Document:

exv10w16

 

Exhibit 10.16

ABM DEFERRED COMPENSATION PLAN

FOR NON-EMPLOYEE DIRECTORS

Effective October 31, 2006

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	Article I DEFINITIONS
	 	 	1	 
	1.01 “Account”
	 	 	1	 
	1.02 “Administrative Committee” or “Committee”
	 	 	1	 
	1.03 “Beneficiary”
	 	 	1	 
	1.04 “Board”
	 	 	1	 
	1.05 “Company”
	 	 	1	 
	1.06 “Compensation”
	 	 	1	 
	1.07 “Deferral”
	 	 	1	 
	1.08 “Director”
	 	 	1	 
	1.09 “Effective Date”
	 	 	1	 
	1.10 “Internal Revenue Code” or “Code”
	 	 	1	 
	1.11 “Participant”
	 	 	1	 
	1.12 “Person”
	 	 	1	 
	1.13 “Plan”
	 	 	1	 
	1.14 “Plan Administrator”
	 	 	2	 
	1.15 “Plan Year”
	 	 	2	 
	1.16 “Unforeseeable Emergency”
	 	 	2	 
	1.17 “Valuation Date”
	 	 	2	 
	 
	 	 	 	 
	Article II ELIGIBILITY FOR PARTICIPATION
	 	 	3	 
	2.01 Eligibility Requirements
	 	 	3	 
	2.02 Change in Status
	 	 	3	 
	2.03 Determination of Eligibility
	 	 	3	 
	 
	 	 	 	 
	Article III CONTRIBUTIONS
	 	 	4	 
	3.01 Deferrals
	 	 	4	 
	3.02 Elective Deferral Election
	 	 	4	 
	 
	 	 	 	 
	Article IV ACCOUNTS. FUNDING AND VALUATION
	 	 	5	 
	4.01 Establishment of Account
	 	 	5	 
	4.02 Valuation of Account
	 	 	5	 
	 
	 	 	 	 
	Article V PARTICIPANTS’ VESTED INTERESTS
	 	 	6	 
	5.01 Vesting
	 	 	6	 
	 
	 	 	 	 
	Article VI DISTRIBUTION OF BENEFITS
	 	 	7	 
	6.01 Distribution of Benefits
	 	 	7	 
	6.02 Retirement and Termination
	 	 	7	 
	6.03 Unforeseeable Emergency Withdrawals
	 	 	7	 
	6.04 Form of Distribution
	 	 	8	 
	 
	 	 	 	 
	Article VII DEATH
	 	 	9	 
	7.01 Death
	 	 	9	 
	 
	 	 	 	 
	Article VIII THE ADMINISTRATIVE COMMITTEE
	 	 	10	 

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	8.01 Duties and Responsibility
	 	 	10	 
	8.02 Allocation and Delegation of Responsibilities
	 	 	10	 
	8.03 Expenses and Compensation
	 	 	11	 
	8.04 Information from Company
	 	 	11	 
	8.05 Administrative Committee; Signature
	 	 	11	 
	 
	 	 	 	 
	Article IX PARTICIPANTS’ RIGHTS
	 	 	12	 
	9.01 Disclosures
	 	 	12	 
	9.02 Filing a Claim for Benefits
	 	 	12	 
	9.03 Denial of a Claim
	 	 	12	 
	9.04 Limitation of Rights
	 	 	12	 
	 
	 	 	 	 
	Article X AMENDMENT AND TERMINATION
	 	 	13	 
	10.01 Amendment or Termination
	 	 	13	 
	10.02 Procedure Upon Termination of the Plan
	 	 	13	 
	 
	 	 	 	 
	Article XI MISCELLANEOUS
	 	 	14	 
	11.01 Execution of Receipts and Releases
	 	 	14	 
	11.02 Notice and Unclaimed Benefits
	 	 	14	 
	11.03 Non-Alienation of Benefits
	 	 	14	 
	11.04 Loans to Participants
	 	 	15	 
	11.05 Benefits Payable to Incompetents
	 	 	15	 
	11.06 Applicable Law
	 	 	15	 
	11.07 Headings as Guide
	 	 	15	 
	11.08 Pronouns
	 	 	15	 
	11.09 Reference to Laws
	 	 	15	 
	11.10 Participant’s Rights Unsecured
	 	 	15	 

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Article I

DEFINITIONS

     The following terms as used herein shall have the meaning hereinafter set forth unless the
context clearly indicates a different meaning is required. Whenever in these definitions a word or
phrase not previously defined is used, such word or phrase shall have the meaning thereafter given
to it in Article I unless otherwise specified.

	1.01	 	“Account” means the account established and maintained by the Administrative
Committee for each Participant.
	 
	1.02	 	“Administrative Committee” or “Committee” means the Governance Committee of
the Board of Directors of the Company.
	 
	1.03	 	“Beneficiary” means the Person last designated by a Participant on a form provided by
the Administrative Committee or by the terms of the Plan to receive any amounts payable under
the Plan following the death of the Participant. A Participant may change the Beneficiary
from time to time on a form provided by the Administrative Committee.
	 
	1.04	 	“Board” means the Board of Directors of the Company.
	 
	1.05	 	“Company” means ABM Industries Incorporated, and, where appropriate, its successors
or assigns.
	 
	1.06	 	“Compensation” means all the annual retainer and board meeting fees paid by the
Company to the Eligible Director while a Participant with respect to services rendered during
the Plan Year.
	 
	1.07	 	“Deferral” means an amount that a Participant has elected to defer under Article III.
	 
	1.08	 	“Director” means any individual who is a member of the Board and who is not an
employee of the Company.
	 
	1.09	 	“Effective Date” means October 31, 2006.
	 
	1.10	 	“Internal Revenue Code” or “Code” means the Internal Revenue Code of 1986, as
amended from time to time.
	 
	1.11	 	“Participant” means any Director or former Director who has satisfied the eligibility
requirements of Section 2.01 who is, or may become, eligible to receive a benefit or whose
Beneficiary may be eligible to receive a benefit under the Plan.
	 
	1.12	 	“Person” means any individual, partnership, joint venture, corporation, mutual
company, joint stock company, trust, estate, unincorporated organization, association, or
employee organization, and shall, where appropriate, include two or more of the above.
	 
	1.13	 	“Plan” means the ABM Deferred Compensation Plan for Non-Employee Directors.

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	1.14	 	“Plan Administrator” means the Company.
	 
	1.15	 	“Plan Year” means the calendar year.
	 
