Document:

exv10w4

Exhibit 10.4

JEFFERIES GROUP, INC.

DEFERRED COMPENSATION PLAN

As Amended and Restated as of January 1, 2009

     WHEREAS, in recognition of the success provided to the Company by certain Employees, the
Company desires to establish a deferred compensation plan to enable those Employees to defer the
payment of all or a portion of the compensation otherwise payable in cash by the Company;

     WHEREAS, the Company adopted the Plan effective January 1, 2001 and amended and restated the
Plan effective January 1, 2003.

     NOW, THEREFORE, the Company hereby adopts this amendment and restatement of the Plan effective
January 1, 2009, as follows:

ARTICLE I

DEFINITIONS

     1.1 Definitions: Whenever used in this Plan:

          (a) “Accounts” shall mean the separate bookkeeping accounts established under the Plan for
each Participant. The Account includes two sub-accounts for purposes of complying with Code
Section 409A: The “Grandfathered Account” is that portion of the Account resulting from deferrals
of compensation that was vested before 2005, except for any designated deferred compensation which
the Committee has caused to be not grandfathered for purposes of Code Section 409A. The
“2005-and-Later Account” is the remaining portion of the Account which is not “grandfathered” for
purposes of Code Section 409A. Note: In some cases compensation deferred in a given Plan Year may
by in the Grandfathered Account for some Participants but in the 2005-and-Later Account for others,
or for a single Participant compensation relating to a single Plan Year may be partly in the
Grandfathered Account and partly in the 2005-and-Later Account.

          (b) “Administrator” shall mean a committee of officers authorized to administer the Plan.
Unless otherwise determined by the Committee, the Administrator shall be a committee consisting of
the Chief Executive Officer, the Chairman of the Executive Committee, the Chief Financial Officer
and the Treasurer.

          (c) “Board” shall mean the Board of Directors of the Company.

          (d) “Change of Control” shall mean the first to occur of any of the following events after the
effective date of the Plan:

     (i) Any “person,” as such term is used in Section 13(d) and 14(d) of the Exchange
Act (other than the Company, any trustee or other fiduciary holding

 

 

securities under an employee benefit plan of the Company, or any company owned,
directly or indirectly, by the shareholders of the Company in substantially the same
proportions as their ownership of stock of the Company), acquires voting securities of
the Company and immediately thereafter is a “50% Beneficial Owner.” For purposes of
this provision, a “50% Beneficial Owner” shall mean a person who is the “beneficial
owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 50% or more of the combined voting power of the
Company’s then-outstanding voting securities; provided, however, that the term “50%
Beneficial Owner” shall not include any person who shall become the beneficial owner of
50% or more of the combined voting power of the Company’s then-outstanding voting
securities solely as a result of an acquisition by the Company of its voting securities,
until such time thereafter as such person shall become the beneficial owner (other than
by means of a stock dividend or stock split) of any additional voting securities and
becomes a 50% Beneficial Owner in accordance with this subsection;

     (ii) During any period of two consecutive years commencing on or after the
effective date of this Plan, individuals who at the beginning of such period constitute
the Board, and any new director whose election by the Board or nomination for election
by the Company’s shareholders was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors at the beginning of the period
or whose election or nomination for election was previously so approved (the “Continuing
Directors”), cease for any reason to constitute at least a majority thereof;

     (iii) The shareholders of the Company have approved a merger, consolidation,
recapitalization, or reorganization of the Company, or a reverse stock split of any
class of voting securities of the Company, or the consummation of any such transaction
if shareholder approval is not obtained, other than any such transaction which would
result in at least 50% of the combined voting power of the voting securities of the
Company or the surviving entity outstanding immediately after such transaction being
beneficially owned by persons who together beneficially owned at least 80% of the
combined voting power of the voting securities of the Company outstanding immediately
prior to such transaction, with the relative voting power of each such continuing holder
compared to the voting power of each other continuing holder not substantially altered
as a result of the transaction; provided that, for purposes of this subsection, such
continuity of ownership (and preservation of relative voting power) shall be deemed to
be satisfied if the failure to meet such 50% threshold (or to substantially preserve
such relative voting power) is due solely to the acquisition of voting securities by an
employee benefit plan of the Company or of such surviving entity or a subsidiary
thereof; and provided further, that, if consummation of the corporate transaction
referred to in this subsection is subject, at the time of such approval by shareholders,
to the consent of any government or governmental agency or approval of the shareholders
of another entity or other material contingency, no Change of Control shall occur until
such time as such

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consent and approval has been obtained and any other material
contingency has been satisfied;

     (iv) The shareholders of the Company have approved a plan of complete liquidation
of the Company or an agreement for the sale or disposition by the Company of all or
substantially all of the Company’s assets (or any transaction having a similar effect);
provided that, if consummation of the transaction referred to in this subsection is
subject, at the time of such approval by shareholders, to the consent of any government
or governmental agency or approval of the shareholders of another entity or other
material contingency, no Change of Control shall occur until such time as such consent
and approval has been obtained and any other material contingency has been satisfied;
and

     (v) Any other event which the Board determines shall constitute a Change of Control
for purposes of this Plan.

          (e) “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time, and the
regulations and other authority issued thereunder by the appropriate governmental authority.
References to the Code shall include references to any successor section or provision of the Code.

          (f) “Committee” shall mean the Compensation Committee of the Board.

          (g) “Company” shall mean Jefferies Group, Inc., a corporation organized under the laws of the
State of Delaware, or any successor corporation.

          (h) “Compensation” shall mean those elements of cash remuneration payable to an Employee by
the Company designated by the Committee (or Administrator) as eligible for deferral with respect to
a given Plan Year. Such designation must be made before any applicable deadline for the
Participant to elect deferral for such Plan Year (to the extent required to comply with Code
Section 409A). The Committee (or Administrator) may, in its discretion, designate salary, bonus
awards, commissions, or sign-on bonus awards as eligible for deferral. Payments to any Employee
for a period during which the Employee is determined to have a 409A Disability shall not be
deferred, however.

          (i) “Date of Grant” shall mean the date on which an Option is credited to a Participant’s
Equity Subaccount pursuant to Section 3.4.

          (j) “Deferral Period” shall mean, with respect to each Account of a Participant, the five-year
period beginning on the first day of the Plan Year with respect to which the Account was
established; provided, however, that (i) this period will be subject to any extension in accordance
with Section 3.6, and (ii), for Plan Years after 2002, the Committee may establish a duration for
the Deferral Period of other than five years, but any such change shall be announced to Employees
invited to participate prior to the enrollment deadline for that Plan Year.

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          (k) “Deferred Shares” shall mean Shares or Restricted Shares during the applicable Deferral
Period.

          (l) “Disability” shall mean a physical or mental impairment that would entitle the Participant
to receive benefits under the Company’s long term disability program, as determined by the
Committee in its sole discretion. The Committee may, in its sole discretion, require a medical
examination performed by a physician at the expense of the Company, as a condition to any
determination of Disability. The term “409A Disability” shall have the meaning as defined in
Section 9.6(a)(v)(C) of the 2003 Incentive Compensation Plan

          (m) “Employee” shall mean any individual employed by the Company, Jefferies & Company, Inc.,
or any other subsidiary designated by the Committee.

          (n) “Equity Subaccount” shall mean the portion of a Participant’s Account deemed to comprise
Options, Restricted Shares and/or Deferred Shares.

          (o) “Equity Unit” shall mean three Restricted Shares and an Option for one Share; provided,
however, that, for any Plan Year after 2002, the Committee may vary the number of Restricted Shares
and number of Options which constitute an Equity Unit, but any such change shall be announced to
Employees invited to participate prior to the enrollment deadline for that Plan Year.

          (p) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended from time to
time, and as now or hereafter construed, interpreted and applied by regulations, rulings and cases.

          (q) “Fair Market Value” shall mean the closing sale price of a Share on the composite tape of
the New York Stock Exchange on the relevant valuation date or Date of Grant, or if Shares are not
traded on such date, on the last date on which Shares are traded preceding such valuation date or
Date of Grant.

          (r) “Investment Subaccount” shall mean the portion of the Participant’s Account that is not
his or her Equity Subaccount.

          (s) “Option” shall mean an option to purchase Shares pursuant to Article V.

          (t) “Option Discount Percentage” means the percentage of the full value of an Option,
determined under such option valuation methodology as may be reasonably selected by the Committee,
represented by the price of an Option specified by the Committee for each Plan Year, which is used
under Section 3.4 to calculate the number of Equity Units or Options credited to a Participant’s
Account. In no event will the Option Discount Percentage be less than 50%.

          (u) “Participant” shall mean an Employee who has satisfied the requirements of Section 2.1.

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          (v) “Plan” shall mean the Jefferies Group, Inc. Deferred Compensation Plan, as amended and
restated, as set forth herein and as amended from time to time. The Plan is implemented as a
sub-plan under the 2003 Incentive Compensation Plan.

          (w) “Plan Quarter” shall mean a calendar quarter ending on March 31, June 30, September 30, or
December 31.

          (x) “Plan Year” shall mean the calendar year.

          (y) “Restricted Period” shall mean the period ending on the last day of the third consecutive
Plan Year for which a Participant defers Compensation pursuant to Section 3.1; provided, however,
that if a Participant ceases to defer Compensation by reason of Disability or 409A Disability, the
Participant shall be treated as if such deferrals have not ceased for the duration of such
Disability or 409A Disability for purposes of determining the end of the Restricted Period. The
foregoing notwithstanding, for any Plan Year after 2002, the Committee may vary the length of the
Restricted Period, but any such change shall be announced to Employees invited to participate prior
to the enrollment deadline for that Plan Year and shall not operate to extend the Restricted Period
applicable to any Account relating to a Participant’s deferrals in a previous Plan Year.

          (z) “Restricted Share” shall mean a contingent right, credited pursuant to Section 3.4, to
receive delivery of a Share at the end of the Deferral Period. A Participant credited with a
Restricted Share has no rights of a shareholder until delivery of a Share has been effected.

          (aa) “Restricted Share Discount Percentage” means the percentage of the Fair Market Value of a
Share specified for the Committee for each Plan Year, which is used under Section 3.4 to calculate
the number of Equity Units or Restricted Shares credited to a Participant’s Account. In no event
will the Restricted Share Discount Percentage be less than 85%.

          (bb) “Retirement Age” shall mean the age at which an Employee’s age plus his years of service
equals 65. For this purpose, years of service shall be credited for each twelve month period
beginning on the date of the Participant’s commencement of employment with the Company and on each
anniversary thereof during which the Employee was in active employment with the Company.

          (cc) “Shares” shall mean the common stock of the Company, $.0001 par value.

