participant’s elections under Sections 3.2 and 3.4, as
applicable.

 

ARTICLE VII
CHANGE IN CONTROL

 

In the event of a Change in Control, any Participant shall receive a
distribution of 100% of the value of the Participant’s Distribution Option
Accounts at the time of the distribution. Such distribution shall be made in a
lump sum within 30 days following the date the Change in Control is consummated,
in an amount equal to the value of such Distribution Option Accounts as of the
business day the Funds are deemed to be liquidated to make the payment.

 

ARTICLE VIII
DEATH BENEFITS

 

Upon the death of a Participant before his or her Distribution Option Account(s)
has been paid in full (either in a lump sum or installment payments), his or her
Beneficiary shall receive the balance of the Participant’s vested Account as of
the date of death, as adjusted by subsequent gains or losses prior to
distribution, in the form of a lump sum payment as soon as reasonably
practicable following the date of the Participant’s death.

 

23

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ARTICLE IX
CLAIMS PROCEDURES

 

9.1 – Claims.

 

A Participant or, following the Participant’s death, a Beneficiary (collectively
referred to in this section as “Claimant”) may submit a claim for benefits under
the Plan. Any claim for benefits under this Plan shall be made in writing to the
Committee. If such claim for benefits is wholly or partially denied, the
Committee shall, within 90 days after receipt of the claim, notify the Claimant
of the denial of the claim unless special circumstances require an extension of
time for processing the claim, which extension shall not exceed 180 days from
receipt of the claim. If such extension is required, written notice of the
extension shall be furnished to the Claimant prior to the termination of the
initial 90-day period and shall indicate the special circumstances requiring an
extension of time and the date by which the Committee expects to render a final
decision. A notice of denial shall be in writing, shall be written in a manner
calculated to be understood by the Claimant, and shall contain the specific
reason or reasons for denial of the claim, a specific reference to the pertinent
Plan provisions upon which the denial is based, a description of the additional
material or information (if any) necessary to perfect the claim, together with
an explanation of why such material or information is necessary, and an
explanation of the claims review procedure set forth below, including a
statement of the Claimant’s right to bring a civil action under
section 502(a) of the Employee Retirement Income Security Act of 1974, as
amended (“ERISA”) following an adverse benefit determination on review.

 

9.2 – Appeal.

 

Within 60 days after the receipt by a Claimant of a written notice of denial of
a claim, the Claimant may file a written request with the Committee that it
conduct a full and fair review of

 

24

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the denial of the claim for benefits. The Claimant, or duly authorized
representative, shall receive, upon request and free of charge, reasonable
access to, and copies of, all documents, records and other information relevant
to the Claimant’s claim for benefits. The Claimant, or duly authorized
representative may also submit written comments, documents, records and other
information relating to the claim for benefits, and the review will take into
account such items whether or not they were considered in the initial benefit
determination.

 

The Committee shall deliver to the Claimant, or authorized representative, a
written decision on the claim within 60 days after the receipt of the request
for review, except that if there are special circumstances that require an
extension of time, the 60-day period may be extended to 120 days. If such
extension is required, written notice shall be furnished to the Claimant, or
authorized representative, prior to the termination of the initial 60-day period
and shall indicate the special circumstances requiring an extension of time and
the date by which the final decision will be rendered. The decision shall be
written in a manner calculated to be understood by the Claimant, include the
specific reason or reasons for the decision, include a statement that the
Claimant is entitled to receive upon request and free of charge, access to and
copies of all documents and other information relevant to the claim, contain a
specific reference to the pertinent Plan provisions upon which the decision is
based, and include a statement describing any voluntary appeal procedures
offered by the Plan and a statement of the Claimant’s right to bring an action
under section 502(a) of ERISA.

 

9.3 – Authority.

 

The Committee, in determining claims for benefits, shall have the complete
discretion to review and determine related factual questions, to construe the
terms of the Plan, and to bind the Company with respect to the Plan.

 

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ARTICLE X
ADMINISTRATION

 

10.1 - Committee.

 

A committee shall be appointed by, and serve at the pleasure of, the Board. The
number of members comprising the Committee shall be determined by the Board
which may from time to time vary the number of members. A member of the
Committee may resign by delivering a written notice of resignation to the Board.
The Board may remove any member by delivering a certified copy of its resolution
of removal to such member. Vacancies in the membership of the Committee shall be
filled promptly by the Board.

