Document:

Stock Deferral Plan

EXHIBIT 10.1 

 

COCA-COLA ENTERPRISES INC.

 

STOCK DEFERRAL PLAN 

 

(As Amended and Restated Effective January 1,
2005) 

ARTICLE I 

PURPOSE 

 

1.1. Purpose. The purpose of the Coca-Cola
Enterprises Inc. Stock Deferral Plan is to provide a select group of management
and highly compensated employees enhanced retirement security under a
nonqualified retirement plan that provides for the following: 

 

	 	(a)	Accounting
      for and distribution of deferrals of stock awards granted under the
      Company's Restricted Stock Program, 

 

	 	(b)	Accounting
      for awards of Stock Units granted by the Committee before April 1,
      2004, and 

 

	 	(c)	Accounting
      for and distribution of deferrals of stock otherwise issuable upon the
      exercise of stock options granted under the Company's Stock Option
      Program. 

 

1.2. Effective Date. This amendment and
restatement of this Plan is effective January 1, 2005. 

 

1.3. Background. This Plan was established
effective July 1, 1998. The Restricted Stock Deferral Plan was established
January 1, 2001 and restated January 1, 2002. As of April 1,
2004, the Restricted Stock Deferral Plan was merged into this Plan. Elections
made and accounts established under these prior plans shall be treated in all
respects having been made under this Plan. As of January 1, 2005, the Plan
no longer permits any new deferrals. It is intended that Account accruals
relating to Restricted Stock and Option deferrals shall be subject to the
requirements of Code Section 409A, but that accruals relating to Deferred
Stock Awards shall be "grandfathered" and not subject to Code Section 409A.

 

1.4. Shares Distributable Under the Plan.
The stock to be distributed under the Plan shall be shares of common stock, $1
par value, of the Company (the "Stock"). The Stock shall be made available from
shares of Stock held by the Company in its treasury. 

 

ARTICLE II 

DEFINITIONS 

 

2.1. "Account" means a Participant's interest
under the Plan. Each Account shall be composed of a Share Unit Account and a
Cash Credit Account. A Participant's Account shall be reflected as a book
reserve entry in the Company's accounting records. 

 

2.2. "Beneficiary" means the person or persons
last designated by a Participant, in writing, as entitled to receive such
Participant's interest under the Plan in the event of his or her death. If all
designated Beneficiaries predecease the Participant or the Participant fails to
designate a Beneficiary, the Beneficiary shall be the estate of the Participant.
Notwithstanding the foregoing, if the Participant designates his or her spouse
as a Beneficiary, such designation will be void upon the divorce of the
Participant and the former spouse unless, or until, the Participant again
designates the former spouse as a Beneficiary. 

 

2.3. "Cash Credit" means the unit for measuring
the value of any fractional Profit Shares deferred under the Plan and the value
of Hypothetical Dividends and Interest Credits. 

 

2.4. "Cash Credit Account" means the account under
which a Participant's Cash Credits are recorded. 

 

2.5. "Cash Credits Conversion Date" means the
first full trading day of each calendar year on the New York Stock Exchange
occurring before April 1, 2004. There shall be no conversions of Cash
Credits to Share Units under this Plan on or after April 1, 2004.

 

2.6. "Code" means the Internal Revenue Code of
1986, as amended. 

 

2.7. "Committee" means the Compensation Committee
of the board of directors of the Company, who shall administer the Plan as
provided in Article VIII. 

 

2.8. "Company" means Coca-Cola Enterprises Inc., a
Delaware corporation. 

 

2.9. "Deferral Date" means the date on which an
Eligible Grantee or Eligible Optionee makes an effective Deferral Election.

 

2.10. "Deferral Election" means a Restricted Stock
Deferral Election or a Stock Option Deferral Election. 

 

2.11. "Deferred Stock Award" means a grant of
Share Units made before April 1, 2004, which Share Units shall be subject
to the vesting and distribution terms specified in the Deferred Stock Award
Document. 

 

2.12. "Deferred Stock Award Cash Credit Account"
means the Cash Credit Account relating to a Deferred Stock Award, as provided
under Section 6.2(b). 

 

2.13. "Deferred Stock Award Document" means the
document under which the Company has notified the Participant of an award of
Share Units made before April 1, 2004, and which contains the vesting and
distribution terms applicable to those Share Units. 

 

2.14. "Deferred Stock Award Share Unit Account"
means the Share Unit Account relating to a Deferred Stock Award, as provided
under Section 6.1(b). 

 

2.15. "Employee" means a common-law employee of
the Company or a Subsidiary. For purposes of this Plan, a Subsidiary is a
company in which the Company owns, directly or indirectly, at least 20% of the
voting stock or capital. 

 

2.16. "Eligible Grantee" means an Employee who is
determined to be eligible for participation in the Plan by the Committee, with
respect to a deferral of the receipt of Restricted Stock. 

 

2.17. "Eligible Optionee" means an individual who
holds an Option who, at the time of making a Deferral Election, is an Employee
of the Company or Subsidiary and who is determined to be eligible for
participation in the Plan by the Committee. 