	1.16	 	“Unforeseeable Emergency” means shall mean a severe financial hardship to the
Participant or his or her Beneficiary resulting from: (i) an illness or accident of the
Participant or Beneficiary, the Participant’s or Beneficiary’s spouse, or the Participant’s or
Beneficiary’s dependent (as defined in Code section 152(a)); (ii) loss of the Participant’s or
Beneficiary’s property due to casualty (including the need to rebuild a home following damage
to a home not otherwise covered by insurance); or (iii) other similar extraordinary and
unforeseeable circumstances arising as a result of events beyond the control of the
Participant or Beneficiary. Hardship shall not constitute an Unforeseeable Emergency to the
extent that it is, or may be, relieved by: (a) reimbursement or compensation, by insurance or
otherwise; (b) liquidation of the Participant’s or Beneficiary’s assets to the extent that the
liquidation of such assets would not itself cause severe financial hardship; or (c) cessation
of deferrals under the Plan. An Unforeseeable Emergency does not include (among other
events): (y) sending a child to college; or (z) purchasing a home.
	 
	1.17	 	“Valuation Date” means March 31, June 30, September 30 and December 31 of each Plan
Year.

2

 

Article II

ELIGIBILITY FOR PARTICIPATION

	2.01	 	Eligibility Requirements
	 
	 	 	Each Director of the Company shall become a Participant under the Plan on the date he or she
makes an election to defer Compensation under the Plan.
	 
	2.02	 	Change in Status
	 
	 	 	A Participant’s participation in the Plan shall terminate immediately as of the date on
which he or she ceases to be a Director, except that the Participant shall retain the right
to receive his or her Account.
	 
	2.03	 	Determination of Eligibility
	 
	 	 	The Administrative Committee shall determine whether each Director has satisfied the
eligibility requirements for participation in the Plan. The Committee’s determination shall
be conclusive and binding upon all persons.

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Article III

CONTRIBUTIONS

	3.01	 	Deferrals
	 
	 	 	For each Plan Year commencing with 2007, a Participant may elect to defer receipt of all or
any portion of his or her Compensation that he or she would otherwise receive from the
Company. In addition, in October 2006 each Eligible Director who is a party to a Director
Retirement Plan benefit agreement may elect to have such benefit converted to a credit to
the Account established pursuant to this Plan, effective November 1, 2006.
	 
	3.02	 	Elective Deferral Election
	 
	 	 	For each Plan Year, a Participant may make an election described in Section 3.01 by filing
an election form with the Administrative Committee within a reasonable period of time, as
specified by the Committee, before the beginning of the Plan Year to which the Deferral
election applies. A Deferral election may not be changed during the Plan Year that it is
effective; provided, that upon a showing of an Unforeseeable Emergency and with the consent
of the Administrative Committee, a Participant may at any time revoke his or her Deferral
election with respect to Compensation he or she has not yet earned during the Plan Year. A
Participant who revokes his or her Deferral election may not again make an election to defer
the receipt of Compensation effective before the beginning of the next Plan Year.

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Article IV

ACCOUNTS. FUNDING AND VALUATION

	4.01	 	Establishment of Account
	 
	 	 	The Administrative Committee shall open and maintain a separate Account for each
Participant. Such Account shall be credited with all Deferrals for the Participant. In
addition, the Account of each Eligible Director who has elected to convert his or her
Director Retirement Plan benefits to an Account credit under this Plan shall be credited on
November 1, 2006, with the amount approved by the Governance Committee pursuant to its
resolution adopted on September 5, 2006. As soon as reasonably possible after each
Valuation Date, each Participant shall be notified of the value of his or her Account.
	 
	4.02	 	Valuation of Account

	 	(a)	 	Interest shall be credited to each Participant’s Account as of each Valuation
Date equal to the product of

	 	(1)	 	the amount credited to the Participant’s
Account as of the last preceding Valuation Date, less any distributions
or withdrawals and plus one-half (1/2) of Deferrals, if any, since the
last preceding Valuation Date, multiplied by
	 
	 	(2)	 	the applicable interest rate; provided,
however, that for the December 31, 2006 Valuation Date, interest shall
be based on the Account balance on November 1, 2006, if any.

	 	(b)	 	On each Valuation Date, each Participant’s Account will be credited with
interest. The amount of interest will be derived from the prime interest rate
published in The Wall Street Journal on the last business day coinciding with
or next preceding the Valuation Date. Any prime rate up to 6% will be considered in
full and 1/2 of any prime rate over 6% will be considered. The amount credited will be
a proration of the prime rate considered taking into consideration the period of time
elapsed since the last Valuation Date (or since November 1, 2006, in the case of the
December 31, 2006 Valuation Date).

For example, if the Plan is valued quarterly and on March 31, the prime rate is 7%, the rate
credited will be (1/4 x 6%) + (1/4 x 1/2 x 1%) or 1.625%.

5

 

Article V

PARTICIPANTS’ VESTED INTERESTS

	5.01	 	Vesting

Each Participant shall always be one hundred percent (100%) vested in his or her Account; provided,
however, that any amount credited to a Participant’s Account on November 1, 2006 pursuant to the
election described in Section 3.01 shall be forfeited if the Participant voluntarily resigns his or
her position as a Director before November 1, 2007 for any reason other than disability, as
determined pursuant to Section 409A(a)(2)(C) of the Code or in connection with a Change in Control.
A “Change in Control” means that any of the following events occurs:

     (i) any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act) (a “Person”) (A) is or becomes the beneficial owner (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of more than 35% of the combined voting power of the
then-outstanding Voting Stock of the Company or succeeds in having nominees as directors elected in
an “election contest” within the meaning of Rule 14a-12(c) under the Exchange Act and (B) within 18
months thereafter, individuals who were members of the Board of Directors of the Company
immediately prior to either such event cease to constitute a majority of the members of the Board
of Directors of the Company; or

     (ii) a majority of the Board ceases to be comprised of Incumbent Directors; or

     (iii) the consummation of a reorganization, merger, consolidation, plan of liquidation or
dissolution, recapitalization or sale or other disposition of all or substantially all of the
assets of the Company or the acquisition of the stock or assets of another Company, or other
transaction (each, a “Business Transaction”), unless, in any such case, (A) no Person (other than
the Company, any entity resulting from such Business Transaction or any employee benefit plan (or
related trust) sponsored or maintained by the Company, any Subsidiary or such entity resulting from
such Business Transaction) beneficially owns, directly or indirectly, 35% or more of the combined
voting power of the then outstanding shares of Voting Stock of the entity resulting from such
Business Transaction and (B) at least one-half of the members of the Board of Directors of the
entity resulting from such Business Transaction were Incumbent Directors at the time of the
execution of the initial agreement providing for such Business Transaction.

6

 

Article VI

DISTRIBUTION OF BENEFITS

	6.01	 	Distribution of Benefits
	 
	 	 	Except as provided in Article 6.03 below, a Participant’s Account may not be distributed to
a Participant or his or her Beneficiary before the date the Participant ceases to be a
member of the Board.
	 