ARTICLE II

PARTICIPATION

     2.1 Eligibility to Participate. An Employee who is a full-time employee of the
Company or a participating subsidiary shall become a Participant upon his designation by the
Committee as eligible to participate in the Plan and his election to defer Compensation in
accordance with Article III. A Participant is not automatically eligible to defer compensation in
a given Plan Year, but must be designated as eligible to defer in such Plan Year by the Committee.

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     2.2 Termination of Participation. Once an Employee becomes a Participant, the
Employee shall remain a Participant (subject to Section 2.1) until termination of employment with
the Company and thereafter until all benefits to which the Participant or the Participant’s
beneficiary is entitled under the Plan have been paid.

ARTICLE III

DEFERRAL OF COMPENSATION

     3.1 Deferral Election. With respect to each Plan Year, a Participant may elect to
defer the receipt of Compensation otherwise payable to him. A Participant’s deferral election
shall designate an annual dollar amount or percentage for deferral separately with respect to each
component of Compensation (e.g., base salary, bonus, commissions, to the extent such component is
deferrable). In the event that a designated dollar deferral amount for any component of
Compensation exceeds the actual annual amount of such component of Compensation, 100% of such
component of Compensation shall be deferred in lieu of this designated dollar amount. The
Committee may establish a maximum limit on the aggregate amount of deferrals by any Participant
during any Plan Year. Such election must be made before the beginning of the Plan Year to which
the deferral relates, or by such other deadline as may be specified by the Committee, in the form
and manner prescribed by the Committee; provided, however, that the election deadline for any
deferral of compensation credited or to be credited to the 2005-and-Later Account shall comply with
Exhibit A to the 2003 Incentive Compensation Plan (and to the extent applicable Section 9.6(a)(ii)
of that Plan). Notwithstanding the foregoing, with respect to the Plan Year beginning January 1,
2001, deferral elections must be made before February 16, 2001, and such elections will relate only
to amounts not yet earned or not yet payable as of that date, as specified by the Committee.
Elections to defer (including the related election as to the time of distribution) become
irrevocable at the applicable deadline for the filing of such elections, or at such earlier time as
may be specified by the Committee.

     3.2 Establishment of Account. With respect to each Plan Year, an Account will be
established for each Participant and the Compensation that the Participant elects to defer under
the Plan with respect to that Plan Year will be credited to that Account. Unless otherwise
determined by the Committee, each such credit will be made to the Account as of the last day of the
Plan Quarter during which such Compensation would have otherwise been payable to the Participant in
cash. Prior to the deadline for deferral elections for a given Plan Year, the Committee will
establish the proportions in which amounts deferred will be allocated to the Participant’s
Investment Subaccount in accordance with Section 3.3 and to the Equity Subaccount in accordance
with Section 3.4; provided, however, that Committee may permit the Participant to elect from among
two or more choices as to the allocations of the Participant’s deferrals for the Plan Year to the
Subaccounts, and may permit the Participant to elect among investment alternatives within each
Subaccount.

     3.3 Investment Subaccount. Amounts allocated to the Investment Subaccount portion of
a Participant’s Account shall be treated as if invested in the investment vehicles selected by the
Participant from among the investment vehicles made available by the Committee, as follows:

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          (a) The Participant shall select, in the form and manner prescribed by the Committee, the
investment vehicles in which the Investment Subaccount portion of each Account shall be deemed to
be invested. If one of the available investment vehicles is a money market fund, the Participant
shall be permitted to elect at least once during each Plan Year, in the form and manner prescribed
by the Committee, to treat any amounts deemed invested in the money
market fund as if they were thereafter invested in such other available investment vehicles
(if any are made available by the Committee) as the Participant shall designate.

          (b) The investment vehicles deemed to be made available to the Participant, and any limitation
on the maximum or minimum percentages of the Participant’s Investment Subaccount that may be
invested in any particular investment vehicle and the times and terms upon which Participants will
be permitted to reallocate balances between different investment vehicles, shall be determined by
the Committee from time to time, and the Committee may add, change, or delete investment vehicles
at any time.

          (c) As of the last day of each Plan Quarter, each of a Participant’s Investment Subaccounts
shall be credited or debited with earnings and losses (net of investment management fees and
expenses) as if invested for such Plan Quarter (or portion thereof from the date any deferred
amount would otherwise have been payable to the Participant in cash until the last day of the Plan
Quarter) in the investment vehicles selected by the Participant. The Committee may cause such
crediting or debiting of earnings and losses as of other dates, in its discretion.

          (d) If a Participant does not furnish complete and clear investment designation instructions,
the undesignated portion of the Participant’s Investment Subaccount shall be deemed to be invested
in the money market fund made available under the Plan, until such time as complete and clear
investment designation instructions are provided by the Participant.

3.4 Equity Subaccount.

          (a) As of the last day of each Plan Quarter, the Equity Subaccount portion of a Participant’s
Account shall be credited with Equity Units, or separately with Restricted Shares or Options, in
accordance with the terms established by the Committee and any Participant elections, if permitted
by the Committee, under Section 3.2. The number of Equity Units to be so credited shall equal the
greatest number obtained by dividing (i) the amount of Compensation deferred and allocated to the
Participant’s Equity Subaccount for the Plan Quarter, by (ii) the sum of (A) the Restricted Share
Discount Percentage times the Volume Weighted Average Price of one Share as of the last day of the
Plan Quarter times the number of Restricted Shares included in the Equity Unit, and (B) the price
of an Option specified by the Committee for the Plan Year, which shall be based on the Option
Discount Percentage, times the number of Options included in the Equity Unit. If Restricted Shares
or Options are to be credited to the Equity Subaccount separately from Equity Units, the number of
each shall be calculated in a manner consistent with the manner used for Equity Units. Restricted
Shares and Options shall be credited and relate to whole shares, with any fractional remainder for
the Plan Quarter allocated to the Participant’s Investment Subaccount, unless the Committee
specifies another reasonable method of dealing with fractional Equity Units and fractional Shares
or cash amounts that relate

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thereto. The Committee may cause the crediting of Equity Units,
Restricted Shares and Options at dates other than the last day of Plan Quarters, in its discretion.

          (b) Restricted Shares and Options, and Equity Units comprising them, shall be subject to the
provisions of Article IV and V, as applicable.

          (c) Shares which will be reserved for Restricted Shares and Options under the Plan shall be
authorized and unissued shares or treasury shares (including shares reacquired by the Company for
purposes of the Plan). From and after the time the 2003 Incentive Compensation Plan was adopted by
the Board and approved by the Company’s shareholders (May 5, 2003), the shares to be used under the
Plan for delivery upon exercise of outstanding Options and in connection with outstanding
Restricted Shares and Deferred Shares, and for such awards thereafter, shall be drawn from the 2003
Incentive Compensation Plan, and the shares theretofore reserved under this Plan shall be released.

          (d) If any Restricted Shares or Deferred Shares under the Plan are forfeited, or if any
Options terminate or expire unexercised, the Shares forfeited or subject to the terminated or
expired Options shall (unless the Plan shall have been terminated) again become available for
delivery under the Plan (or 2003 Incentive Compensation Plan to the extent the Shares at issue
originated under such Plan).

     3.5 Account Statements. Each Participant will receive a statement of the balance in
the Participant’s Accounts as promptly as practicable after the end of each Plan Quarter.

     3.6 Redeferral of Account. At least thirteen months prior to the end of the Deferral
Period with respect to each Grandfathered Account, and at the time(s) specified in Section 2 of
Exhibit A to the 2003 Incentive Compensation Plan (and as otherwise permitted under Section
9.6(a)(ii) of that Plan) with respect to each 2005-and-Later Account, a Participant who is an
Employee may elect to defer the amounts credited to that Account for an additional period of five
years (or such other period as may be permitted by the Committee, subject to the applicable
requirements of such Exhibit A), beginning on the first day of the Plan Year immediately following
the last day of the Deferral Period. An election to extend the Deferral Period shall be made in
the form and manner prescribed by the Committee. With respect to Grandfathered Accounts, (i) only
one election to extend the Deferral Period may be made with respect to any Grandfathered Account,
and if a Participant is determined to have incurred a Disability, the election to extend the
Deferral Period for a Grandfathered Account otherwise permitted under this Section 3.6 shall not
become effective if the Participant remains subject to the Disability at the time it otherwise
would become effective.

ARTICLE IV

RESTRICTED SHARES

     4.1 Terms of Restricted Shares. If a Participant’s employment with the Company
terminates prior to the earliest of (i) the end of the Restricted Period, (ii) the Participant’s
retirement after attainment of Retirement Age, (iii) the Participant’s death, (iv) the occurrence
of a Change of Control, or (v) the fifth anniversary of the first day of the Plan Year that
includes the Date of Grant, a portion of the Restricted Shares credited to his or her Equity
Subaccount for

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each Plan Year shall be forfeited. The number of Restricted Shares to be forfeited
shall be (A) the total number of Restricted Shares credited for that Plan Year minus (B) that total
number of Restricted Shares times the Restricted Shares Discount Percentage for that Plan Year.
Any Deferred Shares credited under Section 4.2 that are attributable, directly or indirectly, to
such forfeited Restricted Shares will also be forfeited. Any fractional shares resulting from this
calculation will be disregarded and not forfeited, unless the Equity Subaccount is then being
maintained in a manner that credits and accounts for fractional shares.

     4.2 Dividend Equivalents. As of the last day of each Plan Quarter, each Participant’s
Equity Subaccounts shall be credited with a number of whole and fractional Deferred Shares equal to
(i) the product of (A) the aggregate number of Restricted Shares and Deferred Shares credited to
the Participant’s Equity Subaccounts, multiplied by (B) the cash value or Fair Market Value of any
dividend paid with respect to a Share during such Plan Quarter, determined as of the payment date
for such dividend, divided by (ii) the Volume Weighted Average Price of a Share as of the last day
of such Plan Quarter; provided, however, that, in the case of a non-cash dividend, the Committee
may determine to make an equitable adjustment under Article VII in lieu of crediting the
Participant’s Equity Subaccounts under this Section 4.2. The foregoing notwithstanding, the
Committee may specify an alternative method for crediting dividend amounts, including by cash
crediting to the Participant’s Investment Subaccount, for administrative convenience; such
alternative methods need not apply uniformly to all Participants.

