Exhibit 10.12


 


Interval Leisure Group, Inc.


Deferred Compensation Plan for Non-Employee Directors


 


1.             Purpose.  The purpose of the Interval Leisure Group, Inc.
Deferred Compensation Plan for Non-Employee Directors (the “Plan”) is to
provide non-employee directors of Interval Leisure Group, Inc. (or any
successor thereto) (the “Company”) with an opportunity to defer Director
Fees (as defined in paragraph 4(b) below).


 


2.             Effective Date.  The Plan shall become effective on August       , 2008,
subject to approval by the Company’s Board of Directors (the “Board”).


 


3.             Eligibility.  Any director of the Company who is not an
employee of the Company or of any subsidiary or affiliate of the Company is
eligible to participate in the Plan.


 


4.             Election to Defer Compensation.


 


(a)           Time of Eligibility.  An election to defer Director Fees by a newly
elected director shall be made by such director within the 30-day period
following his or her election to the Board, which election shall apply only to
Director Fees earned for services performed after
the date of such election.  A director
who has either (i) not previously elected to defer Director Fees or (ii) discontinued
(or wishes to modify) a prior election to defer Director Fees may elect to defer
Director Fees (or modify an existing deferral election) by giving written
notice to the Company on or prior to November 1 of each year (or such
other date as may be determined from time to time by the Secretary of the
Company in accordance with paragraph 10 of the Plan and in compliance with applicable
law).  Any such election shall only apply
to Director Fees earned for services performed during the calendar year following such written notice.  The effectiveness of a given election shall
continue until the participant’s “separation from service,” as defined under Section 409A
of the Internal Revenue Code of 1986, as amended (the “Code”) and
Treasury Regulation §1.409A, from the Company and any entity that would be
treated as a single employer with the Company under Section 414(b) or
414(c) of the Code (a “Separation from Service”) or until the end
of the calendar year during which the director gives the Company written notice
of its discontinuance or modification, whichever shall occur first.  Any notice of discontinuance or modification
shall operate prospectively from the first day of the calendar year following
the receipt of such written notice by the Secretary of the Company, and
Director Fees payable during any subsequent calendar year shall either be paid
(absent any timely future deferral election) or deferred in accordance with the
terms of the discontinuance or modified election, as applicable; provided, however,
that Director Fees theretofore deferred shall continue to be withheld and shall
be paid in accordance with the notice of election pursuant to which they were
withheld.  All written notices regarding
deferral elections and/or the discontinuance or modification of prior deferral
elections shall be made on a form prescribed by the Company.


 


(b)           Amount of Deferral.  A participant may elect to defer receipt of
all or a specified portion of the cash fees receivable by such director for
services performed as a 


 

















 


director of the Company (which amounts shall
include fees for services as a member of one or more Committee(s) of the
Board and meeting attendance fees, if any (among other fees), as and if applicable
from time to time) that are otherwise payable to the director in cash (the “Director
Fees”).


 


(c)           Manner of Electing Deferral.  A participant shall elect to defer Director
Fees by giving written notice to the Company in a form prescribed by the
Company.  Such notice shall include:


 


(i)            the percentage or amount of
Director Fees to be deferred (the “Deferred Fees”);


 


(ii)           the allocation of the Deferred
Fees between the “Cash Fund” or “Share Units;” and


 


(iii)          in the case of a participant’s
initial election only, an election of a lump-sum payment or of a number of
annual installments (not to exceed five) for the payment of the Deferred Fees
(plus the amounts (if any) credited under Section 5), with such lump-sum
payment or the first installment payment occurring on the later of (A) the
calendar year following the calendar year in which the participant’s Separation
from Service occurs (but not earlier than January 15th of such
year) or (B) the first day of the seventh month following the date on
which the participant’s Separation from Service occurs (and otherwise in
compliance with applicable law), with any successive annual installment
payments to be made not earlier than January 15th of each such
year.  Any payment election made by a
participant in connection with his or her initial election to participate in
the Plan shall apply to all Deferred Fees, whether covered by the initial
deferral election or a subsequent deferral election; provided,  however,  that  this
paragraph 4(c)(iii) shall not preclude subsequent modifications to the
payment election described immediately above that are made in connection with a
participant’s Separation from Service and in compliance with paragraph (d) below.


 


(d)           A participant may change his or
her payment election in accordance with the following requirements:


 


(i)            Subject to clauses (ii) and
(iii) of this paragraph (d), such election may not take effect until the
twelve (12) month anniversary of the date the election is made and filed with
the Secretary of the Company using a form prescribed by the Company;


 


(ii)           Such lump-sum payment or the
first installment payment  shall not be
made less than five (5) years after the date that the participant’s Deferred
Fees (plus the amounts (if any) credited under Section 5)would have been
paid pursuant to paragraph (c)(iii) above (or such later year if a prior
modification was made pursuant to this paragraph); and


 


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(iii)          Any new election shall not be
effective unless made at least twelve (12) months prior to the year in which
the payment of the Deferred Fees (plus the amounts (if any) credited under Section 5)
would otherwise commence.