	6.02	 	Retirement and Termination

	 	(a)	 	When a Participant’s status as a Director terminates, the vested portion of his
or her Account shall be distributed, or distribution shall commence within 90 days
following termination of Director status. The amount in his or her Account shall be
determined as of the Valuation Date that last precedes the date of distribution, plus
Deferrals and less any withdrawals or distributions, if any, for the period from the
last preceding Valuation to the date of distribution.
	 
	 	(b)	 	The distribution shall be made in the form elected by the Participant under
Section 6.04. If the Participant made no election at the time specified in Section
6.04, his or her benefit shall be paid as a lump sum.

	6.03	 	Unforeseeable Emergency Withdrawals

	 	(a)	 	A Participant may withdraw up to one hundred percent (100%) of the amount in
his or her Deferral Account in the event of an Unforeseeable Emergency to the extent
provided in this Section 6.03.
	 
	 	(b)	 	A Participant who wishes to withdraw any amount pursuant to this Section 6.03
must submit, on a form provided by the Administrative Committee, a written request by
the Participant that states:

	 	(1)	 	The Unforeseeable Emergency for which the
withdrawal is requested;
	 
	 	(2)	 	The amount needed to satisfy the financial
need, which amount may include any federal, state, or local income
taxes or penalties reasonably anticipated to result from the
withdrawal;
	 
	 	(3)	 	A representation that the need cannot be
satisfied in any of the ways stated in the definition of Substantial
Hardship;
	 
	 	(4)	 	The date the funds are required; and
	 
	 	(5)	 	Any other information the Administrative
Committee deems necessary.

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	 	(c)	 	The Administrative Committee will determine if an Unforeseeable Emergency
withdrawal will be allowed by applying the standards set forth in the definition of
Substantial Hardship.
	 
	 	(d)	 	A withdrawal from a Participant’s Account under Section 6.03 shall be paid in a
lump sum.

	6.04	 	Form of Distribution
	 
	 	 	A Participant may elect in writing, on a form prescribed by the Administrative Committee, to
have his or her benefit (other than an Unforeseeable Emergency withdrawal) paid (a) as a
lump sum, or (b) in substantially equal annual installments over a ten (10) year period.
Such election must be made within 30 days following the date the Eligible Director becomes
eligible to participate in the Plan (i.e., the later of the date of the Eligible Director’s
election to the Board or October 31, 2006). If the Participant fails to make such election
or later wishes to change such election, he or she may make a later election, subject to the
following restrictions: (i) The later election must be made no later than 12 months before
the date payment is scheduled to be made or commence; (ii) The later election must defer the
payment date for a minimum of five years from the previously scheduled payment date; and
(iii) The later election must not accelerate the date of any payment or distribution. For
purposes of the Plan, installment payments shall be treated as a single distribution under
Code section 409A.

8

 

Article VII

DEATH

	7.01	 	Death
	 
	 	 	If a Participant dies before distribution of his or her Account has begun or been completed,
the remaining portion of the Participant’s Account shall constitute a Death Benefit and
shall be payable to the Participant’s Beneficiary in a lump sum within six months after the
date of death. The value of the Participant’s Account shall be determined in accordance
with the rules set forth in Section 6.02. If the Participant has not designated a
Beneficiary or if the named Beneficiary does not survive the Participant, payment shall be
made to the Participant’s surviving spouse, if any, or if none to the Participant’s
surviving children, if any, in equal shares or if none to the Participant’s estate.

9

 

Article VIII

THE ADMINISTRATIVE COMMITTEE

	8.01	 	Duties and Responsibility
	 
	 	 	The Committee shall administer the Plan and shall have full discretionary authority to
construe this Plan and to determine all questions of interpretation or policy in a manner
not inconsistent with the Plan and the Administrative Committee’s construction or
determination in good faith shall be final and conclusive and binding on all parties
including but not limited to the Company and any Participant or Beneficiary, except as
otherwise provided by law. The Administrative Committee may correct any defect, supply any
omission, or reconcile any inconsistency in such manner and to such extent as shall be
deemed necessary or advisable to carry out the purpose of the Plan, provided, however, that
any interpretation or construction shall be done in a nondiscriminatory manner and shall be
consistent with the intent that the Plan shall be an unfunded plan. The Administrative
Committee shall have all powers necessary or appropriate to accomplish its duties under this
Plan.
	 
	 	 	The Administrative Committee shall be charged with the duties of the general administration
of the Plan, including but not limited to, the following:

	 	(a)	 	To determine all questions relating to the eligibility of Directors to
participate in or remain a Participant hereunder;
	 
	 	(b)	 	To maintain all the necessary records for the administration of the Plan;
	 
	 	(c)	 	To interpret the provisions of the Plan and to make and publish such rules for
regulation of the Plan as are not inconsistent with the terms hereof;
	 
	 	(d)	 	To make any adjustments in the allocations, to Accounts under the Plan
necessary to comply with any provision of law; and
	 
	 	(e)	 	To advise, counsel and assist any Participant regarding any rights, benefits or
elections available under the Plan.

The Administrative Committee shall also be responsible for preparing and filing such annual
disclosure reports as may be required by law.

Whenever it is determined by the Administrative Committee to be in the best interest of the
Plan and its Participants and Beneficiaries, the Administrative Committee may request such
variances, deferrals, extensions, or exemptions or make such elections for the Plan as may
be available under the law.

	8.02	 	Allocation and Delegation of Responsibilities
	 
	 	 	The Administrative Committee may engage agents to assist in carrying out the Administrative
Committee’s functions hereunder.

10

 

	8.03	 	Expenses and Compensation
	 
	 	 	The expenses necessary to administer the Plan and the expenses incurred by the
Administrative Committee shall be paid by the Company.
	 
	8.04	 	Information from Company
	 
	 	 	The Company shall supply full and timely information to the Administrative Committee on all
matters relating to the compensation of all Participants, their continuous regular
employment, their retirement, death, disability or termination of employment, and such other
pertinent facts as the Administrative Committee may require.
	 
	8.05	 	Administrative Committee; Signature
	 
	 	 	The signature of one member of the Administrative Committee may be accepted by any
interested party as conclusive evidence that the Administrative Committee has duly
authorized the action therein set forth. No person receiving documents or written
instructions and acting in good faith and in reliance thereon shall be obliged to ascertain
the validity of such action under the terms of this Agreement. The Administrative Committee
shall act by a majority of its members at the time in office and such action may be taken
either by a vote at a meeting or in writing without a meeting.

11

 

Article IX

PARTICIPANTS’ RIGHTS

	9.01	 	Disclosures
	 
	 	 	The Administrative Committee shall furnish at least every six (6) months each Participant or
Beneficiary with a written statement, based on the latest available information, indicating
the value of his or her Account.
	 
