**Exhibit10.1**

 

**AS ADOPTED**

**BY THE BOARD OF DIRECTORS OF**

**PZENA INVESTMENT MANAGEMENT, INC.**

**ON JULY 21, 2009**

 

PZENA INVESTMENT MANAGEMENT, INC.

NON-EMPLOYEE DIRECTORDEFERRED COMPENSATION PLAN

 

SECTION 1.      PURPOSE;BACKGROUND.  This plan shall be known asthe Pzena Investment Management, Inc. Nonemployee Director DeferredCompensation Plan and is herein referred to as the “Plan.”  The Plan is an “unfunded” deferredcompensation arrangement designed to attract and retain individuals to serve asNonemployee Directors of Pzena Investment Management, Inc. (the “Company”)by allowing such individuals to defer payment of all or a portion of theirdirector fees into deferred stock units, the value of which is based on thevalue of shares of Stock (as defined below).

 

SECTION 2.      DEFINITIONS.  The following definitions shall apply ininterpreting the Plan:

 

2.1                                 “Account” shall mean a Participant’s book account establishedby the Company under the Plan to which Units shall be allocated with respect todeferred Compensation.

 

2.2                                 “Administrator” shall mean the Compensation Committee of theBoard.

 

2.3                                 “Beneficiary” shall mean such individual or the trustee ortrustees of a trust as may be designated by a Participant pursuant to suchParticipant’s deferral election.

 

2.4                                 “Board” shall mean the Board of Directors of the Company.

 

2.5                                 “Change in Control” (1) shall have the meaning ascribedto such term in the Equity Plan or (2) if the Equity Plan does not includesuch a definition, “Change in Control” shall mean an event constituting achange in the ownership or effective control of a corporation, or a change inthe ownership of a substantial portion of the assets of a corporation, ineither case, within the meaning of Section 409A of the Code.

 

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2.6                                 “Code” shall mean the Internal Revenue Code of 1986, asamended, and all regulations promulgated thereunder, both as amended from timeto time.

 

2.7                                 “Company” shall mean Pzena Investment Management, Inc.,a Delaware corporation.

 

2.8                                 “Compensation” shall mean all amounts to be paid to aNonemployee Director in respect of the individual’s service on the Board,including annual retainer fees (but excluding any payment or reimbursement withrespect to any expenses arising from the individual’s service as a member ofthe Board) that would otherwise be payable in accordance with the Company’spolicies as in effect from time to time.

 

2.9                                 “Equity Plan” shall mean the Company’s 2007 Equity IncentivePlan or any other successor plan or similar, stockholder-approved Company planproviding for the grant of awards relating to the value of the Company’s Stock.

 

2.10                           “Fair Market Value” of a share of Stock shall have themeaning ascribed to such term in the Equity Plan under which Units are beingissued for purposes of the Plan.

 

2.11                           “Nonemployee Director” shall mean a member of the Board whois not an employee of the Company.

 

2.12                           “Participant” shall mean a Nonemployee Director who makes adeferral of Compensation under the terms of the Plan.

 

2.13                           “Plan Year” shall mean the calendar year commencing on January 1.

 

2.14                           “Separation from Service” shall mean the termination of aParticipant’s service with the Company, within the meaning of Section 409A(a)(2)(A)(i) ofthe Code.

 

2.15                           “Stock” shall mean the Class A common stock of theCompany, par value $0.01 per share.

 

2.16                           “Unforeseeable Emergency” shall have the meaning ascribed tosuch term under Section 409A(a)(2)(B)(ii) of the Code.

 

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2.17                           “Unit” shall mean a stock unit allocated to a Participant’sAccount, which shall at all times be equal in value to the Fair Market Value ofone share of Stock and which shall be issuable under the Equity Plan.

 

SECTION 3.      PARTICIPATION.

 

3.1                                 General.  Any Nonemployee Director may elect to haveall or part of the Compensation otherwise payable to the director deferred andpaid at the time and in the manner prescribed herein.

 

3.2                                 Deferrals of Compensation.  A Nonemployee Director wishing to participatein the Plan shall make deferrals of Compensation no later than December 31of the Plan Year immediately preceding the Plan Year in respect of which suchCompensation may be earned.  Deferralsmay be denominated in an aggregate dollar amount or as a percentage ofCompensation and shall be allocated to the Account.  Notwithstanding the foregoing, theAdministrator may allow a Nonemployee Director whose service on the Boardbegins during any Plan Year to make a deferral election prior to or within 30 days after the commencementof such Nonemployee Director’s service on the Board with respect toCompensation to be earned following the date on which such election is made.