 


5.             Deferred Compensation Account.  The Company shall establish a book-entry
account for each participant to record the participant’s Deferred Fees (the “Account”).


 


(a)           For Deferred Fees allocated by
the participant to the Cash Fund:


 


(i)            at the time the Director Fees
would otherwise have been payable, the Account will be credited with the amount
of the Deferred Fees, receipt of which the participant has elected to defer,
and


 


(ii)           at the end of each calendar year
or terminal portion of a year, the Account will be credited with deemed
interest, at an annual rate equivalent to the weighted average prime or base
lending rate of JP Morgan Chase Bank (including any successor thereto or such
other financial institution that may be selected from time to time by the Secretary
of the Company in accordance with paragraph 10 of the Plan and in accordance
with applicable law) for the relevant year or portion thereof (the “Interest
Equivalents”), upon the average daily balance in the Account during such
year or portion thereof.


 


(b)           For  Deferred Fees allocated by the participant to
Share Units:


 


(i)            at the time the Director Fees
would otherwise have been payable, (A) the Account will be credited with
the amount of the Deferred Fees, receipt of which the participant has elected
to defer and (B) such amount of Deferred Fees shall be converted on such
date to a number of “Share Units” (computed to the nearest 1/1000 of a share)
equal to the number of shares of common stock, par value $.01 per share (“Common
Stock”), of the Company that theoretically could have been purchased on
such date with such amount of Deferred Fees, using the closing price for the
Common Stock on such date (or, if such date is not a trading day, on the next
preceding trading day) on The Nasdaq Stock Market’s National Market System (“Nasdaq”)
or, if the Common Stock is not then listed or quoted on Nasdaq, the principal
stock exchange on which the Common Stock is then traded;


 


(ii)           on each date on which a dividend
is paid on the Common Stock, the Account will be credited with the number of
Share Units (computed to the nearest 1/1000 of a share) which theoretically
could have been purchased with the amount of dividends payable on the number of
shares of Common Stock equal to the number of Share Units in the participant’s
Account immediately prior to the payment of such dividend; the number of
additional Share Units shall be calculated as in paragraph 5(b)(i) above,
provided that, with respect to dividends paid in kind, the amount of such
dividend shall be determined based on the fair 


 


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market value of such dividend on the date of
the dividend distribution (which, if such dividend is a security that is then
traded on a stock exchange, the fair market value of such security shall be the
closing price on such date of the security on the principal stock exchange on
which the security is then traded (or, if such date is not a trading day, on
the next trading day); and


 


(iii)          on the date of the occurrence of
any event described in paragraph 7(d) below, the Account will be credited with
the number of Shares Units necessary for an equitable adjustment, which
adjustment shall be determined in accordance with paragraphs 7(d) and 10
of the Plan and in accordance with applicable law.


 


(c)           Unless otherwise determined by
the Secretary of the Company in accordance with paragraph 10 of the Plan and in
accordance with applicable law, Deferred Fees shall be payable (and related
amounts credited to participant Accounts) on a quarterly basis.  Each payment shall be classified as a “separate
payment” under Section 409A of the Code.


 


6.             Value of Deferred Compensation
Accounts.  The value of each participant’s Account on
any date shall consist of (a) in the case of the Cash Fund, the sum of the
Deferred Fees credited in accordance with paragraph 5 above and the Interest
Equivalents credited through such date, if any, and (b) in the case of the
Share Units, the market value of the corresponding number of shares of Common
Stock on such date, determined using the closing price for the Common Stock on
such date (or, if such date is not a trading day, on the next preceding trading
day) on Nasdaq, or if the Common Stock is not then listed or quoted on Nasdaq,
the principal stock exchange on which the Common Stock is then traded.  A participant’s Account shall be credited
with Interest Equivalents or additional Share Units, if any, as applicable for
so long as there is an outstanding balance credited to the Participant’s Account.


 


7.             Payment of Deferred Compensation.  No payment shall be made from a participant’s
Account except as follows:


 


(a)           The balance of Deferred Fees and
Interest Equivalents in a participant’s Account credited to the Cash Fund shall
be paid in cash in the manner elected in accordance with the provisions of
paragraph 4(c) above.  If annual
installments are elected, the amount of the first payment shall be a fraction
of the balance in the participant’s Account as of the December 31 of the
year preceding such payment, the numerator of which is one and the denominator
of which is the total number of annual installments elected.  The amount of each subsequent payment shall
be a fraction of the balance in the participant’s Account as of December 31
of the year preceding each subsequent payment, the numerator of which is one
and the denominator of which is the total number of installments elected minus
the number of installments previously paid. 
Each payment pursuant to this paragraph 7(a) shall include Interest
Equivalents, but only on the amount being paid, from the preceding December 31
to the date of payment.


