Document:

Exhibit
10.3

 

AMERIPRISE FINANCIAL

 

SUPPLEMENTAL RETIREMENT PLAN

 

 

As Amended and Restated Effective April 1, 2010

 

 

TABLE OF CONTENTS

 

	
  ARTICLE 1 PURPOSE,
  EFFECTIVE DATE AND TRANSITION RULES

  	
  1

  
	
   

  	
   

  
	
  ARTICLE 2 DEFINITIONS

  	
  2

  
	
   

  	
   

  
	
  ARTICLE 3 ELIGIBILITY

  	
  4

  
	
   

  	
   

  
	
  ARTICLE 4 PLAN BENEFITS

  	
  5

  
	
   

  	
   

  
	
  ARTICLE 5 SUBACCOUNTS,
  INVESTMENT PERFORMANCE AND TRANSFERS

  	
  8

  
	
   

  	
   

  
	
  ARTICLE 6 DISTRIBUTION OF
  BOOK RESERVE ACCOUNTS

  	
  10

  
	
   

  	
   

  
	
  ARTICLE 7 BENEFICIARY
  DESIGNATION

  	
  12

  
	
   

  	
   

  
	
  ARTICLE 8 EFFECT OF
  CERTAIN EVENTS

  	
  12

  
	
   

  	
   

  
	
  ARTICLE 9 SPECIAL RESTRICTIONS

  	
  13

  
	
   

  	
   

  
	
  ARTICLE 10 AMENDMENT AND
  TERMINATION

  	
  14

  
	
   

  	
   

  
	
  ARTICLE 11 ADMINISTRATION

  	
  14

  
	
   

  	
   

  
	
  ARTICLE 12 CLAIMS
  PROCEDURES

  	
  15

  
	
   

  	
   

  
	
  ARTICLE 13 MISCELLANEOUS

  	
  16

  

 

 

AMERIPRISE FINANCIAL

SUPPLEMENTAL RETIREMENT PLAN

 

As Amended and Restated Effective April 1, 2010

 

Article 1

Purpose, Effective Date and Transition Rules

 

1.01.                        Purpose.  The Ameriprise Financial Supplemental
Retirement Plan (the “Plan”) was adopted by Ameriprise Financial, Inc.
effective October 1, 2005, was amended and restated in its entirety effective
January 1, 2007, was amended and restated in its entirety effective January 1,
2009 and January 1, 2010 and is hereby amended and restated in its
entirety effective April 1, 2010. 
The Plan is intended to supplement retirement benefits provided under
the Retirement Plan, the 401(k) Plan (for pay periods ending prior to December 31,
2006), and any other retirement and savings plans sponsored by the Company, for
a select group of management or highly compensated individuals.  The Plan is intended to be and shall be
construed and operated as a “top-hat plan” under Sections 201(2), 301(a)(3),
and 401(a)(1) of the Employee Retirement Income Security Act of 1974, as
amended (“ERISA”), and Section 2520.104 -23 of the United States
Department of Labor Regulations.

 

1.02.                        Effective Date.  The Plan became effective October 1,
2005. Effective as of the close of business on September 30, 2005, the
American Express Company effectuated the distribution of all of the outstanding
securities of Ameriprise Financial, Inc. to the shareholders of the
American Express Company in a tax-free spin-off under the Code (the
“Spin-Off”). On that date, the Company ceased to be a participating employer in
the American Express Company’s tax-qualified retirement plans and the components
of such plans covering Company participants were transferred to new plans
established by the Company in a transaction that complied with Section 414(l) of
the Code. In connection with this transaction, the component of the American
Express Company Supplemental Retirement Plan (the “AXP Plan”) covering Company
participants was similarly transferred to the Company.  Effective as of the close of business on September 30,
2005, the Company and its subsidiaries ceased to be participating companies,
and employees and retirees of the Company and its subsidiaries ceased to be
participants, in the AXP Plan. Effective January 1, 2007, the Plan was
amended to discontinue contributions to Participants in excess of the limits
under the 401(k) Plan for pay periods ending after December 31, 2006,
and to reflect certain other design changes. Effective January 1, 2009,
the Plan was amended to comply with the requirements of Section 409A, and
to reflect certain other design changes. 
Effective April 1, 2010, the Plan is hereby amended to clarify the
operation of certain provisions in compliance with Section 409A.

 

1.03.                        Transition
Rules

 

(a)                                  Opening
Account Balances and Participation. Unless otherwise expressly
set forth herein, the account balance as of the close of business on September 30,
2005 of any individual who had accumulated benefits under the AXP Plan, the
responsibility for which was transferred to the Company pursuant to the
Employee Benefits Agreement by and between the American Express Company and the
Company, dated as of September 30, 2005 (the “EBA”), shall be the account
balance such Participant had in the AXP Plan immediately before the

 

 

Spin-Off. For purposes of
this transition rule only, “Participant” shall include individuals with
accrued benefits under the AXP Plan, the responsibility for which was
transferred to the Company under the EBA. 
A Participant who became an Employee of the Company and Participant
under the Plan shall accrue benefits and receive distributions of such
benefits, including benefits accrued under the AXP Plan, as set forth below in
the Plan. A Participant who had accrued benefits under the AXP Plan, but did
not become an Employee of the Company accruing additional benefits under the
Plan, shall have benefits solely as set forth in, and shall receive payments
from the Company solely in accordance with, the terms of the AXP Plan as in
effect on September 30, 2005.

 

(b)                                 Plan
Elections and Designations.  Notwithstanding
anything herein to the contrary and in accordance with the requirements of the
EBA, all beneficiary designations, deferral election forms, investment
elections, payment form elections, and qualified domestic relations orders
creating rights for alternate payees in effect under the AXP Plan as of September 30,
2005 shall be deemed to be effective with respect to the Plan. For purposes of
this Article 1.03(b), investment elections relating to the American
Express Company Stock Fund under the AXP Plan shall be deemed to apply to the
Company Stock Fund under the Plan.

 

(c)                                  Calculation
of Limitations. 
Notwithstanding anything herein to the contrary, for purposes of
calculating the Section 415 Limitations and the Section 401(a)(17)
Limitation, compensation and benefits accrued under the AXP Plan (and the
underlying AXP qualified retirement plans) and/or while a Participant was
employed by the American Express Company or its affiliates during 2005 shall be
taken into consideration under the Plan for the 2005 Plan Year.

 

Article 2

Definitions

 

As used in the Plan, the
following terms have the meanings indicated below:

 

2.01.                        “Affiliate”
means any corporation or other trade or business under common control with the
Company, as further defined in the Company’s Qualified Retirement Plans.

 

2.02.                        “Beneficiary”
means the individual or entity designated by the Participant pursuant to Article 7
and in accordance with procedures established by the Committee to receive
benefits under the Plan in the event of the Participant’s death.

 

2.03.                        “Board”
means the board of directors of the Company.

 

2.04.                        “Change in
Control” has the meaning given such term in the Ameriprise Financial 2005
Incentive Compensation Plan, as amended.

 

2.05.                        “Claimant”
has the meaning set forth in Article 12.01.

 

2.06.                        “Code”
means the Internal Revenue Code of 1986, as it may be amended from time to
time, and all regulations, interpretations and administrative guidance issued
thereunder.

 

 

2.07.                        “Committee”
means the Compensation and Benefits Committee of the Company or such other
committee designated by the Board to administer the Plan. Any reference herein
to the Committee shall be deemed to include any person to whom any duty of the
Committee has been delegated pursuant to Article 11.03.

 

2.08.                        “Company”
means Ameriprise Financial, Inc. and any of its subsidiaries and
Affiliates which have become participating employers in a Qualified Retirement
Plan.

 

2.09.                        “Compensation”
means, with respect to excess benefits calculated with reference to a
particular Qualified Retirement Plan, “Compensation” as defined in the applicable
Qualified Retirement Plan, as the context implies, provided that the Committee
may, in its discretion, designate additional or different items, such as the
value of certain equity awards, as Compensation for purposes of one or more of
the benefits provided under the Plan.