ARTICLE V

OPTIONS

     5.1 Nonqualified Stock Options. Each Option credited to a Participant pursuant to
Section 3.4 shall be a non-qualified stock option and shall be evidenced by a Share Option
Certificate in such form as the Committee shall approve. A Certificate evidencing Options not
forfeited pursuant to Section 5.3(b) shall be issued following the earliest of (i) the third
anniversary of the first day of the Plan Year that includes the Date of Grant, or (ii) the
Participant’s termination of employment for any reason, including death; provided, however, that
the Committee may provide for issuance of such Certificate at earlier dates than those specified
or, if announced to a Participant prior to the effectiveness of his or her deferral election which
results in acquisition of the Option, at later dates later than those specified. References in
this Plan to distributions of Accounts do not include distributions of Options, which are governed
by the certification procedure and vesting described in this Article V.

     5.2 Option Price. The option exercise price of each Option granted under the Plan
shall be such exercise price as may be specified by the Committee in accordance with the 2003
Incentive Compensation Plan.

     5.3 Option Term; Vesting.

          (a) An Option may not be exercised prior to the issuance of a Share Option Certificate with
respect to such Option in accordance with Section 5.1, and may not be exercised after the earlier
of (i) the last day of the Plan Year that includes the fifth anniversary of the Date of Grant, or
(ii) in the case of a Participant who ceases to be an Employee other than by reason

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of the Participant’s death, the sixtieth day following termination of the Participant’s employment. Any
Option not exercised within the foregoing Option term shall automatically terminate at the
expiration of such Option term.

          (b) If a Participant’s employment with the Company terminates before the earliest of (i) the
end of the Restricted Period, (ii) the Participant’s retirement after attainment of Retirement Age,
(iii) the Participant’s death, (iv) the occurrence of a Change of Control, or (v) the third
anniversary of the first day of the Plan Year that includes the Date of Grant, a portion of the
Options credited to his or her Equity Subaccount for that Plan Year shall terminate and be
forfeited, which portion shall be (A) the total number of Options credited for that Plan Year minus
(B) that total number of Options times the Option Discount Percentage for that Plan Year. Any
Option relating to a fractional share resulting from this calculation will be disregarded and not
terminated and forfeited.

     5.4 Exercise and Payment.

          (a) An exercisable Option may be exercised by notice (in the form prescribed by the Committee)
to the Company specifying the number of Shares to be purchased. Payment for the number of Shares
purchased upon the exercise of an Option shall be made in full at the price provided for in the
applicable Share Option Agreement. Such purchase price shall be paid by the delivery to the
Company of cash (including check or similar draft) in United States dollars or whole Shares
(subject to any restrictions the Committee may impose), or a combination thereof. Shares used in
payment of the purchase price shall be valued at their Fair Market Value as of the date the notice
of exercise is received by the Company. Any Shares delivered to the Company shall be in such form
as is acceptable to the Company.

          (b) The Company may defer making delivery of Shares under the Plan until satisfactory
arrangements have been made for the payment of any tax attributable to exercise of the Option. The
Committee may, in its sole discretion, permit a Participant to elect, in such form and at such time
as the Committee may prescribe, to pay all or a portion of any taxes arising in connection with the
exercise of an Option by electing to (i) have the Company withhold whole Shares, or (ii) deliver
other whole Shares previously owned by the Participant, except that the number of shares withheld
or surrendered shall be limited to that number having a Fair Market Value not greater than the
minimum applicable withholding tax rate for federal (including FICA), state and local tax
withholding obligations associated with the transaction if such restriction is then necessary in
order that the Company not recognize additional accounting expense in connection with the
transaction.

          (c) If an Option is exercised, Shares shall be delivered at the time of exercise, subject to
subsection 5.4(b).

     5.5 Nontransferability. Except as otherwise determined by the Committee, no Option or
any rights with respect thereto shall be subject to any debts or liabilities of a Participant, nor
shall they be assignable or transferable except by will or the laws of descent and distribution.

     5.6 Rights as a Shareholder. A Participant shall have no rights as a record holder
with respect to Shares covered by his or her Option until the exercise of such Option and

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payment in full of the purchase price. No adjustment will be made for cash dividends for which the record
date is prior to the date of such exercise.

ARTICLE VI

DISTRIBUTION OF DEFERRED COMPENSATION

     6.1 Election of Distribution Form. At the time of filing of each deferral election
described in Section 3.1 (by the applicable deadline thereunder in the case of 2005-and-Later
Account), the Participant shall elect to receive the balance of the Account with respect to which
such deferral election is made, in the form of a single sum, periodic distributions over a period
of five years, or periodic distributions over a period of ten years. At the time prescribed in
Section 3.6 with respect to each of the Participant’s Accounts, the Participant may make a new
election as to the timing of distribution of that Account. The election timing rules specified
herein are intended to comply with Code Section 409A; the provisions of Section 9.6(a)(ii) of the
2003 Incentive Compensation Plan shall apply for this purpose. Elections made pursuant to this
Section 6.1 shall be made in the form and manner prescribed by the Committee. If a Participant
fails to make an election pursuant to this Section 6.1 with respect to any Account, that Account
will be distributed in a single sum.

     6.2 Form of Distribution. Distribution shall be made in accordance with the election
made pursuant to Section 6.1, as in effect at the time of distribution. Notwithstanding the
preceding sentence, if the balance of a Participant’s Grandfathered Account at the time
distribution is made in accordance with this Article VI has a value of less than $50,000, the
Committee may direct that such distribution shall be made in a single sum. Distributions from the
Investment Subaccount portion of a Participant’s Account shall be made in cash, unless in-kind
distribution of assets that match the Participant’s notional investments is authorized by the
Committee. Distributions from the Equity Subaccount portion of a Participant’s Account shall be
made in the form of Shares, with any fractional Shares distributed in cash unless other means of
settlement of fractional shares is authorized by the Committee. If a Participant’s Investment
Subaccount is distributed in annual installments, the undistributed portion of such Investment
Subaccount shall continue to be credited with earnings and losses in accordance with Section
3.3(c). As of the last day of each Plan Year, the amount of each remaining installment shall be
redetermined by dividing the undistributed balance of the Investment Subaccount, as adjusted in
accordance with the preceding sentence, by the number of remaining installments. The Committee
may, in its sole discretion, accelerate distributions from a Participant’s Grandfathered Account
in the event of the Participant’s Disability.

     6.3 Distribution Upon Expiration of Deferral Period. Unless distribution is made at
an earlier time pursuant to this Article VI, the balance of each Account shall be distributed to
the Participant in the manner prescribed under Section 6.2 in, or beginning in, the January
following the end of the Deferral Period applicable to that Account (including any extension in
accordance with Section 3.6). All installments shall be distributed in January of the applicable
year.

     6.4 Hardship Distribution. Notwithstanding any other provisions of this Plan, if the
Committee determines, after consideration of a Participant’s application, that the Participant has
sustained a severe financial hardship resulting from a sudden and unexpected illness or accident

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of the Participant or the Participant’s dependent (as defined in Section 152(a) of the Code), loss of
the Participant’s property due to casualty, or other similar extraordinary and unforeseeable
circumstances resulting from events beyond the Participant’s control, the Committee may, in
its sole discretion, (i) direct that all or a portion of the balance of the Participant’s
Grandfathered Accounts be paid to the Participant and, (ii) if the applicable conditions of Section
9.6(a)(iv) and (v) of the 2003 Incentive Compensation Plan relating to an “Unforeseeable
Emergency” have been met, direct that all or a portion of the 2005-and-Later Account be paid to the
Participant; provided, however, that during the Restricted Period applicable to any Restricted
Shares, no such Restricted Shares in excess of the number of such Restricted Shares that would
remain after forfeiture under Section 4.1 shall be distributed under this Section 6.4. The
payment will be made in the manner and at the time specified by the Committee, subject to
compliance with such applicable requirements of Code Section 409A in the case of 2005-and-Later
Accounts. No Participant who is also a member of the Committee may in any way take part in any
decision pertaining to a request for payment made by that Participant under this Section 6.4. In
the event of a withdrawal from a 2005-and-Later Account under this Section 6.4, the Participant’s
deferral election shall be cancelled for the Plan Year in which the withdrawal occurs, and in the
event of any withdrawal under this Section 6.4 no deferral election will be permitted for the next
following Plan Year.

     6.5 Penalty Withdrawals. Except as otherwise provided under Section 6.4, prior to the
end of the Deferral Period applicable to any Grandfathered Account, a Participant may withdraw all
or a portion of the balance of that Grandfathered Account; provided, however, that if such
withdrawal is made before the end of the Restricted Period applicable to any Restricted Shares, no
such Restricted Shares in excess of the number of such Restricted Shares remaining after forfeiture
under Section 4.1 may be withdrawn under this Section 6.5. If any such withdrawal is made, the
Participant shall receive from his Grandfathered Account an amount equal to:

          (a) If the withdrawal is made before a Change of Control or more than twenty-four months
following a Change of Control, 90% of the amount requested, and the remaining 10% of the amount
requested shall be forfeited; or

          (b) If the withdrawal is made within the twenty-four month period beginning on the date
following a Change of Control, 95% of the amount requested, and the remaining 5% of the amount
requested shall be forfeited.

No request to withdraw less than 10% of the balance of any Grandfathered Account shall be permitted
under this Section 6.5. Any request to withdraw 75% or more of the balance of any Grandfathered
Account shall result in the withdrawal or forfeiture of the entire balance of such Account. In the
event of a withdrawal under this Section 6.5, the Participant’s deferral election for the
then-current Plan Year shall be unaffected, but no deferral election will be permitted for the next
following Plan Year.

     6.6 Death Benefit. In the event of a Participant’s death before the balance in the
Participant’s Account is fully paid out:

-12-

 

          (a) If the Participant’s death occurs prior to the commencement of payments from an Account as
otherwise provided under this Article VI, payment of the balance of the Account
will be made to the beneficiary or beneficiaries designated by the Participant or, if the
Participant has made no such designation or no beneficiary survives, to the Participant’s estate.
In either case, such payment will be made in a single sum in January following the date of the
Participant’s death.

          (b) If a Participant’s death occurs after periodic payments have begun to be made from an
Account but before all payments have been made, the remaining payments shall be made to the
beneficiary or beneficiaries designated by the Participant or if there is no such designation or no
beneficiary survives, to the Participant’s estate. Notwithstanding the foregoing, however, if the
remainder of the payments from an Account are to be paid to the estate of the Participant, the
Committee may, in its sole and absolute discretion and upon receipt of an application therefor from
the duly appointed administrator or executor of such estate, direct that the sum of the remaining
payments from any Grandfathered Account be paid to the estate in a single payment in January
following the date of the Participant’s death (this alternative will not apply to a 2005-and-Later
Account, however).