 

3.3                                 Election to Defer to be Made Annually.  Elections to deferCompensation under the Plan shall be made on a Plan Year-to-Plan Yearbasis.   The amount accumulated under thePlan prior to a Participant’s decision not to defer Compensation with respectto any Plan Year will continue to be subject to the provisions of the Plan.

 

3.4                                 Timing of Distribution.  Distributions under the Plan shall be made ina single distribution of shares of Stock at such time as elected by theParticipant at the time such deferral was elected.  At the time the deferral election is made, aNonemployee Director may elect to receive such Participant’s Account upon theearlier to occur of:

 

(a)                      the date of the Participant’s death;

 

(b)                     the date the Participant becomesDisabled (as defined in Section 409A(a)(2)(C) of the Code);

 

(c)                      the date of the Participant’s Separation from Service withthe Company for any reason other than death;

 

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(d)                     adate specified by the Participant, provided that the date is not less than fiveyears following the end of the calendar year to which the deferral relates.

 

3.5                                 No Further Deferrals Following Separation from Service.  Notwithstanding anyother provision of the Plan to the contrary, in the event of a Separation fromService during any Plan Year, no Compensation as yet unpaid with respect tosuch Plan Year (or any future Plan Year) may be deferred under the Plan.

 

SECTION 4.      METHOD OFDEFERRAL OF COMPENSATION.

 

4.1                                 The Company shall establish a separate Account on its booksin the name of each Participant.  Thereshall be allocated to each Participant’s Account all deferred Compensation atsuch times and in such amounts as such Compensation would have been availableto the Participant had the Participant not deferred the receipt of suchCompensation pursuant to Section 3.

 

4.2                                 Compensation deferred under the Plan shall be deferred in theform of Units equal to the number of shares of Stock hypothetically purchasedwith deferred Compensation.  Compensationdeferred under the Plan for any Plan Year shall be recorded on the first day ofthe Plan Year, subject to forfeiture as set forth in Section 4.3.  The number of Units to be recorded withrespect to each amount of deferred Compensation allocated to the Account shallbe equal to (i) in the case of Compensation that otherwise would have beenpaid in cash, the quotient obtained by dividing the amount of deferred cash bythe Fair Market Value of one share of Stock on the first day of the Plan Yearwith respect to which the deferred Compensation relates and (ii) in thecase of Compensation that otherwise would have been paid in shares of Stock,the number of shares of Stock that would have been issued to the Participantduring such Plan Year absent deferral under the Plan.  The Administrator’s determination of thevalue of a Unit shall be binding on the Company and its successors, theParticipants and their Beneficiaries.

 

4.3                                 Forfeiture of Recently Deferred Amounts.  In the event of aSeparation from Service, any amount deferred under the Plan with respect to thecalendar quarter in which occurs the effective date of such Separation fromService and with respect to the remainder of the applicable Plan Year(including any dividend equivalents credited thereto) shall be immediately 

 

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cancelled and forfeited.  On the last day of each calendar quarter, amounts deferred under Section 4.2 onthe first day of the applicable Plan Year shall become nonforfeitable and shallbe distributed in accordance with the terms of the Plan.

 

Accordingly, in the event of Separation fromService:  (i) before March 31of a Plan Year, 100% of the Units recorded on the first day of such Plan Yearshall be cancelled and forfeited; (ii) on or after March 31 butbefore June 30 of a Plan Year, 75% of the Units recorded on the first dayof such Plan Year shall be cancelled and forfeited; (iii) on or after June 30but before September 30 of a Plan Year, 50% of the Units recorded on thefirst day of such Plan Year shall be cancelled and forfeited; and (iv) onor after September 30 but before December 31, of a Plan Year, 25% ofthe units recorded on the first day of such Plan Year shall be cancelled andforfeited.

 

4.4                                 Additional Units shall be credited to a Participant’s accountas of each date (a “Dividend Date”) on which cash dividends and/or specialdividends and distributions are paid with respect to Stock, provided that atleast one Unit is credited to such Participant’s account as of the record datefor such dividend or distribution.  Thenumber of Units to be credited to a Participant’s account under the Plan as ofany Dividend Date shall equal the quotient obtained by dividing (1) theproduct of (a) the number of the Units credited to such account on therecord date for such dividend or distribution and (b) the per sharedividend (or distribution value) payable on such Dividend Date by (2) theFair Market Value of a share of Stock as of such Dividend Date.