 

2.18. "Exercise Date" means the date on which an
exercise of any Option that is the subject of a Deferral Election is effected by
the Company, which date shall be specified by the Participant in the Deferral
Election. In the event the Exercise Date specified by the Participant is not a
trading day on the  New York Stock Exchange, the Exercise Date will be the
immediately preceding date that is a trading date. 

 

2.19. "Fair Market Value" means the average of the
high and low trading prices on a given trading date, as reported on the New York
Stock Exchange Composite Transactions listing. 

 

2.20. "Hypothetical Dividends" means an amount to
be credited to a Participant's Cash Credit Account, which amount is equal to the
dividends paid on the Stock, determined as if the Share Units credited to a
Participant's Share Unit Account were shares of Stock on the record date of any
such dividend. 

 

2.21. "Interest Credit" means an amount,
calculated as described in Section 6.2(d) and based on the annual rate
equivalent to the weighted average prime lending rate of SunTrust Bank, Atlanta
for the relevant year or portion of the year. 

 

2.22. "Option" means any option to purchase shares
of Stock (i) that was granted to the Optionee under the Company's Stock
Option Program and (ii) that will, by its terms, expire as of a date that
is not more than three years after the date on which the relevant Deferral
Election is received by the Company. 

 

2.23. "Participant" means any Eligible Grantee or
Eligible Optionee who has made a Deferral Election or who has received a
Deferred Stock Award. An individual or former Employee who has an interest under
the Plan shall also be considered a Participant, even though such individual is,
for any particular Plan Year, ineligible to make a Deferral Election.

 

2.24. "Plan" means the Coca-Cola Enterprises Inc.
Stock Deferral Plan, as it may be amended from time to time. 

 

2.25. "Profit Shares" means the number of shares
of Stock the Participant would otherwise be eligible to receive upon the
Participant's exercise of an Option by delivering the exercise price in shares
of Stock. Specifically, the number of Profit Shares received upon such an
exercise equals the difference between the number of shares subject to an Option
and the number of shares that, in the aggregate, have a Total Market Value equal
to the exercise price of an Option. Any amount realized upon such an exercise
that would not represent a whole share of Stock is described herein as a
fractional Profit Share. 

 

2.26. "Restricted Stock" means any shares of Stock
that are subject to restrictions on their transfer. 

 

2.27 "Restricted Stock Award" means a grant of
Restricted Stock under the Company's Restricted Stock Program which is held by
an Eligible Grantee and which has restrictions that will not lapse within six
months of the date on which the relevant Deferral Election is received by the
Company. 

 

2.28. "Restricted Stock Award Document" means the
document under which the Company notifies the Participant of an award of
Restricted Stock and the terms under which the restrictions will lapse.

 

2.29. "Restricted Stock Cash Credit Account" means
the Cash Credit Account relating to a Restricted Stock Deferral Election, as
provided under Section 6.2(a). 

 

2.30. "Restricted Stock Deferral Election" means a
Participant's election to defer the receipt of Stock that would otherwise become
fully transferable to the Participant at a future date under the terms of the
grant of Restricted Stock, pursuant to Article III. 

 

2.31. "Restricted Stock Program" means any plan,
approved by the shareholders of the Company before April 1, 2004, under
which the Company makes awards of Restricted Stock. 

 

2.32. "Restricted Stock Share Unit Account" means
the Share Unit Account relating to a Restricted Stock Deferral Election, as
provided under Section 6.1(a). 

 

2.33. "Share Unit" means the measurement under the
Plan representing the future right to the distribution of one whole share of
Stock. 

 

2.34. "Share Unit Account" means the account under
which a Participant's Share Units are credited, which Account shall consist of a
Deferred Stock Award Share Unit Account, a Restricted Stock Share Unit Account,
and a Stock Option Share Unit Account. 

 

2.35. "Stock" means shares of common stock of the
par value of $1.00 per share of Coca-Cola Enterprises Inc. 

 

2.36. "Stock Option Cash Credit Account" means the
Cash Credit Account relating to a Stock Option Deferral Election, as provided
under Section 6.2(c). 

 

2.37. "Stock Option Deferral Election" means a
Participant's election to defer the receipt of Stock upon the exercise of an
Option, pursuant to Article V. 

 

2.38. "Stock Option Program" means any plan,
approved by the shareholders of the Company before April 1, 2004, under
which the Company makes grants of Options. 

 

2.39. "Stock Option Share Unit Account" means the
Share Unit Account relating to a Stock Option Deferral Election, as provided
under Section 6.1(c). 

 

2.40. "Stock Ownership Affidavit" means a
notarized affidavit under which a Participant attests to the ownership of Stock
for purposes of satisfying the exercise price of an Option subject to a Deferral
Election. 

 

2.41. "Total Market Value" means the aggregate
value of all Stock identified in a Stock Ownership Affidavit, which value equals
the sum of the Fair Market Value of all such Stock. 