     6.7 Acceleration of Periodic Distributions. If a Participant’s Grandfathered Account
is being paid to the Participant or a beneficiary of the Participant in the form of periodic
payments, such Participant or beneficiary may make an election to have the remainder of the balance
of such Grandfathered Account distributable to him or her distributed in a single sum. In the
event a Participant or beneficiary makes an election under this Section 6.7, the remaining balance
of the Participant’s Grandfathered Account at the time of such election shall be subject to the
forfeiture provisions of Section 6.5. Elections pursuant to this Section 6.7 shall be made in the
form and manner prescribed by the Committee.

     6.8 Tax Withholding; FICA. The Company may defer making delivery of cash or Shares
under this Article VI until satisfactory arrangements have been made for the payment of any
withholding taxes attributable to the distribution or withdrawal, provided that no deferral is
permitted hereunder to the extent not in compliance with Code Section 409A. The Committee may
require that a Participant pay, or permit a Participant to elect, in such form and at such time as
the Committee may prescribe, to pay, all or a portion of any taxes arising in connection with the
distribution of Shares in settlement of a Participant’s Equity Subaccounts by electing to (i) have
the Company withhold whole Shares, or (ii) deliver other whole Shares previously owned by the
Participant, except that the number of shares withheld or surrendered shall be limited to that
number having a Fair Market Value not greater than the minimum applicable withholding tax rate for
federal (including FICA), state and local tax withholding obligations associated with the
transaction if and to the extent such restriction is then necessary in order that the Company not
recognize additional accounting expense in connection with the transaction. By electing to defer
compensation under the Plan, each Participant will have agreed to pay any FICA/HI or other taxes
that may be applicable to the amounts deferred or upon the vesting of Restricted Shares hereunder.

ARTICLE VII

EFFECT OF CERTAIN CHANGES

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In the event of any extraordinary dividend, share dividend, recapitalization, merger,
consolidation,
share split, warrant or rights issuance, or combination or exchange of such shares, or other
similar transactions, the number and type of outstanding Restricted Shares, Deferred Shares, and
Options, the price of Options for the Plan Year, the exercise price of outstanding Options, and
other affected Plan terms, shall be equitably adjusted by the Committee to reflect such event and
preserve the value of such Restricted Shares, Deferred Shares, and Options; and the Committee may
make such other adjustments to the terms of outstanding Restricted Shares, Deferred Shares, and
Options as it may deem equitable under the circumstances; provided, however, that any Options for
fractional Shares resulting from such adjustment shall be eliminated. A Participant’s right to an
adjustment to outstanding Restricted Shares, Deferred Shares and Options is subject to Section 5.3
of the 2003 Incentive Compensation Plan, and this Article VII shall not be deemed to limit or
expand the rights so conferred under the 2003 Incentive Compensation Plan.

ARTICLE VIII

GENERAL

     8.1 Unsecured Claims. The right of any Participant, beneficiary or estate to receive
payment of any unpaid balance in the Participant’s Account will be an unsecured claim against the
general assets of the Company.

     8.2 Anti-alienation and Assignment. During a Participant’s lifetime, any payment
under the Plan will be made only to the Participant. No Account balance, Restricted Shares,
Deferred Shares, sum or other interest under the Plan shall be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge, and any
attempt by a Participant or any beneficiary under the Plan to do so shall be void. No interest
under the Plan shall in any manner be liable for or subject to the debts, contracts, liabilities,
engagements or torts of a Participant or beneficiary entitled thereto. 2005-and-Later Accounts
shall also be subject to Section 9.6(a)(vii) of the 2003 Incentive Compensation Plan.

     8.3 No Rights to Continued Employment. Nothing in the Plan shall confer upon any
Participant the right to continue employment with the Company or to be entitled to any remuneration
or benefits not set forth in the Plan.

     8.4 Administration.

          (a) The Plan shall be administered by the Committee, except as otherwise specifically provided
in the Plan. The Committee shall have the full authority and discretion to make such
interpretations and constructions of the Plan as are necessary to administer the Plan in accordance
with, and subject to, the Plan’s provisions. Unless otherwise determined by the Committee, the
Administrator shall have delegated authority to take all ministerial actions the Committee is
authorized to take under the Plan, and any other actions the Committee is authorized to take with
respect to the Plan that do not result in more than an immaterial cost to the Company. This
delegated authority includes authority to determine the terms of participation in the Plan,
including the compensation eligible for deferral hereunder. In any case in which such person or
persons are acting on behalf of the Committee pursuant to such delegated authority, references in
the Plan to the Committee shall be deemed to include such person or persons.

-14-

 

          (b) All decisions, determinations and interpretations of the Committee (or its delegee) shall
be final and binding on all persons, including the Company, the Participant (or any person claiming
any rights under the Plan from or through any Participant) and any shareholder. No member of the
Committee (or its delegee) shall be liable for any action taken or determination made in good faith
with respect to the Plan or any grant hereunder.

          (c) All determinations of the Committee with respect to the terms and timing of elections by
Participants hereunder shall be implemented in a manner that reasonably assures that a Participant
making the election will not be deemed to be in constructive receipt of the compensation or have
the economic benefit of the compensation such that federal income taxation of such compensation
would be triggered prior to the end of the applicable Deferral Period, and to ensure that no
Participant is subject to taxation (including penalties) under Code Section 409A.

     8.5 Amendment and Termination of the Plan. The Board at any time and from time to
time may suspend, terminate, modify or amend the Plan; provided, however, that the Plan may not be
suspended, terminated, modified, or amended for a period of twenty-four months following a Change
of Control, unless approved by Participants whose Accounts represent not less than 50% of the
aggregate value of all Accounts under the Plan. The Committee may act on behalf of the Board under
this Section 8.5 to the extent the Committee is acting within the scope of its authority under any
Committee chartering document or other delegation of authority by the Board. Except as provided in
Article VII hereof, no suspension, termination, modification or amendment of the Plan may
materially and adversely affect any amount, Restricted Shares, Deferred Shares, or Options
previously credited to a Participant, unless the written consent of the Participant is obtained. No
amendment shall be adopted or effective to cause a Participant to be subject to taxation (including
penalties) under Code Section 409A.

     8.6 Governing Law. The Plan and the rights of all persons claiming hereunder shall be
construed and determined in accordance with the Delaware General Corporation Law and, in other
respects, the laws of the State of New York without giving effect to the choice of law principles
thereof, except to the extent that any such law is preempted by federal law.

     8.7 Implementing Plan in Foreign Jurisdictions. The Committee is authorized to amend
or vary the terms of the Plan in implementing deferrals in foreign jurisdictions in which eligible
Employees are employed, in order to conform with local laws and customs, and to permit
participation by such Employees on terms deemed by the Committee to be reasonably comparable to the
terms of participation of U.S. resident Employees and consistent with the purposes of the Plan.
Unless otherwise determined by the Committee in advance of the deadline for an election to
participate by a non-U.S. resident, restrictions required to comply with Code Section 409A shall
apply to any such non-U.S. resident.

     8.8 Terms of Deferrals Prior to 2003. The terms of participation and deferrals prior
to 2003 are governed by the terms of the Plan, and terms set thereunder by the Committee, in effect
prior to the amendment and restatement at January 1, 2003, except that revised definitions under
Article I and the discretion of the Committee with respect to existing Accounts, as provided in the
amended and restated Plan, shall apply to Account balances and awards resulting from deferrals
prior to 2003.

-15-

 

     8.9 Certain Restrictions to Promote Compliance with Code Section 409A. The provisions
of Section 9.6 of the 2003 Incentive Compensation Plan shall be further restrictions under this
Plan. For this purpose, deferrals of compensation hereunder, other than Options and Grandfathered
Accounts, constitute 409A Awards for purposes of the 2003 Incentive Compensation Plan.
Distributions relating to each Plan Year, distributions in respect of a Plan year resulting from
annual incentives, forfeitable Restricted Stock, and non-forfeitable Restricted Stock each shall
constitute a separate payment for purposes of Code Section 409A; distributions relating to a Plan
Year in the form of installments shall constitute a single payment with respect to such Plan Year
for purposes of Code Section 409A.

-16-exv10w5

Exhibit 10.5

 

JEFFERIES GROUP, INC.

1999 Directors’ Stock Compensation Plan 

As Amended and Restated January 1, 2009

     1. PURPOSE. The purpose of this 1999 Directors’ Stock Compensation Plan (the “Plan”) is to
advance the interests of the Company and its stockholders by providing a means to attract, retain
and compensate non-employee directors and to enable such persons to increase their proprietary
interest in the Company. In furtherance of this purpose, the Plan provides for periodic grants of
options, Deferred Shares or Restricted Stock (as defined below), the opportunity for a director to
elect deferred and alternative forms of compensation in lieu of cash fees for service as a
director, including Options, Deferred Shares, and deferred cash, and the opportunity to defer
delivery of shares deliverable upon exercise of options or in settlement of other awards.

     2. DEFINITIONS. In addition to the terms defined in Section 1, the following terms shall be
defined as set forth below:

     2.1 “Administrator” means the administrative committee specified in Section 3(b) to whom the
Board has delegated the authority to take action under the Plan.

     2.2 “Beneficiary” means the person(s) or trust(s) which have been designated by a Participant
in his or her most recent written beneficiary designation filed with the Administrator to receive
the benefits specified under the Plan upon such Participant’s death. If, upon a Participant’s
death, there is no designated Beneficiary or surviving designated Beneficiary, then the term
Beneficiary means the person(s) or trust(s) entitled by will or the laws of descent and
distribution to receive such benefits.

     2.3 “Board” means the Board of Directors of the Company.

     2.4 “Code” means the Internal Revenue Code of 1986, as amended, including regulations
thereunder and successor provisions and regulations thereto.

     2.5 “Company” means Jefferies Group, Inc., a Delaware corporation, formerly named JEF Holding
Company, Inc., the common stock of which was distributed in the Spin-off.

     2.6 “DDCP” means Predecessor’s Non-Employee Directors’ Deferred Compensation Plan.

     2.7 “Deferral Account” means the account established and maintained by the Company for
Deferred Shares credited under Sections 7 and 8 and deferred cash credited under Section 8. A
Deferral Account shall include one or more subaccounts, including a Deferred Share Account for
forfeitable Deferred Shares under Section 7, a Deferred Share Account for Deferred Shares that have
become nonforfeitable under Section 7 or that are at all times nonforfeitable under Section 8(c), a
Deferred Share Account for Deferred Shares resulting from Option exercises under Section 9(a), and
a Deferred Cash Account described in Section 8(d). The Deferral Account also includes two
subaccounts for purposes of complying with Code Section 409A: The “Grandfathered Account” is that
portion of the Deferral Account (and subaccouns) resulting from deferrals of compensation that was
vested before 2005, except for any designated deferred compensation which the Committee has caused
to be not grandfathered for purposes of Code Section 409A. The “2005-and-Later Account” is the
remaining portion of the Deferral Account (and subaccounts) which is not “grandfathered” for
purposes of Code Section 409A. The Deferral Account and subaccounts, and Deferred Shares and
deferred cash credited thereto, will be maintained solely as bookkeeping entries by the Company to
evidence unfunded obligations of the Company.