 


(b)           The balance in a participant’s
Account credited to Share Units shall be paid in the number of actual shares of
Common Stock equal to the whole number of 


 


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Share Units in the participant’s Account.  If annual installments are elected, the whole
number of shares of Common Stock in the first payment shall be a fraction of
the number of Share Units in the participant’s Account as of December 31
of the year preceding such payment, the numerator of which is one and the denominator
of which is the total number of annual installments elected.  The whole number of shares of Common Stock in
each subsequent payment shall be a fraction of the Share Units in the participant’s
Account as of December 31 of the year preceding each subsequent payment,
the numerator of which is one and the denominator of which is the total number
of installments elected minus the number of installments previously paid.  If annual installments are elected, cash payments
in lieu of fractional shares of Common Stock issuable in respect of fractional
Share Units, if applicable, shall be made with the last payment.


 


(c)           Notwithstanding the election of
the participant pursuant to paragraph 4(c), in the event of a participant’s
death while a director, “conflict of interest” within the meaning of Treasury
Regulation Section 1.409A-3(j)(4)(iii), or “disability” within the meaning
of Treasury Regulation Section 1.409A-3(i)(4), the balance in the
participant’s Account (in the case of the Cash Fund, including Interest Equivalents
in relation to the elapsed portion of a year) shall be determined as of such
date of death, conflict of interest or disability, and such balance shall be
paid in one lump-sum payment in cash in the case of the Cash Fund or in actual
shares of Common Stock in the case of Share Units to the participant or the
participant’s estate, as the case may be, as soon as reasonably practicable
thereafter (and otherwise in compliance with applicable law and Section 409A
of the Code) but in no event later than the later of the last day of such
calendar year in which the death, conflict of interest or disability occurred
or ninety (90) days following the occurrence of the death, conflict of interest
or disability.


 


(d)           In the event of any merger,
consolidation, acquisition of property or shares, stock rights offering,
liquidation, disaffiliation, or similar event affecting the Company or any of
its subsidiaries, the Board or the Compensation and Human Resources Committee
(or such other Committee as the Board may from time to time designate) (the “Committee”)
may make such equitable substitutions or adjustments in the aggregate number of
Share Units in a participant’s Account, in the form or type of property
represented by such Share Units and in the number and kind of shares reserved
for issuance as the Board or the Committee deems appropriate.  In the event of a stock dividend, stock
split, reverse stock split, separation, spinoff, reorganization, extraordinary
dividend of cash or other property, share combination, or recapitalization or
similar event affecting the capital structure of the Company, the Committee or
the Board shall make such substitutions or adjustments as it deems appropriate
and equitable to the aggregate number of Share Units in a participant’s
Account, in the form or type of property represented by such Share Units and in
the number and kind of shares reserved for issuance.  Any successor corporation or other acquirer
of the Company shall be required to assume the Company’s obligations hereunder
and substitute an appropriate number of shares of stock or other equity measure
of such successor entity for Share Units.


 


8.             Participant’s Rights Unsecured.  The right of a participant to receive any
unpaid portion of the participant’s Account, whether the Cash Fund or Share
Units, shall be an unsecured claim against the general assets of the Company.


 


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9.             Nonassignability.  The right of a participant to receive any
unpaid portion of the participant’s Account shall not be assigned, transferred,
pledged or encumbered or be subject in any manner to alienation or anticipation.


 


10.           Administration.  This Plan shall be administered by the
Secretary of the Company, who shall have the authority to adopt rules and
regulations for carrying out the Plan and to interpret, construe and implement
the provisions thereof.


 


11.           Stock Subject to Plan.  The total number of Share Units that may be
credited to the Accounts of all eligible directors, and the total number of
shares of Common Stock reserved and available for issuance, under the Plan
shall be 100,000.


 


12.           Conditions Upon Issuance of
Common Stock.  Shares of Common Stock shall not be issued
pursuant to the Plan unless the issuance and delivery of such shares pursuant
hereto shall comply with all relevant provisions of law, including, without limitation,
the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the
requirements of any stock exchange upon which the shares of Common Stock may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.


 


13.           Amendment and Termination.  This Plan may be amended, modified or
terminated at any time by the Committee or the Board; provided, however,
that no such amendment, modification or termination shall, without the consent
of a participant, adversely affect such participant’s rights with respect to
amounts theretofore accrued to the participant’s Account and any amendment or
termination of the Plan shall be effected in accordance with the requirements
of Section 409A of the Code.


 


14.           Section 409A of the Code.


 


(a)           The terms and conditions of the Plan are
intended to comply (and shall be interpreted in accordance) with Section 409A
of the Code and the regulations thereunder.


 


(b)           No action shall be taken under the Plan that
will cause any Account to fail to comply in any respect with Section 409A
of the Code without the written consent of the participant.


 


(c)           Any adjustments to Share Units and/or cash
payments made pursuant to paragraph 7(d) shall be made (i) in
compliance with the requirements of Section 409A of the Code and (ii) in
such a manner as to ensure that after such adjustment and/or cash payment, the
Share Units or Deferred Fees to be paid comply with the requirements of Section 409A
of the Code.


 


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