 

ARTICLE III 

RESTRICTED STOCK DEFERRAL ELECTIONS

 

3.1. Deferred Restricted Stock. Before
January 1, 2005, Eligible Grantees were permitted to elect to defer the
receipt of Restricted Stock which could otherwise have become fully transferable
to the Participant during his or her employment with the Company, with such
election being in exchange for the Company's promise of a future distributions
of shares of the Company's Stock. On and after January 1, 2005, new
Restricted Stock deferrals are no longer permitted. Any Restricted Stock
deferred before January 1, 2005 shall continue to be deferred, subject to
the provisions of this Plan. 

 

ARTICLE IV 

DEFERRED STOCK AWARDS 

 

4.1. Deferred Stock Award. Before
April 1, 2004, the Committee may have granted Share Units to a Participant
under a Deferred Stock Award, which Share Units shall have been credited to his
or her Account under the Plan. The terms of a Participant's Deferred Stock Award
Document specify the conditions for vesting and distribution, which shall be
treated as terms of this Plan. Such Deferred Stock Awards shall continue to be
governed by the terms of this Plan until fully distributed or forfeited for
failure to satisfy the conditions for vesting. No Deferred Stock Awards shall be
made under this Plan on or after April 1, 2004. 

 

ARTICLE V 

STOCK OPTION DEFERRAL ELECTIONS 

 

5.1. Deferred Stock Options. Before
January 1, 2005, Eligible Optionees were permitted to elect to defer the
receipt of Profit Shares to which they would otherwise have been entitled upon
exercise of an Option, with such election being in exchange for the Company's
promise of a future distributions of shares of the Company's Stock. On and after
January 1, 2005, new deferrals of Profit Shares are no longer permitted.
Any Profit Shares deferred before January 1, 2005 shall continue to be
deferred, subject to the provisions of this Plan. 

 

ARTICLE VI 

ACCOUNT ACCRUALS 

 

6.1. Share Unit Account. A Participant's
interest in his or her Share Unit Account shall be the total of all Share Units
credited to the Participant under the Plan, determined as follows: 

 

	 	(a)	A
      Participant's Restricted Stock Share Unit Account will be credited with
      the same number of Share Units as the number of shares of Restricted Stock
      the Participant surrendered to the Company on the applicable Deferral
      Date. 

 

	 	(b)	A
      Participant's Deferred Stock Award Share Unit Account will be credited
      with the number of Share Units granted under a Deferred Stock Award
      Document before April 1, 2004. 

 

	 	(c)	A
      Participant's Stock Option Share Unit Account will be credited with the
      number of Share Units equal to the number of whole Profit Shares the
      Participant would have received upon exercise of an Option, with respect
      to Options subject to a Deferral Election. 

 

	 	(d)	
      On each Cash Credits
      Conversion Date occurring before April 1, 2004, each of the
      Participant's Share Unit Accounts described in Sections 6.1(a) and
      (c) will also be increased by the number of Share Units equal to the
      maximum number of whole shares of Stock that could be purchased with funds
      equal to the respective balances of the Participant's Cash Credit Accounts
      described in Sections 6.2(a) and (c) on such date if each account
      were actual funds. The Fair Market Value of the Stock on the Cash Credits
      Conversion Date shall be used to determine the number of shares that could
      be so purchased. This Section 6.1(d) shall also be applicable to the
      Deferred Stock Award Share Unit Account, but only if the Participant has
      made an election to have his or her Deferred Stock Award Cash Credit
      Account converted to Share Units on the appropriate form provided by the
      Committee. This Section 6.1(d) shall cease to be effective with respect to
      all Cash Credit Accounts, and there shall be no further conversions of
      Cash Credits under the Plan, as of April 1, 2004.
  

 

 

6.2. Cash Credit Account. A Participant's
interest in his or her Cash Credit Account shall be the total of all Cash
Credits credited to the Participant under the Plan, determined as follows:

 

	 	(a)	A
      Participant's Restricted Stock Cash Credit Account will be increased by an
      amount equal to the Hypothetical Dividends credited with respect to the
      Participant's Restricted Stock Share Unit Account balance as of each of
      the Company's dividend record dates. 

 

	 	(b)	A
      Participant's Deferred Stock Award Cash Credit Account will be increased
      by an amount equal to the Hypothetical Dividends credited with respect to
      Participant's Deferred Stock Award Share Unit Account balance as of each
      of the Company's dividend record dates. 

 

	 	(c)	Upon the
      exercise of an Option subject to a Stock Option Deferral Election, a
      Participant's Stock Option Cash Credits Account will be increased by an
      amount equal to the Fair Market Value of any fractional Profit Share the
      Participant would have received upon exercise of the Option if it had not
      been subject to a Stock Option Deferral Election. Further, a Participant's
      Stock Option Cash Credit Account will be increased by an amount equal to
      the Hypothetical Dividends credited with respect to Participant's Stock
      Option Share Unit Account balance as of each of the Company's dividend
      record dates. 