 

2.10.                        “Deferral
Plan” means the Ameriprise Financial Deferred Compensation Plan, or any
similar or successor non-qualified plan for the deferral of compensation in
accordance with Section 409A.

 

2.11.                        “Defined
Termination” has the meaning given such term in the Senior Executive
Severance Plan.

 

2.12.                        “Employee”
means an elected or appointed officer of the Company or any other individual
whom the Committee identifies as an employee of the Company, and whose
compensation is reported on a Form W-2, regardless of whether the use of
such form is subsequently determined to be erroneous.

 

2.13.                        “Exchange
Act” means the Securities Exchange Act of 1934, as amended.

 

2.14.                        “Insiders”
means such Participants who are or may be required to file reports under Section 16(a) of
the Exchange Act, with respect to equity securities of  Ameriprise Financial, Inc.

 

2.15.                        “401(k) Plan”
means the Ameriprise Financial 401(k) Plan, as amended.

 

2.16.                        “Participant”
means an eligible Employee who accrues benefits under the Plan.

 

2.17.                        “Plan Year”
means the calendar year with reference to which benefits are determined under
the Plan.

 

2.18.                        “Qualified
Retirement Plan” means the Retirement Plan and/or the 401(k) Plan, as
the context may imply.

 

2.19.                        “Retirement
Plan” means the Ameriprise Financial Retirement Plan, as amended.

 

2.20.                        “Section 401(a)(17)
Limitation” refers to the limitation on the dollar amount of Compensation
which may be taken into account under the Qualified Retirement Plans under Section 401(a)(17)
of the Code.

 

 

2.21.                        “Section 409A”
means Section 409A of the Code, and the Treasury Regulations promulgated
and other official guidance issued thereunder.

 

2.22.                        “Section 415
Limitations” refer to the limitations on benefits for defined benefit
pension plans and defined contribution plans which are imposed by Section 415
of the Code.

 

2.23.                        “Senior
Executive Severance Plan” means the Ameriprise Financial Senior Executive
Severance Plan, as amended.

 

2.24.                        “Termination
of Employment” means a “separation from service” as defined under Section 409A,
as determined in accordance with the Company’s Policy Regarding Section 409A
Compliance.

 

2.25.                        “Unforeseeable
Emergency” means, with respect to a Participant, a severe financial
hardship to the Participant resulting 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 control of the Participant. In making its
determination, the Committee shall be guided by the prevailing authorities
applicable under Section 409A.

 

Article 3

Eligibility

 

3.01.                        Automatic
Participation.  Participation
in the Plan shall be limited to Employees who meet the requirements of Articles
3.02(a) and 3.02(b), and shall automatically occur for such Employees;
provided, that the Committee may designate, on a case-by-case basis, Employees
or categories of Employees who shall not be eligible to participate in all or
any portion of the Plan.

 

3.02.                        Participation
Requirements.  To become a
Participant in the Plan, an Employee must:

 

(a)                                  be a
participant under a Qualified Retirement Plan maintained by the Company.  Participation by an Employee in a Qualified
Retirement Plan shall be determined pursuant to and in accordance with the
eligibility criteria applicable under such Qualified Retirement Plan; and

 

(b)                                 for the
relevant Plan Year:

 

 

(i)                                     be credited
with Compensation earned from the Company in an amount in excess of the
applicable Code Section 401(a)(17) Limitation or accrue benefits under a
Qualified Retirement Plan in excess of the Section 415 Limitation; or

 

(ii)                                  have deferred
Compensation under a Deferral Plan and be classified as a level “Grade Band 50”
personnel or greater (as such classification is defined by the Committee from
time-to-time); provided, however, that the Committee may, in its sole
discretion, set a different required pay level or grade for participation in
the Plan.

 

Article 4

Plan Benefits

 

4.01.                        Benefits Under
the Retirement Plan.  For
purposes of this Article 4.01, capitalized terms not otherwise defined
herein shall have the same meaning set forth in the Retirement Plan.

 

(a)                                  Benefits
in Excess of Limits Under the Retirement Plan.  If a Participant is a
participant under the Retirement Plan, other than a terminated participant, the
Company shall establish a book reserve account to be determined as follows:

 

(i)                                     Initial Book
Reserve Account Balance.  A
Participant’s initial book reserve account balance shall be zero unless the
Participant was a participant in the AXP Plan. A Participant who was a
participant in the AXP Plan shall have an initial book reserve account balance
equal to his or her book reserve account balance in the AXP Plan on September 30,
2005.

 

(ii)                                  Contribution
Credits.  There shall be credited to a
Participant’s book reserve account, in accordance with Article 4.04, an
amount equal to the excess, if any, of: (x) the Contribution Credits that
would have been credited to a Participant’s Defined Benefit Account Balance
under the Retirement Plan for the Plan Year if the Plan’s definition of
Compensation was used, the Section 401(a)(17) Limitation was ignored, and
the Participant had not elected or been required to defer the receipt of any
Compensation pursuant to a Deferral Plan, over (y) the actual Contribution
Credits credited to the Participant’s Defined Benefit Account Balance under the
Retirement Plan for the Plan Year.  In
the event a Participant terminates from service as a result of a disability, as
determined under the Retirement Plan, this Article 4.01(a)(ii) will
apply as if the Section 401(a)(17) Limitation and Section 415
Limitations applied to the deemed Compensation considered by the Retirement
Plan.

 

(b)                                 Additional
Years of Service.  Certain
Participants, as determined by the Company in its sole discretion, may be
deemed to have rendered five additional Years of Service under the Plan. For
each such Participant, subject to such terms and conditions as the Company may
impose upon such benefits by special agreement with such Participant (in the
event of a conflict with this Article 4.01(b), such special agreement
shall control), an additional amount shall be credited to the Participant’s
book reserve account equal to the excess, if any of: (x) the total
cumulative Contribution Credits that would have been credited to the
Participant’s book reserve account under Article 4.01(a) had the
Participant rendered such additional Years of Service under the Retirement
Plan, over (y) the actual total cumulative Contribution Credits credited
to the Participant’s book reserve account under Article 4.01(a) as of
the date the

 

 

Participant is eligible for
such benefits under the Plan.  Subject to
the terms of the special agreement with each such Participant, such amounts
shall be calculated and credited in accordance with Article 4.04 under
procedures to be determined from time to time by the Committee and consistently
applied to similarly situated Employees. 
Unless otherwise determined by the Committee or agreed in a special
agreement with the Participant, amounts credited under this Article 4.01(b) shall
be subject to five year vesting, and such amounts shall be forfeited by the Participant
if the Participant’s service with the Company terminates for any reason other
than death or disability (as defined in the Retirement Plan) before five years
of actual service have been rendered to the Company by such Participant.

 

(c)                                  Benefits
Formula.  The formula of the benefits
for a Plan Year under this Article 4.01 shall be determined by the
Committee and applied in a uniform manner for all similarly situated Employees.

 

(d)                                 Benefits
Restricted to Vested Portion.  The benefits credited under this Article 4.01
at the time of distribution to a Participant shall be restricted to a
Participant’s vested portion. Unless otherwise expressly provided in the Plan,
a Participant’s vested portion shall be determined under the vesting provisions
of the Retirement Plan; provided, that vesting shall cease as of the date a
Participant commences payment pursuant to Article 6.02. Any non-vested
portion of amounts credited to a Participant hereunder shall be forfeited.

 

(e)                                  Additional
Accounts.  The
Committee may, in its sole and exclusive discretion, establish additional book
reserve accounts from time to time.  The
procedures to reflect and credit increases, decreases, interest, dividends, and
other income, gains and losses shall be determined by the Committee in its sole
and exclusive discretion.

 

4.02.                        Benefits Under
the 401(k) Plan.  For
purposes of this Article 4.02, capitalized terms not otherwise defined
herein shall have the same meaning set forth in the 401(k) Plan.