 

4.5                                 Modification of Prior Deferral.  Once an election to defer Compensation hasbecome irrevocable, a Participant may, with the prior consent of theAdministrator, modify the time and form of payment of an amount previouslydeferred under the Plan (such modification, a “Subsequent Change”), subject tothe following conditions:  (1) suchSubsequent Change shall not take effect until as least 12 months after the dateon which the Subsequent Change is made; (2) except with respect to aSubsequent Change relating to the form of distribution to be made upon theParticipant’s death or Disability, the payment must be deferred for anadditional period of not less than five years from the date such payment wouldotherwise have been paid; and (3) a Subsequent Change made with respect topayments elected under Section 3.4(e) (upon a specified date ordates) must be made not less than 12 months before the date the payment 

 

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isscheduled to be made.

 

SECTION 5.      DISTRIBUTION OFDEFERRED COMPENSATION.

 

5.1                                 The Company shall pay to the Participant (or the Participant’sBeneficiary or estate, as applicable) the nonforfeitable balance credited tosuch Participant’s Account in a single distribution of shares on the first dateof the calendar month following the date or event specified for suchdistribution by the Participant. Distributions shall be made in the form of shares of Stock.

 

5.2                                 Notwithstanding any other provision of the Plan to thecontrary, the Administrator in its sole discretion may at any time authorizethe distribution of shares of Stock of part or all of the Participant’s Accountto such Participant prior to the time such amount would otherwise be payablepursuant to the provisions of the Plan, in any case where the Administratordetermines that the Participant has proved an Unforeseeable Emergency.  The value of any shares of Stock distributedunder this section shall not exceed the amount necessary to satisfy suchUnforeseeable Emergency plus the value of any shares of Stock to pay taxesreasonably anticipated as a result of the distribution, after taking intoaccount the extent to which the Unforeseeable Emergency is or may be relievedthrough reimbursement or compensation by insurance or otherwise or byliquidation of the Participant’s assets (to the extent the liquidation of suchassets would not itself cause several financial hardship) as specified in Section 409A(a)(2)(B)(ii)(II) ofthe Code.  The determination of theAdministrator shall be final, conclusive and binding upon all persons affectedthereby.

 

5.3                                 Change in Control.  Notwithstanding anything in the Plan to thecontrary, each participant’s Account shall be distributed in shares of Stock,immediately prior to a Change in Control, subject to the actual occurrence ofthe Change in Control, provided that the event constituting such Change inControl constitutes a change in the ownership or effective control of acorporation, or a change in the ownership of a substantial portion of theassets of a corporation, in either case, within the meaning of Section 409Aof the Code.

 

5.4                                 Notwithstanding anything in the Plan to the contrary, to theextent necessary to avoid the application of an accelerated or additional taxunder Section 409A of the Code, amounts that would otherwise be payable 

 

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pursuant to the Plan during thesix-month period immediately following the Participant’s Separation fromService shall instead be paid on the first business day after the date that issix months following the Participant’s Separation from Service (or upon theParticipant’s death, if earlier).

 

SECTION 6.      ADMINISTRATION.

 

6.1                                 The Plan shall be administered by the Administrator.  The Administrator may delegate such duties asit determines in its discretion to be necessary or desirable for theadministration of the Plan.

 

6.2                                 All determinations made by the Administrator with respect tothe Plan shall be conclusive and binding on the Company and its successors, theParticipants and their Beneficiaries. Neither the Company, the Administrator, the Fund nor any officer oremployee thereof shall be liable to any person for any action taken or omittedin connection with the interpretation and administration of this Plan unlessattributable to its or his own willful misconduct or lack of good faith.

 

6.3                                 The Company intends the following with respect to thisPlan:  (1) that Participants willnot recognize gross income as a result of participation in the Plan unless anduntil and then only to the extent that distributions are received; (2) thatthe Plan shall be an “unfunded” plan for purposes of the Employee RetirementIncome Security Act of 1974, as amended, and (3) the design andadministration of the Plan should comply with the requirements of Section 409Aof the Code.  Notwithstanding theforegoing, no Nonemployee Director, Participant, former Participant,Beneficiary or any other person shall have any recourse against the Company,the Administrator or any of their affiliates, employees, agents, successors,assigns or other representatives if any of those conditions are determined notto be satisfied.

 

SECTION 7.      GENERALPROVISIONS.

 

7.1                                 The number of Units allocated to Accounts shall be adjustedby the Administrator, as it deems appropriate, in the event that theAdministrator shall determine that any dividend or other distribution (whetherin the form of cash, Stock, or other property), recapitalization, stock split, reversesplit, reorganization, merger, consolidation, spin-off, combination,repurchase, or share exchange, or other similar corporate transaction or event,affects the Units such that an adjustment is appropriate in order to 

 

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prevent dilution or enlargement of the rights of Participantsunder the Plan.