	 	 	Upon termination of his or her status as a Director, a Participant is entitled to a written
explanation of and accounting for his or her Account.
	 
	9.02	 	Filing a Claim for Benefits
	 
	 	 	A Participant or Beneficiary or the Company acting in his or her behalf shall notify the
Administrative Committee of a claim for benefits under the Plan. Such request may be in any
form acceptable to the Administrative Committee and shall set forth the basis of such claim
and shall authorize the Administrative Committee to conduct such examinations as may be
necessary to determine the validity of the claim and to take such steps as may be necessary
to facilitate the payment of any benefits to which the Participant or Beneficiary may be
entitled under the terms of the Plan.
	 
	9.03	 	Denial of a Claim
	 
	 	 	Whenever a claim for benefits by any Participant or Beneficiary has been denied, a written
notice, prepared in a manner calculated to be understood by the Participant or Beneficiary
must be provided, setting forth the specific reasons for the denial and explaining the
procedure for an appeal and review of the decision by the Administrative Committee.
	 
	9.04	 	Limitation of Rights
	 
	 	 	Participation hereunder shall not grant any Participant the right to be retained as a member
of the Board of Directors of the Company or any rights or interest other than those
specifically herein set forth.

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Article X

AMENDMENT AND TERMINATION

	10.01	 	Amendment or Termination
	 
	 	 	The Company, by action of the Board, may at any time and from time to time amend or
terminate this Plan in whole or in part (including retroactively). The Company shall not
have the right to amend or terminate the Plan retroactively in such a manner as to deprive
any Participant or Beneficiary of any benefit to which he or she was entitled under the Plan
by reason of Deferrals prior to the amendment or termination.
	 
	10.02	 	Procedure Upon Termination of the Plan
	 
	 	 	Upon complete termination of the Plan, Participants’ Accounts shall be paid at the form and
time determined pursuant to Articles VI and VII; provided, however, that Participants’
Accounts may, in the discretion of the Board, be distributed within the period beginning 12
months after the date the Plan was terminated and ending 24 months after the date the Plan
was terminated (or, if earlier, pursuant to Articles VI or VII), in which case the Board
shall terminate all account balance non-qualified deferred compensation plans with respect
to all Directors and shall not adopt a new account balance non-qualified deferred
compensation plan for Directors for at least five years after the date the Plan was
terminated; provided, further, that the Board may terminate the Plan upon a corporate
dissolution of the Company that is taxed under Section 331 of the Code or with the approval
of a bankruptcy court pursuant to 11 U.S.C. section 503(D)(1)(A), provided the Participants’
Accounts are distributed and included in the gross income of the Participants by the later
of (i) the year in which the Plan terminates, or (ii) the first calendar year in which
distribution of Participants’ Accounts is administratively practicable; provided, further,
that the Board, in its discretion, may terminate the Plan 30 days prior to or 12 months
following a “change in the ownership or effective control or a change in the ownership of a
substantial portion of the assets” of the Company, as defined in regulations promulgated
under Section 409A of the Code and distribute the Accounts of the Participants within the
12-month period following termination of the Plan, in which case the Board shall terminate
all account balance non-qualified deferred compensation plans with respect to all Directors
and shall not adopt a new account balance non-qualified plan for Directors for at least five
years after the Plan was terminated.

13

 

Article XI

MISCELLANEOUS

	11.01	 	Execution of Receipts and Releases
	 
	 	 	Any payment to any Participant or Beneficiary, in accordance with the provisions of this
Plan, shall, to the extent thereof, be in full satisfaction of all claims hereunder against
the Plan, and the Administrative Committee may require such Participant or Beneficiary, as a
condition precedent to such payment, to execute a receipt and release therefor in such form
as the Administrative Committee shall determine.
	 
	11.02	 	Notice and Unclaimed Benefits
	 
	 	 	Each Participant and Beneficiary must file with the Company from time to time in writing his
or her post office address and each change of post office address. Any communication,
statement, or notice addressed to a Participant or Beneficiary at his or her last post
office address filed with the Company will be binding on the Participant and his or her
Beneficiary for all purposes of the Plan. Neither the Company nor the Administrative
Committee shall be obliged to search for or ascertain the whereabouts of any Participant or
Beneficiary.
	 
	 	 	The Committee shall notify any Participant or Beneficiary when a distribution is required
under the Plan. The Committee may also request the Social Security Administration to notify
the Participant or Beneficiary in accordance with any procedures the Administration has
established for this purpose. In the event that the Participant or Beneficiary shall fail
to respond to any notice from the Committee, the amount in his or her Account shall be
forfeited.
	 
	11.03	 	Non-Alienation of Benefits
	 
	 	 	Except in the case of a qualified domestic relations order, as defined in Code § 414(p):

	 	(a)	 	No Participant or Beneficiary, and no creditor of a Participant or Beneficiary
shall have any right to assign, pledge, sell, hypothecate, anticipate or in any way
create a lien upon his or her benefits under the Plan by operation of law or otherwise,
and any attempt to do so shall be void; nor shall any such benefits in any manner be
liable for or subject to the debts, contracts, liabilities, engagements or torts of the
person entitled to such benefits.
	 
	 	(b)	 	No interest in the Plan shall be subject to assignment or transfer or otherwise
be alienable, either by voluntary or involuntary act or by operation of law or equity,
or subject to attachment, execution, garnishment, sequestration, levy or other seizure
under any legal, equitable or other process, or be liable in any way for the debts or
defaults of Participants and Beneficiaries.

14

 

	11.04	 	Loans to Participants
	 
	 	 	A Participant may not receive a loan from the Plan of any portion of his or her Account.
	 
	11.05	 	Benefits Payable to Incompetents
	 
	 	 	Each individual receiving benefit payments under the Plan shall be conclusively presumed to
have been legally competent until the date upon which the Administrative Committee shall
have received written notice in the form and manner acceptable to it that such individual is
an incompetent for whom a guardian or other person legally vested with his or her care shall
have been appointed. From and after the date of receipt of such notice by Administrative
Committee, all future benefit payments to which such individual is entitled under the Plan
shall be payable to his or her guardian or other person legally vested with his or her care,
until such time as the Administrative, Committee shall be furnished with evidence
satisfactory to it that such individual is legally competent.
	 
	11.06	 	Applicable Law
	 
	 	 	This Plan shall be governed and construed under the laws of the State of California.
	 
	11.07	 	Headings as Guide
	 
	 	 	The headings of this Plan are inserted for convenience of reference only and are not to be
considered in construction of the provisions hereof.
	 
	11.08	 	Pronouns
	 
	 	 	When necessary to the meaning hereof, either the masculine or the neuter pronoun shall be
deemed to include the masculine, the feminine, and the neuter, and the singular shall be
deemed to include the plural.
	 