 

(a)                                  Benefits
in Excess of Limits Under the 401(k) Plan. If a Participant is a
participant in the 401(k) Plan for a Plan Year ending on or before December 31,
2006, the Company shall establish book reserve accounts under the Plan on
behalf of such Participant. A Participant’s initial book reserve account
balance shall be zero unless the Participant was a participant in the AXP Plan.
A Participant who was a participant in the AXP Plan shall have an initial
balance in each book reserve account equal to such Participant’s book reserve
account balance in the equivalent account under the AXP Plan on September 30,
2005. The following amounts shall be credited to the Participant’s book reserve
accounts as described in Article 4.04:

 

 

(i)                                     Company Stock
Contribution Allocation.  For
pay periods ending on or before December 31, 2006, an amount shall be
credited to the Participant’s book reserve account for each Plan Year equal to:
(A) one percent, or such other amount as may be set by the Committee for
some or all Participants, of the sum of: 
(1) the Participant’s Compensation, calculated without the Section 401(a)(17)
Limitation or Section 415 Limitations, plus (2) that portion of a
Participant’s Compensation deferred during such Plan Year pursuant to a
Deferral Plan, minus (B) the amount actually allocated as a Company Stock
Contribution to the account of the Participant under the 401(k) Plan.

 

(ii)                                  Company
Profit-Sharing Contribution Allocation.  For pay periods ending on or before December 31,
2006, an amount shall be credited to the Participant’s book reserve account for
each Plan Year equal to:  (A) the
Company Profit-Sharing Contribution percentage utilized for purposes of the 401(k) Plan
for that Plan Year for such Participant times the sum of:  (1) the Participant’s Compensation,
calculated without the Section 401(a)(17) Limitation or Section 415
Limitations, plus (2) that portion of a Participant’s Compensation
deferred during such Plan Year pursuant to a Deferral Plan, minus (B) the
amount actually allocated as a Company Profit-Sharing Contribution to the
account of the Participant under the 401(k) Plan.  Unless otherwise expressly provided in the
Plan, benefits credited under this Article 4.02(a)(ii) at the time of
distribution shall be restricted to a Participant’s vested portion as
determined under the applicable provisions of the 401(k) Plan. Any
non-vested portion of such deferred compensation to be paid shall be forfeited.

 

(iii)                               Company
Matching Contribution Allocation.  For pay periods ending on or before December 31,
2006, a Company matching contribution, whether or not the Participant actually
elects to defer Compensation under the 401(k) Plan, for each Plan Year
equal to three percent, or such other amount as may be set by the Committee for
some or all Participants, of: (A) that portion of the Participant’s
Compensation which was deferred during the Plan Year pursuant to a Deferral
Plan, plus (B) that portion of the Participant’s Compensation (not
including the amounts deferred as described in clause (A) above) in excess
of the Section 401(a)(17) Limitation, shall be contributed and allocated
to the account of a Participant by the Company as a matching contribution on
behalf of such Participant; provided, however, for purposes of this Company
matching contribution, Compensation shall not be subject to the Section 401(a)(17)
Limitation.

 

(b)                                 Additional
Accounts.  The
Committee may, in its discretion, establish additional book reserve accounts
from time to time.  The procedures to
reflect and credit increases, decreases, interest, dividends, and other income,
gains and losses shall be determined by the Committee in its sole and exclusive
discretion.

 

4.03.                        Benefits Upon a
Change in Control.  If a
Participant who is eligible to receive benefits under the Senior Executive
Severance Plan experiences a Defined Termination, then the Participant shall be
entitled to an additional benefit under the Plan in an amount equal to the
contributions that would have been made by the Company on behalf of the
Participant under the Retirement Plan or the Plan (and other similar plans of
the Company), during a period equal to the number of weeks of severance pay to
which the Participant is entitled under the Senior Executive Severance Plan, as
in effect immediately prior to the Change in Control, assuming compensation per
week during such period of an amount equal to the Participant’s weekly

 

 

severance benefit under the
Senior Executive Severance Plan (for avoidance of doubt, without consideration
of any offsets which may be provided in such plan against severance benefits,
such as termination pay, office closing amounts, etc.).  The full amount of such benefit shall be
credited to the Participant’s book reserve accounts, as described in Article 4.04,
effective as of the date of the Defined Termination.

 

4.04.                        Crediting of
Accounts

 

(a)                                  Time
and Manner.  Amounts
described in this Article 4 shall be credited to a book reserve account
established for a Participant at such times and in such manner as may be determined
by the Committee. In making such credits, the Committee shall generally attempt
to, but shall not be required to, credit accounts at a time and in a manner as
similar as possible to the time and manner for the crediting of similar amounts
under the Qualified Retirement Plans; provided that, unless the Committee
determines otherwise, amounts credited to an account with respect to the
application of the Section 415 Limitations to the Retirement Plan shall be
credited upon the commencement of the benefit payment under the Retirement
Plan, and may, pursuant to rules determined by the Committee, include for
purposes of such calculation years of service, compensation, and other
crediting information accrued under the AXP Plan.  The Committee shall apply such procedures
consistently to similarly situated Participants.

 

(b)                                 Company
Stock Contributions.  Amounts
described in Article 4.02(a)(i) shall be initially credited to a book
reserve account established for a Participant which shall be denominated in
units (“Units”). For purposes of the Plan, the price and value of a Unit shall be
determined by the Committee in a manner determined by the Committee to be
reasonably consistent with similar determinations made under the 401(k) Plan
Company Stock Fund (the “Stock Fund”).

 

(c)                                  Other
Contributions.  Amounts
described in Articles 4.02(a)(ii) (profit-sharing contributions), 4.02(a)(iii) (matching
contributions) and 4.03 (benefits upon a change in control) shall be credited
to a book reserve account established for a Participant which shall contain
various subaccounts selected by the Committee in its sole and exclusive
discretion, representing the various investment funds available to a
Participant under the 401(k) Plan as provided for in the Plan; provided
that, unless otherwise determined by the Committee, no subaccount shall be
established under the Plan to coincide with any self-directed brokerage account
which may be available under the 401(k) Plan.

 

Article 5

Subaccounts, Investment Performance and Transfers

 

5.01.                        Earnings
Crediting.  For each
Participant, the book reserve accounts established pursuant to Article 4.01
shall be increased by the Imputed Earnings Credit (as such term is defined in
the Retirement Plan), not less frequently than annually, under procedures and
at times determined by the Committee and consistently applied for similarly
situated Participants. Such earnings shall be credited at the same interest
rate and computed in a similar manner (to the extent administratively feasible)
as Imputed Earnings Credits are computed under the Retirement Plan for each
Plan Year.

 

 

5.02.        Performance of Company Stock. Subject to Article 5.06,
and to such rules as may be adopted by the Committee, the performance of
the book reserve account established for each Participant pursuant to Article 4.04(b) shall
reflect the performance of the Stock Fund. 
Such book reserve account shall reflect such increases or decreases in
value from time to time, whether from dividends, gains, losses or otherwise, as
may be experienced by the Stock Fund. Subject to Article 9, and to such rules as
may be adopted by the Committee, a Participant may elect to transfer credits to
the book reserve account established pursuant to Article 4.04(b) to
or from such account to or from one or more subaccounts established pursuant to
Article 4.04(c), in a manner similar to the rules for such transfers
under the 401(k) Plan.

 

5.03.        Investment following Change
in Control. 
Notwithstanding the above, effective immediately upon a Change in
Control, to the extent a book reserve account established on behalf of a
Participant reflects, or by the terms of the Plan should in the future reflect,
the performance of the Stock Fund, it shall thereafter reflect the performance
of the 401(k) Plan Income Fund, or a default subaccount selected by the
Committee.