 

	 	(d)	At the end
      of each calendar year, or as of any other date designated by the
      Committee, each of a Participant's Cash Credit Accounts described in
      Section 6.2(a) through (c) will be increased by Interest
      Credits, determined with respect to the average daily balance of each such
      Cash Credit Account during such year or relevant portion of the year.
      

 

	 	(e)	On each Cash
      Credits Conversion Date occurring before April 1, 2004, each of a
      Participant's Cash Credit Accounts described in Sections 6.2(a) through
      (c) will be decreased by an amount equal to the amount of increases
      in the Participant' Share Unit Accounts provided under
      Section 6.1(d). This paragraph 6.2(e) shall cease to be effective
      with respect to all Cash Credit Accounts, and there shall be no further
      conversions of Cash Credits under the Plan, as of April 1, 2004.
      

 

6.3. Vesting of Accounts. 

 

	 	(a)	A
      Participant's interest in his or her Restricted Stock and Stock Option Share Unit Accounts and
      Cash Credit Accounts shall be 100% nonforfeitable.
  

	 	(b)	

    A
    Participant's interest in his or her Deferred Stock Award Share Unit Account
    and Deferred Stock Award Cash Credit Account shall become nonforfeitable, or
    vest, as provided in the Deferred Stock Award Document.  In the event
      that the conditions for vesting set forth in a Deferred Stock Award
      Document are not satisfied, the Share Units attributable to the Deferred
      Stock Award shall be forfeited and deleted as entries in the Participant's
      applicable Share Unit Accounts. 

 

ARTICLE VII 

DISTRIBUTIONS 

 

7.1. Form of Payment of Account.

 

	 	(a)	A
      Participant's vested interest under his or her Restricted Stock Share Unit
      Account and his or her Stock Option Share Unit Account shall be
      distributed in whole shares of Stock. 

 

	 	(b)	A
      Participant's vested interest under his or her Deferred Stock Award Share
      Unit Account shall be distributed in whole shares of Stock or Restricted
      Stock, as provided under the Deferred Stock Award Document.
  

 

	 	(c)	A
      Participant's vested interest in his or her Cash Credit Accounts shall be
      distributed in cash. 

 

7.2. Commencement of Distribution.

 

	 	(a)	At the time
      a Participant first made a Restricted Stock Deferral Election he or she
      elected whether distribution of the vested interest in his or her
      Restricted Stock Share Unit Account and Restricted Stock Cash Credit
      Account shall commence (i) as soon as practicable following the first
      day of the calendar year following the year in which he or she separates
      from service (within the meaning of Code Section 409A(a)(2)(A)(i) and
      the regulations thereunder), (ii) as of the Participant's attaining a
      specific age, or (iii) as of the later of (i) and (ii).
    

 

	 	(b)	At the time
      a Participant first made a Stock Option Deferral Election he or she
      elected whether distribution of his or her Stock Option Share Unit Account
      and Stock Option Cash Credit Account shall commence at the times set forth
      in (i), (ii), or (iii) of Section 7.2(a).

 

	 	(c)	A
      Participant's vested interest in his or her Deferred Stock Award Share
      Unit Account and Deferred Stock Award Cash Credit Account shall be
      distributed in accordance with the terms of the Deferred Stock Award
      Document. 

 

 

	 	(d)	Before
      December 12, 2005, a Participant was permitted to change, at any
      time, his or her election made under Sections 7.2(a) and (b); provided,
      however, that any such change was not effective for one year or more after
      the date of the subsequent election. 

 

	 	(e)	On and after
      December 12, 2005 and through December 31, 2006, a Participant
      is permitted to change his or her election made under Sections 7.2(a) and
      (b); provided, however, that a Participant shall not be permitted to
      change his or her election in 2006 with respect to an amount that is
      otherwise payable in 2006, or elect in 2006 to change his or her election
      to provide for payment in 2006. 

 

	 	(f)	On and after
      January 1, 2007, a Participant is permitted to change his or her
      election made under Sections 7.2(a) and (b); provided, however, that
      (i) the change may not accelerate any payments, (ii) the first
      payment with respect to which the change is made is deferred for at least
      five years, (iii) the change shall not take effect for at least 12
      months, and (iv) any change to an election to make payments upon a
      specified age under Section 7.2(a)(ii) or (iii) must be made not
      less than 12 months before the date of the first scheduled payment to be
      made upon attaining such specified age. 

 

	 	(g)	In the event
      a Participant is eligible to and fails to make an election with respect to
      the commencement of payment of any portion of his or her Account,
      distribution of such portion to the Participant shall be made as soon as
      practicable following his or her separation from service.
  

 

7.3. Optional Forms of Distribution.

 

	 	(a)	At the time
      a Participant first made a Restricted Stock Deferral Election he or she
      elected whether distribution of the vested interest in his or her
      Restricted Stock Share Unit Account and Restricted Stock Cash Credit
      Account shall be made as (i) a single-sum payment, or (ii) a
      series of substantially equal quarterly, semiannual, or annual
      installments over a period of 2 to 10 years. 