	11.09	 	Reference to Laws
	 
	 	 	Any reference to any section or regulation under the Internal Revenue Code or to any other
statute or law shall be deemed to include any successor law of similar import.
	 
	11.10	 	Participant’s Rights Unsecured
	 
	 	 	The right of the Participant or his or her designated Beneficiary to receive a distribution
hereunder shall be an unsecured claim against the general assets of the Corporation, and
neither the Participant nor his or her designated beneficiary shall have any rights in or
against any amount credited to his or her Account or any other specific assets of the
Corporation. All amounts credited to an Account shall constitute general assets of the
Corporation and may be disposed of by the Corporation at such time and for such purposes as
it may deem appropriate. An Account may not be encumbered or assigned by a Participant or
any Beneficiary.

15

 

     Executed at this 5th day of December, 2006 to be effective as of October 31, 2006.

	 	 	 	 	 
	 	COMPANY:

ABM INDUSTRIES INCORPORATED

 	 
	 	By  	     /s/ Erin M. Andre
 	 
	 	 	         Erin M. Andre 	 
	 	 	         Senior Vice President — Human Resources 	 
	 

16exv10w18

 

Exhibit 10.18

ABM INDUSTRIES INCORPORATED

STATEMENT OF TERMS AND CONDITIONS APPLICABLE TO

OPTIONS, RESTRICTED STOCK, RESTRICTED STOCK UNITS

AND PERFORMANCE SHARES GRANTED TO EMPLOYEES

PURSUANT TO THE 2006 EQUITY INCENTIVE PLAN

(As Adopted October __2, 2006)

I. INTRODUCTION

The following terms and conditions shall apply to each Award granted under the Plan to an Employee
eligible to participate in the Plan. This Statement of Terms and Conditions is subject to the terms
of the Plan and of any Award made pursuant to the Plan. In the event of any inconsistency between
this Statement of Terms and Conditions and the Plan, the Plan shall govern.

II. DEFINITIONS

Capitalized terms not otherwise defined in this Statement of Terms and Conditions shall have the
meaning set forth in the Plan. When capitalized in this Statement of Terms and Conditions, the
following additional terms shall have the meaning set forth below:

A. “Grant Date” means the date the Administrator grants the Award.

B. “Option Period” means the period commencing on the Grant Date of an Option and, except
at otherwise provided in Section III.E, ending on the Termination Date.

C. “Termination Date” means the date that an Option expires as set forth in the Option
Agreement.

III. OPTIONS

A. Option Notice and Agreement. An Option granted under the Plan shall be evidenced by an
Option Agreement setting forth the terms and conditions of the Option, including whether the Option
is an Incentive Stock Option or a Nonqualified Stock Option and the number of Shares subject to the
Option. Each Option Agreement shall incorporate by reference and be subject to this Statement of
Terms and Conditions and the terms and conditions of the Plan.

B. Exercise Price. The Exercise Price of an Option, as specified in the Option Agreement,
shall be equal to or greater than the Fair Market Value of the Shares underlying the Option on the
Grant Date.

C. Option Period. An Option shall be exercisable only during the applicable Option Period,
and during such Option Period the exercisability of the Option shall be subject to the vesting
provisions of Section III.D as modified by the rules set forth in Sections III.E, V and VI. The
Option Period shall be not more than seven years from the Grant Date.

 

 

D. Vesting of Right to Exercise Options.

1. Except as provided in Sections V and VI, an Option shall be exercisable during the
Option Period in accordance with the following vesting schedule: (i) 25 percent of the
Shares subject to the Option shall vest on the first anniversary of the Grant Date; (ii) an
additional 25 percent of the Shares shall vest on the second anniversary of the Grant Date;
(iii) an additional 25 percent of the Shares shall vest on the third anniversary of the
Grant Date; and (iv) the remaining 25 percent of the Shares subject to the Option shall
vest on the fourth anniversary of the Grant Date. Notwithstanding the foregoing, the
Administrator may specify a different vesting schedule at the time the Option is granted
and as specified in the Option Agreement.

2. Any vested portion of an Option not exercised hereunder shall accumulate and be
exercisable at any time on or before the Termination Date, subject to the rules set forth
in Sections III.E, V and VI. No Option may be exercised for less than 5 percent of the
total number of Shares then available for exercise under such Option. In no event shall the
Company be required to issue fractional shares.

E. Termination of Employment. In addition to the terms set forth in the Plan with respect
to termination of employment:

1. If a Participant ceases to be a bona fide employee of the Company or an Affiliate due
to his or her Retirement, Disability or death during the Option Period, in addition to any
Shares vested under the Option Agreement prior to the date of Disability or death, the
Option shall vest in the number of Shares equal to 25 percent of the number of Shares
originally subject to the Option, multiplied by the number of whole months between the most
recent anniversary date of the Option grant and the date of Retirement, Disability or
death, and divided by 12.

2. If a Participant who ceases to be a bona fide employee of the Company or an Affiliate
is subsequently rehired prior to the expiration of his or her Option, then the Option shall
continue to remain outstanding until such time as the Participant subsequently terminates
employment or the Option otherwise terminates pursuant to this Statement of Terms and
Conditions. Upon the Participant’s subsequent termination of employment, the
post-termination exercise period calculated pursuant to the terms and conditions of this
Section III.E shall be reduced by the number days between the date of the Participant’s
initial termination of employment and his or her rehire date; provided, however, that if
the rehired Participant continues to be employed by the Company or an Affiliate for at
least one year from his or her rehire date, then the post-termination exercise period for
the Option shall be determined in accordance with the Plan and shall not be adjusted as
described above.

2

 

F. Method of Exercise. A Participant may exercise an Option with respect to all or any
part of the exercisable Shares as follows:

1. By giving the Company, or its authorized representative designated for this purpose,
written notice of such exercise specifying the number of Shares as to which the Option is
so exercised. Such notice shall be accompanied by an amount equal to the Exercise Price of
such Shares, in the form of any one or combination of the following:

a. cash or certified check, bank draft, postal or express money order payable to
the order of the Company in lawful money of the United States;

b. if approved by the Company at the time of exercise, personal check of the
Participant;

c. if approved by the Company at the time of exercise, a “net exercise” pursuant
to which the Company will not require a payment of the exercise price from the
Participant but will reduce the number of Shares issued upon the exercise by the
largest number of whole Shares that has a Fair Market Value that does not exceed
the aggregate exercise price. With respect to any remaining balance of the
aggregate exercise price, the Company shall accept payment in a form identified in
(a) or (b) of this section;

d. if approved by the Company at the time of exercise, by tendering to the Company
or its authorized representative Shares which have been owned by the Participant
for at least six months prior to said tender, and having a Fair Market Value, as
determined by the Company, equal to the Exercise Price. In the event a Participant
tenders Shares to pay the Exercise Price, tender of Shares acquired through
exercise of an Incentive Stock Option may result in unfavorable income tax
consequences unless such Shares are held for at least two years from the Grant Date
of the Incentive Stock Option and one year from the date of exercise of the
Incentive Stock Option;

e. if approved by the Company at the time of exercise, delivery (including by FAX
transmission) to the Company or its authorized representative of an executed
irrevocable option exercise form together with irrevocable instructions to an
approved registered investment broker to sell Shares in an amount sufficient to pay
the Exercise Price plus any applicable withholding taxes and to transfer the
proceeds of such sale to the Company; and