 

5.04.        Investment Allocation. For each
Participant, credits to the book reserve account established pursuant to Article 4.04(c) shall
be made to such subaccounts thereunder as directed by such Participant. If more
than one subaccount is selected, a Participant must designate, on a form or
other medium acceptable to the Committee, in one-percent increments, the
amounts to be credited to each subaccount. 
A Participant shall be allowed to amend such designation consistent with
the frequency of investment changes offered the Participant under rules governing
the 401(k) Plan for a given Plan Year.

 

5.05.        Investment Performance.  Subject to Article 5.06, for each
Participant, the performance of such subaccounts shall reflect the performance
of the investment fund under the 401(k) Plan that such subaccount
represents. Each such subaccount shall reflect such increases or decreases in
value from time to time, whether from dividends, gains, losses or otherwise, as
that experienced by the related investment fund under the 401(k) Plan.  Subject to Article 9, credits to such
subaccounts may be transferred to any other subaccount under the Plan on such
terms and at such times as permitted with respect to the related investment
funds under the 401(k) Plan, and to such rules as may be adopted by
the Committee. If a Participant fails to affirmatively designate one or more
subaccounts pursuant to this Article 5.05, subject to rules established
by the Committee, such Participant shall be deemed to have selected either a
default account selected by the Committee or, to the extent feasible, the
subaccount(s) that relate to the Participant’s investment direction under
the 401(k) Plan; provided, however, to the extent an Insider has directed
401(k) Plan amounts to the Stock Fund, such Insider shall be deemed to
have selected the subaccount relating to the 401(k) Plan Income Fund or a
default subaccount selected by the Committee. Notwithstanding the foregoing,
the Committee may, in its sole discretion, provide that one or more investment
funds available under the 401(k) Plan, including any self-directed
brokerage account which may be available under the 401(k) Plan, shall not
be available for designation under the Plan.

 

5.06.        Valuation. Subject to Article 4.04(c),
the subaccounts shall be valued subject to such reasonable rules and
procedures as the Committee may adopt and apply to all Participants similarly
situated with an effort to value such subaccounts as if amounts designated were
invested in at similar times and in manners, subject to administrative convenience,
as amounts

 

 

are invested, and subject to
the same market fluctuation factors used in valuing such investments in the 401(k) Plan.

 

Article 6

Distribution of Book Reserve Accounts

 

6.01.        Distribution Elections.

 

(a)           Initial
Elections. In accordance with rules and procedures adopted
by the Committee, and in compliance with Section 409A, existing
Participants, including Participants (other than those in pay status on December 31,
2004) who were participants under the AXP Plan, may make a distribution election
to receive benefits in a single lump-sum payment or in annual installments
payable over a period of five, ten or 15 consecutive calendar years.  The amount of each installment payment shall
be equal to the value of the Participant’s respective book reserve accounts
divided by the number of installments remaining to be paid.

 

(i)            Participants who have not
previously made an initial distribution election, whether under the Plan or
under the AXP Plan, may make such an initial election on or before the date set
by the Committee.

 

(ii)           Employees who first become
Participants after December 31, 2005 may make an initial distribution
election in accordance with rules and procedures adopted by the Committee
in compliance with Section 409A.

 

(iii)          A Participant’s distribution
election is irrevocable and may not be modified except as provided in Article 6.01(b) .
Such election shall apply to the payment of all benefits under the Plan,
including benefits accrued under the AXP Plan (except for benefits that were in
pay status under the AXP Plan on December 31, 2004).

 

(iv)          If a Participant fails to
make a valid, timely distribution election in accordance with this Article 6.01(a) and
the rules and procedures adopted by the Committee, such Participant shall
be deemed to have made an initial distribution election to receive benefits in
the form of a single lump sum.

 

(b)           Subsequent
Distribution Elections. A Participant who has not previously modified
an initial distribution election, whether under the Plan or under the AXP Plan,
may make a one-time modification to such Participant’s initial distribution
election to elect a different form of payment. To be effective, such a
modification shall be made by filing a written notice of modification in such
form and manner as the Committee may prescribe; provided, however, that the
modification (i) must be submitted no later than a date specified by the
Committee in accordance with the requirements of Section 409A, (ii) shall
not take effect until 12 months after the date on which such modification
becomes effective, and (iii) specifies a new distribution date (or a new
initial distribution date in the case of installment distributions) that is no
sooner than five years after the original distribution date (or the original
initial distribution date in the case of installment distributions), or such
later date specified by the Committee. A Participant may not change the payment
method after Termination of Employment. For the avoidance of doubt, any such
distribution which accelerates payments from the Plan shall not cause any
reduction in the amounts otherwise payable hereunder (notwithstanding Section V(E)(1)(b)(ii) of
the AXP Plan).

 

 

6.02.        Payment of Benefits.

 

(a)           Subject to Article 8,
if a Participant has not made an effective one-time modification to his or her
initial distribution election pursuant to Article 6.01(b), then payment of
benefits shall be made (or commence in the case of installment distributions)
as follows: (i) if a Participant has elected (or is deemed to have
elected) a lump sum payment, it shall be made on the first January 1 or July 1
which is at least six months following the Participant’s Termination of
Employment for any reason from the Company, or as soon thereafter as
administratively practicable, but in no event later than 90 days thereafter;
and (ii) if a Participant has elected annual installment payments, they
shall begin on July 1 of the calendar year following the Participant’s
Termination of Employment for any reason from the Company, or as soon
thereafter as administratively practicable, but in no event later than 90 days
thereafter, and shall continue on each July 1 thereafter for the period
selected by the Participant.

 

(b)           Subject to Article 8,
if a Participant has made an effective one-time modification to his or her
initial distribution election pursuant to Article 6.01(b), then payment of
benefits shall be made (or commence in the case of installment distributions)
as follows: (i) if a Participant has elected (or is deemed to have
elected) a lump sum payment, it shall be made on the first January 1 or July 1
which is at least five years and six months following the Participant’s
Termination of Employment for any reason from the Company, or as soon
thereafter as administratively practicable, but in no event later than 90 days
thereafter; and (ii) if a Participant has elected annual installment
payments, they shall begin on July 1 of the calendar year following the
five-year anniversary of the Participant’s Termination of Employment for any reason
from the Company, or as soon thereafter as administratively practicable, but in
no event later than 90 days thereafter, and shall continue on each July 1
thereafter for the period selected by the Participant.

 

(c)           A Participant who has
experienced a Termination of Employment and has begun receiving payments as set
forth above, shall continue receiving any remaining payments according to the
terms in effect on the date of such Participant’s Termination of Employment,
even if later re-employed by the Company.

 

6.03.        Offsets.
Notwithstanding anything in the Plan, the Retirement Plan or the 401(k) Plan
to the contrary, to the maximum extent permissible by Section 409A and
applicable law, any amount otherwise due or payable under the Plan may be
forfeited, or its payment suspended, at the discretion of the Committee, to
apply toward or recover any claim the Company may have against the Participant,
including but not limited to, for the enforcement of the Company’s Detrimental
Conduct provisions under its long-term incentive award plan, to recover a debt
to the Company or to recover a benefit overpayment under a Company benefit plan
or program. No amounts shall be offset against a Participant’s account prior to
the date on which the offset amounts would otherwise be distributed to the
Participant unless otherwise permitted by Section 409A. An offset shall be
made only to the extent and in the manner permitted by the Company’s Policy
Regarding Section 409A Compliance.

 

6.04.        Effect of Severance Plans. The benefits
of a Participant under the Plan are subject to the terms of any severance plan
of the Company or an Affiliate applicable to such Participant, which plans may
provide for the reduction of such benefits in accordance with the terms
thereof.

 

 

6.05.        Withholding.  The Company shall be entitled to deduct from
any payment under the Plan, regardless of the form of such payment, the amount
of all applicable income and employment taxes, if any, required by law to be
withheld with respect to such payment or may require the Participant to pay to
it such tax prior to and as a condition of the making of such payment.

 

6.06.        Payment Medium.  Any benefits payable under the Plan shall be
paid in cash from the general assets of the Company.