     2.8 “Deferred Share” means a credit to a Participant’s Deferred Share Account under Sections 7
or 8 which represents the right to receive one Share upon settlement of such Account. Deferred
Shares granted under Section 7 may be designated as “Restricted Stock Units.”

     2.9 “Disability” means a Participant’s termination of service as a director of the Company due
to a physical or
mental incapacity of long duration which renders the Participant unable to perform the duties of a
director of the

 

 

Company.

     2.10 “Eligible Holder” means each person who, at the Spin-off Date, holds an option or
deferred share granted by Predecessor under a plan or program for Predecessor’s non-employee
directors with respect to which the Company has agreed to grant, or offer to grant, an Option or
Deferred Share award in substitution for such Predecessor award or to offset any lost value due to
the early termination of such option or deferred share.

     2.11 “Exchange Act” means the Securities Exchange Act of 1934, as amended, including rules
thereunder and successor provisions and rules thereto.

     2.12 “Fair Market Value,” means, with respect to Shares, the fair market value of such Shares
determined by such methods or procedures as shall be established from time to time by the Board.
Unless otherwise determined by the Board, the Fair Market Value of a Share as of any given date
means the average of the closing sales prices of a Share as reported in the table entitled “New
York Stock Exchange Composite Transactions” contained in The Wall Street Journal (or an equivalent
successor table) for the day as of which the valuation is to be made or, if that day is not a
trading day, the nearest preceding trading day, and the four trading days immediately prior
thereto; PROVIDED, HOWEVER, that Fair Market Value at the date of the Spin-off shall be determined
based on the first five trading days for which a closing price is reported following the Spin-off.

     2.13 “Option” means the right, granted to a Participant under Section 6 or 8, to purchase a
specified number of Shares at the specified exercise price for a specified period of time under the
Plan. All Options will be non-qualified stock options.

     2.14 “Option Valuation Methodology” means the method for determining the number of shares to
be subject to Options, and the exercise price thereof, granted in payment of Retainer Fees under
Section 8(b).

     2.15 “Other Director Compensation” means fees payable to a director in his or her capacity as
such, other than Retainer Fees, for attending meetings and other service on the Board and Board
committees.

     2.16 “Participant” means any person who has been granted an Option which remains outstanding,
has Deferred Shares or cash credited to his or her Deferral Account, or has elected to be granted
Options in payment of Retainer Fees or to defer payment of Retainer Fees and Other Director
Compensation in the form of Deferred Shares or cash under the Plan.

     2.17 “Plan Year” means, with respect to a Participant, the period commencing at the time of
election of the director at an annual meeting of stockholders (or the election of a class of
directors if the Company then has a classified Board of Directors), or the director’s initial
appointment to the Board if not at an annual meeting of stockholders, and continuing until the
close of business of the day preceding the next annual meeting of stockholders; PROVIDED, HOWEVER,
that the initial Plan Year shall be deemed to be a continuation of the plan year in effect under
the DDCP at the Spin-Off Date. “409A Plan Year” means the calendar year.

     2.18 “Predecessor” means Jefferies Group, Inc., a Delaware corporation, as it existed
immediately prior to the Spin-off.

     2.19 “Restricted Stock” means Shares granted under Section 7, subject to a risk of forfeiture
and restrictions on transfer for a specified period.

     2.20 “Retainer Fees” means annual retainer fees payable to a director in his or her capacity
as such for service on the Board and service as chairman of any Board committee.

     2.21 “Retirement” means a Participant’s termination of service as a director of the Company at
or after age 65.

     2.22 “Shares” means shares of common stock, par value $.01 per share, of the Company and such
other securities as may be substituted or resubstituted for Shares pursuant to Section 5.3.

 

 

     2.23 “Spin-off” means the distribution of the Common Stock of the Company by the Predecessor
to the Predecessor’s stockholders, which was approved by the Predecessor’s stockholders on April
20, 1999.

     2.24 “Spin-off Date” means the record date for Predecessor’s distribution of Shares in the
Spin- off.

     2.25 “Valuation Date” shall mean the close of business on the last business day of each
calendar quarter and, in the case of any final distribution from a Participant’s Deferred Cash
Account, the day preceding such distribution.

     3. ADMINISTRATION.

     3.1 AUTHORITY. Both the Board and the Administrator (subject to the ability of the Board to
restrict the Administrator) shall administer the Plan in accordance with its terms, and shall have
all powers necessary to accomplish such purpose, including the power and authority to construe and
interpret the Plan, to define the terms used herein, to prescribe, amend and rescind rules and
regulations, agreements, forms, and notices relating to the administration of the Plan, and to make
all other determinations necessary or advisable for the administration of the Plan. The
Administrator may perform any function of the Board under the Plan, except for grants of awards
under Sections 6 and 7, adoption of material amendments to the Plan under Section 11.5, or other
functions from time to time specifically reserved by the Board to itself. Any actions of the Board
or the Administrator with respect to the Plan shall be final, conclusive, and binding upon all
persons interested in the Plan, except that any action of the Administrator will not be binding on
the Board. The Board and Administrator may each appoint agents and delegate thereto powers and
duties under the Plan, except as otherwise limited by the Plan.

     3.2 ADMINISTRATOR. The Administrator shall be the Director of Human Resources and the
Secretary or such other committee as may designated by the Board. In any case in which a director
is a member of the Administrator, such director shall be not act on or decide any matter relating
solely to himself or herself or any of his or her rights or benefits under the Plan. No bond or
other security need be required of the Administrator or any member thereof in any jurisdiction.

     3.3 LIMITATION OF LIABILITY. Each member of the Board and the Administrator shall be entitled
to, in good faith, rely or act upon any report or other information furnished to him or her by any
officer or other employee of the Company or any subsidiary, the Company’s independent certified
public accountants, or any executive compensation consultant, legal counsel, or other professional
retained by the Company to assist in the administration of the Plan. No member of the Board or the
Administrator, nor any person to whom ministerial duties under the Plan have been delegated, shall
be personally liable for any action, determination, or interpretation taken or made in good faith
with respect to the Plan, and any such person shall, to the extent permitted by law, be fully
indemnified and protected by the Company with respect to any such action, determination, or
interpretation.

     4. SHARES AVAILABLE UNDER THE PLAN. The total number of Shares reserved and available for
delivery under the Plan is 2,000,000, subject to adjustment as provided in Section 11.2 (this
reflects stock splits from the effective date of the Plan through January 1, 2009). Shares that
may be delivered under the Plan may consist, in whole or in part, of authorized and unissued
Shares, treasury Shares or Shares acquired in the market for the account of a Participant. For
purposes of the Plan, shares that may be purchased upon exercise of an Option or distributed in
settlement of Deferred Shares will not be considered to be available after such Option has been
granted or Deferred Share credited, except for purposes of delivery in connection with such Option
or Deferred Share; provided, however, that, if an Option expires for any reason without having been
exercised in full or Deferred Shares or shares of Restricted Stock are forfeited or cancelled, the
shares subject to the unexercised portion of such Option or to the forfeited or cancelled Deferred
Shares or Restricted Stock will again be available for delivery under the Plan.

     5. ELIGIBILITY. Each non-employee director of the Company who is paid fees for service on
the Board or a Board committee, and each Eligible Holder, may participate in the Plan, subject to
the terms hereof. No person other than those specified in this Section 5 will be eligible to
participate in the Plan. The Administrator will notify each person of his or her eligibility to
participate in the Plan on an elective basis not later than 15 days (or such other period as may be
determined by the Administrator) prior to any deadline for filing an election form.

 

 

     6. INITIAL AND ANNUAL GRANTS OF OPTIONS. Options shall be granted to non-employee directors
in accordance with policies established from time to time by the Board specifying the classes of
directors to be granted Options, the number of Shares to be subject to each Option, and the time or
times at which such Options shall be granted; provided, however, that the maximum number of Shares
that may be subject to Options granted to a director in a given year under this Section 6 (i.e.,
without a corresponding reduction in fees) shall be 40,000, subject to adjustment as provided in
Section 11.2. Options granted to an Eligible Holder under Section 9.6 shall not be counted against
the limitation set forth in the preceding sentence.

     6.1 GRANT POLICY — OPTION GRANTS. The policy with respect to grants of Options under this
Section 6 shall be established, modified and/or revoked from time to time by the Board.

     6.2 TERMS OF OPTIONS GRANTED UNDER SECTION 6. Each Option granted under this Section 6 shall
be subject to the following terms and conditions:

     (a) EXERCISE PRICE. The exercise price per Share purchasable under an Option will be
equal to 100% of the Fair Market Value of a Share on the date of grant of the Option.

     (b) OPTION TERM. Each Option shall expire at the end of a term fixed by the Board, not
longer than ten years after the date of grant, or at such earlier date as the Option may no
longer be exercised and cannot, by its terms, thereafter become exercisable. Options
granted under the initial policy set out in Section 6.1 shall expire at the earlier of (i) a
fixed term of five years after the date of grant, (ii) 12 months after the Participant
ceases to serve as a Director of the Company due to death, Disability, or Retirement, or
(iii) 60 days after the Participant ceases to serve as a Director of the Company for any
reason other than death, Disability, or Retirement.

     (c) VESTING AND EXERCISABILITY. The Board may establish terms regarding the times at
which Options shall become vested and exercisable. Options granted under the initial policy
set out in Section 6.1 and not previously forfeited shall vest and become exercisable by a
Participant on the date three months after the date of grant, and, unless otherwise provided
in the Participant’s Option agreement, any portion of a Participant’s Option that has not
vested and become exercisable at the time of termination of the Participant’s service as a
director shall be forfeited.

     (d) PAYMENT. The exercise price of an Option shall be paid to the Company either in
cash or by the surrender of Shares, or any combination thereof, or in such other form or
manner as may be established by the Administrator; PROVIDED, HOWEVER, that, unless otherwise
determined by the Administrator, shares shall not be surrendered in payment of the exercise
price if such surrender would result in additional accounting expense to the Company.