 

10.2 - Committee Action.

 

The Committee shall act at meetings by affirmative vote of a majority of the
members of the Committee. Any action permitted to be taken at a meeting may be
taken without a meeting if, prior to such action, a written consent to the
action is signed by all members of the Committee and such written consent is
filed with the minutes of the proceedings of the Committee. A member of the
Committee shall not vote or act upon any matter which relates solely to himself
or herself as a Participant. The Chairman or any other member or members of the
Committee designated by the Chairman may execute any certificate or other
written direction on behalf of the Committee.

 

10.3 - Powers and Duties of the Committee.

 

(a)                                  The Committee, on behalf of the
Participants and their Beneficiaries, shall enforce the Plan in accordance with
its terms, shall be charged with the general administration of the Plan, and
shall have all powers necessary to accomplish its purposes, including, but not
by way of limitation, the following:

 

26

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(i)                                     To select the mutual funds, contracts or
investment funds to be the Funds in accordance with Section 3.3(b) hereof;

 

(ii)                                  To construe and interpret the terms and
provisions of this Plan and to make factual determinations;

 

(iii)                               To compute and certify to the amount and
kinds of benefits payable to Participants and their Beneficiaries;

 

(iv)                              To maintain all records that may be necessary
for the administration of the Plan;

 

(v)                                 To provide for the disclosure of all
information and the filing or provision of all reports and statements to
Participants, Beneficiaries or governmental agencies as shall be required by
law;

 

(vi)                              To make and publish such rules for the
regulation of the Plan and procedures for the administration of the Plan as are
not inconsistent with the terms hereof; and

 

(vii)                           To appoint a plan administrator or any other
agent, and to delegate to them such powers and duties in connection with the
administration of the Plan as the Committee may from time to time prescribe.

 

(viii)                        On behalf of the Company, to select those Highly
Compensated Employees who shall be Eligible Employees.

 

10.4 - Construction and Interpretation.

 

(a)                                  The Committee shall have full discretion to
construe and interpret the terms and provisions of this Plan, which
interpretation or construction shall be final and binding on all parties,
including but not limited to, the Company and any Participant or Beneficiary.
The

 

27

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Committee shall administer such terms and provisions in a uniform and
nondiscriminatory manner and in full accordance with any and all laws applicable
to the Plan.

 

(b)                                 Nothing contained in the Plan shall be
construed to prevent the Company from taking any action which is deemed by it to
be appropriate or in its best interest. No Participant, Beneficiary, or other
person shall have any claim against the Company as a result of such action. Any
decisions, actions or interpretations to be made under the Plan by the Company
or the Board, or the Committee acting on behalf of the Company, shall be made in
its respective sole discretion, not as a fiduciary, need not be uniformly
applied to similarly situated individuals and shall be final, binding and
conclusive on all persons interested in the Plan.

 

10.5 - Information.

 

To enable the Committee to perform its functions, the Company shall supply full
and timely information to the Committee on all matters relating to the
Compensation of all Participants, their death, Disability, or other cause of
termination, and such other pertinent facts as the Committee may require.

 

10.6 - Compensation, Expenses and Indemnity.

 

(a)                                  The Committee is authorized at the expense
of the Company to employ such legal counsel as it may deem advisable to assist
in the performance of its duties hereunder. Expenses and fees in connection with
the administration of the Plan shall be paid by the Company.

 

(b)                                 To the extent permitted by applicable state
law, the Company shall indemnify and save harmless the Committee and each member
thereof, the Board and any delegate of the Committee who is an employee of the
Company against any and all expenses, liabilities and claims, including legal
fees to defend against such liabilities and claims arising out of their
discharge in good faith of responsibilities under or incident to the Plan, other
than expenses and

 

28

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liabilities arising out of willful misconduct. This indemnity shall not preclude
such further indemnities as may be available under insurance purchased by the
Company or provided by the Company under any bylaw, agreement or otherwise, as
such indemnities are permitted under state law.

 

10.7 -  Quarterly Statements.

 

Under procedures established by the Committee, a Participant shall receive a
statement with respect to such Participant’s Accounts on a quarterly basis as of
each March 31, June 30, September 30 and December 31.