2. If required by the Company, by giving satisfactory assurance in writing, signed by the
Participant, the Participant shall give his or her assurance that the Shares subject to the
Option are being purchased for investment and not with a view to

3

 

the distribution thereof;
provided that such assurance shall be deemed
inapplicable to (i) any sale of the Shares by such Participant made in accordance with the
terms of a registration statement covering such sale, which has heretofore been (or may
hereafter be) filed and become effective under the Securities Act of 1933, as amended (the
“Securities Act”) and with respect to which no stop order suspending the effectiveness
thereof has been issued, and (ii) any other sale of the Shares with respect to which, in
the opinion of counsel for the Company, such assurance is not required to be given in order
to comply with the provisions of the Securities Act.

G. Limitations on Transfer. An Option shall, during a Participant’s lifetime, be
exercisable only by the Participant. No Option or any right granted thereunder shall be
transferable by the Participant by operation of law or otherwise, other than as set forth in the
Plan. In the event of any attempt by a Participant to alienate, assign, pledge, hypothecate, or
otherwise dispose of an Option or of any right thereunder, except as provided herein, or in the
event of the levy of any attachment, execution, or similar process upon the rights or interest
hereby conferred, the Company at its election may terminate the affected Option by notice to the
Participant and the Option shall thereupon become null and void.

H. No Shareholder Rights. Neither a Participant nor any person entitled to exercise a
Participant’s rights in the event of the Participant’s death shall have any of the rights of a
shareholder with respect to the Shares subject to an Option except to the extent that an Option has
been exercised.

IV. RESTRICTED STOCK, RESTRICTED STOCK UNITS, AND PERFORMANCE SHARES

A. Agreement. A Restricted Stock Award, Restricted Stock Unit Award, or Performance Share
Award granted under the Plan shall be evidenced by an Agreement to be executed by the Participant
and the Company setting forth the terms and conditions of the Award. Each Award Agreement shall
incorporate by reference and be subject to this Statement of Terms and Conditions and the terms and
conditions of the Plan.

B. Special Restrictions. Each Restricted Stock Award, Restricted Stock Unit Award, or
Performance Share Award made under the Plan shall contain the following terms, conditions and
restrictions and such additional terms, conditions and restrictions as may be determined by the
Administrator; provided, however, that no Award shall be subject to additional terms, conditions
and restrictions which are more favorable to a Participant than the terms, conditions and
restrictions set forth in the Plan, the Restricted Stock Agreement, Restricted Stock Unit Award
Agreement, Performance Share Award Agreement, or this Statement of Terms and Conditions.

1. Restrictions. Until the restrictions imposed on any Restricted Stock Award
shall lapse, shares of Restricted Stock granted to a Participant: (a) shall not be sold,
assigned, transferred, pledged, hypothecated, or otherwise disposed of, and (b) shall, if
the Participant’s continuous employment with the

4

 

Company or an Affiliate shall terminate
for any reason (except as otherwise provided in the Plan
or in Section IV.B.2) be returned to the Company forthwith, and all the rights of the
Participant to such Shares shall immediately terminate. A Participant shall not be
permitted to sell, transfer, pledge, assign or encumber such Restricted Stock Units or
Performance Shares, other than pursuant to a qualified domestic relations order as defined
in the Code or Title I of the Employee Retirement Income Security Act. If a Participant
ceases to be a bona fide employee of the Company or an Affiliate (except as otherwise
provided in the Plan or in Section IV.B.2) prior to the lapse of the restrictions imposed
on a Restricted Stock Unit Award or Performance Share Award, the unvested portion of the
Restricted Stock Unit Award or Performance Share Award shall be forfeited to the Company,
and all the rights of the Participant to such Award shall immediately terminate. If a
Participant is absent from work with the Company or an Affiliate because of his or her
short-term disability or because the Participant is on an approved leave of absence, the
Participant shall not be deemed during the period of any such absence, by virtue of such
absence alone, to have terminated employment with the Company or an Affiliate except as the
Administrator may otherwise expressly determine. Notwithstanding the foregoing, if the
Participant is on a voluntary leave of absence for the purpose of serving the government of
the country of which the Participant is a citizen or in which the Participant’s principal
place of employment is located such leave shall be considered an approved leave of absence.

2. Termination of Employment by Reason of Retirement, Disability or Death.

a. Restricted Stock Awards and Restricted Stock Unit Awards.
Notwithstanding any provision contained herein or in the Plan or the Restricted
Stock Agreement or Restricted Stock Unit Agreement to the contrary, if a
Participant who has been in the continuous employment of the Company or an
Affiliate since the Grant Date of a Restricted Stock Award or Restricted Stock Unit
Award ceases to be a bona fide employee of the Company or an Affiliate as a result
of Retirement, Disability or death, then the restrictions shall lapse as to the
number of Shares or Share Equivalents equal to: (i) 50 percent of the number of
Shares or Share Equivalents originally subject to the Award, multiplied by (ii) the
number of whole months between the Grant Date (or if the Grant Date occurred more
than two years prior to the date of Retirement, Disability or death, the second
anniversary of the Grant Date) and the date of Retirement, Disability or death,
divided by (iii) 24.

b. Performance Share Awards. Notwithstanding any provision contained
herein or in the Plan or the Performance Share Agreement to the contrary, if a
Participant who has been in the continuous employment

5

 

of the Company or an
Affiliate since the Grant Date of a Performance Share Award ceases to be a bona
fide employee of the Company or an Affiliate as a result of Retirement, Disability
or death, then at the end of the performance period the restrictions shall lapse as
to the number of Share
Equivalents equal to: (i) the number of Performance Shares vested in accordance
with the performance objectives established by the Administrator for the Award,
multiplied by (ii) the number of whole months between the Grant Date and the date
of Retirement, Disability or death, divided by (iii) the number of months in the
performance period.