     7. GRANTS OF DEFERRED SHARES AND RESTRICTED STOCK. Deferred Shares and/or Restricted Stock
shall be granted to non-employee directors in accordance with policies established from time to
time by the Board specifying the classes of directors to be granted such awards, the number of
Deferred Shares or shares of Restricted Stock to be granted, and the time or times at which such
awards shall be granted; provided, however, that the maximum number of Deferred Shares and shares
of Restricted Stock that may be granted to a director in a given year under this Section 7, without
a corresponding reduction in fees, shall be 50% of the number of Deferred Shares that could be
granted under Section 8.3 in that year with such a corresponding reduction in fees. A grant of a
specified dollar amount of Deferred Shares or Restricted Stock shall be deemed a reduction in fees
for purposes of this Section 7. Deferred Shares and Restricted Stock granted to an Eligible Holder
under Section 9.6 shall not be counted against the limitation set forth in the preceding sentence.

     7.1 GRANT POLICY. The policy with respect to grants of awards under this Section 7 shall be
established, modified and/or revoked from time to time by the Board.

 

 

     7.2 TERMS OF DEFERRED SHARES AND RESTRICTED STOCK GRANTED UNDER SECTION 7.
Deferred Shares granted under this Section 7 shall be subject to the terms and conditions of
Deferred Shares specified in Sections 9.2, 9.3, and 9.4 (including the requirement that any
Deferred Shares granted or vested in 2005 or thereafter comply with Code Section 409A), unless
otherwise determined by the Board. Deferred Shares and Restricted Stock granted under this Section
7 shall also be subject to the following additional terms and conditions:

     (a) VESTING AND FORFEITURE. The Board may establish terms regarding the times at which
Deferred Shares and Restricted Stock shall become vested and non-forfeitable. Unless
otherwise determined by the Board, an award granted under this Section 7 shall be subject to
the following terms: Such award, if not previously forfeited, shall become vested and
non-forfeitable as to one-third of the number of Deferred Shares or shares of Restricted
Stock at the close of business on the day preceding each of the three annual meetings of
stockholders following the date of grant of such award, rounded to the nearest number of
whole shares; provided, however, that if such award was not previously vested or forfeited,
it shall vest and become non-forfeitable on an accelerated basis upon the termination of the
Participant’s service as a director due to death, Disability or Retirement (settlement shall
remain subject to Section 9.4, however). Unless otherwise determined by the Board, an award
of Deferred Shares or Restricted Stock not previously vested or forfeited will cease to vest
and will be forfeited upon the termination of the Participant’s service as a director for
any reason other than death, Disability or Retirement.

     (b) DEFERRED SHARES CREDITED AS A RESULT OF DIVIDEND EQUIVALENTS. Unless otherwise
determined by the Board, Deferred Shares credited as a result of dividend equivalents under
Section 9.2 shall be subject to the same terms, including risk of forfeiture, as the
Deferred Shares with respect to which the dividend equivalents were credited.

     (c) DIVIDENDS ON RESTRICTED STOCK. Unless otherwise determined by the Board, dividends
on Restricted Stock declared and paid prior to the lapse of the risk of forfeiture on such
Restricted Stock shall be automatically reinvested in additional shares of Restricted Stock,
which shall be subject to the same terms, including risk of forfeiture, as the Restricted
Stock on which the dividend was paid.

     (d) AWARDS NONTRANSFERABLE. Deferred Shares and Restricted Stock shall be
nontransferable by the Participant at any time that the award remains subject to a risk of
forfeiture.

     (e) CONSIDERATION FOR RESTRICTED STOCK. If shares to be granted as Restricted Stock
are not treasury shares, the Board or Administrator may impose additional conditions upon
the grant of the Restricted Stock, possibly including a requirement that cash consideration
be paid by the Participant, if and to the extent necessary to ensure that the Company will
receive lawful consideration equal to the aggregate par value of the Shares being granted as
Restricted Stock.

     8. OPTIONS GRANTED IN PAYMENT OF FEES AND DEFERRAL OF FEES IN DEFERRED SHARES AND DEFERRED
CASH. Each director of the Company who is eligible under Section 5 may elect, in accordance with
Section 8.1, to be paid Retainer Fees in the form of Options under Section 8.2 or to defer receipt
of Retainer Fees and Other Director Compensation in the form of Deferred Shares under Section 8.3
or deferred cash under Section 8.4.

     8.1 ELECTIONS. A director shall elect to participate and the terms of such participation by
filing an election with the Company prior to the beginning of a 409A Plan Year or, in the case of a
director commencing service with the Company, prior to his or her commencement of service, or at
such other date compliant with Exhibit A to the 2003 Incentive Compensation Plan and/or compliant
with Section 9.6(a)(ii) of the 2003 Incentive Compensation Plan as may be specified by the
Administrator, provided that any date so specified shall ensure effective deferral of taxation
(including under Code Section 409A) and otherwise comply with applicable laws.

     (a) EFFECT AND IRREVOCABILITY OF ELECTIONS. Elections shall be deemed continuing, and
therefore applicable to Plan Years or 409A Plan Years after the initial Plan Year or 409A
Plan Year

 

 

covered by the election, until the election is modified or superseded by the
Participant. Elections to participate (including the amount of any deferrals), other than
those elections subject to Section 9.4, shall become irrevocable with respect to a given
Plan Year or 409A Plan Year at the commencement of the Plan Year/409A Plan Year to which an
election relates, unless the Administrator specifies a different time (which in no event
may be later than the permitted deadline for filing an election to defer). Elections
relating to the time of settlement of a Deferral Account shall become irrevocable at the
time specified in Section 9.4. Elections may be modified or revoked by filing a new
election prior to the time the election to be modified or revoked has become irrevocable.
The latest election filed with the Administrator shall be deemed to revoke all prior
inconsistent elections that remain revocable at the time of filing of the latest election.

     (b) MATTERS TO BE ELECTED. The Administrator will provide a form of election which
will permit a director to make appropriate elections with respect to all relevant matters
under this Section 8.

     (c) TIME OF FILING ELECTIONS. An election must be received by the Administrator prior
to the applicable deferral election deadline. Under no circumstances may a Participant
defer compensation to which the Participant has attained, at the time of deferral, a legally
enforceable right to current receipt of such compensation.

     8.2 OPTIONS GRANTED IN PAYMENT OF RETAINER FEES. A Participant who has validly elected to be
paid a specified amount of Retainer Fees in the form of Options shall be granted, at the close of
business on the day the Participant’s Plan Year commences, an Option to purchase the number of
whole Shares determined in accordance with the Option Valuation Methodology specified by the Board.
Each Option granted under this Section 8.2 shall be subject to the following terms and conditions:

     (a) OPTION VALUATION METHODOLOGY. The Board shall determine the Option Valuation
Methodology which will be used to determine the number of Options granted and the Option
exercise price. The Option Valuation Methodology may be based upon a valuation of the
Option (for example, using the Black-Scholes option valuation model), a discounting of the
aggregate exercise price of the Options by the amount of Retainer Fees to be paid in the
form of Options, or such other methodology as may be deemed reasonable for purposes of this
Section 8.2.

     (b) OPTION TERM. Each Option will expire ten years after the date of grant; PROVIDED,
HOWEVER, that, unless otherwise determined by the Board, any portion of an Option that is
not yet exercisable at the date a Participant ceases to serve as a director for any reason
will expire at the date such service ceases; and, PROVIDED FURTHER, that, unless otherwise
determined by the Board, any portion of an Option that is not yet exercisable at the date a
Participant ceases to serve as chair or a member of a Board committee will, to the extent
specified in Section 8.2(e), expire at the date such service ceases.

     (c) VESTING AND EXERCISABILITY. Each Option will vest and become exercisable as to 25%
of the underlying shares on the June 30, September 30, December 31, and March 31 following
the date of grant; PROVIDED, HOWEVER, that, in the case of a Plan Year which begins on or
after June 30 and before September 30, the vesting percentage shall be 33%, and in the case
of a Plan Year which begins on or after September 30 and before December 31, the vesting
percentage shall be 50%; and PROVIDED FURTHER, that an Option will become fully vested and
exercisable at the close of business on the last day of the Plan Year in which it was
granted. The number of Shares as to which the Option becomes vested and exercisable will be
rounded to the nearest whole number. The foregoing notwithstanding, upon termination of the
Participant’s service as a director due to death, Disability, or Retirement, that portion of
the Option which would become vested and exercisable on the last day of the calendar quarter
in which such death, Disability, or Retirement occurred will become immediately vested and
exercisable. Unless otherwise determined by the Board, an Option will cease to further vest
and become exercisable upon the termination of the Participant’s service as a director for
any reason, and the portion that has not vested and become exercisable at the time of such
termination shall be forfeited.

     (d) EXERCISE PRICE. The exercise price per Share purchasable under an Option will be

 

 

determined in accordance with the Option Valuation Methodology. The exercise price of an
Option shall be paid to the Company either in cash or by the surrender of Shares, or any
combination thereof, or in such other form or manner as may be established by the
Administrator; PROVIDED, HOWEVER, that, unless otherwise determined by the Administrator,
shares shall not be surrendered in payment of the exercise price if such surrender would
result in additional accounting expense to the Company.

     (e) CHANGES IN FEES; CHANGES IN SERVICE AS A COMMITTEE CHAIR. If the amount of
Retainer Fees is increased during a Plan Year, or if a Director is appointed chair of a
Board committee such that an additional Retainer Fee is payable during a Plan Year, such
increased or additional fees will not be paid in the form of Options. Unless otherwise
determined by the Board, if a Director has been granted an Option in respect of a Plan Year
in payment of Retainer Fees which included committee-related fees for service as chair or a
member of any Board committee, and during such Plan Year he or she ceases such service but
remains on the Board, the Option will expire in part at the time such service ceases, to the
extent of that portion of the Option which is not yet exercisable multiplied by a fraction
the numerator of which is the amount of committee-related fees included in such Retainer
Fees and the denominator of which is the total amount of such Retainer Fees.

     (f) SERVICE DURING PART OF A QUARTER. If a Participant ceases to serve as a director
or on committee at a date other than a vesting date for the Option and if the Board does not
exercise its discretion to permit vesting of the Participant’s Option in consideration for
the Participant’s service in that final quarterly period, the Participant shall be entitled
to payment in cash for his or her service in that final quarterly period if and to the
extent then provided in the Company’s regular non-employee director compensation policies.

     8.3 DEFERRAL OF RETAINER FEES AND OTHER DIRECTOR COMPENSATION IN THE FORM OF DEFERRED SHARES.
If a Participant has validly elected to defer receipt of a specified amount of Retainer Fees or
Other Director Compensation in the form of Deferred Shares, a number of Deferred Shares shall be
credited to the Participant’s Deferred Share Account, as of the date such Retainer Fees or Other
Director Compensation otherwise would have been payable to the Participant but for such election to
defer, equal to (i) such amount otherwise payable divided by (ii) the Fair Market Value of a Share
at that date. Deferred Shares credited under this Section 8.3 shall be subject to the terms and
conditions of Deferred Shares specified in Sections 9.2, 9.3, and 9.4. The right and interest of
each Participant in Deferred Shares credited to the Participant’s Deferred Share Account under this
Section 8.3 at all times will be nonforfeitable.