 

	 	
(b)	At the time
      a Participant first made a Stock Option Deferral Election he or she
      elected whether distribution of his or her Stock Option Share Unit Account
      and Stock Option Cash Credit Account shall be made in the forms set forth
      in (i) or (ii) of Section 7.3(a).

 

	 	(c)	A
      Participant's vested interest in his or her Deferred Stock Award Share
      Unit Account and Deferred Stock Award Cash Credit Account shall be
      distributed in accordance with the terms of the Deferred Stock Award
      Document. 

 

	 	
(d)	Before
    December 12, 2005, a
      Participant is permitted to change, at any time, his or her election made
      under Section 7.3(c); provided, however, that any such change shall
      not be effective for one year or more after the date of the subsequent
      election. 

 

 

	 	(e)	On and after
    December 12, 2005 and through December 31, 2006, a Participant is permitted
    to change his or her election made under Sections 7.3(a) and (b); provided,
    however, that a Participant shall not be permitted to change his or her
    election in 2006 with respect to an amount that is otherwise payable in
    2006, or elect in 2006 to change his or her election to provide for payment
    in 2006. 

 

	 	(f)	On and after
      January 1, 2007, a Participant is permitted to change his or her
      election made under Sections 7.3(a) and (b); provided, however that
      (i) the change shall not accelerate any payments, (ii) the first
      payment with respect to which the change is made is deferred for at least
      five years, (iii) the change shall not take effect for at least 12
      months, and (iv) any change to an election to make payments upon a
      specified age under Section 7.2(a)(ii) or (iii) must be made not
      less than 12 months before the date of the first scheduled payment to be
      made upon attaining such specified age. For purposes of this
      Section 7.3(g), payments made in the form of installments shall be
      treated as a single payment made on the date of the first installment
      payment. 

 

	 	(g)	In the event
      a Participant is eligible to and fails to make an election with respect to
      the form of payment of any portion of his or her Account, distribution of
      such portion to the Participant shall be made in the form of a single-sum
      payment. 

 

7.4. Distributions to Specified Employees.
Notwithstanding anything in this Plan to the contrary, distributions made on
account of separation from service to a Participant who is a "specified
employee" (within the meaning of Code Section 409A(a)(2)(B)(i) and the
regulations thereunder) shall not be made before the date that is six months
after the date of such separation from service (or, if earlier, the date of such
specified employee's death). Any payments that would otherwise have been made
during such six-month period shall be made at the same time as the first payment
following such six-month period. 

 

7.5. Distributions on Account of Death. In
the event of the death of a Participant prior to distribution of the total
balance of his or her Account, distribution of the balance of such Account shall
be made to the Participant's Beneficiary in a single-sum payment as soon as
practicable following the death of such Participant. 

 

7.6. Distribution on Account of Financial
Hardship. In the event a Participant has a financial hardship due to an
unforeseeable emergency (with the meaning of Code
Section 409A(a)(2)(B)(ii)), the Committee, in its sole discretion, may, but
is under no obligation to, distribute all or any portion of the Participant's
Account up to the amount reasonably necessary to satisfy such emergency need.

 

7.7. Participant Election to Terminate
Account. On and after December 12, 2005 and before January 1,
2006, a Participant may elect to terminate all or any portion of his or her
Account (other than any portion of his Account attributable to a Deferred Stock
Award) and receive an immediate, lump-sum distribution of the terminated portion
of such Account, in accordance with Q&A-20 of IRS Notice 2005-1. 

 

 

ARTICLE VIII 

ADMINISTRATION 

 

8.1. Plan Administration. The Plan shall be
administered by the Compensation Committee of the board of directors of the
Company. 

 

8.2. Committee Action. Action of the
Committee may be taken with or without a meeting of its members; provided,
however, that any action shall be taken only upon the vote or other affirmative
expression of a majority of Committee members qualified to vote with respect to
such action. 

 

8.3. Rights and Duties of Committee. The
Committee shall administer the Plan and shall have all powers necessary to
accomplish that purpose, including, but not limited to, construing,
interpreting, and administering the Plan. The decisions of the Committee shall
be final and binding on all parties. 

 

8.4. Taxes. If all or any portion of a
Participant's Account shall become liable for the payment of any estate,
inheritance, or other tax which the Company shall be required to pay or withhold
upon distribution of the Participant's account, the Company shall have the full
power and authority to (i) withhold distribution of the Participant's
Account until the Participant makes appropriate arrangements with the Company to
satisfy such liability or (ii) withhold actual shares distributed from the
Account that have value equal to such liability. In the event the Participant is
liable for any tax prior to a distribution under the Plan, the Company shall be
entitled to satisfy such liability from any other funds owed by the Company to
the Participant to the extent provided by law. 