 

Article 7

Beneficiary Designation

 

7.01.        Beneficiary.  A Participant shall designate such
Participant’s Beneficiary or Beneficiaries entitled to receive benefits under
the Plan by filing written notice of such designation with the Committee in
such form as the Committee may prescribe.

 

7.02.        Beneficiary Designation;
Change.  A Participant may revoke or
modify such designation at any time by a further written designation in such
form as the Committee may prescribe. A Participant’s Beneficiary designation
shall be deemed automatically revoked in the event of the death of the
Beneficiary or, if the Beneficiary is the Participant’s spouse, in the event of
dissolution of marriage.

 

7.03.        No Beneficiary Designation.  If no designation is in effect at the time
benefits payable under the Plan become due, the Beneficiary shall be deemed to
be the Participant’s surviving spouse, if any, and if not, the Participant’s
estate.

 

Article 8

Effect of Certain Events

 

8.01.        Death.  Upon a Participant’s death, benefits under
the Plan shall be payable in cash to a Participant’s Beneficiary.  If a Participant dies while still actively
employed by the Company, such payment shall be made as a single lump-sum
payment on the first January 1 or July 1 which is at least six months
following the Participant’s death.  If a
Participant elects annual installment payments and dies after such installment
payments have commenced, any remaining installment payments shall be made to
such Participant’s Beneficiary as a single lump-sum payment within 90 days of
the date of the Participant’s death, or such later date permissible under Section 409A.

 

8.02.        Unforeseeable Emergency.  In the event that a Participant experiences
an Unforeseeable Emergency, the Participant may petition the Committee to
receive a partial or full payout of amounts credited to one or more of the
Participant’s book reserve accounts.  The
Committee shall determine, in its sole discretion, whether the requested payout
shall be made, the amount of the payout and the Plan Accounts from which the
payout will be made; provided, however, that the payout shall not exceed the
lesser of the Participant’s vested balance in his or her book reserve accounts
or the amount reasonably needed to satisfy the Unforeseeable Emergency plus
amounts necessary to pay taxes reasonably anticipated as a result of the
distribution. In making its determination under this Article 8.02, the
Committee shall be guided by the requirements of Section 409A and any
other related prevailing legal authorities and the

 

 

Committee shall take into
account the extent to which a Participant’s Unforeseeable Emergency is or may
be relieved through reimbursement or compensation by insurance or otherwise or
by the liquidation by the Participant of his or her assets (to the extent the
liquidation of such assets would not itself cause severe financial
hardship).  If, subject to the sole
discretion of the Committee, the petition for a payout is approved, the payout
shall be made within 90 days of the date of the Unforeseeable Emergency.

 

8.03.        Change In Control.  Notwithstanding the above and any other
provision herein to the contrary, to the extent permitted by Section 409A
without excise tax or penalty, effective immediately upon a Change of Control,
the entire value of each Participant’s book reserve accounts under the Plan
shall be maintained in a trust (the “Trust”) established by the Company for
this purpose and the Company shall transfer to the Trust an amount sufficient
to fund the entire value of each Participant’s book reserve accounts. The Trust
is intended to be classified for federal income tax purposes as a “grantor
trust” within the meaning of Subpart E, Part I, Subchapter J, Chapter 1,
Subtitle A of the Code.

 

8.04.        Plan Termination.  In the event of a termination of the Plan
pursuant to Article 10.02 as it relates to any Participant, then subject
to Article 4.04, all amounts credited to each of the book reserve accounts
of each affected Participant shall be 100 percent vested and shall be paid to
the Participant or, in the case of the Participant’s death, to the Participant’s
Beneficiary, in a lump sum. Such lump-sum payment shall be made 13 months after
such termination (or such earlier date permitted under Section 409A),
notwithstanding any elections made by the Participant, except that the Company
shall not have any right to so accelerate the payment of any amount to the
extent such right would cause the Plan to fail to comply with, or cause a
Participant to be subject to a tax under, the provisions of Section 409A.

 

Article 9

Special Restrictions

 

9.01.        Insider Status.  The provisions of this Article 9 shall
apply to Insiders.  Such provisions shall
apply during all periods that Insiders are subject to reporting under Section 16(a) of
the Exchange Act, including any period following cessation of Insider status
during which such Insiders are required to report transactions pursuant to Rule 16a-2(b) (or
its successor) under the Exchange Act. 
At such time as any Insider ceases to be subject to Section 16(a) reporting
(and any period contemplated by Rule 16a-2(b) has expired), this Article 9
shall cease to be applicable to such Participant.

 

9.02.        Applicability.  This Article 9 shall be automatically
applicable to any person who, on and after the date hereof, becomes an Insider.
For purposes of the foregoing, the effective date of this Article shall be
the date the person becomes an Insider.

 

9.03.        Stock Fund Limitations.  Notwithstanding anything in the Plan to the
contrary, (a) except as set forth below, credits to the account of an
Insider pursuant to Article 4.04 may not be made to any subaccount that
reflects the performance of the Stock Fund, (b) credits made pursuant to Article 4.04
to the account of an Insider at any time may not be transferred to any book
reserve account or subaccount that reflects the performance of the Stock Fund,
and (c) credits made to an Insider’s book reserve account pursuant to Article 4.04(b) at
any time and

 

 

credits to the account of an
Insider pursuant to Article 4.04 that were made to a subaccount that
reflects the performance of the Stock Fund (which credits could only have been
made when such individual was not an Insider) may not be transferred, withdrawn,
paid out or otherwise changed, other than (i) pursuant to Article 4.04(a) or
(b) (but only at such time as such person is no longer an Insider), or (ii) pursuant
to the forfeiture provisions contained in the last sentence of Article 4.02(a)(ii).

 

9.04.        Exchange Act Exemption.  It is intended that the crediting of amounts
to the accounts of Insiders that represents the performance of the Stock Fund
is intended to qualify for exemption from Section 16 under Rule 16b-3(d) under
the Exchange Act. The Committee shall, with respect to Insiders, administer and
interpret all Plan provisions in a manner consistent with such exemption.

 

Article 10

Amendment And Termination

 

10.01.      Plan Amendment.  The Committee may, at any time, amend or
modify the Plan in whole or in part, provided that the Committee may not reduce
or modify the amount of any benefit payable to a Participant or any Beneficiary
receiving benefit payments at the time the Plan is amended or modified.
Notwithstanding the foregoing, the Committee shall not have the right to amend
the Plan to the extent such amendment or modification would result in a
violation of Section 409A.

 

10.02.      Plan Termination.  Although the Company may anticipate that it
will continue the Plan for an indefinite period of time, there is no guarantee
that the Company will continue the Plan or will not terminate the Plan at any
time in the future.  Accordingly, the
Committee reserves the right to discontinue its sponsorship of the Plan and to terminate
the Plan; provided, however, that: (a) the Committee may not reduce or
modify the amount of any benefit payable to a Participant or any Beneficiary
receiving benefit payments at the time the Plan is terminated; (b) all
plans that are aggregated with the Plan for purposes of Section 409A are
also terminated; and (c) the Plan is not terminated proximate to a
downturn in the financial health of the Company, or any entity other than the
Company with whom the Company would be considered a single employer under
Sections 414(b) or 414(c) of the Code In the event of a termination
described in this Article 10.02, no new deferred compensation plans may be
established by the Company for a minimum period of three years following the
termination and liquidation of the Plan if such new plan would be aggregated
with the Plan under Section 409A.

 

Article 11

Administration

 

11.01.      Committee Duties.  The Plan shall be administered by the
Committee.  The Committee shall have full
power, authority and discretion to interpret, construe and administer the Plan,
and such interpretation and construction thereof and actions taken thereunder
shall be binding on all persons for the purposes so stated by the Committee.
The Committee may correct any defect, supply any omission or reconcile any
inconsistency in the Plan in the manner and to the extent the Committee deems
necessary or desirable. The Committee may prescribe a form of

 

 

agreement to be used by a
Participant and the Company, to the extent deemed necessary, to defer
compensation under the Plan.