     8.4 DEFERRAL OF RETAINER FEES AND OTHER DIRECTOR COMPENSATION IN THE FORM OF DEFERRED CASH.
If a Participant has validly elected to defer receipt of a specified amount of Retainer Fees or
Other Director Compensation in the form of deferred cash, an amount equal to such specified amount
shall be credited to the Participant’s Deferred Cash Account as of the date such Retainer Fees or
Other Director Compensation otherwise would have been payable to the Participant but for such
election to defer. As of the close of business on each Valuation Date, interest shall be credited
to such Deferred Cash Account in an amount equal to the average daily balance in such Deferred Cash
Account since the last Valuation Date multiplied by the interest rate as specified by the Board and
applicable to the period since the last Valuation Date. The initial policy with respect to the
interest rate under this Section 8.4, effective as of the Spin-off Date and continuing until
modified or revoked by the Board, shall be to credit interest at the prime interest rate of a
single large bank as published in The Wall Street Journal and effective on the date of the latest
annual meeting of stockholders of the Company or the date on which Predecessor’s stockholders
approved the Plan. The right and interest of each Participant relating to his or her Deferred Cash
Account at all times will be nonforfeitable.

     9. OTHER DEFERRALS AND TERMS OF DEFERRAL ACCOUNTS.

     9.1 [Reserved.]

     9.2 DIVIDEND EQUIVALENTS ON DEFERRED SHARES. Dividend equivalents will be credited on
Deferred Shares credited to a Participant’s Deferred Share Account as follows, unless the
Administrator determines

 

 

to credit dividend equivalents in an alternative form deemed to be
equitable by the Administrator

     (a) CASH AND NON-SHARE DIVIDENDS. If the Company declares and pays a dividend on
Shares in the form of cash or property other than Shares, then a number of additional
Deferred Shares shall be credited to a Participant’s Deferred Share Account as of the
payment date for such dividend equal to (i) the number of Deferred Shares credited to the
Account as of the record date for such dividend, multiplied by (ii)
the amount of cash plus the Fair Market Value of any property other than shares actually
paid as a dividend on each share at such payment date, divided by (iii) the Fair Market
Value of a Share at such payment date.

     (b) SHARE DIVIDENDS AND SPLITS. If the Company declares and pays a dividend on Shares
in the form of additional Shares, or there occurs a forward split of Share, then a number of
additional Deferred Shares shall be credited to the Participant’s Deferred Share Account as
of the payment date for such dividend or forward Share split equal to (i) the number of
Deferred Shares credited to the Account as of the record date for such dividend or split
multiplied by (ii) the number of additional Shares actually paid as a dividend or issued in
such split in respect of each Share.

     9.3 REALLOCATION OF ACCOUNTS. A Participant shall have no right to have amounts credited as
cash to the Participant’s Deferred Cash Account reallocated or switched to his or her Deferred
Share Account or amounts credited to the Participant’s Deferred Share Account reallocated or
switched to his or her Deferred Cash Account, unless otherwise determined by the Board.

     9.4 ELECTIONS AS TO SETTLEMENT. Each Participant, while still a director of the Company,
shall file an election with the Administrator specifying the time or times at which the
Participant’s Deferral Account will be settled, following the Participant’s termination of service
as a director of the Company, and whether distribution will be in a single lump sum or in a number
of annual installments not exceeding ten; PROVIDED, HOWEVER, that, if no valid election has been
filed as to the time of settlement of a Participant’s Deferral Account or any portion thereof, such
Deferral Account or portion thereof shall be distributed in a single lump sum on the first business
day of the year following the year in which the Participant ceases to serve as a director. If
installments are elected, such installments must be annual installments commencing not later than
the first year following the year in which the Participant ceases to serve as a director (on such
annual installment date as may be specified by the Administrator) and extending over a period not
to exceed ten years.

     (a) MATTERS COVERED BY ELECTION. Subject to the terms of the Plan, the Administrator
shall determine whether all deferrals under the Plan must be subject to a single election as
to the time or times of settlement, or whether settlement elections may relate to a
specified sub-account (I.E., the Deferred Share Account or the Deferred Cash Account) and/or
a specified Plan Year or 409A Plan Year. If the Administrator permits elections to relate
to a specified Plan Year or 409A Plan Year, such election shall apply to the amounts
originally credited to the specified subaccount in respect of such Plan Year or 409A Plan
Year and to any additional amounts credited as dividend equivalents or interest in respect
of such originally credited amounts and previously credited additional amounts.

     (b) MODIFYING ELECTIONS. A Participant may modify a prior election as to the time at
which a Participant’s Deferral Account (including a specified subaccount) will be settled at
any time prior to the time the Participant ceases to serve as a director of the Company,
subject to such requirements as may be specified by the Administrator. Such modification
shall be made by filing a new election with the Administrator. The foregoing
notwithstanding, elections under this Section 9.4 shall not be permitted, including
elections which would have the effect of advancing the time of settlement of any portion of
the Deferral Account, if permitting such an election would result in constructive receipt by
the Participant of compensation in respect of the Participant’s Deferral Account prior to
the actual settlement of such Deferral Account.

     (c) COMPLIANCE RULES FOR CODE SECTION 409A. 2005 and Later Accounts, including any
award granted under Section 7 and credited thereto but only to the extent that such award
constitutes a deferral of compensation under Code Section 409A, shall be subject to the
terms of Section 9.6 of the 2003

 

 

Incentive Compensation Plan (treating such a 2005-and-Later Account as a “409A Award”), including the following:

	 	•	 	If any distribution is triggered by a termination of service as a director,
only a separation from service within the meaning of Treasury Regulation § 1.409A-1(h)
shall qualify. For this purpose, continued service as an employee as described in
Section 11.8 shall be taken into account in determining whether the Participant has had
a separation from service.
	 
	 	•	 	Settlement may only occur in accordance with Section 9.6(a)(iii) of the 2003
Incentive Compensation
Plan, and the six-month delay rule of Section 9.6(a)(iii)(B) will apply in accordance
with its terms;
	 
	 	•	 	Acceleration of settlement will be limited as specified in Section 9.6(a)(iv)
of the 2003 Incentive Compensation Plan;
	 
	 	•	 	Each vesting tranche of Deferred Shares subject to a substantial risk of
forfeiture (and any pro rata portion that would vest upon a termination or other event
as of December 31 of a given year, and the remaining portion that would not so vest)
will be deemed a separate payment for purposes of Code Section 409A.
	 
	 	•	 	The provisions of Section 9.6 of the 2003 Incentive Compensation Plan shall be
further restrictions under this Plan applicable to any right hereunder which
constitutes a deferral of compensation under Code Section 409A (excluding a
grandfathered deferral).
	 
	 	•	 	Any restriction imposed on Deferred Shares solely to ensure compliance with
Section 409A shall not be applied to a Deferred Share that is not a deferral of
compensation under Code Section 409A except to the extent necessary to preserve the
status of such Deferred Share as not a deferral under Code Section 409A.
	 
	 	•	 	If any mandatory term required for a 2005-and-Later Account to avoid tax
penalties under Section 409A is not otherwise explicitly provided under this Plan or
other applicable documents, such term is hereby incorporated by reference and fully
applicable as though set forth at length herein.

     9.5 ELECTION FORMS. Elections under the Plan shall be made in writing on such form or forms
as may be specified from time to time by the Administrator.

     9.6 TREATMENT OF PREDECESSOR AWARDS AND DEFERRALS. Options may be granted under the Plan to
Eligible Holders in substitution for options granted by Predecessor, including under the DDCP. The
terms of such substitute Options shall be adjusted to the extent authorized under the applicable
Predecessor plan or agreement, and otherwise as determined to be equitable by the Board. In
addition, the Board may grant Options to Eligible Holders intended to offset any value lost by the
Eligible Holder due to the early termination of a Predecessor option in connection with the
Spin-off. In such case, the Board will determine such value lost and the replacement value of the
Options granted under the Plan in accordance with Section 8.2(a). Deferred Shares and Deferred
Cash shall be credited to an Eligible Holder in place of like credits under the DDCP, subject to
adjustment to the terms of the Deferred Shares to the extent authorized under the DDCP and
otherwise as determined to be equitable by the Board. The interest rate applicable to amounts of
Deferred Cash so credited and deferrals of cash under Section 8.4 prior to the Company’s first
annual meeting of stockholders shall be based on the applicable interest rate that would apply
under the DDCP assuming the meeting of Predecessor’s stockholders at which the Plan was approved
had been an annual meeting.

     9.7 STATEMENTS. The Administrator will furnish statements to each Participant reflecting the
amount credited to a Participant’s Deferral Account, transactions therein, and other related
information no less frequently than once each calendar year.

     9.8 FRACTIONAL SHARES. The amount of Deferred Shares credited to a Deferred Share Account
shall include fractional shares calculated to at least three decimal places.

     10. SETTLEMENT OF DEFERRAL ACCOUNTS. The Company will settle a Participant’s Deferral
Account by making one or more distributions to the Participant (or his or her Beneficiary,
following Participant’s death) at the time or times, in a lump sum or installments, as specified in
the Participant’s election(s) filed in accordance with Section 9.4; PROVIDED, HOWEVER, that a
Deferral Account will be settled at times earlier than

 

 

those specified in such election in accordance with Sections 10.2 and 10.3.

     10.1 FORM OF DISTRIBUTION. Distributions in respect of a Participant’s Deferred Share Account
shall be made only in Shares, together with cash in lieu of any fractional share remaining at a
time that less than one whole Deferred Share is credited to such Deferred Share Account. Shares
may be delivered in certificate form to a Participant (or his or her Beneficiary) or to a nominee
for the account of the Participant (or his or her Beneficiary), or in such other manner as the
Administrator may determine. Distributions in respect of a Participant’s Deferred Cash Account
shall be made only in cash.

     10.2 DEATH. If a Participant ceases to serve as a director due to death or dies prior to
distribution of all amounts from his or her Deferral Account, the Company shall make a single
lump-sum distribution to the Participant’s Beneficiary. Any such distribution shall be made as
soon as practicable following notification to the Company of the Participant’s death, provided
that, in the case of a 2005-and-Later Account, such distribution shall be made on the
30th day after death.