 

ARTICLE IX 

CLAIMS PROCEDURE 

 

9.1. Claims for Benefits Under Plan. All
applications for benefits under the Plan shall be submitted to and processed by
such representative of the Committee whom it may designate (the "Claims
Representative"). Applications for benefits must be in writing on forms
acceptable to the Committee and must be signed by the Participant, or in the
case of a death benefit, by the Beneficiary or legal representative of the
Beneficiary. Each application shall be acted upon and approved or disapproved by
the Claim Representative within 90 days following receipt by the Claims
Representative (or within 180 days if special circumstances require and notice
is given to the applicant before the end of the 90-day period informing the
applicant of the circumstances requiring the extension of time and the date by
which the Claims Representative expects to render a decision). 

 

If any application for benefits is denied, in
whole or in part, the Claims Representative shall notify the applicant in
writing of such denial and of the applicant's right to a review of the decision
and shall set forth, in a manner calculated to be understood by the applicant,
the specific reasons for such denial, the specific references to pertinent Plan
provisions on which the denial is based, a description of any additional
material or information necessary for the applicant to perfect the application,
an explanation of why such material or information is necessary and an
explanation of the Plan's review procedure and the time limits applicable to the
procedure, including a statement of the applicant's right to bring a civil
action under ERISA following an adverse determination on review. 

 

9.2. Appeals. Any person whose application
for benefits is denied in whole or in part may appeal to the Committee for
review of the decision by submitting, within 60 days (180 days for denials of
claims for disability benefits under the Plan) after receiving notice of the
denial of the claim, a written statement to the Committee that: 

 

(i) requests a review by the Committee of the
application for benefits; 

 

(ii) sets forth all of the grounds upon which the
request for review is based and any facts in support of such request; and

 

(iii) sets forth any issues or comments that the
applicant deems pertinent to the application. 

 

In addition, an applicant may submit written comments, documents, records
and other information in support of the appeal, and the applicant shall be
provided, free of charge, reasonable access to and copies of all documents,
records and other information relevant to the applicant's claim for benefits.

 

The Committee shall meet as required to review appeals of denials of
applications for benefits submitted to it. The Committee shall act upon each
appeal within sixty days (forty-five days in the case of denials of claims for
disability benefits) after receipt of the applicant's request for review by the
Committee. The Committee shall make a full and fair review of each application
and any written material submitted by the applicant or the Employer in
connection with such review, without regard to whether such information was
submitted or considered in the initial benefit determination. If the Committee
determines that special circumstances require an extension of time for
processing an appeal, it may extend the initial period, in which case written
notice of the extension shall be furnished to the applicant before the end of
the initial period, indicating the special circumstances requiring an extension
and the date by which the Committee expects to render a determination on review.
In no event shall such extension exceed a period of 60 days from the end of the
initial period. Based on this review, the Committee shall make an independent
determination of the applicant's eligibility for benefits under the Plan.

 

In the case of a denial of any appeal, the Committee shall notify the
applicant in writing of such determination and shall set forth, in a manner
calculated to be understood by the applicant, the specific reasons for the
adverse determination, references to the specific Plan provisions on which the
determination is based, a statement that the applicant is entitled to receive,
upon request and free of charge, reasonable access to and copies of all
documents, records and other information relevant to the applicant's claim for
benefits, and a statement of the applicant's right to bring an action under
ERISA. 

 

The decision of the Committee on any application for benefits shall be
final and conclusive upon all persons. Exhaustion of the appeal rights under
this Section 9.2 shall be required before any Participant may file suit in
court. 

 

ARTICLE X 

AMENDMENT AND TERMINATION 

 

10.1. Amendment. The Committee shall have
the right to amend the Plan in whole or in part at any time; provided, however,
that no amendment shall reduce the amount credited to any Participant's Account
as of the later of the date such amendment is adopted or effective. Any
amendment shall be in writing and executed by a duly authorized officer of the
Company. 

 

10.2. Termination. The Committee reserves
the right to discontinue and terminate the Plan, and distribute Participants'
Accounts, at any time, in whole or in part, for any reason, to the maximum
extent permitted under Code Section 409A and the regulations thereunder. In
the event of such a termination of the Plan, the amounts credited to any
Participant's Account, as of the effective date of such termination, shall not
be reduced. As of January 1, 2005, the Committee terminated the provisions
of Articles III and V permitting new deferrals under the Plan. Deferrals already
credited to Participants' Accounts as of January 1, 2005 (plus any Cash
Credits under Section 6.2) shall be distributed at the time and in the
manner specified in the Participant's latest election, as such election may be
subsequently modified in accordance with Article VII, unless the Plan is earlier
terminated pursuant to this Section 10.2. 

 

ARTICLE XI 

MISCELLANEOUS 

 

11.1. Limitation on Participant's Rights.
Participation in this Plan shall not give any Participant the right to be
retained in the Company's employ or any rights or interest in this Plan or any
assets of the Company other than as herein provided. The Company reserves the
right to terminate the employment of any Participant without any liability for
any claim against the Company under this Plan, except to the extent provided
herein. 