 

11.02.      Binding Effect of Decisions.  The decision or action of the Committee with
respect to any question arising out of or in connection with the
administration, interpretation and application of the Plan and the rules and
regulations promulgated hereunder shall be final and conclusive and binding
upon all persons having any interest in the Plan.

 

11.03.      Agents.  In the administration of the Plan, the
Committee may, from time to time, employ agents and delegate to them such
administrative duties as it sees fit (including acting through a duly appointed
representative) and may from time to time consult with counsel who may be
counsel to the Company.

 

11.04.      Indemnity of Committee.  The Company shall indemnify and hold harmless
the members of the Committee, and any agent to whom duties of the Committee may
be delegated, against any and all claims, losses, damages, expenses or
liabilities arising from any action or failure to act with respect to the Plan,
except in the case of willful misconduct by the Committee or any of its members
or any such agent.

 

Article 12

Claims Procedures

 

12.01.      Presentation of Claim.  Any Participant or the Beneficiary of a
deceased Participant (such Participant or Beneficiary being referred to below
as a “Claimant”) may deliver to the Committee a written claim for a
determination with respect to the amounts distributable to such Claimant from
the Plan. If such a claim relates to the contents of a notice received by the
Claimant, the claim must be made within 60 days after such notice was received
by the Claimant. The claim must state with particularity the determination
desired by the Claimant.  All other
claims must be made within 180 days of the date on which the event that caused
the claim to arise occurred.  The claim
must state with particularity the determination desired by the Claimant.

 

12.02.      Notification of Decision.  The Committee shall consider a Claimant’s
claim within a reasonable time, and shall notify the Claimant in writing:  (a) that the Claimant’s requested
determination has been made, and that the claim has been allowed in full; or (b) that
the Committee has reached a conclusion contrary, in whole or in part, to the
Claimant’s requested determination, and such notice must set forth in a manner
calculated to be understood by the Claimant: (i) the specific reason(s) for
the denial of the claim, or any part of it; (ii) specific reference(s) to
pertinent provisions of the Plan upon which such denial was based; (iii) a
description of any additional material or information necessary for the
Claimant to perfect the claim, and an explanation of why such material or
information is necessary; and (iv) an explanation of the claim review
procedure set forth in Article 12.03.

 

12.03.      Review of a Denied Claim.  Within 60 days after receiving a notice from
the Committee that a claim has been denied, in whole or in part, a Claimant (or
the Claimant’s duly authorized representative) may file with the Committee a
written request for a review of the denial of the claim. Thereafter, but not
later than 30 days after the review procedure began, the

 

 

Claimant (or the Claimant’s
duly authorized representative):  (a) may
review pertinent documents; (b) may submit written comments or other
documents; and/or (c) may request a hearing, which the Committee, in its
sole discretion, may grant.

 

12.04.      Decision on Review.  The Committee shall render its decision on
review promptly, and not later than 60 days after the filing of a written
request for review of the denial, unless a hearing is held or other special
circumstances require additional time, in which case the Committee’s decision
must be rendered within 120 days after such date. Such decision must be written
in a manner calculated to be understood by the Claimant, and it must contain: (a) specific
reasons for the decision; (b) specific reference(s) to the pertinent
Plan provisions upon which the decision was based; and (c) such other
matters as the Committee deems relevant.

 

12.05.      Cause of Action.  No legal or equitable action for benefits
under the Plan may be brought after the earliest of 90 days after the claim
denial or one year after the date the cause of action accrued.  For this purpose, a cause of action is
considered to have accrued when the person bringing the legal action knew, or
in the exercise of reasonable diligence should have known, that a plan party
has clearly repudiated the claim or legal position which is the subject of the
action, regardless of whether such person has filed a claim for benefits. The
Committee’s decisions are final.  As
described above, an individual is required to follow the procedures described
in this Article 12 and a lawsuit generally cannot be filed unless the
claims and appeals process is complete. The deadlines for filing a lawsuit
apply regardless of whether the claims procedures are followed, and the
deadline generally will expire sooner if the claims and appeals process has not
been completed. For example, the 90-day period for filing a lawsuit involving a
Plan change or amendment starts to run as of the date the change or amendment
is first communicated to Plan participants even if a claim is not filed.

 

Article 13

Miscellaneous

 

13.01.      Status of Plan.  The Plan is intended to be (a) a plan
that is not qualified within the meaning of Section 401(a) of the Code
and (b) a plan that “is unfunded and is maintained by an employer
primarily for the purpose of providing deferred compensation for a select group
of management or highly compensated employees” within the meaning of Sections
201(2), 301(a)(3) and 401(a)(1) of ERISA. The Plan shall be
administered and interpreted to the extent possible in a manner consistent with
that intent. All book reserve accounts and all credits and other adjustments to
such book reserve accounts shall be bookkeeping entries only and shall be
utilized solely as a device for the measurement and determination of amounts to
be paid under the Plan.  No book reserve
accounts, credits or other adjustments under the Plan shall be interpreted as
an indication that any benefits under the Plan are in any way funded.

 

13.02.      Section 409A.  It is intended that the Plan (including all
amendments thereto) comply with provisions of Section 409A, so as to
prevent the inclusion in gross income of any benefits accrued hereunder in a
taxable year prior to the taxable year or years in which such amount would
otherwise be actually distributed or made available to the Participants. The
Plan shall be administered and interpreted to the extent possible in a manner
consistent with that intent and the Company’s Policy Regarding Section 409A
Compliance.

 

 

13.03.      Unsecured General Creditor.  Participants and their beneficiaries, heirs,
successors and assigns shall have no legal or equitable rights, interests or
claims in any property or assets of the Company. For purposes of the payment of
benefits under the 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 to pay money in the future.

 

13.04.      Other Benefits and
Agreements.  The
benefits provided for a Participant under the Plan are in addition to any other
benefits available to such Participant under any other plan or program for
employees of the Company.  The Plan shall
supplement and shall not supersede, modify or amend any other such plan or
program except as may otherwise be expressly provided.

 

13.05.      Limitations on Liability.  Neither the establishment of the Plan nor any
modification thereof, nor the creation of any account under the Plan, nor the
payment of any benefits under the Plan shall be construed as giving to any
Participant or other person any legal or equitable right against the Company,
or any officer or employer thereof except as provided by law or by any Plan
provision. No person (including the Company) in any way guarantees any
Participant’s book reserve account from loss or depreciation, whether caused by
poor investment performance of a deemed investment or the inability to realize
upon an investment due to an insolvency affecting an investment vehicle or any
other reason. In no event shall the Company or any successor, employee,
officer, director or stockholder of the Company, be liable to any person on
account of any claim arising by reason of the provisions of the Plan or of any
instrument or instruments implementing its provisions (except that the Company
shall make benefit payments in accordance with the terms of the Plan), or for
the failure of any Participant, Beneficiary or other person to be entitled to
any particular tax consequences with respect to the Plan, or any credit or
distribution hereunder.

 

13.06.      Nonassignability.  Neither a Participant nor any other person
shall have any right to commute, sell, assign, transfer, pledge, anticipate,
mortgage or otherwise encumber, transfer, hypothecate, alienate or convey in
advance of actual receipt, the amounts, if any, payable hereunder, or any part
thereof, which are, and all rights to which are expressly declared to be, unassignable
and non-transferable.  No part of the
amounts payable shall, prior to actual payment, be subject to seizure,
attachment, garnishment or sequestration for the payment of any debts,
judgments, alimony or separate maintenance owed by a Participant or any other
person, be transferable by operation of law in the event of a Participant’s or
any other person’s bankruptcy or insolvency or be transferable to a spouse as a
result of a property settlement or otherwise.

 

13.07.      Not a Contract of
Employment. The terms and conditions of the Plan shall not be deemed to
constitute a contract of employment between the Company and the Participant.
Such employment is hereby acknowledged to be an “at will” employment
relationship that can be terminated at any time for any reason, or no reason,
with or without cause, and with or without notice, except as otherwise provided
in a written employment agreement. Nothing in the Plan shall be deemed to give
a Participant the right to be retained in the service of the Company or to
interfere with the right of the Company to discipline or discharge the
Participant at any time.