 

7.2                                 The right of any Participant to receive future distributionsunder the Plan shall be an unsecured claim against the general assets of theCompany.

 

7.3                                 Notwithstanding any provision of the Plan to the contrary, noprovision in the Plan shall create or be construed to create any claim, rightor cause of action against either the Company or any of its subsidiaries oraffiliates arising from any diminution in the value of the Units in connectionwith the deemed investments in Stock through the Accounts.

 

7.4                                 A Participant may change the Participant’s Beneficiary at anytime by notifying the Administrator in such form as the Administrator shallfrom time to time designate.

 

7.5                                 No Participant or Beneficiary shall have any power tocommute, encumber, sell, or otherwise dispose of the rights provided herein,and such rights shall be non-assignable and non-transferable.

 

SECTION 8.      EFFECTIVE DATEOF THE PLAN; TERMINATION AND AMENDMENT OF THE PLAN.

 

8.1                                 The Plan shall be effective as of July 21, 2009, thedate it was adopted by the Company.  ThePlan shall remain in effect until such time as it is terminated by the Companyin accordance with the terms of the Plan and applicable law.

 

8.2                                 No Participant nor the Administrator shall have the power toterminate the Plan except as provided in Section 409A of the Code.  Upon termination of the Plan, all Accountsshall be paid in shares of Stock to each Participant or, if applicable, suchParticipant’s Beneficiary or estate.  TheCompany shall use its commercially reasonable best efforts to comply with theprovisions of Section 409A of the Code with respect to termination of thePlan in order to ensure that amounts payable in connection with termination ofthe Plan shall not be subject to tax under Section 409A of the Code.

 

8.3                                 The Plan may be amended from time to time by theAdministrator, provided that no amendment of the Plan shall have a materialadverse effect on any Participant’s Account under the Plan without the priorwritten consent of such Participant.

 

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**EXHIBITADeferral Form**

** **

Pzena Investment Management, Inc.

120 West 45th Street

New York, New York  10036

 

Attention:  [                  ]

 

Dear Sir or Madam:

 

Pursuant to the provisions of Section 3 of thePzena Investment Management, Inc. Nonemployee Director DeferredCompensation Plan (hereinafter called the “Plan”), I hereby irrevocably make adeferral with respect to the following percentage of Compensation, which amountwill be deferred in the manner provided in the Plan:

 

TotalAmount to be Deferred

 
| Annual Retainer: |                % |
|------------------|---------------------------------------------------------------------------------------------|

 

Thisdirection shall be effective for the Plan Year [        ]only.

 

I specifically and irrevocably designate that the amounts due me frommy Account under the Plan shall be distributed to me, as specified in Section 5of the Plan, upon the earlier to occur of:

 

·                  the date of mydeath;

·                  the date I become Disabled;

·                  my separationfrom service with the Company other than by reason of my death;

·                                   (noless than 5) years following the end of the calendar year to which thisdeferral relates (for example, under a 5-year deferral, a deferral made on12/31/09 with respect to the year 2010 would end on 12/31/15)(1)

 

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(1)                              A date need notbe specified in order to participate in the Plan.  Participants who do not specify a date willbe paid their deferred compensation on the earliest to occur of the threeevents listed above, subject to the terms of the Plan.

 

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I acknowledge and agree that my Account will be paid to me (or myBeneficiary, if applicable) on the first day of the calendar month followingthe month in which occurs the first date or event specified above.  I understand and agree that all distributionsfrom my Account shall be made in the form of shares of Stock.

 

I hereby relinquish and release any and all rights to receive paymentof the deferred amounts except in accordance with the Plan.

 

(continued on next page)

 

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In the event that I should die while I am serving onthe Board as a Nonemployee Director, I hereby direct that, pursuant to Section 5thereof, all amounts distributable to me under the Plan be distributed asfollows:

 
| In a single distribution  of shares of Stock to |
|-------------------------------------------------|
|                                            |   |   |
|                                            |   | (Insert Name of Beneficiary) |
|                                            |   |   |
|                                            |   |   |
|                                            |   |   |
|                                            |   |   |
|                                            |   | (If more than one Beneficiary is named, |
|                                            |   | indicate percentages to be paid to each Beneficiary) |
|                                            |   |   |
| Date:                                           |   |   |
|                                            |   |   |
|                                            |   |   |
|                                            |   | [PARTICIPANT NAME] |
|                                            |   |   |
|                                            |   |   |

 

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