 

11.2. Changes in Capitalization. The number
of Share Units credited to each Participant's Share Unit Account shall be
proportionately adjusted for any increase or decrease in the number of issued
and outstanding shares of Stock resulting from a subdivision or combination of
shares or the payment of a stock dividend in shares of common stock of the
Company to holders of outstanding shares or any other increase or decrease in
the number of such shares effected without receipt of consideration by the
Company. Appropriate adjustments shall also be made to reflect any
recapitalization, reclassification of shares or reorganization affecting the
capital structure of the Company. In the event of a merger or consolidation in
which the Company is not the surviving corporation or in which the Company
survives only as a subsidiary of another corporation, and in such transaction
the holders of Stock of the Company become entitled to receive shares of stock
or securities of the surviving corporation, the Participant's Share Unit Account
shall be credited with that number of Share Units representing securities of the
surviving corporation that would be exchanged for the shares of Stock of the
Company in such transaction if they had been outstanding shares, and any cash or
other consideration that would be receivable if such shares had been outstanding
shall be credited to the Participant's Cash Credit Account. 

 

11.3. Participants' Interest Unfunded. All
amounts payable under the Plan to Participants shall be payable from the general
assets of the Company. Nothing contained herein shall require the Company to set
aside or hold in trust any amounts or assets for the purpose of paying benefits.
Participants shall have the status of general unsecured creditors of the Company
with respect to amounts they defer under the Plan or any other obligation of the
Company to pay Participants' interests pursuant hereto. Any funds of the Company
available to pay benefits under the Plan shall be subject to the claims of
general creditors of the Company and may be used for any purpose by the Company.

 

11.4. Other Plans. This Plan shall not
affect the right of any Participant to participate in and receive benefits under
any employee benefit plans which are now or hereafter maintained by the Company,
unless the terms of such other employee benefit plan or plans specifically
provide otherwise. 

 

11.5. Governing Law. This Plan shall be
construed, administered, and governed in all respects in accordance with
applicable federal law and, to the extent not preempted by federal law, in
accordance with the laws of the State of Georgia. If any provisions of this
instrument shall be held by a court of competent jurisdiction to be invalid or
unenforceable, the remaining provisions hereof shall continue to be fully
effective. 

 

11.6. Gender, Number, and Headings. In this
Plan, whenever the context so indicates, the singular or plural number and the
masculine, feminine, or neuter gender shall be deemed to include the other.
Headings and subheadings in this Plan are inserted for convenience of reference
only and are not considered in the construction of the provisions hereof.

 

11.7. Successors and Assigns; Nonalienation of
Benefits. This Plan shall inure to the benefit of, and be binding upon, the
parties hereto and their successors and assigns; provided, however, that the
amounts credited to the Account of a Participant shall not be subject in any
manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, charge, garnishment, execution or levy of any kind, either
voluntary or involuntary, and any attempt to anticipate, alienate, sell,
transfer, assign, pledge, encumber, charge or otherwise dispose of any right to
any benefits payable hereunder shall be void, including, without limitation, any
assignment or alienation in connection with a separation, divorce, child support
or similar arrangement. 

 

11.8. Compliance with Code
Section 409A. Notwithstanding anything in this Plan to the contrary,
this Plan is intended to comply with the provisions of Code Section 409A
(except with respect to Deferred Stock Awards under Article IV, which are
intended to be "grandfathered" and not subject to Code Section 409A).
Accordingly, the provisions of this Plan shall be interpreted in a manner that
complies with the requirements of Code Section 409A and the regulations
thereunder, and any provision of this Plan that does not comply with Code
Section 409A is hereby modified to the extent necessary to comply with Code
Section 409A and the regulations thereunder.Unassociated Document

    MORGAN
      STANLEY ABS CAPITAL I INC. TRUST 2006-WMC2

     

    EXHIBIT
      4.2

     

     

     

    _____________________

     

    AMENDMENT
      NO. 2 TO POOLING AND SERVICING AGREEMENT

     

    Dated
      as
      of December 8, 2006 

     

     

    _________________________

     

    Morgan
      Stanley ABS Capital I Inc. Trust 2006-WMC2

    

    Mortgage
      Pass-Through Certificates, Series 2006-WMC2

    

     

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    AMENDMENT
      NO. 2

     

    AMENDMENT
      NO. 2 (this “Amendment”) effective as of June 1, 2006, among Morgan Stanley ABS
      Capital I Inc., as depositor (the “Depositor”), Wells Fargo Bank, N.A., as
      servicer (the “Servicer”), as securities administrator (the “Securities
      Administrator”) and as custodian (the “Custodian”), WMC Mortgage Corp., as
      responsible party (the “Responsible Party”), and Deutsche Bank National Trust
      Company, as trustee (the “Trustee”).