C. Dividends, Dividend Equivalents, and Business Transactions. Upon cash dividends being
paid on outstanding shares of ABM common stock, dividends shall be paid with respect to Restricted
Stock during the Restriction Period and shall be converted to additional shares of Restricted
Stock, which shall be subject to the same restrictions as the original Award for the duration of
the Restricted Period. Upon cash dividends being paid on outstanding shares of ABM common stock,
dividend equivalents shall be credited in respect of Restricted Stock Units and Performance Shares,
which shall be converted into additional Restricted Stock Units or Performance Shares, which will
be subject to all of the terms and conditions of the underlying Restricted Stock Unit Award or
Performance Share Award, including the same vesting restrictions as the underlying Award. Upon
stock dividends being paid on outstanding shares of ABM common stock or a Business Transaction, the
Administrator is authorized to take such actions and make such changes with respect to outstanding
Awards, including the performance criteria for the termination of restrictions on Awards, as are
consistent with the Plan and this Statement of Terms and Conditions to effect the terms of the
Awards.

D. Election to Recognize Gross Income in the Year of Grant. If any Participant validly
elects within thirty days of the Grant Date, to include in gross income for federal income tax
purposes an amount equal to the Fair Market Value of the Shares of Restricted Stock granted on the
Grant Date, such Participant shall pay to the Company, or make arrangements satisfactory to the
Administrator to pay to the Company in the year of such grant, any federal, state or local taxes
required to be withheld with respect to such shares in accordance with Section VII.F.

E. No Shareholder Rights for Restricted Stock Units or Performance Shares. Neither a
Participant nor any person entitled to exercise a Participant’s rights in the event of the
Participant’s death shall have any of the rights of a shareholder with respect to the Share
Equivalents subject to a Restricted Stock Unit Award or Performance Share Award except to the
extent that a stock certificate has been issued with respect to such Shares upon the payment of any
vested Restricted Stock Unit Award or Performance Share Award.

F. Time of Payment of Restricted Stock Units and Performance Shares. Upon the lapse of the
restriction imposed on Restricted Stock Unit Awards or Performance Share Award,

6

 

all Restricted
Stock Units and Performance Shares that were not forfeited pursuant to Sections IV.B.1 or V shall
be paid to the Participant as soon as reasonably practicable after the restrictions lapse but not
later than two and one-half months following the end of the calendar year in which the restrictions
lapse. Payment shall be made in Shares in the form of a stock certificate. The foregoing
notwithstanding, the Participant may elect to defer payment of the Restricted Stock Units in the
manner described in Section IV.G.

G. Deferral Election. Each Participant, pursuant to rules established by the
Administrator, may be entitled to elect to defer all or a percentage of any payment in respect of a
Restricted Stock Unit Award or Performance Shares that he or she may be entitled to receive as
determined pursuant to Section IV.F. This election shall be made by giving notice in a manner and
within the time prescribed by the Administrator and in compliance with Code Section 409A. Each
Participant must indicate the percentage (expressed in whole percentages) he or she chooses to
defer of any payment he or she may be entitled to receive. If no notice is given, the Participant
shall be deemed to have made no deferral election. Each deferral election filed with the Company
shall become irrevocable in accordance with the terms and conditions of the Company’s Deferred
Compensation Plan (or any successor plan) and in compliance with Code Section 409A.

V. SPECIAL FORFEITURE AND REPAYMENT RULES

Any other provision of this Statement of Terms and Conditions to the contrary notwithstanding, if
the Administrator determines that a Participant has engaged in conduct which constitutes Cause
prior to, or during the 12 month period following, the exercise of an Option or the vesting of an
Award, the consequences set forth in Section 16 of the Plan govern and the following consequences
shall apply:

A. Any outstanding Option shall immediately and automatically terminate, be forfeited and shall
cease to be exercisable, without limitation. In addition, any shares of Restricted Stock,
Restricted Stock Units or Performance Shares as to which the restrictions have not lapsed shall
immediately and automatically be forfeited, all of the rights of the Participant to such shares or
share equivalents shall immediately terminate, and any Restricted Stock shall be returned to the
Company.

B. Any exercise of an Option during the period beginning 12 months prior to through 24 months
after the Participant’s termination of employment with the Company or an Affiliate shall be
rescinded and all outstanding Awards shall be canceled up to 24 months after the Participant’s
termination of employment with the Company or an Affiliate. The Participant shall deliver to the
Company the Shares received by the Participant upon exercise of an Option if such exercise has been
rescinded and the Shares retained by the Participant.

C. The lapse of restrictions on or vesting of Restricted Stock, Restricted Stock Units, or
Performance Shares that have vested or upon which the restrictions have lapsed during the period
beginning 12 months prior to through 24 months after the Participant’s termination of employment
with the Company or an Affiliate

7

 

shall be rescinded and all outstanding Awards shall be cancelled
up to 24 months after the Participant’s termination of employment with the Company or an Affiliate.
The Participant shall deliver to the Company the Shares delivered upon vesting or lapse of
restrictions if such vesting or lapse of restrictions has been rescinded and the Shares retained by
the Participant.

D. The Participant shall pay over to the Company the proceeds (less the Participant’s purchase
price, if any) received by the Participant upon (1) the sale, transfer or other transaction
involving the Shares acquired upon the exercise of any Option exercised during the period beginning
12 months prior to through 24 months after the Participant’s termination of employment with the
Company or an Affiliate or (2) the sale, transfer or other transaction involving the Shares
acquired upon the vesting of any Award or lapse of restrictions on any Award within 12 months
prior to through 24 months after the Participant’s termination of employment with the Company or an
Affiliate in such manner and on such terms and conditions as may be required, and, without
limiting any other remedy the Company or an Affiliate may have, the Company shall be entitled to
set-off against the amount of any such proceeds any amount owed the Participant by the Company or
an Affiliate to the fullest extent permitted by law.

The Administrator shall determine in its sole discretion whether the Participant has engaged in
conduct that constitutes Cause.

Any provision of Section 16 of the Plan and this Section V which is determined by a court of
competent jurisdiction to be invalid or unenforceable should be construed or limited in a manner
that is valid and enforceable and that comes closest to the business objectives intended by such
invalid or unenforceable provision, without invalidating or rendering unenforceable the remaining
provisions of this Section V.

VI. CHANGE IN CONTROL

A. Effect of Change in Control on Options. Subject to the limitations set forth
in Section VI.C, in the event of a Change in Control, the surviving, continuing,
successor, or purchasing Company or other business entity or parent thereof, as the case
may be (the “Acquiror”) may, without the consent of any Participant, either assume or
continue the Company’s rights and obligations under outstanding Options or substitute for
outstanding Options substantially equivalent options covering the Acquiror’s stock.
Options that are assumed or continued in connection with a Change in Control shall be
subject to such additional accelerated vesting and/or exercisability in connection with
the Participant’s subsequent termination of employment (i) as are set forth in a Severance
Agreement between the Participant and the Company approved by the Board of Directors or
the Compensation Committee, or (ii) as the Board may determine. Any Options granted one
year or more prior to the Change in Control that are neither assumed nor continued by the
Acquiror in connection with the Change in Control shall, contingent on the Change in
Control, become fully vested and

8

 

exercisable immediately prior to the Change in Control.
Any Option granted less than one year prior to the Change of Control that is neither
assumed nor continued by the Acquiror in connection with the Change in Control shall, to
the extent not previously vested and exercisable, immediately prior to the Change in
Control become vested and exercisable as to the number of Shares subject to such Option
equal to (i) the number of Shares originally subject to such Option, multiplied by (ii)
the number of whole months between the Grant Date and the Change in
Control, divided by (iii) the number of months between the Grant Date and the date on
which all Shares originally subject to such Option would have been fully vested and
exercisable; and such Option shall terminate with respect to all remaining Shares subject
to such Option.