     10.3 FINANCIAL EMERGENCY AND OTHER PAYMENTS. Other provisions of the Plan notwithstanding,
if, upon the written application of a Participant, the Board determines that the Participant has a
financial emergency of such a substantial nature and beyond the Participant’s control that payment
of amounts previously deferred under the Plan is warranted, the Board may direct the payment to the
Participant of all or a portion of the balance of a Deferral Account and the time and manner of
such payment; provided, however, that payments from the 2005-and-Later Account shall be made only
in compliance with Section 9.6(a)(iv)(A) and (v)(D) of the 2003 Incentive Compensation Plan.

     11. GENERAL PROVISIONS.

     11.1 LIMITS ON TRANSFERABILITY. Options, Deferred Shares, Restricted Stock and all other
rights under the Plan will not be transferable by a Participant except by will or the laws of
descent and distribution, or to a Beneficiary in the event of a Participant’s death, and will not
otherwise be subject to alienation, anticipation, encumbrance, garnishment, attachment, levy,
execution or other legal or equitable process, nor subject to the debts, contracts, liabilities or
engagements, or torts of any Participant or his or her Beneficiary. Any attempt to alienate, sell,
transfer, assign, pledge, garnish, attach or take any other action subject to legal or equitable
process or encumber or dispose of any interest in the Plan shall be void. The foregoing
notwithstanding:

	 	(i)	 	the Administrator may permit a Participant to transfer Options, Deferred
Shares, and related rights to one or more trusts, partnerships, or family members
during the lifetime of the Participant solely for estate planning purposes, but only if
and to the extent then consistent with the registration of any offer and sale of shares
related thereto on Form S-8, Form S-3, or such other registration form of the
Securities and Exchange Commission as may then be permitted to be filed with respect to
the Plan, and subject to clause (ii) below; and
	 
	 	(ii)	 	Any amount credited to the Participant’s 2005-and-Later Account(including any
award) shall be subject to the limitation on transferability specified in Section
9.6(a)(vii) of the 2003 Incentive Compensation Plan.

The Company may rely upon the beneficiary designation last filed in accordance with this Section
11.1.

     11.2 ADJUSTMENTS. In the event that any large, special and non-recurring dividend or other
distribution (whether in the form of cash, Shares, or other property), recapitalization, forward or
reverse split, reorganization, merger, consolidation, spin-off, combination, repurchase, share
exchange, liquidation, dissolution or other similar corporate transaction or event affects the
Shares such that an adjustment is determined by the Board to be appropriate in order to prevent
dilution or enlargement of a Participant’s rights under the Plan, then the Board shall, in such
manner as it may deem equitable, adjust any or all of (i) the number and kind of Shares reserved
and available for delivery under the Plan and to be subject to Options, Deferred Shares, and
Restricted Stock thereafter granted or credited, (ii) the number of Shares subject to Options
automatically granted under any policy under Section 6.1, the number of Deferred Shares and/or
Shares of Restricted Stock automatically granted under any policy

 

 

under Section 7.1, and the
maximum number of Shares that may be subject to Options granted to a director in a single year
under Section 6, (iii) the number and kind of Shares deliverable upon exercise of outstanding
Options, and the exercise price per share thereof (provided that no fractional shares will be
delivered upon exercise of any Option), (iv) the number and kind of Shares to be delivered upon
settlement of outstanding Deferred Shares (taking into account any Deferred Shares credited as
dividend equivalents under Section 9.2), and (v) the number and kind of shares outstanding as
Restricted Stock. Upon the occurrence of an event constituting an “equity restructuring” as
defined under Statement of Financial Accounting Standards No. 123R with respect to Shares, each
Participant shall have a legal right to the equitable adjustment to Options, Deferred Shares and
Restricted Stock (including Deferred Shares credited to his or her Deferral Account), with the
manner of such adjustment to be determined by the Board.

     11.3 RECEIPT AND RELEASE. Payments (in any form) to any Participant or Beneficiary in
accordance with the provisions of the Plan shall, to the extent thereof, be in full satisfaction of
all claims for the compensation deferred and relating to the Deferral Account to which the payments
relate against the Company, the Board, or the Administrator, and the Administrator may require such
Participant or Beneficiary, as a condition to such payments, to execute a receipt and release to
such effect. In the case of any payment under the Plan of less than all amounts then credited to a
Deferral Account in the form of Deferred Shares, the amounts paid shall be deemed to relate to the
Deferred Shares credited to the Account at the earliest time.

     11.4 COMPLIANCE. The Company shall have no obligation to settle any Deferral Account of a
Participant (in any form) until all legal and contractual obligations of the Company relating to
establishment of the Plan and such settlement shall have been complied with in full. In addition,
the Company shall impose such restrictions on Shares delivered to a Participant hereunder and any
other interest constituting a security as it may deem advisable in order to comply with the
Securities Act of 1933, as amended, the requirements of the New York Stock Exchange or any other
stock exchange or automated quotation system upon which the Shares are then listed or quoted, any
state securities laws applicable to such a transfer, any provision of the Company’s Certificate of
Incorporation or By-laws, or any other law, regulation, or binding contract to which the Company is
a party.

     11.5 CHANGES TO THE PLAN AND AWARDS. The Board may amend, suspend, discontinue, or terminate
the Plan or the authority to grant awards under the Plan without the consent of stockholders or
Participants, except that any amendment shall be subject to the approval of the Company’s
stockholders at or before the next annual meeting of stockholders for which the record date is
after the date of such Board action if such stockholder approval is required by any federal or
state law or regulation or the rules of any stock exchange or automated quotation system on which
the Shares may then be listed or quoted, and the Board may otherwise, in its discretion, determine
to submit other such amendments to stockholders for approval; PROVIDED, HOWEVER, that, without the
consent of an affected Participant, no such action may materially impair the rights of such
Participant under any award theretofore granted. The Committee may amend, suspend, discontinue, or
terminate any award theretofore granted and any award agreement relating thereto; PROVIDED,
HOWEVER, that no such amendment may reduce the exercise price of an outstanding Option (except as
authorized under Section 11.2) or provide for award terms that the Plan would not then permit for a
newly granted award; and PROVIDED FURTHER, that, without the consent of an affected Participant, no
such action may materially impair the rights of such Participant under such award. The foregoing
notwithstanding, the Board may, in its sole discretion, terminate the Plan (in whole or in part)
and, and may distribute to any Participant (in whole or in part, and whether or not in connection
with a termination of the Plan) the amounts credited to the Participant’s Deferral Account.

     11.6 UNFUNDED STATUS OF PLAN; CREATION OF TRUSTS. The Plan is intended to constitute an
“unfunded” plan for deferred compensation and Participants shall rely solely on the unsecured
promise of the Company for payment hereunder. With respect to any payment not yet made to a
Participant under the Plan, nothing contained in the Plan shall give a Participant any rights that
are greater than those of a general unsecured creditor of the Company; PROVIDED, HOWEVER, that the
Board may authorize the creation of trusts or make other arrangements to meet the Company’s
obligations under the Plan, which trusts or other arrangements shall be consistent with the
“unfunded” status of the Plan unless the Board otherwise determines with the consent of each
affected Participant. The establishment and maintenance of, or allocations and credits to, the
Deferral Account of any Participant shall not vest in any Participant any right, title or interest
in and to any Plan assets or benefits except at the time or times and upon the terms and conditions
and to the extent expressly set forth in the Plan and in accordance with the terms of any trust.

 

 

     11.7 OTHER PARTICIPANT RIGHTS. No Participant shall have any of the rights or privileges of a
stockholder of the Company under the Plan, including as a result of the grant of an Option or
crediting of Deferred Shares or other amounts to a Deferral Account, or the creation of any Trust
and deposit of Shares therein, except at such time as such Option may have been duly exercised or
Shares may be actually delivered in settlement of a Deferral Account, except that a Participant
granted Restricted Stock shall have rights of a stockholder except to the extent that those rights
are limited by the terms of the Plan and the agreement relating to the Restricted Stock. No
provision of the Plan, document relating to the Plan, or transaction hereunder shall confer upon
any Participant any right to continue to serve as a director of the Company or in any other
capacity with the Company or a subsidiary or to be nominated for reelection as a director, or
interfere in any way with the right of the Company to increase or decrease the amount of any
compensation payable to such Participant. Subject to the limitations set forth in Section 11.1,
the Plan shall inure to the benefit of, and be binding upon, the parties hereto and their
successors and assigns.

     11.8 CONTINUED SERVICE AS AN EMPLOYEE. If a Participant ceases to serve as a director and,
immediately thereafter, is employed by the Company or any subsidiary, then such Participant will
not be deemed to have ceased to serve as a director or as chair or as a member of a Board committee
at that time, and his or her continued employment by the Company or any subsidiary will be deemed
to be continued service as a director or chair or a member of a Board committee; PROVIDED, HOWEVER,
that, for purposes of Section 5, such former director will not be deemed to be a non-employee
director eligible for further grants of awards.

     11.9 GOVERNING LAW. The validity, construction, and effect of the Plan, any rules and
regulations under the Plan, and any agreement under the Plan will be determined in accordance with
the Delaware General Corporation Law and other laws (including those governing contracts) of the
State of Delaware, without giving effect to principles of conflicts of laws, and applicable federal
law.

     11.10 LIMITATION. A Participant and his or her Beneficiary shall assume all risk in
connection with any decrease in value of Options or a Deferral Account and neither the Company, the
Board nor the Administrator shall be liable or responsible therefor.

     11.11 CONSTRUCTION. The captions and numbers preceding the sections of the Plan are included
solely as a matter of convenience of reference and are not to be taken as limiting or extending the
meaning of any of the terms and provisions of the Plan. Whenever appropriate, words used in the
singular shall include the plural or the plural may be read as the singular.

     11.12 SEVERABILITY. In the event that any provision of the Plan shall be declared illegal or
invalid for any reason, said illegality or invalidity shall not affect the remaining provisions of
the Plan but shall be fully severable, and the Plan shall be construed and enforced as if said
illegal or invalid provision had never been inserted herein.

     11.13 NONEXCLUSIVITY OF THE PLAN. The adoption of the Plan by the Board shall not be
construed as creating any limitation on the power of the Board to adopt such other compensatory
arrangements for directors as it may deem desirable.

     11.14 EFFECTIVE DATE, STOCKHOLDER APPROVAL, AND PLAN TERMINATION. The Plan shall become
effective on April 20, 1999. Unless earlier terminated by action of the Board, the Plan will
remain in effect until such time as no Shares remain available for delivery under the Plan and the
Company has no further rights or obligations under the Plan with respect to outstanding Options or
other awards under the Plan.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00154-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00154-of-00352.parquet"}]]