     

    PRELIMINARY
      STATEMENT

     

    WHEREAS,
      the Depositor, the Servicer, the Securities Administrator, the Custodian, the
      Responsible Party and the Trustee, are parties to the Pooling and Servicing
      Agreement, dated as of June 1, 2006 (the “Agreement”);

     

    WHEREAS,
      Section 11.01 of the Agreement provides that the Agreement may be amended by
      the
      Depositor, the Servicer, the Securities Administrator, the Custodian, the
      Responsible Party and the Trustee; and

     

    NOW,
      THEREFORE, in consideration of the foregoing and of other good and valuable
      consideration, the receipt and sufficiency of which is hereby acknowledged,
      the
      parties hereto agree as follows:

     

    1.  Capitalized
      terms used but not defined herein shall have the meanings ascribed to such
      terms
      in the Agreement.

     

    2.  Amendments:
      

     

    The
      following provisions shall be added to the end of Schedule V to the
      Agreement:

     

    (4) With
      respect to each Group I Mortgage Loan which is a Second Lien Mortgage Loan
      (A)
      such lien is on a one-to four-family residence that is the principal residence
      of the related Mortgagor, (B) the original principal balance was within one-half
      of Freddie Mac’s and Fannie Mae’s dollar amount limits for one-unit conforming
      one-to four-family mortgage loans for first lien mortgage loans, without regard
      to the number of units in the related Mortgaged Property and (C) the original
      principal balance of the related first lien mortgage loan plus the original
      principal balance of any subordinate lien mortgage loans relating to the same
      Mortgaged Property was within Freddie Mac’s and Fannie Mae’s dollar amount
      limits for first lien mortgage loans for that property type.

     

    3.  Except
      as
      expressly modified or amended in this Amendment, all of the terms, covenants,
      provisions, agreements and conditions of the Agreement are hereby ratified
      and
      confirmed in every respect and shall remain unmodified and unchanged and shall
      continue in full force and effect.

     

    4.  The
      Depositor certifies that all conditions for the execution of this Amendment
      have
      been satisfied.

     

    5.  This
      Amendment shall become effective as of the date hereof when, and only when,
      the
      Agent shall have received executed counterparts of this Amendment from the
      parties hereto. 

     

    6.  This
      Amendment may be executed in counterparts, each of which shall be an original
      but all of which, taken together, shall constitute one and the same instrument.
      This Amendment shall be construed in accordance with the laws of the State
      of
      New York (excluding provisions regarding conflicts of laws) and the obligations,
      rights and remedies of the parties hereunder shall be determined in accordance
      with such laws.

     

    

     

    IN
      WITNESS WHEREOF, the parties have duly executed this Amendment No. 2 as of
      the
      date first above written.

     

    
      	 	 	 	 	 	 	 	
              MORGAN
                STANLEY ABS CAPITAL I INC.,

              as
                Depositor

            
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	
              By:

            	
              /s/
                Steven Shapiro

            
	 	 	 	 	 	 	 	
              Name:

            	
              Steven
                Shapiro

            
	 	 	 	 	 	 	 	
              Title:

            	
              Managing
                Director

            

    

    

     

    
      	 	 	 	 	 	 	 	
              WMC
                MORTGAGE CORP., as Responsible Party

            
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	
              By:

            	
              /s/
                Mardy Grossman

            
	 	 	 	 	 	 	 	
              Name:

            	
              Mardy
                Grossman

            
	 	 	 	 	 	 	 	
              Title:

            	
              Senior
                Vice President 

            

    

    

     

    
      	 	 	 	 	 	 	 	
              WELLS
                FARGO BANK, N.A., as Securities Administrator

            
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	
              By:

            	
              /s/
                Patricia Russo

            
	 	 	 	 	 	 	 	
              Name:

            	
              Patricia
                Russo

            
	 	 	 	 	 	 	 	
              Title:

            	
              Vice
                President

            

    

    

     

    
      	 	 	 	 	 	 	 	
              WELLS
                FARGO BANK, N.A., as Servicer

            
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	
              By:

            	
              /s/
                Laurie McGoogan

            
	 	 	 	 	 	 	 	
              Name:

            	
              Laurie
                McGoogan

            
	 	 	 	 	 	 	 	
              Title:

            	
              Vice
                President

            

    

    

     

    
      	 	 	 	 	 	 	 	
              WELLS
                FARGO BANK, N.A., as Custodian

            
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	
              By:

            	
              /s/
                Patricia Russo

            
	 	 	 	 	 	 	 	
              Name:

            	
              Patricia
                Russo

            
	 	 	 	 	 	 	 	
              Title:

            	
              Vice
                President

            

    

     

     

    
      	 	 	 	 	 	 	 	
              DEUTSCHE
                BANK NATIONAL TRUST

              COMPANY,
                as Trustee

            
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	
              By:

            	
              /s/
                Ronaldo Reyes

            
	 	 	 	 	 	 	 	
              Name:

            	
              Ronaldo
                Reyes

            
	 	 	 	 	 	 	 	
              Title:

            	
              Vice
                President

            
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	
              By:

            	
              /s/
                Jennifer Hermansader

            
	 	 	 	 	 	 	 	
              Name:

            	
              Jennifer
                Hermansader

            
	 	 	 	 	 	 	 	
              Title:

            	
              Associate

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