B. Effect of Change in Control on Awards Other than Options. Subject to the limitations
set forth in Section VI.C, in the event of a Change in Control, the Acquiror may, without the
consent of any Participant, either assume or continue the Company’s rights and obligations under
outstanding Awards other than Options or substitute for such Awards substantially equivalent awards
covering the Acquiror’s stock. Awards that are assumed or continued in connection with a Change in
Control shall be subject to such additional accelerated vesting or lapse of restrictions in
connection with the Participant’s subsequent termination of employment without Cause (i) as are set
forth in a Severance Agreement between the Participant and the Company approved by the Board of
Directors or the Compensation Committee; or (ii) as the Board may determine. Any Award granted one
year or more prior to the Change in Control that is neither assumed nor continued by the Acquiror
in connection with the Change in Control shall, upon the Change in Control, become fully vested and
all restrictions shall be released immediately prior to the Change in Control. Restricted Unit
Awards and Performance Share Awards granted one year or more prior to such Change in Control also
shall become immediately payable. Subject to the limitations set forth in Section VI.C, in the
event of a Change in Control outstanding Awards other than Options granted less than one year prior
to the Change in Control, shall, immediately prior to the Change of Control, become vested and all
restrictions shall to the extent not previously released be released with respect to the number of
Shares equal to (i) the number of Shares originally subject to such Award, multiplied by (ii) the
number of whole months between the Grant Date and the Change in Control, divided by (iii) the
number of months between the Grant Date and the date on which the restrictions on such Award would
otherwise have terminated. To the extent such restrictions are released, Restricted Unit Awards
and Performance Share Awards also shall become immediately payable. Awards shall terminate to the
extent such Awards do not become vested and restrictions do not terminate.

C. Excess Parachute Payments. Subject to a Severance Agreement between the Participant
and the Company approved by the Board of Directors or the Compensation Committee, if any amount or
benefit to be paid or provided under an Award or any other agreement between a Participant and the
Company would be an Excess Parachute Payment but for the application of this sentence, then the
payments and benefits to be paid or provided under the Award and any other agreement will be
reduced to the minimum extent necessary (but in no event to less than zero) so that no portion of

9

 

any such payment or benefit, as so reduced, constitutes an Excess Parachute Payment. The
determination of whether any reduction in such payments or benefits to be provided under the Award
or any other agreement or otherwise is required pursuant to the preceding sentence will be made at
the expense of the Company by independent accountants or the Company’s benefits consultant. The
fact that the Participant’s right to payments or benefits may be reduced by reason of the
limitations contained in this paragraph will not of itself limit or otherwise affect any other
rights of the Participant
under any other agreement. In the event that any payment or benefit intended to be provided is
required to be reduced pursuant to this paragraph, the Participant will be entitled to designate
the payments and/or benefits to be so reduced in order to give effect to this paragraph. The
Company will provide the Participant with all information reasonably requested by the Participant
to permit the Participant to make such designation. In the event that the Participant fails to make
such designation within 10 business days after receiving notice from the Company of a reduction
under this paragraph, the Company may effect such reduction in any manner it deems appropriate.

VII. MISCELLANEOUS

A. No Effect on Terms of Employment. Subject to the terms of any employment contract
entered into by the Company and a Participant to the contrary, the Company (or an Affiliate which
employs him or her) shall have the right to terminate or change the terms of employment of a
Participant at any time and for any reason whatsoever.

B. Grants to Participants in Foreign Countries. In making grants to Participants in
foreign countries, the Administrator has the full discretion to deviate from this Statement of
Terms and Conditions in order to adjust Awards under the Plan to prevailing local conditions,
including custom and legal and tax requirements.

C. Information Notification. Any information required to be given under the terms of an
Award Agreement shall be addressed to the Company in writing by mail, overnight delivery service,
or by electronic transmission to the Senior Vice President, Human Resources and the Assistant Vice
President & Director of Compensation. Any notice to be given to a Participant shall be given in
writing by mail, overnight delivery service, or by electronic transmission.

D. Administrator Decisions Conclusive. All decisions of the Administrator administering
the Plan upon any questions arising under the Plan, under this Statement of Terms and Conditions,
or under an Award Agreement, shall be conclusive.

E. No Effect on Other Benefit Plans. Nothing herein contained shall affect a Participant’s
right to participate in and receive benefits from and in accordance with the then current
provisions of any pensions, insurance or other employment welfare plan or program offered by the
Company.

10

 

F. Withholding. Each Participant shall agree to make appropriate arrangements with the
Company and his or her employer for satisfaction of any applicable federal, state or local income
tax withholding requirements or payroll tax requirements. If approved by the Company at the time
of exercise, such arrangements may include an election by a Participant to have the Company retain
some portion of the Stock acquired pursuant to exercise of an Option to satisfy such withholding
requirements. The election must be made prior to the date on which the amount to be withheld is
determined. If a qualifying election is made, then upon exercise of an Option, in whole or in
part, the Company will retain the number of Shares having a value equal to the amount necessary to
satisfy any
withholding requirements. Calculation of the number of Shares to be withheld shall be made based on
the Fair Market Value of the Stock. In no event, however, shall the Company be required to issue
fractional shares of Stock. The Administrator shall be authorized to establish such rules, forms
and procedures as it deems necessary to implement the foregoing.

With respect the vesting of an Award other than an Option, if the Participant does not make an
arrangement with Company and his or her employer for satisfaction of the applicable income and
withholding requirements or social security requirements in advance of the vesting date, the
Company shall retain the number of Shares (that otherwise would have been payable to the
Participant) having a value equal to the amount necessary to satisfy any withholding requirements.
Calculation of the number of such Shares shall be as described above.

G. Successors. This Statement of Terms and Conditions and the Award Agreements shall be
binding upon and inure to the benefit of any successor or successors of the Company. “Participant”
as used herein shall include the Participant’s Beneficiary.

H. Governing Law. The interpretation, performance, and enforcement of this Statement of
Terms and Conditions and all Award Agreements shall be governed by the laws of the State of
Delaware.

11

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