 

 

13.08.      No Guarantee of Tax
Consequences.

 

(a)           The Company makes no
representations or warranties and assumes no responsibility as to the tax
consequences to any Participant in the Plan. Further, payment by the Company to
a Participant (or to a Participant’s Beneficiary or Beneficiaries) in
accordance with the terms of the Plan, including any designation of Beneficiary
on file with the Committee at the time of such Participant’s death, shall be
binding on all interested parties and persons, including such Participant’s
heirs, executors, administrators and assigns, and shall discharge the Company,
its directors, officers and employees from all claims, demands, actions or
causes of action of every kind arising out of or on account of Participant’s
participation in the Plan, known or unknown, for himself or herself, his or her
heirs, executors, administrators and assigns.

 

(b)           No person connected with the
Plan in any capacity, including, but not limited to, the Company and its
directors, officers, agents and employees, makes any representation,
commitment, or guarantee that any tax treatment, including, but not limited to,
Federal, state and local income, estate and gift tax treatment, will be
applicable to any amounts deferred under the Plan, or paid to or for the
benefit of a Participant or Beneficiary under the Plan, or that such tax
treatment will apply to or be available to a Participant or Beneficiary on account
of participation in the Plan.

 

(c)           Any agreement executed
pursuant to the Plan shall be deemed to include the above provisions of this Article 13.08.

 

13.09.      Furnishing Information.  A Participant will cooperate with the
Committee by furnishing any and all information requested by the Committee and
take such other actions as may be requested in order to facilitate the
administration of the Plan and the payments of benefits hereunder, including
but not limited to taking such physical examinations as the Committee may deem
necessary.

 

13.10.      Terms.  Whenever any words are used herein in the
masculine, they shall be construed as though they were in the feminine in all
cases where they would so apply; and whenever any words are used herein in the
singular or in the plural, they shall be construed as though they were used in
the plural or the singular, as the case may be, in all cases where they would
so apply.

 

13.11.      Captions.  The captions of the articles and paragraphs
of the Plan are for convenience only and shall not control or affect the
meaning or construction of any of its provisions.

 

13.12.      Governing Law.  The Plan and all determinations made and
actions taken thereunder, to the extent not otherwise governed by federal law,
shall be governed by the laws of the State of Delaware, without reference to
principles of conflict of laws, and construed accordingly.

 

13.13.      Notice. Any notice or
filing required or permitted to be given to the Committee under the Plan shall
be sufficient if in writing and hand-delivered, or sent by registered or
certified mail, to the address below:

 

Ameriprise Financial, Inc.

360 Ameriprise Financial
Center

 

 

Minneapolis, Minnesota 55474

Attn: Vice President,
Benefits

 

with a copy to:

 

General Counsel’s Office

 

Such notice shall be deemed
given as of the date of delivery or, if delivery is made by mail, as of the
date shown on the postmark or the receipt for registration or certification.

 

Any notice or filing
required or permitted to be given to a Participant under the Plan shall be
sufficient if in writing and hand-delivered, or sent by mail, to the last known
address of the Participant.

 

13.14.      Successors. The
provisions of the Plan shall bind and inure to the benefit of the Company and
its successors and assigns and the Participant and the Participant’s designated
Beneficiaries.

 

13.15.      Spouse’s Interest.  The interest in the benefits hereunder of a
spouse of a Participant who has predeceased the Participant shall automatically
pass to the Participant and shall not be transferable by such spouse in any
manner, including but not limited to such spouse’s will, nor shall such
interest pass under the laws of intestate succession.

 

13.16.      Validity.  In case any provision of the Plan shall be
illegal or invalid for any reason, said illegality or invalidity shall not
affect the remaining parts hereof, but the Plan shall be construed and enforced
as if such illegal or invalid provision had never been inserted herein.

 

13.17.      Incompetent. If the
Committee determines in its discretion that a benefit under the Plan is to be
paid to a minor, a person declared incompetent or to a person incapable of
handling the disposition of that person’s property, the Committee may direct
payment of such benefit to the guardian, legal representative or person having
the care and custody of such minor, incompetent or incapable person. The
Committee may require proof of minority, incompetence, incapacity or
guardianship, as it may deem appropriate prior to distribution of the benefit.
Any payment of a benefit shall be a payment for the account of the Participant
and the Participant’s estate, as the case may be, and shall be a complete
discharge of any Company liability under the Plan for such payment amount.

 

13.18.      Legal Fees To Enforce Rights
After Change in Control. The Company is aware that upon the
occurrence of a Change in Control, the Board (which might then be composed of
new members), or a stockholder of the Company or of any successor corporation
might then cause or attempt to cause the Company or such successor to refuse to
comply with its obligations under the Plan and might cause or attempt to cause
the Company to institute, or may institute, arbitration or litigation seeking
to deny Participants the benefits intended under the Plan.  In these circumstances, the purpose of the
Plan could be frustrated. Accordingly, if, following a Change in Control, it
should appear to any Participant that the Company or any successor corporation
has failed to comply with any of its obligations under the Plan or any
agreement thereunder, or if the Company or any other person takes any action to
declare the Plan void or

 

 

unenforceable or institutes
any arbitration, litigation or other legal action designed to deny, diminish or
to recover from any Participant the benefits intended to be provided, then the
Company irrevocably authorize such Participant to retain counsel of his or her
choice at the expense of the Company to represent such Participant in
connection with the initiation or defense of any arbitration, litigation or
other legal action, whether by or against the Company or any director, officer,
stockholder or other person affiliated with the Company or any successor
thereto in any jurisdiction; provided, however, that in the event that the
trier in any such legal action determines that the Participant’s claim was not
made in good faith or was wholly without merit, the Participant shall return to
the Company any amount received pursuant to this Article 13.18. Any
reimbursements shall be paid in accordance with the Company’s Policy Regarding Section 409A
Compliance.

 

*
 *  *  *  *Exhibit
10.1

 

 

April 26,
2010

 

Edmond Cheng

 

(Delivery by email)

 

Dear Edmond:

 

I am pleased to
confirm the offer of employment by UTStarcom, Inc. (“UTStarcom” or the “Company”)
to you for the position of Senior Vice President and Chief Financial Officer
with a start date on or about May 10th,
2010.  This position reports directly to
Peter Blackmore, President and Chief Executive Officer.

 

The key elements
of this employment offer are as follows:

 

Salary: Your gross annual salary is $380,000 USD.  Paydays
are on the 15th and the last day of each month. 
Direct deposit is available.  Your
salary payments will be subject to any applicable tax or other legally-required
withholding.

 

Annual
Performance Bonus:
On an annual basis, you will be eligible for a performance target bonus of 70%
of your base salary (the “Annual Bonus”) based upon achievement of Company and
individual performance objectives determined by the Compensation
Committee.  For the 2010 Fiscal Year 100%
of your annual target bonus will be guaranteed to you and will be payable at
the time bonuses for the 2010 fiscal year are paid to other executives (but no
later than March 15, 2011).

 

Equity
Award: We will
recommend to the Compensation Committee (the “Compensation Committee”) of our
Board of Directors, at its next meeting after your start date at which grants
are considered for approval, that you be granted equity awards pursuant to the
Plan and subject to the form of applicable award agreements adopted by
UTStarcom for use under the Plan as follows:

 

·                  200,000 shares of Restricted Stock.  One quarter of the shares would vest on the
first anniversary of the date of grant, and then one-quarter of the shares
would vest annually thereafter, subject to your continuing to provide services
to the Company through each applicable vesting date.

 

·                  100,000 Restricted Stock Units (RSU’s).  One quarter of the RSU’s would vest on the
first anniversary of the date of grant, and then one-quarter of the RSU’s would
vest annually thereafter, subject to your continuing to provide services to the
Company through each applicable vesting date.