 

ARTICLE XI
MISCELLANEOUS

 

11.1 - Unsecured General Creditor.

 

Participants and their Beneficiaries, heirs, successors, and assigns shall have
no legal or equitable rights, claims, or interest in any specific property or
assets of the Company. No assets of the Company shall be held under any trust,
or held in any way as collateral security for the fulfilling of the obligations
of the Company under this Plan. Any and all of the Company’s assets shall be,
and remain, the general unpledged, unrestricted assets of the Company. The
Company’s obligation under the Plan shall be merely that of an unfunded and
unsecured promise of the Company to pay money in the future, and the rights of
the Participants and Beneficiaries shall be no greater than those of unsecured
general creditors.

 

11.2 - Restriction Against Assignment.

 

The Company shall pay all amounts payable hereunder only to the person or
persons designated by the Plan and not to any other person or corporation. No
part of a Participant’s Accounts shall be liable for the debts, contracts, or
engagements of any Participant, his or her Beneficiary, or successors in
interest, nor shall a Participant’s Accounts be subject to execution

 

29

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by levy, attachment, or garnishment or by any other legal or equitable
proceeding, nor shall any such person have any right to alienate, anticipate,
commute, pledge, encumber, or assign any benefits or payments hereunder in any
manner whatsoever. If any Participant, Beneficiary or successor in interest is
adjudicated bankrupt or purports to anticipate, alienate, sell, transfer,
assign, pledge, encumber or charge any distribution or payment from the Plan,
voluntarily or involuntarily, the Committee, in its discretion, may cancel such
distribution or payment (or any part thereof) to or for the benefit of such
Participant, Beneficiary or successor in interest in such mariner as the
Committee shall direct.

 

11.3 - Withholding.

 

There shall be deducted from each payment made under the Plan or any other
compensation payable to the Participant (or Beneficiary) all taxes which are
required to be withheld by the Company in respect to such payment or this Plan.
The Company shall have the right to reduce any payment (or compensation) by the
amount of cash sufficient to provide the amount of said taxes.

 

11.4 - Amendment, Modification, Suspension or Termination.

 

It is the intention of the Company to continue the Plan and to distribute
benefits to Participants in accordance with Article 6 in the absence of the
development of circumstances concerning construction or operation of the Plan
which are materially adverse to the Company or the Participants. However, the
Committee or the Board may at any time, or from time to time, in its sole
discretion amend or terminate the Plan in any manner that the Committee or Board
deems appropriate, including amending or terminating outstanding deferral
elections, if necessary or appropriate to comply with changes to applicable law,
without the consent of any Participant. In the event the Committee or the Board
acts to terminate the Plan, distribution to Participant shall

 

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be made in accordance with Article 6, unless an alternative method of
distribution is permitted under applicable law.

 

11.5 - Governing Law.

 

This Plan shall be construed, governed and administered in accordance with the
laws of the State of California.

 

11.6 - Receipt or Release.

 

Any payment to a Participant or the Participant’s Beneficiary in accordance with
the provisions of the Plan shall, to the extent thereof, be in full satisfaction
of all claims against the Committee, the Company and the Trustee. The Committee
may require such Participant or Beneficiary, as a condition precedent to such
payment, to execute a receipt and release to such effect.

 

11.7 - Payments on Behalf of Persons Under Incapacity.

 

In the event that any amount becomes payable under the Plan to a person who, in
the sole judgement of the Committee, is considered by reason of physical or
mental condition to be unable to give a valid receipt therefore, the Committee
may direct that such payment be made to any person found by the Committee, in
its sole judgement, to have assumed the care of such person. Any payment made
pursuant to such determination shall constitute a full release and discharge of
the Committee and the Company.

 

11.8 - Headings.

 

Headings and subheadings in this Plan are inserted for convenience of reference
only and are not to be considered in the construction of the provisions hereof.

 

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IN WITNESS WHEREOF, the Company has caused this document to be executed by its
duly authorized officer to be effective on this 20th day of December, 2005.

 

 

HILTON HOTELS CORPORATION

 

 

 

 

 

By:

/s/ Molly McKenzie Swarts

 

 

 

 

 

Its:

   Senior Vice President

 

 

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