 

 

We will recommend
to the Compensation Committee in January 2011 that you be granted
additional equity awards, in addition to any normal annual executive options
awards, covering 100,000 shares of UTStarcom common stock in January 2011,
subject to you continuing to provide services to the Company through that
time.  The additional equity awards would
be granted pursuant to the Plan and subject to the form of applicable award agreements
adopted by UTStarcom for use under the Plan as follows:

 

·                  100,000 shares of Restricted Stock.  One quarter of the shares would vest on the
first anniversary of the date of grant, and then one-quarter of the shares
would vest annually thereafter, subject to your continuing to provide services
to the Company through each applicable vesting date.

 

We will recommend
to the Compensation Committee in January 2012 that you be granted
additional equity awards, in addition to any normal annual executive options
awards, covering 100,000 shares of UTStarcom common stock in January 2012,
subject to you continuing to provide services to the Company through that
time.  The additional equity awards would
be granted pursuant to the Plan and subject to the form of applicable award
agreements adopted by UTStarcom for use under the Plan as follows:

 

·                  100,000 shares of Restricted Stock.  One quarter of the shares would vest on the
first anniversary of the date of grant, and then one-quarter of the shares
would vest annually thereafter, subject to your continuing to provide services
to the Company through each applicable vesting date.

 

The decision to
make any equity grant, as well as the terms of any such award, will be in the
full discretion of the Compensation Committee.

 

Sign-on
Bonus: You will
be paid a Sign-on Bonus of $50,000 USD
payable after your start date on the first payroll as soon as administratively
possible.  If you resign from UTStarcom
within six (6) months from your employment with UTStarcom, the Sign-on
Bonus must be repaid to UTStarcom in full.

 

Education
Assistance: You
will be provided with full reimbursement for the cost up to $125,000 USD to pursue your Executive MBA program during
your employment with the Company.  The
reimbursement is subjected to submission of valid documentation and receipts of
payment.

 

Expatriate
Benefits: You
will be eligible to receive expatriate benefits as follows:

 

·                  Housing Allowance — $4,000 USD
monthly

 

·                  Relocation reimbursement of up to $15,000 USD
to cover the actual expenses of reasonable, documented travel, and moving to
and storing your personal effects in the assignment country within 12 months
from your start date.  You have the
option of submitting receipts for reimbursement or receiving a lump sum.  If you resign from your employment with the
Company within one (1) year following your start date, you agree that you
will immediately repay the Company the full amount of the relocation
reimbursement that you receive, less 1/12 of that amount for each full month
that you are actually employed by the Company and this will not be pro-rated if
you worked less than a full month.

 

2

 

·                  Home visit travel benefit of one round-trip
business-class airfare per year for your immediate family of five to home
country.

 

·                  Dependent Education - You are entitled to an annual
reimbursement of up to $15,000 USD  per child (maximum 2 children / $30,000 USD up to 18 years
of age) to pay for the cost of education for your children who will be
permanently residing overseas with you.

 

·                  Repatriation: Upon the repatriation of your assignment
for any reason the Company will reimburse you for the actual, reasonable,
documented moving and travel costs incurred by you to return to your home
country.  The maximum amount of such
reimbursement up to $15,000 USD
(which amount will be subject to setoff for any amounts owed by you to the
Company) and original receipts are required; no lump sum payment option is
available.  To qualify for the
reimbursement, relocation expense must incur within 90 days following effective
date of your repatriation.

 

·                  Medical and Dental Plan coverage will be provided
under Aetna Global Benefits for you, your spouse and your three children.

 

·                  Taxation equalization: The Company will provide you
with tax equalization so that you incur no additional tax liability or benefit
as a result of your assignment outside the USA (home country).  (In other words, your tax liability will be
the same as if you had remained in your home country.) The Company will provide
tax preparation and equalization services through Deloitte & Touche,
which will also assist you in complying with all applicable tax laws of your
home country and host country.

 

·                  Car/Driver: you will be provided access to a company
car and driver for business purposes.

 

·                  HZ Meal Allowance: You will also be eligible for a
meal allowance of $8 USD/day.

 

Interest or
penalties imposed by tax authorities as a result of improper reporting or
delays in providing necessary documents by you to Deloitte & Touche
will be your responsibility.

 

Executive
Involuntary Termination Severance Pay Plan: You will be covered by the Amended and Restated
Executive Involuntary Termination Severance Pay Plan on the commencement of
your employment, in which the terms and conditions, in part provide as follows:

 

3

 

In the event of involuntary termination of your employment for reasons
other than cause, death or disability, you will be provided with payment of one
year’s base salary plus 100% of your on target bonus for the year in which the
termination occurs, an amount equal to twelve (12) months of the premiums for
continuation coverage for your health benefits and 100% full vesting of equity
as granted to you, including without limitation to stock options, restricted
stock, restricted stock units, stock appreciation rights, performance units,
performance shares and other stock awards.

 

Financial
Planning benefit:
UTStarcom will cover up to $5,000 per year
of costs incurred by you in obtaining comprehensive financial planning and
investment management services to assist you in understanding your financial
picture and estate planning and insurance needs.  Covered services include retirement planning,
education funding, portfolio risk management, concentrated stock and employee
stock option management, 10b5-1 design, income and asset protection, estate
planning and philanthropic gifting. 
While we have made special arrangements for these services to be
provided by Merrill Lynch, you can use any provider of your choice.  This is considered a taxable benefit

 

At Will
Employment: Your
employment with UTStarcom is “at will”; it is for no specified term, and may be
terminated by you or UTStarcom at any time, with or without cause or advance
notice.

 

Dispute
Resolution: In
the event of any dispute or claim relating to or arising out of your employment
relationship with the Company, this agreement, or the termination of your
employment with the Company for any reason (including, but not limited to, any
claims of breach of contract, wrongful termination or age, sex, race, national
origin, disability or other discrimination or harassment), you and the Company
agree that all such disputes shall be fully, finally and exclusively resolved
by binding arbitration conducted by the American Arbitration Association (“AAA”)
in Alameda County, California.  Any
arbitration under this provision will be determined by a single arbitrator
under the AAA’s then-current National Rules For the Resolution of
Employment Disputes, a copy of which is available at www.adr.org.  You and the Company hereby waive your
respective rights to have any such disputes or claims tried to a judge or jury.

 

Governing
Law: This
agreement shall be governed by, and interpreted in accordance with, the laws of
the State of California.

 

Other
Conditions: As a
condition of your employment, you must provide the Company with satisfactory
proof of your identity and your eligibility for employment in the United States
on your first day of work, in compliance with the Immigration Reform and
Control Act (Form I-9).  As a
further condition of your employment, you will be required to sign a copy of
the Company’s standard form of employment, confidential information and
invention assignment agreement, and to strictly comply with all Company rules and
regulations at all times.

 

If you have any
questions about UTStarcom’s employee benefits programs, please feel free to
contact Melody Fan at melody.fan@utstar.com or 510-749-1520.

 

4

 

To accept the
Company’s offer of employment, please sign and date this letter in the space
provided below and return it to me at the confidential fax of
510-747-0129.  This letter
agreement, along with the confidentiality agreement described above, sets forth
the terms of your employment with the Company and supersedes any prior
representations or agreements, whether written or oral.  This agreement may not be modified or amended
except by a subsequent written agreement, signed by an authorized officer of
the Company and by you.

 

Sincerely,

 

 

Peter Blackmore

Chief Executive
Officer and President

 

 

	
  /s/ PETER
  BLACKMORE

  	
   

  

 

 

I agree to and
accept employment with UTStarcom on the terms and conditions set forth in this
letter agreement.  Also, I acknowledge
and agree that I am not an employee subject to the laws of the People’s
Republic of China.

 

 

	
  Signed:

  	
  /s/ EDMOND CHENG

  	
   

  
	
   

  	
  Employee
  Signature

  	
   

  

 

Print
Name: Edmond Cheng

 

Date: April 26,
2010

 

5

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